Judge: David S. Cunningham, Case: 22STCV21554, Date: 2024-04-15 Tentative Ruling
Case Number: 22STCV21554 Hearing Date: April 15, 2024 Dept: 11
McGhee (22STCV21554)
Tentative Ruling Re: Motion to Compel Arbitration
Date: 4/15/24
Time: 10:00
am
Moving Party: E.B. Bradley Co. (“EBB”) and West
Coast Laminating, LLC (“WCL”) (collectively “Defendants”)
Opposing Party: Roberto Lopez
Department: 11
Judge: David
S. Cunningham III
________________________________________________________________________
TENTATIVE RULING
EBB
The current record is inadequate
to resolve the signature issue. The
Court intends to hold an evidentiary hearing with live testimony and
cross-examination under oath, if necessary.
As to enforcement, the Court finds
that Lopez should be provided notice and an opportunity to opt out of
arbitration.
If an agreement to arbitrate ends
up being found to exist and to otherwise be enforceable, the Court intends to
compel Lopez’s individual Private Attorneys General Act (“PAGA”) claim to
arbitration and to stay the case as to the representative PAGA claim.
WCL
The motion to compel arbitration
is denied without prejudice.
BACKGROUND
Plaintiff Robert Lopez worked for
Defendants. He alleges that Defendants
subjected him and the putative class members to numerous wage-and-hour
violations.
At issue here is Defendants’
motion to compel arbitration of Lopez’s individual claims.
DISCUSSION
Existence and Assent:
“[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.4th 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.4th 390, 396, emphasis in original.)
The
burden of proof rests with the petitioner.
(See Rosenthal, supra, 14 Cal.4th 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.4th 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. Practice Guide: Alternative Dispute Resolution
(The Rutter Group December 2023 Update) ¶ 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.)
Defendants
claim Lopez signed EBB’s arbitration agreement on September 23, 2022. (See Selmon Decl., ¶ 5.) The agreement:
*
identifies Lopez and EBB as the contracting parties (see Selmon Decl., Ex. A,
p. 0000211);
*
requires all employment-related controversies to be “settled by binding
arbitration pursuant to the Federal Arbitration Act [(‘FAA’)] in Los Angeles
County” (ibid.);
*
states that “[t]he arbitration will be administered by JAMS in compliance with
the then existing JAMS Employment Arbitration Rules & Procedures, a copy of
which can be obtained upon request or from the JAMS website at www.jamsadr.com/rules-employment-arbitration” (ibid.);
*
waives class and representative claims (see ibid.);
*
notes that the arbitrator must provide a written decision (see ibid.);
*
discusses arbitration fees and costs (see id. at Ex. A, §§ 8, 10, 11);
*
contains modification and severance provisions (see ibid.); and
*
emphasizes:
THIS AGREEMENT TO ARBITRATE MEANS THAT THERE WILL BE NO
COURT OR JURY TRIAL OF DISPUTES BETWEEN YOU AND THE COMPANY WHICH ARISE OUT OF
YOUR EMPLOYMENT OR THE TERMINATION OF YOUR EMPLOYMENT.
* * *
PLEASE READ THE AGREEMENT CAREFULLY, AND SIGN BELOW. THE AGREEMENT APPLIES TO YOUR EMPLOYMENT
WHETHER OR NOT YOU SIGN THE ACKNOWLEDGEMENT, WHICH IS INTENDED SIMPLY TO
CONFIRM THAT YOU HAVE RECEIVED AND READ YOUR COPY.
(Ibid.,
emphasis in original.)
Facts
and terms like these usually suffice to demonstrate an agreement to arbitrate,
but Lopez raises an assent challenge. He
asserts that the signature on the agreement does not look like his signature
and that he believes he did not sign it.
(See Lopez Decl., ¶ 8.)
In
response, Defendants contend (1) Lopez failed to submit “admissible forensic
evidence” showing that it is not his signature, (2) the declaration of
Defendants’ vice president of human resources states that the signature
“conforms to other documents he signed as part of the employment onboarding
process[,]” and (3) even assuming he did not sign the agreement, he impliedly
assented by continuing to work after receiving it. (Selmon Decl., ¶ 5; see also Reply, pp. 7-8.)
The
Court favors a continuance. Lopez’s
declaration is more cagey than affirmative; Defendants’ vice president does not
show that she is a handwriting expert, nor does she attach the other documents
that Lopez allegedly signed; and, while continued work can qualify as implied
assent, the record indicates that Lopez stopped working just three days after
EBB provided the arbitration agreement to him.
(See Selmon Decl., ¶¶ 5, 7; see also Lopez Decl., ¶¶ 3, 7.) Under these circumstances, the best option is
to hold an evidentiary hearing with live testimony and cross-examination under
oath to resolve the signature issue.
Enforcement
Notice
The
following timeline is relevant:
* on
May 20, 2021, EBB hired Lopez (see Lopez Decl., ¶ 3; see also Selmon Decl., ¶
5);
* on
July 5, 2022, Plaintiff Harold Levall McGhee filed the instant putative class
action;
* in
mid-September 2002, EBB provided the arbitration agreement to Lopez (see Lopez
Decl., ¶ 5);
* on
September 23, 2002, Lopez allegedly signed the agreement (see Selmon Decl., ¶
6, Ex. A);
* on
January 23, 2024, McGhee filed the second amended complaint, adding Lopez as a
named Plaintiff;
* on
February 5, 2024, Defendants moved to compel arbitration.
Assuming
arguendo that an arbitration agreement exists, Lopez claims it is unenforceable
because Defendants failed to give him notice of the pendency of this lawsuit
when they presented the agreement to him.
He contends “courts routinely exercise discretion to invalidate or
refuse to enforce arbitration agreements implemented while a putative class
action is pending if the agreement might interfere with the putative class
members’ rights.” (Opposition, p. 7
[citing Balasanyan v. Nordstrom, Inc. (S.D. Cal. 2013) 294 F.R.D. 550, O’Connor
v. Uber Technologies, Inc. (N.D. Cal. Dec. 6, 2013, No. C-13-3826 EMC) 2013
WL 6407583, and Jimenez v. Menzies Aviation Inc. (N.D. Cal. Aug. 17,
2015, No. 15-cv-02392-WHO) 2015 WL 4914727].)
Defendants
disagree. They contend Lopez “fails
to cite any controlling California authority holding an arbitration agreement
is rendered unconscionable and/or unenforceable due to the employer’s failure
to advise an employee of a pending class or representative action.” (Reply, p. 6.) They contend the federal decisions are
nonbinding. (See id. at pp. 6-7.)
Balasanyan does not seem
to help Lopez. There, the proposed class
included new employees who had been hired after the plaintiffs filed the
case. Although the defendant required
the new employees to sign arbitration agreements as the case was pending, the
district court held that the new employees should be excluded from the
class. (See Balasanyan, supra,
294 F.R.D. at 573-574.)
In O’Connor, the defendant
gave updated arbitration agreements to employees subsequent to the filing of a
class action. The district court
determined, under Federal Rule of Civil Procedure 23(d), that it had authority
to control the defendant’s post-filing communications with putative class
members. The district court ordered the
defendant to give the employees notice of the arbitration agreements, to
explain the legal effect of the agreements to them, and to provide them a new
opt-out period to decide whether to accept or reject the agreements. (See O’Connor, supra, 2013 WL 6407583,
at *6-*7.)
In Jimenez, the defendant
implemented an arbitration policy during a class action. The policy obligated employees to sign an
arbitration agreement with a class waiver.
Judge William Orrick held that the defendant’s “issuance” of the
arbitration policy “without advising putative class members of its impact on
their class claims constitute[d] an improper class communication and ma[de]”
the policy and the agreement “unenforceable[.]”
(Jimenez, supra, 2015 WL 4914727, at *3; see also id. at *5-*6
[also finding the agreement unenforceable since it failed to “provid[e] an
opt-out procecedure”].)
The O’Connor and Jimenez
rulings rely on Rule 23(d), not findings of unconscionability. In fact, the O’Connor and Jimenez
courts declined to determine whether the agreements there were
unconscionable. The key, rather, was
that the defendants had engaged in improper communications with putative class
members by obligating them to sign arbitration agreements without giving them
sufficient notice and a chance to opt out.
The Court finds O’Connor
and Jimenez persuasive and especially favors the approach taken in O’Connor. The Court is inclined to order Defendants to
provide notice and an opt-out period to Lopez (and, perhaps, to the putative
class members he represents who are in the same situation as him).
Depending on whether Lopez
accepts or opt outs, the evidentiary hearing on the signature issue could
become unnecessary.
PAGA
Lopez also claims the agreement
is unenforceable because it “waives [his] right to bring or participate in a
PAGA claim in any forum[.]” (Opposition,
p. 5.)
Prior to Viking River Cruises,
Inc. v. Moriana (2022) 142 S.Ct. 1906 (“Viking River”), the
applicable law was Iskanian v. CLS Transportation Los Angeles, LLC
(2014) 59 Cal.4th 348. “Iskanian’s
principal rule prohibits waivers of ‘representative’ PAGA claims in the first
sense.” (Viking River, supra, 142
S.Ct. at 1916, underlined case name added.)
“That is, it prevents parties from waiving representative standing
to bring PAGA claims in a judicial or arbitral forum.” (Ibid., emphasis in original.) “But Iskanian also adopted a secondary
rule that invalidates agreements to separately arbitrate or litigate
‘individual PAGA claims for Labor Code violations that an employee suffered,’
on the theory that resolving victim-specific claims in separate arbitrations
does not serve the deterrent purpose of PAGA.”
(Id. at 1916-1917, underlined case name added; see also, e.g., Knight,
supra, at ¶ 5:49.4m [citing California case law for the proposition that a
“single count under PAGA could not be ‘split into an arbitrable individual
claim and a nonarbitrable representative claim”].)
In Viking River, the
plaintiff “executed an agreement to arbitrate any dispute arising out of her
employment.” (Viking River,
supra, 142 S.Ct. at 1916.) “The agreement contained a ‘Class Action
Waiver’ providing that in any arbitral proceeding, the parties could not bring
any dispute as a class, collective, or representative PAGA action.” (Ibid.) “It also contained a severability clause
specifying that if the waiver was found invalid, any class, collective,
representative, or PAGA action would presumptively be litigated in court.” (Ibid.) “But under that severability clause, if any ‘portion’
of the waiver remained valid, it would be ‘enforced in arbitration.’” (Ibid.)
“After leaving her position” with the defendant, the
plaintiff “filed a PAGA action . . . in California court.” (Ibid.)
“Her complaint contained a claim that [the defendant] had failed to
provide her with her final wages within 72 hours, as required by” Labor Code
sections 101 and 102. (Ibid.) “But the complaint also asserted a wide array
of other code violations allegedly sustained by other . . . employees,
including violations of provisions concerning the minimum wage, overtime, meal
periods, rest periods, timing of pay, and pay statements.” (Ibid.)
The defendant “moved to compel arbitration of [the plaintiff’s] ‘individual’
PAGA claim” – i.e., “the claim that arose from the violation she suffered — and
to dismiss her other PAGA claims.”
(Ibid.) “The trial court denied
that motion, and the California Court of Appeal affirmed, holding that
categorical waivers of PAGA standing are contrary to state policy and that PAGA
claims cannot be split into arbitrable individual claims and nonarbitrable ‘representative’
claims.” (Ibid.)
The Court of Appeal’s ruling “was dictated by . . . Iskanian.” (Ibid., underlined case name added.) “Iskanian’s principal prohibition
required the lower courts to treat the representative-action waiver” in Viking
River “as invalid insofar as it was construed as a wholesale waiver of PAGA
standing.” (Id. at 1917, underlined case
name added.) “The agreement's
severability clause, however, allowed enforcement of any ‘portion’ of the
waiver that remained valid, so the agreement still would have permitted
arbitration of [the plaintiff’s] individual PAGA claim even if wholesale
enforcement was impossible.”
(Ibid.) “But because” Iskanian
“prohibits division of a PAGA action into constituent claims, the state courts
refused to compel arbitration of that claim as well.” (Ibid.)
The United States Supreme Court
granted review and reversed, holding, eight to one, that the FAA preempts Iskanian
“insofar as it precludes division
of PAGA actions into individual and non-individual claims through an agreement
to arbitrate.” (Id. at 1924.) The opinion instructs:
This holding compels reversal in this
case. The agreement between [the
defendant] and [the plaintiff] purported to waive “representative” PAGA claims.
Under Iskanian, this provision
was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that
aspect of Iskanian is not preempted by the FAA, so the
agreement remains invalid insofar as it is interpreted in that manner. But the severability clause in the agreement
provides that if the waiver provision is invalid in some respect, any “portion”
of the waiver that remains valid must still be “enforced in arbitration.” Based on this clause, [the defendant] was
entitled to enforce the agreement insofar as it mandated arbitration of [the
plaintiff’s] individual PAGA claim. The
lower courts refused to do so based on the rule that PAGA actions cannot be
divided into individual and non-individual claims. Under our holding,
that rule is preempted, so [the defendant] is entitled to compel arbitration of
[the plaintiff’s] individual claim.
(Id. at 1924-1925, underlined case names added.)
The opinion continues:
The remaining question is what the lower
courts should have done with [the plaintiff’s] non-individual claims. Under our holding in this case, those claims
may not be dismissed simply because they are “representative.” Iskanian’s
rule remains valid to that extent. But
as we see it, PAGA provides no mechanism to enable a court to adjudicate
non-individual PAGA claims once an individual claim has been committed to a
separate proceeding. Under PAGA's
standing requirement, a plaintiff can maintain non-individual PAGA claims in an
action only by virtue of also maintaining an individual claim in that
action. [Citation.] When an employee's own dispute is pared away
from a PAGA action, the employee is no different from a member of the general
public, and PAGA does not allow such persons to maintain suit. [Citation.]
As a result, [the plaintiff] lacks statutory standing to continue to
maintain her non-individual claims in court, and the correct course is to
dismiss her remaining claims.
(Id. at 1925, underlined case
name added.)
Four takeaways stand out:
* Iskanian’s prohibition
against waiving representative PAGA claims stands;
* Iskanian is preempted to
the extent it bars dividing PAGA claims into individual and representative
claims;
* the defendant is allowed to
compel the plaintiff’s individual PAGA claim to arbitration; and
* once the plaintiff’s individual
PAGA claim is compelled to arbitration, he or she lacks standing to maintain
the representative PAGA claim.
The High Court’s standing ruling
is nonbinding. The California Supreme
Court reversed it in Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th
1104.
Considering Iskanian, Viking
River, and Adolph, and because the FAA applies, if an agreement is
found to exist and to otherwise be enforceable, the Court intends to compel
Lopez’s individual PAGA claim to arbitration and to stay the case as to the
representative PAGA claim.
Lopez’s assertion that the
representative waiver constitutes a wholesale PAGA waiver is unavailing. The waiver states:
There will be no
right or authority for any dispute to be brought, heard or arbitrated as a
class, collective or representative action (“Class Action Waiver”), unless
otherwise provided by law.
Notwithstanding any other clause contained in this agreement, the
preceding sentence shall not be severable from this Agreement in any case in
which the dispute to be arbitrated is brought as a class, collective or
representative action. . . .
(Selmon Decl., Ex. A, p. 000211,
emphasis added.) The Court agrees with
Defendants that the italicized wording limits the scope and makes the waiver
enforceable. (See Reply, pp. 3-4.)
The Court also agrees with
Defendants that Lopez’s authorities – DeMarinis v. Heritage Bank of Commerce
(2023) 98 Cal.App.5th 776 and Westmoreland v. Kindercare
Education LLC (2023) 90 Cal.App.5th 967 – are
distinguishable. The DeMarinis
and Westmoreland waiver sections did not contain the type of limiting
language found in EBB’s agreement. (See DeMarinis,
supra, 98 Cal.App.5th at 780-781; see also Westmoreland,
supra, 90 Cal.App.5th at 971-972; Reply, pp. 4-5.)
WCL
The motion to compel is denied
without prejudice as to WCL. Both EBB
and WCL move to compel arbitration, yet there is no discussion of WCL’s right
to compel arbitration in the moving and reply briefs. WCL appears to be a nonsignatory. Rules exist permitting a nonsignatory to
compel arbitration in some instances; however, Defendants fail to address those
rules and to show that they apply.