Judge David S. Cunningham, Case 21STCV36359 2022-08-18 Tentative Ruling

Judge: David S. Cunningham, Case: 21STCV36359, Date: 2022-08-18 Tentative Ruling

Tentative Ruling Re: Motion to Compel Arbitration Re: 21STCV36359 (Gutierrez)

Plaintiff’s request for judicial notice is granted as to Exhibits A through E because they are court records. The Court judicially notices the existence of the documents.

Asheet Sharma declaration: Plaintiff’s objection 1 is overruled; objection 2 is sustained as to the first two sentences; and objection 3 is sustained as to the second sentence.

Luz Price declaration: Plaintiff’s objections are overruled, except objection 6 is sustained as to the first sentence (“Once Ms. Gutierrez signed the Addendum to the Employee Handbook”).

The Court intends to hold an evidentiary hearing to determine whether Plaintiff e-signed the arbitration agreement.

* finds that Plaintiff’s individual Private Attorneys General Act (“PAGA”) claim is arbitrable; and

Defendant employed Plaintiff as a restaurant worker from December 2020 to January 2021. (See, e.g., Complaint, ¶ 18.) She alleges numerous “wage and hour” violations and seeks to represent a class of similar current and former, non-exempt California employees. (See, e.g., id. at ¶¶ 12-16.)

Defendant asserts that Plaintiff e-signed an arbitration agreement that covers her claims.

“[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4^th 394, 413.)

“Under ‘both federal and state law, the threshold question . . . is whether there is an agreement to arbitrate.’” (Cruise v. Kroger Co. (2015) 233 Cal.App.4^th 390, 396, emphasis in original.)

The burden of proof rests with the petitioner. (See Rosenthal, supra, 14 Cal.4^th at 413 [requiring the petitioner to prove the existence of the agreement “by a preponderance of the evidence”].) To meet the burden, “the provisions of the written agreement and the paragraph that provides for arbitration . . . must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, rule 3.1330; see also Condee v. Longwood Management Corp. (2001) 88 Cal.App.4^th 215, 218 [same].)

“Competent evidence is required to establish both the existence of the arbitration agreement and any ground for denial.” (Knight, et al., Cal. Prac. Guide: Alternative Dispute Resolution (The Rutter Group 2021) ¶ 5:321.) “The verified petition (and attached copy of the agreement) normally proves the existence of the arbitration agreement. Affidavits or declarations may be necessary when factual issues are tendered.” (Ibid.)

Plaintiff worked for Defendant at a restaurant in Redding, California. During the onboarding process, Defendant claims it provided Plaintiff with a document called “ADDENDUM TO THE EMPLOYEE HANDBOOK[,]” which included the subject “ARBITRATION & CLASS ACTIONS” agreement. (Sharma Decl., ¶ 6, Ex. A, p. CHICO-000002, capitalizing in original.)

The agreement states that the parties agree to use binding arbitration to resolve “[a]ny controversy, dispute or claim between any employee and CHICO FOODS, LLC, or its officers, agents or other employees[,]” it provides that the Federal Arbitration Act (“FAA”) applies, it requires arbitration to be conducted according to the American Arbitration Association (“AAA”) rules, and it identifies covered claims:

1.1 Any controversy, dispute or claim between any employee and CHICO FOODS, LLC, or its officers, agents or other employees (collective referred to as the “Company”), shall be settled by binding arbitration, at the request of either party. The arbitrability of any controversy, dispute or claim under this policy shall be determined by application of the substantive provisions of the [FAA] (9 U.S.C. §§ 1 and 2) and by application of the procedural provisions of the California Arbitration Act (California Code of Civil Procedure §§ 1280 et. seq.). Arbitration shall be the exclusive method for resolving any dispute, provided, however, that either party may request provisional relief from a court of competent jurisdiction, as provided in California Code of Civil Procedure § 1281.8. Even if the Company does not sign for its receipt or acknowledgement of this policy, the Company, like the employee, agrees to be bound by this policy and agrees to arbitrate all disputes with its employees or former employees. This arbitration provision does not alter the at-will status of Employee’s employment.

1.2 The claims which are to be arbitrated under this policy include, but are not limited to, claims for breach of trade secret law, claims regarding breaches of confidentiality, violation of non-disclosure/non-solicitation provisions, embezzlement/conversion, employee theft, claims for wages and other claims compensation and/or reimbursement, claims for breach of contract (express or implied), claims for violation of public policy, wrongful termination, tort claims, claims for unlawful discrimination and/or harassment (including, but not limited to, race, religious creed, color, national origin, ancestry, physical disability, mental disability, gender identity or expression, medical condition, marital status, age, pregnancy, sex or sexual orientation ) to the extent allowed by law, labor claims for unpaid wages, overtime, missed rest period or missed meal periods, wage penalties, and claims for violation of any of the federal, state, or other government law, statute, regulation, or ordinance, except for claims for workers’ compensation, unemployment insurance benefits and petitions or charges that could be brought before the National Labor Relations Board.

1.3 Any such employment dispute shall be submitted to binding arbitration pursuant to the [FAA] using the rules for the resolution of employment disputes of the [AAA] as then in effect. The rules can be found at the AAA website, adr.org, and are also attached to this Agreement. Employee and the Company agree to submit to the jurisdiction of the arbitrator selected in accordance with the AAA rules and procedures. This arbitration procedure will be the exclusive means of redress for any employment dispute. The arbitrator’s award shall be final and binding on both Employee and the Company.

EMPLOYEES AND COMPANY MAY ONLY ARBITRATE CLAIMS AGAINST EACH OTHER IN THEIR INDIVIDUAL CAPACITY AND NOT AS A CLASS REPRESENTATIVE OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING.

Notwithstanding the waiver of an employee's right to bring or participate in a class, collective or other representative proceeding, employees may have a statutory right (e.g., under the National Labor Relations Act) to act concertedly on behalf of themselves and others to challenge this Policy in any forum, and if an employee acts concertedly to pursue any such proceeding, the Company will not retaliate against an employee for doing so. The Company is entitled, however, to enforce this Policy, including employee’s agreement to arbitrate all claims and to forego pursuing any covered dispute on a class, collective or representative basis, and is entitled to seek dismissal of any such class, collective or representative action and otherwise assert this Policy as a defense in any proceeding. Any class action suit that is not subject to this waiver under the law (such as PAGA claims) will still be subject to arbitration under this agreement, to the extent allowable by law.

BOTH THE COMPANY AND EMPLOYEES UNDERSTAND THAT BY USING ARBITRATION TO RESOLVE DISPUTES THEY ARE GIVING UP ANY RIGHT THAT THEY MAY HAVE TO A JUDGE OR JURY TRIAL WITH REGARD TO ALL ISSUES CONCERNING EMPLOYMENT.

5.4 SEVERABILITY OF TERMS. If any term, provision, covenant or condition of this policy is held by a court of competent jurisdiction or an arbitrator to be invalid, void, or unenforceable, the remaining terms and provisions of this policy will remain in full force and effect and shall in no way be affected, impaired or invalidated.

(Id. at Ex. A, pp. CHICO-000003-CHICO-000005, capitalizing and bolding in original.)

It addresses arbitrator selection, explains how to initiate arbitration, and discusses arbitration locations, the applicable laws and rules the arbitrator should apply, discovery, motion practice, written decisions, judicial review, and costs and fees:

3.1 The employee and the Company will select an arbitrator by mutual agreement. If the employee and the Company are unable to agree on a neutral arbitrator, either party may elect to obtain a list of arbitrators from the Judicial Arbitration and Mediation Service, the American Arbitration Association, or any other reputable dispute resolution organization.

3.2 The demand for arbitration must be in writing and must be made by the aggrieved party within the statute of limitations period provided under applicable California and/or federal law for the particular claim. Failure to make a written demand within the applicable statutory period constitutes a waiver to raise that claim in any forum. Arbitration proceedings will be held in Los Angeles County, California, or in the county wherein the employee worked with the Company.

3.3 The arbitrator shall apply applicable California and/or federal substantive law to determine issues of liability and damages regarding all claims to be arbitrated, and shall apply the California Evidence Code to the proceeding. The parties shall be entitled to conduct all discovery to which they would have been entitled to had the parties’ controversy been filed in a California Superior Court and the arbitrator shall have the power to limit such discovery pursuant to motions and protective orders under the same rules and limitations as if he/she were a California Superior Court judge. The arbitrator shall hear motions for summary disposition as provided in the California Code of Civil Procedure.

3.4 Unless otherwise specified in this arbitration policy, the arbitrator shall rely on the California Arbitration Act, California Code of Civil Procedure § 1282 et seq., to conduct the arbitration and any pre-arbitration activities.

3.5 Within thirty (30) days following the hearing and the submission of the matter to the arbitrator, the arbitrator shall issue a written opinion and award which shall be signed and dated. The arbitrator’s award shall decide all issues submitted by the parties, and the arbitrator may not decide any issue not submitted. The arbitrator shall prepare in writing and provide to the parties a decision and award which includes factual findings and the reasons upon which the decision is based. The arbitrator shall be permitted to award only those remedies in law or equity which are requested by the parties and allowed by law.

3.6 The decision of the arbitrator shall be binding and conclusive on the parties and cannot be reviewed for error of law or legal reasoning of any kind. Judicial review of the arbitrator’s award is limited egregious disregard for the law. Judgment upon the award rendered by the arbitrator may be entered in any court having proper jurisdiction.

3.7 The cost of the arbitrator and other incidental costs of arbitration that would not be incurred in a court proceeding shall be borne by the Company. The parties shall each bear their own costs and attorneys’ fees in any arbitration proceeding, provided, however, that the arbitrator shall have the authority to require either party to pay the costs and attorneys’ fees of the other party, as is permitted under federal or state law, as a part of any remedy that may be ordered.

It includes “Miscellaneous Provisions” regarding suits filed in court or with administrative agencies, retroactivity, and policy modifications:

5.1 FILING OF LAWSUIT IN COURT OR WITH ADMINISTRATIVE AGENCY. If either party to this arbitration agreement files a lawsuit against the other in a court or administrative agency instead of requesting arbitration of the dispute, the party seeking to enforce this arbitration agreement can serve the suit-filing party with written notice of this arbitration agreement. If the party seeking to enforce the arbitration agreement provides this written notice, the party filing suit has five (5) days from the date of service (not extended for any time period, regardless of the manner of service) to personally serve a writing on the party seeking to enforce the arbitration agreement, agreeing to arbitrate the dispute. If the suit-filing party does not timely serve his/her/their agreement to arbitrate and the party seeking to enforce the arbitration agreement successfully compels the suit-filing party to arbitration, the party seeking to enforce this arbitration agreement shall be entitled to the reasonable attorneys’ fees it incurred in enforcing this arbitration agreement.

5.2 RETROACTIVITY OF THIS ADDENDUM. The terms of this Addendum apply retroactively to any and all controversies, disputes or claims between the employee and the Company that have accrued prior to the date of this Addendum, including any and all controversies, disputes or claims that were subject to any prior agreements that are superseded by this Addendum, unless such controversy, dispute or claim is currently pending in any court, administrative agency or arbitration proceeding.

5.3 MODIFICATIONS OF POLICY. Only the Company’s Board of Directors may modify this policy in a signed writing and only as is necessary to make this policy enforceable under any federal, state, or local law or other applicable case law effective after this policy’s initial dissemination to its workforce. Otherwise, no employee can modify this policy in any manner or enter into any agreement that is contrary to this policy. If any modification to this policy is made by the Company, the Company will provide the employee written notice prior to the modifications becoming effective.

As with all other provisions of the Employee Handbook, it is your responsibility and obligation to understand these new policies regarding Arbitration and Class Actions. If you cannot understand English, it is your obligation to have it translated.

Nothing in this update shall be considered to modify your status as an “at-will” employee.

Nothing in this update modifies any other policies not specifically indicated above or as specified in any prior official Addendums to the Employee Handbook (except as modified above) and all such policies remain in full force and effect.

This is to acknowledge that you have received this Addendum to the Employee Handbook. You further understand and agree that you are bound by the provisions of the Employee Handbook, including this Addendum to the Employee Handbook, relating to the mandatory, binding arbitration of any employment-related dispute(s).

Your signature below also certifies that you understand that by agreeing to arbitration, you and the Company are waiving your right to participate in class actions of employment matters, and you and the Company are waiving the right to a trial by jury of employment matters. It supersedes all prior agreements, understandings and representations concerning your employment with the Company.

Your signature below also certified that you understand that this Addendum applies retroactively, and covers all employment disputes that have accrued between you and the Company prior to the date of this Addendum.

Notably, the signature lines are blank. There is no printed name or signature from Plaintiff or Defendant’s representative. (See ibid.)

Defendant asserts that Plaintiff e-signed the agreement. (See Motion, p. 1; see also Sharma Decl., ¶ 6, Ex. A, p. CHICO-000001.)

Plaintiff contends the motion should be denied because Defendant fails to demonstrate that:

“Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law.” (Cal. Evid. Code § 1400.)

In Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4^th 836, which Plaintiff cites (see Opposition, pp. 4-5), the Court of Appeal held that “the trial court properly denied a petition to compel arbitration where the employee did not recall signing the arbitration agreement, and the employee’s electronic signature was not authenticated.” (Knight, supra, at ¶ 5:321.2.)

“An ‘electronic signature is attributable to a person if it was the act of the person[.]’” (Id. at ¶ 5:321.3.) “[T]he act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5^th 541, 545.) “For example, a party may establish that the electronic signature was ‘the act of the person’ by presenting evidence that a unique login and password known only to that person was required to affix the electronic signature, along with evidence detailing the procedures the person had to follow to electronically sign the document and the accompanying security precautions.” (Ibid.; see also Knight, supra, at ¶¶ 5:321.4-5:321.5.)

* the arbitration agreement (see Sharma Decl., Ex. A, pp. CHICO-000002-CHICO-000005);

* a separate document purporting to show that Plaintiff e-signed the agreement on 12/28/20 at 12:53 a.m. (see id. at Ex. A, p. CHICO-000001); and

* the declaration of Asheet Sharma, Defendant’s Director of Operations (see id. at ¶¶ 1-7).

The separate document appears to be a copy of a computer printout titled “Eva Gutierrez – Arbitration Agreement[.]” (Id. at Ex. A, p. CHICO-000001, bolding in original.) Under the title, it states:

(Ibid., bolding in original.) It cannot be determined on the document’s face whether Plaintiff, in fact, e-signed the agreement or whether it is her e-signature.

2. I have been employed by Chico Foods LLC ("Defendant") for about 10 years. I am currently the Director of Operations for Defendant.

3. As the Director of Operations, I have access to business records, including personnel records of current and former employees of Defendant. In the ordinary course of business and at all times referenced in this Declaration, Defendant maintains copies of employees’ personnel records, including signed agreements. I have reviewed the personnel records pertaining to Plaintiff Eva Gutierrez (“Plaintiff”), who was an employee of Defendant, and based thereon, I have knowledge of her employment with Defendant.

4. The business records of Defendant referenced in this Declaration were prepared and maintained by employees who had a business duty to do so and were kept in the ordinary course of business. The entries made in such business records were made at or near the time of the occurrences of the events recorded in such records. In addition, the business records were in all instances kept in a safe and secure location.

5. According to applicable business records, Defendant employed Plaintiff to work as a Team Member at its restaurant located at 4085 Railroad Ave., Redding, California. Plaintiff was hired on or about December 28, 2020.

6. As a part of onboarding, Defendant provided Plaintiff with certain human resources related documents, including the “Addendum to Employee Handbook” (“Arbitration Agreement”), for her review and signature. On December 28, 2020, Plaintiff electronically signed the Arbitration Agreement. Attached hereto as Exhibit A is a true and correct copy of Plaintiff's signed Arbitration Agreement.

(Id. at ¶¶ 2-6.) The paragraphs fail to show that Defendant required Plaintiff to use “a unique login and password . . . to affix the electronic signature,” and they fail to “detail[] the procedures” Plaintiff “had to follow to electronically sign the document and the accompanying security precautions.” (Bannister, supra, 64 Cal.App.5^th at 545.)

Defendant’s reply declaration from Luz Price, Defendant’s district manager, states:

2. At all relevant times, Defendant used an online human resources platform. Defendant’s online human resources platform includes an applicant portal. As part of my job duties, I know how to use Defendant’s online human resources platform including the applicant portal. As part of my job duties, I also know Defendant’s process for hiring employees.

3. Like all applicants, when plaintiff Eva Gutierrez applied for employment with Defendant, she filled out an online application. The online application requires each applicant to provide his or her email address. The data from the online application is automatically saved in Defendant’s online human resources platform. Access to the applicant portal requires use of a unique username and private password.

4. Once Defendant decided to make a conditional offer of employment to Ms. Gutierrez, an email was sent to Ms. Gutierrez with a link to the applicant portal so she could create a private password of her own choosing. After clicking the link, Ms. Gutierrez would be required to enter the email address associated with her employment application. Upon doing so, the Defendant’s online human resources platform would have automatically sent Ms. Gutierrez an email with a unique temporary passcode for the applicant portal. Next, Ms. Gutierrez would have been required to use the temporary passcode and the email address associated with her employment application to create a new private password. Defendant does not know or have access to Ms. Gutierrez’s temporary passcode or the private password she created.

5. The applicant portal would not have allowed Ms. Gutierrez to proceed to the next page unless she created a new private password. Ms. Gutierrez had access to the Addendum to the Employee Handbook (i.e., the arbitration agreement) after she logged into the applicant portal with her unique username and private password. If she wanted to, Ms. Gutierrez could have printed and hand signed the Addendum to the Employee Handbook.

6. Ms. Gutierrez could have digitally signed the Addendum to the Employee Handbook through the applicant portal while logged in with her unique username and password. To digitally sign the Addendum to the Employee Handbook, Ms. Gutierrez would have clicked a button that states “Digitally Sign” at the bottom of the screen showing the Addendum to the Employee Handbook. After clicking the “Digitally Sign” button, Ms. Gutierrez would have been prompted to re-enter her private password and click a second button that states “Digitally Sign”. If Ms. Gutierrez did not want to digitally sign the Addendum to the Employee Handbook, she could click a button that states “Cancel”.

7. Once Ms. Gutierrez digitally signed the Addendum to the Employee Handbook, the Addendum to the Employee Handbook was finalized, including her first and last names, unique username, and the date and time that she digitally signed. The digitally signed Addendum to the Employee Handbook was automatically saved in Defendant’s digital records in the ordinary course of business. Defendant’s digital records cannot be modified and are password protected.

8. Attached hereto as Exhibit 1 is a true and correct copy of the Addendum to the Employee Handbook with Ms. Gutierrez’s electronic signature. Only a person with Ms. Gutierrez’[s] unique username and password could have digitally signed the Addendum to the Employee Handbook. Given the above mentioned process, the electronic signature was made by Ms. Gutierrez. Exhibit 1 was saved in Defendant’s digital records. I have access to the Addendum to the Employee Handbook with Ms. Gutierrez’s electronic signature as part of my job duties.

The Price declaration arguably is sufficient to meet Defendant’s burden to show that Plaintiff e-signed the agreement, but Plaintiff has not received a fair opportunity to respond.[1]

The Court is inclined to hold an evidentiary hearing. Instead of making an affirmative representation that she did not e-sign the agreement, Plaintiff is playing opossum. Her opposition papers are silent and intentionally fail to say whether she e-signed it. An evidentiary hearing will ensure that the e-signature issue is resolved on a full factual record.

Assuming arguendo that an agreement to arbitrate exists, the next issue concerns enforcement.

Plaintiff claims the agreement is unenforceable because it is unconscionable. (See Opposition, pp. 7-12.)

“[U]nconscionability has both a ‘procedural’ and a ‘substantive’ element,” the former focusing on “oppression” or “surprise” due to unequal bargaining power, the latter on “overly harsh” or “one-sided” results. “The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” But they need not be present in the same degree. “Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.” In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.

(Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, internal citations omitted, emphasis in original.)

Plaintiff asserts that the agreement is procedurally unconscionable because it is a contract of adhesion. (See Opposition, pp. 7-8.)

The Court disagrees. “[A] predispute arbitration agreement is not invalid merely because it is imposed as a condition of employment.” (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1122–1123.) “[T]he mandatory nature of an arbitration agreement does not, by itself, render the agreement unenforceable.” (Ibid.; see also Knight, supra, at ¶ 5:146 [“The mere fact an adhesion contract is involved does not per se render the arbitration clause unenforceable. Rationale: Such contracts are ‘an inevitable fact of life for all citizens – businessman and consumer alike.’”], emphasis in original; Reply, pp. 5-6.)

Plaintiff argues that the agreement is substantively unconscionable because it is overbroad in scope:

Here, the purported Agreement is overbroad and requires the arbitration of almost any controversy, claim or dispute, except for claims for workers’ compensation, unemployment insurance benefits and petitions or charges that could be brought before the National Labor Relations Board. . . .

On its face, the Arbitration Agreement applies to and prohibits Plaintiff from filing claims with federal, state, and local administrative bodies including the Department of Fair Employment and Housing, and the Equal Employment Opportunity Commission (“EEOC”). Claims that should have been excluded, like FEHA[2] and EEOC claims, are instead subject to arbitration and the Agreement restricts Plaintiff’s statutory rights and denies government agencies who are not parties to the agreement the right to investigate these claims. . . .

The Court disagrees. Plaintiff’s complaint asserts “wage and hour” causes of action based on alleged violations of the Labor Code and the Unfair Competition Law. (See Complaint, ¶¶ 44-108.) These kinds of causes of action are routinely arbitrated. More importantly, Plaintiff is not asserting FEHA or EEOC claims, and there is no evidence that she ever tried to file claims with a federal, state, or local administrative entity or that Defendant ever tried to compel arbitration of such claims. Her “overbroad” argument is hypothetical and inapplicable to the causes of action alleged in the complaint and at issue in Defendant’s motion.

The Court notes that the agreement’s severability provision is available to sever any “overbroad” term if the issue becomes material and ripe in the future. (See also Reply, p. 6 [noting that the agreement’s scope is limited “to the extent allowed by law”].)

Next, Plaintiff contends the agreement is substantively unconscionable because it provides for unilateral modification. (See Opposition, pp. 9-10 [noting that only Defendant is allowed to make modifications].)

“[S]ome courts hold that a provision giving the employer the unilateral right to modify the arbitration agreement or alter its scope renders the agreement illusory.” (Knight, supra, at ¶ 5:245.6, emphasis in original; see also id. at ¶ 5:155.1 [same].)

On the other hand, several decisions instruct that “[a]n arbitration agreement between an employer and an employee may reserve to the employer the unilateral right to modify the agreement.” (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4^th 50, 61; see also, e.g., Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4^th 695; 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4^th 1199; Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4^th 373; Cobb v. Ironwood Country Club (2015) 233 Cal.App.4^th 960; Peng v. First Republic Bank (2013) 219 Cal.App.4^th 1462; Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4^th 1425; Ausmus v. Pacific Bell (2000) 23 Cal.4^th 1.) “But the covenant of good faith and fair dealing implied in every contract requires the employer to exercise that right fairly and in good faith so as not to deprive the employee of his or her reasonable expectations under the agreement.” (Avery, supra, 218 Cal.App.4^th at 61.) Consequently, “the fact that one party reserves the implied power to terminate or modify a unilateral contract is not fatal to its enforcement, if the exercise of the power is subject to limitations, such as fairness and reasonable notice.” (Ausmus, supra, 23 Cal.4^th at 16; see also Cobb, supra, 233 Cal.App.4^th at 965 [same]; Harris, supra, 248 Cal.App.4^th at 388-390 [Second District applying same rule].)

The Court finds the modification provision enforceable. The plain language merely authorizes prospective changes to the extent “necessary” to make the agreement compliant with future “federal, state, or local law or other applicable case law[.]” (Ibid.; see also Avery, supra, 218 Cal.App.4^th at 61 [prohibiting unilateral changes “apply[ing] retroactively to ‘accrued or known’ claims”].) And it mandates “written notice” to employees “prior to” the changes taking effect. (Sharma Decl., Ex. A, p. CHICO-000005.) These limitations satisfy the “fairness and reasonable notice” requirements. (Cobb, supra, 233 Cal.App.4^th at 965; see also Reply, pp. 7-8.)

Last, Plaintiff cites Ramirez v. Charter Communications, Inc. (2022) 75 Cal.App.5^th 365, claiming the agreement is substantively unconscionable because it awards attorney fees to the prevailing party. (See Opposition, pp. 10-12.)

In Ramirez, the employer terminated the plaintiff’s employment, then the plaintiff filed suit against the employer under FEHA, then the employer moved to compel arbitration. The trial court found the arbitration agreement unconscionable, in part, because it contained a provision “award[ing] attorney fees to the prevailing party on a motion to compel arbitration.” (Ramirez, supra, 75 Cal.App.5^th at 369.) The Court of Appeal affirmed, reasoning that the provision conflicted with FEHA, which “allows a prevailing defendant to recover attorney fees only if the plaintiff’s action was frivolous, unreasonable, or groundless.” (Id. at 378, emphasis added.) The Court of Appeal held that the provision could not be severed given that the agreement included multiple other unconscionable provisions. (See id. at 386-387.)

Ramirez creates a split with Patterson v. Superior Court (2021) 70 Cal.App.5^th 473. The Patterson court analyzed the same fees provision that the Ramirez court analyzed. Both courts found the provision conflicting as written, yet the Patterson court held that it was enforceable because it impliedly incorporated FEHA’s fees rule. (See Patterson, supra, 70 Cal.App.5^th at 490 [stating that “we construe the prevailing party fee provision . . . to impliedly incorporate the FEHA asymmetric rule for awarding attorney fees and costs”]; see also Ramirez, supra, 75 Cal.App.5^th at 377 [noting that the Patterson court made the fees provision “enforceable by implying a term that incorporates the FEHA asymmetrical rule of attorney fees”].)

It is unnecessary to pick. Plaintiff does not allege FEHA claims. There is no actual conflict with FEHA’s fees rule here. Ramirez and Patterson do not apply and fail to render Defendant’s fees provision or arbitration agreement unenforceable.

Accordingly, Plaintiff fails to establish unconscionability, and the Court finds the agreement enforceable (assuming Defendant demonstrates an agreement to arbitrate).

The Court strikes Plaintiff’s class claims. The FAA, which expressly applies here, preempts California law and requires Plaintiff’s claims to be arbitrated on an individual basis. (See, e.g., Knight, supra, at ¶ 5:49.4d [discussing Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4^th 348 and AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333].)

Plaintiff asks the Court to stay the case as to Plaintiff’s non-individual/representative PAGA claim until the California Supreme Court decides a case called Adolph v. Uber Technologies, Inc. (See Opposition, pp. 13-14.)

Defendant argues that the Court should follow Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (“Viking River”) and dismiss the non-individual/representative PAGA claim. (See Reply, pp. 10-11.)

The Court agrees with Plaintiff. In Viking River, the United States Supreme Court held that the FAA preempts California law and compels individual PAGA claims to be arbitrated. (See, e.g., Viking River, supra, 142 S.Ct. at 1924-1925.) The High Court also held that non-indvidual/representative PAGA claims are not arbitrable, but PAGA plaintiffs lose standing to prosecute the non-individual/representative PAGA claims once their individual PAGA claims get sent to arbitration. (See, e.g., id. at 1925.) The California Supreme Court will decide the standing question in Adolph. If Defendant shows an agreement to arbitrate, the Court anticipates compelling Plaintiff’s individual PAGA claim to arbitration and staying the case as to the non-individual/representative PAGA claim.

[1] On 8/15/22, Plaintiff filed a one-page sur-reply without leave. It does not suffice in terms of a reasonable opportunity to address the reply evidence.

[2] “FEHA” refers to the Fair Employment and Housing Act.