Judge: David S. Cunningham, Case: 22STCV32401, Date: 2023-04-11 Tentative Ruling

Case Number: 22STCV32401    Hearing Date: April 11, 2023    Dept: 11

22STCV32401 (Valdez)

Tentative Ruling Re: Motion to Compel Arbitration

Date:                           4/11/23

Time:                          9:00 am

Moving Party:           Kohl’s Department Stores, Inc. (“Kohl’s” or “Defendant”)

Opposing Party:        Rubi Valdez (“Plaintiff”)

Department:              11       

Judge:                        David S. Cunningham III

________________________________________________________________________

TENTATIVE RULING

The hearing on the motion to compel arbitration is continued for supplemental briefing (five pages per side).

BACKGROUND

Defendant operates more than 1,000 department stores nationwide, including in California.  (See Cahoon Decl., ¶ 4.)

Plaintiff worked for Defendant as a non-exempt employee from 9/24/09 to 6/28/22.  (See id. at ¶¶ 6-7; see also First Amended Complaint (“FAC”), ¶ 7.)  She seeks to bring a representative action under the Private Attorneys’ General Act (“PAGA”) on behalf of aggrieved California employees to redress multiple alleged “wage and hour” violations.[1]

Here, Defendant moves to compel arbitration.

DISCUSSION

Existence and Assent

Defendant moves to compel arbitration pursuant to the Dispute Resolution Policy (“DRP”), which Defendant implemented in April 2021.  (See Ihelefeld Decl., ¶ 4.)  Defendant assigned the DRP learning course to Plaintiff and other employees via Workday, an online human resources information system.  (See ibid.)  Defendant’s Workday records indicate that Plaintiff enrolled in the DRP course on 4/7/21 and completed it that day.  (See id. at ¶ 16 and Ex. C.) 

In the opening paragraph, the DRP states:

PLEASE READ THIS DISPUTE RESOLUTION POLICY ("DRP") CAREFULLY. UNLESS A COVERED INDIVIDUAL PROPERLY ELECTS TO NOT BE BOUND BY THIS DRP, ANY COVERED DISPUTES MUST BE RESOLVED ONLY BY VOLUNTARY MEDIATION, BINDING INDIVIDUAL ARBITRATION, OR A SMALL CLAIMS COURT ACTION. THIS DRP OTHERWISE WAIVES THE RIGHT TO GO TO COURT OR AN ADMINISTRATIVE AGENCY, TO HAVE A JUDGE OR JURY TRIAL OR AN ADMINISTRATIVE HEARING, AND TO BRING OR PARTICIPATE IN A REPRESENTATIVE ACTION, MASS ARBITRATION OR PAGA ACTION.

(Id. at Ex. A, p. 1, emphasis in original.)

It also states that its purpose is to “resolv[e] covered employment-related and other disputes quickly and fairly and in a mutually beneficial way” and that “individual arbitration . . . or a Small Claims Court action, as applicable, are the sole and exclusive remedies for formal resolution of all unresolved Covered Disputes”: 

1

What is the purpose of the DRP? This DRP is aimed at resolving covered employment-related and other disputes quickly and fairly and in a mutually beneficial way. In keeping with Kohl's open door culture, associates are encouraged to use its internal resolution processes before using the arbitration or Small Claims Court provisions of this DRP. Any workplace issues, including wage and hour issues or unlawful harassment, discrimination, or retaliation, should initially be reported to a manager/supervisor, an Associate Relations/Human Resources representative, the Kohl's Integrity Hotline (www.kohlsintegrity.com or 1-800-837-7297) or through any other dispute resolution processes made available by Kohl's. For any workplace issues not resolved through Kohl's internal resolution processes, mandatory final and binding individual arbitration in accordance with the terms of this DRP or a Small Claims Court action, as applicable, are the sole and exclusive remedies for formal resolution of all unresolved Covered Disputes (as defined below), except as otherwise expressly provided in this DRP.

(Id. at Ex. A, § 1, emphasis in original.)

Additionally, it defines covered parties, covered disputes, and uncovered disputes:

2

Who is covered by the DRP? This DRP applies to the Company and all Covered Individuals (referred to in this DRP collectively as "Parties" and individually as a "Party.") "Company" means and refers to, individually and collectively, the Kohl's entity that a Covered Individual applied for employment with, or is or was employed by, including Kohl's, Inc., a Delaware corporate, and its parent, subsidiary, sibling and other affiliated operating divisions and entities, and it's or their respective agents, employees, officers, directors, and owners, who are all intended third party beneficiaries of this DRP regardless of whether they otherwise are bound by its terms. Except as further provided in Section 28 of this DRP, "Covered Individua and its plural form "Covered Individuals" means and refers to any individual who has applied for employment with Company, or who is or was employed by Company, including where such employment terminates after becoming bound by this DRP. As used in this DRP, "employment" and "employed" means and refers to actual and/or alleged employment and being actually and/or allegedly employed, respectively.

3

What types of disputes are covered by the DRP? This DRP applies only to "Covered Disputes," which are defined to mean any and all claims, causes of action, or other disputes or controversies that have already accrued, now exist, or arise in the future between a Covered Individual and Company and/or between Covered Individuals based on any legal, equitable, or other ground or theory (including whether any such ground or theory constitutes an unwaivable statutory right) and would be cognizable and could be properly brought in a federal, state, or local court or agency under applicable laws. Unless falling within the definition of Excluded Disputes, below, Covered Disputes include those arising out of or related to (i) a Covered Individual's employment with or work for Company, applying for or seeking or being denied such employment or work, the termination of such employment or work, and/or any of the terms, conditions, or benefits of such employment or work (including any wage and hour issues), (ii) issues of arbitrability ( such as the formation, interpretation, applicability or enforceability of this DRP, except to the extent they are Excluded Disputes), (iii) the procedures to be followed in the arbitration proceedings other than any that would allow a Representative Action, Mass Arbitrations or a PAGA Action ( all as defined below), (iv) allegations of delay and waiver, (v) whether Arbitrations or prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, and (vi) any disputes over the payment and/or apportionment of the arbitration forum costs (including arbitrator fees), including as to whether the arbitration forum costs provisions of this DRP are unconscionable under applicable law. Subject to the provisions of Sections 11, 12 and 26 of this DRP, Covered Disputes include those that (a) arose or accrued before and/or arise or accrue after the date of becoming bound by this DRP, including those that are the subject of or asserted in a previously-threatened or filed and/or currently-pending Representative Action or PAGA Action (both as defined below) in which no class or collective certification has been granted or no trial has been commenced by the court as of the date of becoming bound by this DRP, and/or in any subsequently-threatened or filed Representative Action or PAGA Action (both as defined below), (b) arise or accrue before, upon, or after a Covered Individual's employment with or work for Company terminates or his/her application for employment or work is denied, and/or (c) concern or relate to whether a Covered Individual has suffered and/or is suffering or was and/or is subjected to any violation( s) or breach( es) of any legal obligations, including declaratory relief to resolve that issue. Covered Disputes must only be heard and decided by the appointed arbitrator.

4

What types of disputes are not covered by the DRP? This DRP does not apply to "Excluded Disputes." which are defined to mean: (i) claims for workers' compensation benefits under state law; (ii) claims for unemployment or disability insurance or other health or welfare benefits under government-administered programs; (iii) claims arising under a pension, retirement, or other health and welfare benefit plan that contains an arbitration or other dispute resolution procedure; (iv) claims within the jurisdiction of the National Labor Relations Board; (v) claims arising or regulated under federal law for which there is an unwaivable specific statutory or regulatory enactment making such claims not arbitrable; (vi) exhausting administrative remedies or notice requirements, and/or participating in government proceedings, as provided in Sections 16 and 25 of this DRP; (vii) claims for temporary or provisional equitable relief in aid of arbitration under this DRP, as permitted under applicable law, which may be brought either before the appointed arbitrator or a court of competent jurisdiction; (viii) disputes regarding the applicability, interpretation, enforceability, and/or severability of the provisions of Sections 11, 12 and 26 of this DRP, including whether such provisions are governed by the Federal Arbitration Act, which must be decided only by a court of competent jurisdiction; (ix) disputes as to whether Company and any Covered Individual agreed to allow any Representative Action, PAGA Action or alleged Mass Arbitrations (all as defined below) to be arbitrated under this DRP, which must be decided only by a court of competent jurisdiction; (x) claims or disputes required to be grieved and/or arbitrated under the terms of an applicable collective bargaining agreement, if any; and (xi) any disputes as to whether any claims or disputes are Excluded Disputes, which must be decided only by a court of competent jurisdiction.

(Id. at Ex. A, §§ 2-4, emphasis in original, footnotes omitted.)

It allows the parties to pursue mediation or small claims actions:

5

Is mediation an available option? The Parties may, at any time, voluntarily agree to pursue an informal resolution of their Covered Disputes through mediation. A Covered Individual who wishes to pursue mediation of Covered Disputes with Company must submit a written request to Company's General Counsel (see Section 18, below, for contact information). If the Parties then mutually agree to mediate their Covered Disputes with a mutually agreed upon mediator, and unless the parties agree otherwise, Company will pay the mediator's fee for up to eight hours (if the mediatory charges by the hour) or one day (if the mediator charges by the day) of mediation services. However, nothing in this DRP obligates the Parties to agree to mediate or settle any Covered Disputes, which is strictly voluntary.

6

Are Small Claims Court actions allowed? Any Covered Disputes that are within the jurisdiction of a Small Claims Court may, at the option of the Party asserting such Covered Disputes, be resolved in a Small Claims Court proceeding instead of an individual arbitration proceeding pursuant to this DRP.

(Id. at Ex. A, §§ 5-6, emphasis in original.)

It waives jury trials and administrative hearings and bars class and representative actions, including California PAGA representative actions:

7

Are judge and jury trials & administrative hearings waived? The Parties waive any and all rights to a judge or jury trial and/ or administrative hearing of their own Covered Disputes and agree to their resolution exclusively by final and binding individual arbitration in accordance with this DRP, whether initiated by any Covered Individual or by Company, or in a Small Claims Court action. Except as expressly permitted under the terms of this DRP (including Section 25, below), no formal dispute resolution proceedings concerning any Covered Disputes are permitted to take place in any local, state, or federal court or agency.

* * *

11

Are representative actions allowed? As used in this DRP, "Representative Action" means any action or proceeding brought or sought to be brought by any person or entity (whether or not bound by this DRP) in a representative capacity on behalf of or for the benefit of (in whole or in part) a Covered Individual, Company, and/or any governmental entity, other than a PAGA Action (as defined in Section 26), including any type of (i) class action or arbitration, (ii) collective action or arbitration (including without limitation pursuant to the Fair Labor Standards Act ["FLSA"]), (iii) private attorney general action or arbitration, (iv) joined, consolidated, or coordinated actions or arbitrations, and/or (v) claims or disputes brought in a representative capacity on behalf of the general public, of any governmental entity, of other Covered Individuals or Company, or of other persons or entities alleged to be similarly situated or aggrieved. Under this DRP, Covered Individuals and Company (a) cannot bring or participate in a Representative Action in connection with any Covered Disputes, (b) have no agreement, right, or authority for any Covered Disputes to be heard, arbitrated, or decided as any type of Representative Action, and ( c) expressly waive any and all rights to bring or participate in any type of Representative Action to resolve, decide, or adjudicate any Covered Disputes and are prohibited from doing so. The appointed arbitrator will have no power, authority, or jurisdiction to (I) hear or decide any Covered Disputes as any type of Representative Action; (II) award any type of remedy or relief for any Covered Disputes in connection with any type of Representative Action; (III) join or consolidate in the arbitration any Covered Disputes brought by or against any other Covered Individuals or Company; (IV) award injunctive relief other than in favor of the Covered Individual or Company seeking such relief and only to the extent permitted by applicable law and necessary to provide relief warranted by that Covered Individual's or Company's Covered Disputes or (V) interpret, apply, enforce, or modify this DRP in any manner that would empower or authorize the arbitrator to do any of the foregoing.

* * *

26

THE FOLLOWING SECTION APPLIES ONLY IN CALIFORNIA

Are PAGA Actions allowed for California Covered Individuals? As used in this DRP, (i) "PAGA" means and refers to the California Labor Code Private Attorneys General Act of 2004 (California Labor Code Section 2698 et seq.) and (ii) a "PAGA Action" means and refers to any claims, action or proceeding brought or sought to be brought against Company pursuant to PAGA to recover civil penalties for the benefitin whole or in part-of the State of California and allegedly aggrieved employees (as defined under PAGA) based on the individual bringing the action and other allegedly aggrieved employees having been subjected to one or more alleged violations of the California Labor Code and/or a California Industrial Welfare Commission Wage Order (referred to herein as "PAGA Violations").

Except as expressly set forth in this Section, under this DRP, a Covered Individual (I) cannot bring, participate in, or be a real party in interest of a PAGA Action in connection with any Covered Disputes, now existing or in the future, (II) has no agreement, right, or authority for any such Covered Disputes to be heard, arbitrated, or decided as a PAGA Action, and (III) expressly waives any and all rights to bring, participate in, or be a real party in interest of a PAGA Action to resolve, decide, or adjudicate any such Covered Disputes, and is prohibited from doing so. The appointed arbitrator will have no power, authority, or jurisdiction to (A) hear or decide any Covered Disputes as a PAGA Action; (8) award any type of remedy or relief for any Covered Disputes as a PAGA Action; (C) join or consolidate in the arbitration any Covered Disputes brought by or on behalf of any other Covered Individuals or the State of California pursuant to PAGA; or (D)interpret, apply, enforce, or modify this DRP in any manner that would empower or authorize the arbitrator to do any of the foregoing.

Without limiting the applicability or effect of the foregoing provisions in any way, a Covered Individual retains the right to individually arbitrate Covered Disputes under PAGA pursuant to this DRP, but only with respect to recovering civil penalties solely for any PAGA Violations to which that Covered Individual allegedly was or is being personally subjected. The appointed arbitrator will have the power, authority, and jurisdiction to hear and decide such a Covered Dispute only in an individual arbitration proceeding commenced by the Covered Individual against Company or by Company against the Covered Individual, including for individual declaratory relief as to such a controversy, and not as to or on behalf of any other allegedly aggrieved employees and/or other Covered Individuals with respect to any violations to which they allegedly were or are being subjected.

Should any PAGA Action claims brought by a Covered Individual in breach of the provisions of this Section be held by a court of competent jurisdiction not to be subject to such provisions (including holding that the provisions are not enforceable), then such PAGA Action claims will be stayed by the court, including without limitation pursuant to Section 4 of the FAA, California Code of Civil Procedure Section 1281.4 (to the extent applicable), and/or other applicable law. While the PAGA Action claims are stayed, the controversy of whether the Covered Individual who brought the stayed PAGA Action claims was or is being personally subjected to any PAGA Violations properly at issue in the stayed PAGA Action claims, along with the Covered Individual's asserted individual claims (ifany) held to be subjectto the provisions of this DRP (including under Section 11, above), will be arbitrated solely on an individual basis. Thereafter, the PAGA Action claims seeking to recover civil penalties for PAGA Violations that aggrieved employees allegedly were or are being subjected to will be litigated in court only if: (A) the appointed arbitrator decides that the Covered Individual who brought the stayed PAGA Action claims was or is being subjected to one or more of such PAGA Violations properly at issue therein, and (8) the requirements for certifying the PAGA Action claims as a class action pursuant to applicable law are held to be satisfied by the court.

For purposes of this Section and Section 18, under this DRP, the definition of "Covered Individual" set forth in Section 2, above, is expanded to expressly include the California Labor and Workforce Development Agency and each of its constituent administrative entities (collectively referred to as the "LWDA"), which are also intended third party beneficiaries of this DRP. Any other Covered Individual who submits a notice of alleged PAGA Violations by Company to the LWDA under PAGA shall inform the LWDA that the Covered Individual is subject to this DRP and provide a copy of this DRP to the LWDA. If the Covered Individual does not so inform the L WDA, then Company may do so and provide the LWDA with a copy of this DRP and evidence of the Covered Individual having agreed to its terms. If, after being so informed and receiving such documents, the LWDA does not either provide an Election Notice to Company in the time and manner set forth in Section 18, above, or give any notice to Company and the Covered Individual who submitted the notice of violations in the time and manner required under PAGA, then that will be deemed to be the LWDA's agreement to this DRP, including without limitation the provisions of this Section.

(Id. at Ex. A, §§ 7, 11, 26, emphasis in original.)

It explains how arbitration is commenced, how the arbitrator is selected, what arbitration rules apply, and how the arbitrator decides covered disputes:

8

How is arbitration commenced? A demand for arbitration of any Covered Disputes must be made in writing, comply with the requirements for pleadings under the Federal Rules of Civil Procedure ("FRCP"), and be served on the other Party in the manner provided for service of a summons under the FRCP within the applicable statute of limitations periods (including on a proper registered agent for service of process). Service of the demand for arbitration in this manner will stop the statute of limitations periods applicable to the Covered Disputes in the demand from running further until the arbitration concludes.

9

How is the arbitrator selected? The Covered Individual and Company must mutually agree on the selection and appointment of a separate neutral arbitrator for the Covered Disputes placed at issue in the demand who is experienced in the laws placed at issue thereby. If no such agreement can be reached, the Parties must mutually agree on a dispute resolution service provided ("DRS Provider") to administer the arbitration, whose procedures for appointing an arbitrator will be followed. However, unless the Parties expressly agree otherwise in writing post-dispute, neither the American Arbitration Association ("AAA") nor JAMS will be permitted to serve as a DRS Provider to administer any aspect of an arbitration under this DRP. The appointed arbitrator must be located, and the Covered Disputes between the Covered Individual and Company must be heard and decided by the arbitrator, within the geographic district for the United States District Court in which the Covered Individual who is a Party to the Covered Disputes being arbitrated most recently applied to work, currently works, or last worked for Company. The appointed arbitrator must interpret, apply, and enforce this DRP only as written. If mutual agreement on the selection and appointment of an arbitrator or a DRS Provider as set forth herein is not reached, appointment of an Arbitrator meeting the terms and requirements of this DRP may be sought in a court of competent jurisdiction pursuant to applicable law. Any arbitrator appointed by a DRS Provider or by a court rather than by mutual agreement must be a retired federal court judge meeting the qualifications set forth above, unless otherwise agreed.

10

What arbitration rules and procedures will apply? The Federal Rules of Civil Procedure (the "FRCP") and the Federal Rules of Evidence ("FRE") . . . are incorporated into this DRP and will apply to and must be followed and enforced by the appointed arbitrator in any arbitration proceedings. The Parties will have the right to make offers of judgment, conduct normal civil discovery, and bring motions (including to dismiss/strike and for summary judgment), as provided under the FRCP and ifnot inconsistent with the terms of this DRP. The terms of this DRP will supersede, control, and must be followed as written over any different or inconsistent FRCP rules and/or any rules are procedures of an administering DRS Provider.

* * *

13

How does the arbitrator decide Covered Disputes? Within 30 days following the close of the arbitration merits hearing, the Covered Individual and Company will have the right to submit to the arbitrator, and must serve on each other, a post-hearing briefnotto exceed 50 pages in length. This time deadline and page limitation can be enlarged by agreement of the Parties or by order of the arbitrator for good cause shown. The arbitrator will be employed to award either Party to the arbitration any individual remedy that otherwise would have been available to the Party on an individual basis under applicable law had the Covered Disputes been individually litigated in a court or before a governmental agency, subject to whatever limitations on such remedies exist under applicable law. The appointed arbitrator will have no authority or jurisdiction to issue any award that is contrary to or inconsistent with the terms and provisions of this DRP and the applicable laws at issue. Within 60 days after a dispositive motion is fully-briefed and heard, and within 60 days after a merits hearing is closed and all post-hearing briefing has been submitted, the arbitrator must issue an award in writing on the dispositive motion and/ or on the merits which must be accompanied by or include a written, reasoned statement of decision with findings of fact and conclusions of law supporting the award. A judgment of any court having jurisdiction may be entered on the arbitrator's award upon it being confirmed by such court. However, the arbitrator will not have any power or authority to commit errors of law or legal reasoning and, to the extent permitted under applicable law, any award by the arbitrator shall be vacated or corrected for any such error on petition or appeal to a court of competent jurisdiction.

(Id. at Ex. A, §§ 8-10, 13, emphasis in original, footnote omitted.)

It requires confidential arbitration proceedings:

14

Are the arbitration proceedings confidential? Unless otherwise prohibited under applicable law, the Parties to the Covered Disputes being arbitrated and the arbitrator shall maintain the existence, content, and outcome of any arbitration proceedings held pursuant to this DRP in the strictest confidence and shall not disclose the same without the prior written consent of all the parties.

(Id. at Ex. A, § 14, emphasis in original.)

It discusses arbitration costs:

15

How are the arbitration forum costs paid? The Covered Individual and Company will each pay their own respective costs and attorneys' fees incurred in connection with the arbitration of the Covered Disputes, subject to any remedies to which either Party may later be entitled under applicable law. To the extent required by binding United States Supreme Court precedent, Company will pay up to all of the arbitration forum costs (including arbitrator fees), as apportioned by the arbitrator in accordance with such legal authority. Unless such binding precedent requires one party or the other to bear all or a greater share of the arbitration forum costs (including arbitrator fees), such costs shall be apportioned equally between the Covered Individual and Company. Any other apportionment made by the appointed arbitrator must be based on admissible, competent evidence of the Party's inability to pay the equal apportionment of costs, including the resources and/or obligation of the Party's counsel to advance and pay such costs on behalf of the Party. In the event there is a good faith dispute over proper payment or apportionment of any arbitration-related fees, any delay from resolving the dispute shall not be a waiver of the right to arbitrate under this DRP.

(Id. at Ex. A, § 15, emphasis in original.)

It addresses the Federal Arbitration Act (“FAA”), interstate commerce, and Delaware law:

17

What law governs the DRP? This DRP, any arbitration proceedings held pursuant to this DRP, and any court or other proceedings concerning arbitration under this DRP are expressly subject to and governed by the [FAA], 6 U.S.C. section 1 et seq. [], including the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. section 201 et seq. (the "Convention"), if the Convention is applicable. The Parties expressly waive the application or enforcement of any provision of the FAA and/or any Covered Disputes. The Parties agree that Company is engaged in transactions involving interstate commerce. To the extent that state law is applicable under the FAA and/or the Convention, and/or in the event a court of the State of Delaware, where Kohl's, Inc. is incorporated, will be the applicable state law, as applicable and without regard to or application of any conflict of laws principles (the "Chosen State Law"), unless the Covered Individual elects to not be bound by this Chosen State Law provision in the manner set forth in Section 18. To that end, should such a court hold or decide that the FAA does not govern this DRP, then the Delaware Uniform Arbitration Act, Del. Code tit. 10, § 5701 et seq. (the "Delaware UAA") will govern instead, and by becoming bound by this DRP, the Company and each Covered Individual desire to have the Delaware UAA apply to this DRP in that event.

(Id. at Ex. A, § 17, emphasis in original.)

It contains opt-out and severance provisions and prohibits retaliation:

18

Is there a way to opt-out of the DRP or its chosen state law? Not later than the 30th calendar day after the date of the Covered Individual has received notice or a copy of this DRP (the "Election Deadline"), the Covered Individual can elect to not be bound by this DRP or its Chosen State Law provision by giving Company written notice of such election ( an "Election Notice"). Before deciding whether to give Company an Election Notice, the Covered Individual is being provided with this 30-day opportunity to consult with an attorney and/or other advisors of the Covered Individual's choosing. If a Covered Individual gives an Election Notice to Company, it must include (i) the Covered Individual's name, mailing address, phone number, e-mail address (if any or as used on their application) and the Covered Individual's Employee Identification Number or other unique identifier used by Company (if any); (ii) a statement that the Covered Individual is electing to not be bound by either this DRP or its Chosen State Law provision; and (iii) the Covered Individual's signature and date thereof. The Election Notice, must be sent or delivered by the Covered Individual to Company on or by the Election Deadline to General Counsel, N56W17000 Ridgewood Drive, Menomonee Falls, WI 53051, E-mail: Legal@kohls.com, via either (a) hand delivery, with the Covered Individual being given an Acknowledgment of Receipt of the Election Notice; (b) e-mail with the word "ELECTION NOTICE" in the subject line of the e-mail message; or (c) the United States Postal Service (USPS) or private courier (such as FedEx, UPS, or OHL) using delivery services that produce a written record establishing the dates the notice was sent to and received by Company (a "Mail Record"). The Covered Individual must maintain a copy of the Election Notice sentto Company and, as may be applicable, a copy of (A) the Acknowledgment of Receipt received from Company, (8) the Covered Individual's e-mail message, and any attachment(s) thereto, or (C) the Mail Record ( collectively, "Election Records"). In the event of any dispute as to whether a Covered Individual gave Company an Election Notice, the Covered Individual will have the burden of proving he or she did so by producing and copy of the Election Notice and one of the Election Records, as applicable. Company has no preference as to whether any Covered Individual gives either type of Election Notice, and a Covered Individual should feel free to do so without fear of retaliation or reprisal by Company, which is strictly prohibited. If a Covered Individual fails to comply with these Election Notice requirements and provide such an election was made, the Covered Individual will be deemed to have irrevocably agreed to be bound by all of this DRP's provisions.

19

Is retaliation prohibited? Company does not tolerate, and strictly prohibits, any form of retaliation against a Covered Individual for filing administrative charges and complaints, pursuing or opposing resolution of any Covered Disputes under his DRP, or giving Company an Election Notice.

* * *

22

What if any provisions of the DRP are invalid? Specifically excluding the Representative Action. Mass Arbitrations and PAGA Action provisions set forth in Sections 11, 12, and 26, ifany other provisions of this DRP are held or ruled to be invalid or unenforceable, such other provisions will be severed from this DRP and the remainder of this DRP will not be affected. However, absent Company's express written consent given while enforcing this DRP, the provisions of Sections 11, 12 and 26 are not severable and shall not be severed if they are held or ruled to be unenforceable in any material respect. In the event of such a holding or ruling, any Representative Action claims, Mass Arbitrations or PAGA Action claims, as applicable based on the provision( s) that are unenforceable, will only be resolved by court action and not by arbitration under this DRP. Notwithstanding the foregoing, if a court of competent jurisdiction determines that this DRP is lacking in any material respect in any protections for Covered Individuals required under applicable law, Company shall be permitted, at its option, to adhere to any such protections in order to ensure the enforceability of this DRP.

(Id. at Ex. A, §§ 18-19, 22 emphasis in original.)

It authorizes prospective modifications after written notice and a 30-day notice period:

21

Can the DRP be modified or terminated by the Company? This DRP is the full and complete policy and agreement between the Covered Individual and Company relating to the formal resolution of Covered Disputes, and shall be construed as a whole, according to its fair meaning, and not for or against Company or any Covered Individual. It may not be modified or terminated except in writing, or as otherwise expressly permitted or required by this DRP or controlling law, including by Company giving 30 days' advance written or electronic notice to Covered Individuals. Any modification or termination of this DRP will be prospective only and will not apply to any pending individual arbitration of any accrued Covered Disputes initiated pursuant to this version of the DRP before expiration of the 30-day period.

(Id. at Ex. A, § 21, emphasis in original.)

And, importantly, it emphasizes that the parties do not need to sign and that “continuation of employment . . . following actual or constructive notice or knowledge” qualifies as acceptance of the terms:

24

Are signatures required to be bound by the DRP? Unless the Covered Individual properly gives an Election Notice to not be bound by this DRP as set forth herein, the application for or continuation of employment with Company by the Covered Individual following actual or constructive notice or knowledge of this DRP is deemed the Covered Individual's acceptance of and agreement to be bound by all of its terms and provisions, other than the Chosen State Law provision if the Covered Individual elects to not be bound thereby as set forth herein. Company's issuance of this DRP is deemed its acceptance of and agreement to be bound by its terms. Should any provision be made on this DRP document, or on any related document, for signature by Company and/or by a Covered Individual or Company is required for this DRP to apply to Covered Disputes, except to the extent required for its enforcement under the Chosen State Law, if applicable and not preempted.

(Id. at Ex. A, § 24, emphasis in original.)

These kinds of facts and provisions usually suffice to establish an agreement to arbitrate, but Plaintiff raises an assent question.  She asserts that she “do[es] not recall viewing” the DRP course “or being shown a copy of the DRP[.]”  (Plaintiff’s Decl., ¶ 5.)  Also, she declares that she “do[es] not understand” the DRP.  (Id. at ¶ 4.)

The Court disagrees. As noted above, Defendant’s Workday records indicate that Plaintiff completed the DRP course on 4/7/21.  (See Ihelefeld Decl., ¶ 16 and Ex. C.)  To complete the course, Plaintiff had to acknowledge the DRP’s terms by (1) clicking boxes next to certain acknowledgments, and (2) clicking the submit button.  (See id. at ¶ 16.)[2]  These facts refute Plaintiff’s “I don’t remember” assertion.

Moreover, lack of understanding is not a defense, especially since the DRP afforded Plaintiff a 30-day period to consult an attorney and/or to opt out.

The Court finds Defendant’s burden satisfied.

Enforcement, the FAA, Delaware Law, and California Law

Plaintiff claims the DRP is unenforceable because it is unconscionable.  (See Opposition, pp. 6-17.)

California law recognizes procedural unconscionability and substantive unconscionability, “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.) 

However, before the unconscionability issue can be analyzed, the Court needs to determine which law applies.

Defendant contends the DRP requires the Court to apply the FAA and Delaware law.  (See Motion, pp. 14-15; see also Reply, pp. 7-9.)

Plaintiff contends the Court should apply California law because the DRP expressly waives the FAA’s application and is ambiguous regarding Delaware law’s application.  (See Opposition, pp. 8-11.)

The parties’ disagreement stems from the wording of DRP section 17.  The first sentence states that “[t]his DRP, any arbitration proceedings held pursuant to this DRP, and any court or other proceedings concerning arbitration under this DRP are expressly subject to and governed by the [FAA] . . . .”  (Ihlefeld Decl., Ex. A, § 17.)  The second sentence contradicts, stating that “[t]he Parties expressly waive the application or enforcement of any provision of the FAA[.]”  (Ibid., emphasis added.)

According to Defendant, a mistake happened when Defendant uploaded the DRP to the Workday system.  Key words were deleted.  Defendant claims the correct second sentence – “[t]he Parties expressly waive the application or enforcement of any provision of the FAA and/or any state law that would otherwise exclude this DRP from being governed by the FAA” – does not waive the FAA’s application.  (Reply, p. 7, emphasis added; see also Kane Supp. Decl., Ex. 1, § 17.)

The potential problem with Defendant’s argument is that Plaintiff acknowledged and agreed to the incorrect version, not the correct one.  Can the correct version be applied to Plaintiff given these circumstances or should the Court find the FAA inapplicable?  The Court orders supplemental briefing on this issue.

There is a similar potential problem as to Delaware law’s application.  The correct version states: “To the extent that state law is applicable under the FAA and/or the Convention, and/or in the event a court of competent jurisdiction holds or decides that this DRP is not subject to and governed by the FAA, then the laws of the State of Delaware, where Kohl’s, Inc. is incorporated, will be the applicable state law, as applicable and without regard to or application of any conflict of laws principles[.]”  (Kane Supp. Decl., Ex. 1, § 17, emphasis added.)  The incorrect version, which Plaintiff acknowledged and agreed to on Workday, deletes “the laws of the State of Delaware” language.  (Ihlefeld Decl., Ex. A, § 17.)

Notably, even when the FAA applies, it is typical for courts to use state law to assess unconscionability.  (See, e.g., Ting v. AT&T (9^th Cir. 2003) 319 F.3d 1126, 1150 n. 15 [instructing that “‘contract defenses, such as fraud, duress or unconscionability, may be applied to invalidate arbitration agreements without contravening’ the FAA”]; see also, e.g., Doctor’s Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 687 [same].  The supplemental briefs should discuss whether Delaware law or California law applies to the unconscionability issue based on the facts here.

California Representative PAGA Claim

Defendant contends the representative PAGA claim should be dismissed under Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (“Viking River”).  (See Motion, p. 22; see also Reply, pp. 12-14.)

Plaintiff asserts that the DRP’s waiver of California representative PAGA actions violates Viking River and is unenforceable.  (See Opposition, pp. 11-12.)

This issue is premature.  It will not be ripe until the unconscionability issue is resolved, and only if the Court ends up finding the DRP enforceable.

As a matter of guidance, the Court notes that, prior to Viking River, the applicable law was Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4^th 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 seem apparent:

* 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 presence of a severability clause allows the defendant 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.  In fact, the California Supreme Court is set to decide the standing question in a case called Adolph v. Uber Technologies, Inc.

Consequently, once the unconscionability issue is decided, and if the Court finds the DRP enforceable, the Court would be inclined to:

* compel Plaintiff’s individual PAGA claim to arbitration; and

* stay the case as to the representative PAGA claim until the California Supreme Court rules.