Judge: David S. Cunningham, Case: 22STCV31353, Date: 2023-02-08 Tentative Ruling


Case Number: 22STCV31353    Hearing Date: February 8, 2023    Dept: 11

Tentative Ruling Re: Motion to Compel Arbitration Re: 22STCV31353 (Torres) 

 

Date:                                   2/8/23 

Time:                                  10:00 am 

Moving Party:           West Coast Drywall & Company, Inc. (“Defendant”) 

Opposing Party:        Tomas Torres (“Plaintiff”) 

Department:                  11         

Judge:                                 David S. Cunningham III 

________________________________________________________________________ 

 

TENTATIVE RULING 

 

The hearing on Defendant’s motion to compel arbitration is continued. 

 

BACKGROUND 

 

This is a putative class action.  Plaintiff used to work for Defendant.  He seeks to represent a class of similar current and former non-exempt employees.  The complaint alleges a single Unfair Competition Law cause of action based on several alleged “wage and hour” claims. 

 

In November 2018, Plaintiff signed Defendant’s arbitration agreement during the onboarding process.  (See Welsh Decl., Ex. A.) 

 

On 6/15/22, Plaintiff submitted a demand for arbitration under the agreement to JAMS.  (See Davis Decl., ¶ 2.) 

 

On 6/29/22, JAMS created an arbitration invoice to be sent to Defendant or Defendant’s agent for service of process.  (See id. at ¶ 3.) 

 

On 7/12/22, JAMS purportedly sent the invoice to Defendant’s agent for service of process via U.S. mail.  (See id. at ¶ 4.) 

 

On 8/12/22, Plaintiff’s counsel e-mailed JAMS to withdraw from the arbitration pursuant to Code of Civil Procedure section 1281.97 due to Defendant’s alleged failure to pay the invoice on time.  (See id. at ¶ 6.) 

 

On 9/7/22, JAMS closed the arbitration proceeding.  (See ibid.) 

 

Now, Defendant moves to compel arbitration. 

 

DISCUSSION 

 

Existence 

 

“[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. Prac. Guide: Alt. Disp. Res. (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.) 

 

It is undisputed that an agreement to arbitrate exists and that Plaintiff signed the agreement.  (See Welsh Decl., Ex. A.) 

 

Waiver 

 

Code of Civil Procedure section 1281.97 states: 

 

(a)(1) In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration under Section 1281.2. 

 

(2) After an employee or consumer meets the filing requirements necessary to initiate an arbitration, the arbitration provider shall immediately provide an invoice for any fees and costs required before the arbitration can proceed to all of the parties to the arbitration. The invoice shall be provided in its entirety, shall state the full amount owed and the date that payment is due, and shall be sent to all parties by the same means on the same day. To avoid delay, absent an express provision in the arbitration agreement stating the number of days in which the parties to the arbitration must pay any required fees or costs, the arbitration provider shall issue all invoices to the parties as due upon receipt. 

 

(b) If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may do either of the following: 

 

(1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction. 

 

(2) Compel arbitration in which the drafting party shall pay reasonable attorney's fees and costs related to the arbitration. 

 

(Code Civ. Proc. Sec. 1281.97, subds. (a)-(b).). Per the plain language, “unless the parties expressly agree to the contrary, the drafting party’s receipt of the invoice triggers the 30-day clock under . . . subdivision (a)(1).”  (Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 774, emphasis added.)   

 

There is no express contrary agreement in Defendant’s arbitration agreement; thus, section 1281.97 applies here. 

 

Plaintiff contends Defendant violated section 1281.97.  Specifically, Plaintiff claims JAMS mailed the invoice to Defendant’s agent for service of process on 7/12/22, payment was due within 30 days, and Defendant failed to pay within 30 days and still has not paid. 

 

Defendant asserts that the agent for service of process never received the invoice and never transferred it to Defendant, so the 30-day payment period never started.  (See, e.g., Reply, pp. 2-3; see also Blakely Decl., ¶¶ 4-7; Kling Decl., ¶¶ 3-6.) 

 

The Court intends to continue the hearing.  Plaintiff’s counsel declares that a JAMS employee confirmed that JAMS mailed the invoice to the agent for service of process on 7/12/22, but the statement is hearsay and may lack foundation.  (See Davis Decl., ¶ 4.)  Defense counsel declares that Defendant never received the invoice, but he is Defendant’s attorney, not Defendant’s representative regarding documents received by Defendant.  (See Blakely Decl., ¶¶ 5-7.)  The representative of the agent for service of process declares that she “found no record” of the agent “receiving any documents related to this matter between” 6/21/22 and 9/29/22 “at the California Address[,]” but the statement is vague, ambiguous, and inconclusive.  (Kling Decl., ¶ 6.)  Further, the Court is interested in whether the purported act of service by mail expanded the 30-day payment period and, if so, whether Plaintiff’s withdrawal on 8/12/22 was too soon.  Supplemental briefing is needed to address these issues. 

 

Unconscionability 

 

In the alternative, Plaintiff argues that Defendant’s agreement is unconscionable. 

 

The argument is dubious given the fact that Plaintiff sent a demand for arbitration to JAMS.  The Court is inclined to find that Plaintiff waived the unconscionability issue. 

 

Assuming arguendo that he did not waive the issue, the Court is inclined to find the argument unavailing. 

 

“‘[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.”  (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)  “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.”  (Ibid.)  “But they need not be present in the same degree.”  (Ibid.)  “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.”  (Ibid.)  “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.”  (Ibid.)   

 

Plaintiff contends the agreement is procedurally unconscionable because it was presented on a “take it or leave it” basis, and he did not receive an opportunity to review it. 

 

The Court disagrees.  The agreement contains an opt out provision that gives the employee 10 days to opt out.  (See Welsh Decl., Ex. A, ¶ 5.)  The provision is reasonable. 

 

Plaintiff argues that the agreement is substantively unconscionable because (1) it requires mediation as a condition precedent to arbitration without tolling the statute of limitations, (2) it is overbroad in that it waives representative PAGA claims, (3) it does not guarantee that Defendant must pay costs associated with arbitration, (4) it does not guarantee attorney fees and costs to the prevailing party, (5) it is silent concerning discovery, and (5) it does not require a written decision and judicial review. 

 

The Court rejects point (1).  Plaintiff fails to cite authority prohibiting pre-arbitration mediation, a lesser type of alternative dispute resolution.  Regardless, Plaintiff demanded arbitration earlier, Defendant is moving to compel arbitration now, and neither side has asked the Court to compel mediation. 

 

The Court also rejects point (2).  There is no PAGA cause of action in this case, and, even if there were one, Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 allows PAGA causes of action to be split between individual (arbitrable) and representative (non-arbitrable) claims. 

 

Point (3) fails because Defendant concedes that Defendant, not Plaintiff, is responsible for such costs under the agreement.  (See Reply, p. 6.) 

 

Points (4), (5), and (6) fail because the agreement incorporates the JAMS rules, which permit the arbitrator to award all remedies permissible by law, including fees and costs (Rule 24) and which also provides for discovery (Rule 17) and written decisions (Rule 24). (See https://www.jamsadr.com/rules-employment-arbitration/english.)