Judge David S. Cunningham, Case Number: 22STCV32523, Date: 2024-11-08 Tentative Ruling

Judge: David S. Cunningham, Case: 22STCV32523, Date: 2024-11-08 Tentative Ruling

Buzz is a delivery-service company. Plaintiff used to work for Buzz as a delivery driver. She alleges that Buzz subjected her and other current and former employees to numerous wage-and-hour violations.

“[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. 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.)

Plaintiff started working for Buzz in August 2021. (See Al-Chabaoun Decl., ¶ 2.) During the onboarding process, which took place online, Buzz claims Plaintiff e-signed Buzz’s arbitration agreement. (See id. at ¶ 17.)

Soha Al-Chabaoun directs human resources for Beyond HR LLC, a company that provides human-resources services to client companies, including Buzz. (See ibid.) Al-Chabaoun describes the onboarding process this way:

5. . . . When Buzz intend[s] to hire a new employee, it creates a profile for the employee using their name and e-mail address, which causes the onboarding system to send the individual an e-mail. The e-mail notifies the individual of Buzz’s invitation to join it in delivering Amazon packages. It also provides instructions for accessing the steps in the onboarding process. . . .

6. After an employee clicks the “Sign in” link in the email above, the web browser will open a Welcome page that informs the potential employee that Buzz has invited them to join its delivery company and they can “join the company” by clicking on the provided link and creating a unique account. . . .

7. To create their account, the individual has to verify their e-mail address with a unique one-time password that the system sends to their e-mail address, and then the individual sets their own private password. Once they have created and securely accessed their account, they receive an invitation to join Buzz and continue onboarding by clicking on “Accept Invitation.” . . .

8. When the new individual clicks “Accept Invitation,” the link takes the potential new employee to page instructing him or her to download an application on their mobile device to continue with the onboarding process. . . .

9. When the employee clicks “Download app,” the screen displays a link for the employee to download an application. Once the potential new employee downloads that application and launches it, the person must then enter his or her email and personal, private password referenced above.

10. After the user enters the correct email address and password and clicks “Sign In,” the application proceeds [to a page titled “GET STARTED” with a “Continue” button.]

11. After the user clicks “Continue,” the application displays [an “Agreements” page that includes an “Arbitration Agreement” link.]

12. If the user taps the line that says “Arbitration Agreement” . . . , the application displays the Agreement . . . , and the employee can tap the screen to scroll through it[.]

13. . . . Once the potential new employee scrolls through the whole Agreement, he or she can tap the box to the left of “I Agree and Accept,” and then “Continue.” After the potential employee taps the box to the left of “I Agree and Accept” and then “Continue,” the application displays . . . a green checkmark indicating the potential employee has accepted the Agreement[.]

14. The onboarding process gives the potential new employee as much time as they wish for reviewing the terms of the Agreement. For example, he or she could review the Agreement on one day, then return to the application on another day, and click to accept the Agreement at that time.

16. After the potential new employee taps “I Agree and Accept” and “Continue,” their profile (the one I can view in the onboarding system) will display a green checkmark next to the words “Arbitration Agreement,” indicating the individual has electronically accepted the Agreement. Before the new employee clicks “I Agree and Accept” under the Agreement, there is no green checkmark next to the words “Arbitration Agreement” in his or her profile. The only way that the checkmark can turn green is if the new employee accepts the Agreement through his or her account through the steps above. No one other than the employee able to access the employee’s account and accept the Agreement– the employee must do that themselves.

Buzz’s arbitration agreement is attached to Al-Chabaoun’s declaration at exhibit 1. The agreement states:

It is the Company’s goal to provide you (the “Employee”) with a rewarding work environment. Disputes related to work can arise, however, and, if not resolved informally, can be disruptive, costly, and time consuming to resolve. Arbitration is an alternative to the traditional lawsuit and may resolve disputes more quickly and with less cost. In a traditional lawsuit, issues are resolved in court by a judge or a jury. In arbitration, issues are resolved outside of court by an independent third-party, known as an arbitrator.

MANDATORY ARBITRATION. THE EMPLOYEE AND COMPANY AGREE THAT ANY COVERED CLAIM (DEFINED BELOW), WHETHER BASED IN CONTRACT, TORT, STATUTE, COMMON LAW, FRAUD, MISREPRESENTATION OR ANY OTHER LEGAL OR EQUITABLE THEORY, SHALL BE SUBMITTED TO INDIVIDUAL BINDING ARBITRATION.

Covered Claims. Except as explained in the section “Claims Not Covered” below, this Mutual Agreement to Individually Arbitrate Disputes (this “Agreement”) covers all past, current, and future grievances, disputes, claims, issues, or causes of action (collectively, "claims") under applicable federal, state or local laws, arising out of or relating to (a) Employee's application, hiring, hours worked, services provided, and/or employment with the Company or the termination thereof, and/or (b) a Company policy or practice, or the Company’s relationship with or to a customer, vendor, or third party, including without limitation claims Employee may have against the Company and/or any Covered Parties (defined below), or that the Company may have against Employee.

The claims covered by this Agreement include, but are not limited to claims asserted under or relating to: (i) Title VII of the Civil Rights Act of 1964 and similar state statutes; (ii) Age Discrimination in Employment Act and similar state statutes; (iii) Fair Labor Standards Act or similar state statutes; (iv) Family and Medical Leave Act or similar state statutes; (v) Americans with Disabilities Act or similar state statutes; (vi) injuries you believe are attributable to the Company under theories of product liability, strict liability, intentional wrongdoing, gross negligence, negligence, or respondeat superior; (vii) actions or omissions of third parties you attribute to the Company; (viii) claims brought pursuant to actual or alleged exceptions to the exclusive remedy provisions of state workers compensation laws; (ix) Consolidated Omnibus Budget Reconciliation Act of 1985; (v) federal and state antitrust law; (xi) issues regarding benefits, bonuses, wages, penalties, co-employment, or joint employment; (xii) contracts between you and the Company; (xiii) personal or emotional injury to you or your family; (xiv) federal, state, local, or municipal regulations, ordinances, or orders; (xv) any common law, or statutory law issues relating to discrimination by sex, race, age, national origin, sexual orientation, family or marital status, disability, medical condition, weight, dress, or religion or other characteristic protected by applicable law; (xvi) wrongful retaliation of any type, including retaliation related to workers’ compensation laws or employee injury benefit plan actionable at law or equity; and (xvii) misappropriation of confidential information or other acts or omissions by you.

Without limiting the above, the Employee and the Company each specifically acknowledges and agrees that all claims involving minimum wages, overtime, unpaid wages, expense reimbursement, wage statements, and claims involving meal and rest breaks shall be subject to arbitration under this Agreement.

The Employee and the Company each specifically acknowledges and agrees that any claims brought by the Employee against any of the Covered Parties, whether brought jointly or severally with claims against the Company, shall be subject to arbitration under this Agreement. “Covered Parties” means the Company, any entity formerly or currently owned, affiliated, controlled or operated by the Company (a “company entity”), clients of the Company or a company entity, and the former and current officers, directors, managers, employees, owners, attorneys, agents, and vendors of the Company and/or a company entity and/or clients of the Company.

Claims Not Covered. This Agreement does not apply to: (i) claims for workers' compensation or unemployment benefits; (ii) claims expressly precluded from being arbitrated by a governing federal statute; (iii) claims that, under applicable state law that is not preempted by the Federal Arbitration Act, the parties cannot agree to arbitrate; (iv) claims that must be brought before the National Labor Relations Board (“NLRB”); (v) claims for any relief asserted under or governed by the Employee Retirement Income Security Act of 1974 (“ERISA”) (the resolution of ERISA claims will be governed by the terms of the applicable plan and/or applicable law); (vi) actions to confirm, vacate, modify, or correct an arbitrator’s award; (vii) sexual harassment or sexual assault claims, except if the Employee chooses to submit them to arbitration under the terms of this Agreement; and (viii) nothing in this Agreement prohibits the filing any claim or charge with a government administrative agency (for example, the Equal Employment Opportunity Commission, NLRB, Securities and Exchange Commission, or a similar state regulatory agency). To the extent such a claim is not resolved before the agency, it is subject to arbitration under this Agreement rather than proceeding in court.

Waiver of Class, Collective, Consolidated and Representative Action Claims. Each of the Employee and the Company expressly intends and agrees, to the absolute maximum extent permitted by law, that: (a) class action, collective action, or consolidated action procedures are hereby waived and shall not be asserted in arbitration or in court, nor will they apply in any arbitration pursuant to this Agreement; (b) representative action procedures are hereby waived and shall not be asserted in arbitration or in court, nor will they apply in any arbitration pursuant to this Agreement; (c) each will not assert class action, collective action, consolidated action or representative action claims against the other in arbitration or court or otherwise; and (d) the Employee and the Company shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person. No arbitrator selected to arbitrate any claim covered by this Agreement is authorized to arbitrate any claim on a class, collective, consolidated, or representative basis.

In the event the waiver of representative actions is found to be unenforceable in whole or in part, then the representative action will be heard in court, not arbitration, as to the portion of the representative claim to which the waiver is found to be unenforceable and all other Covered Claims will remain subject to arbitration. In that event, the representative claim in court shall be stayed until the arbitration is concluded, unless such stay is contrary to applicable law.

Notwithstanding any provision in the applicable arbitration rules, a court of law must resolve any dispute concerning the validity and enforceability of the Agreement, and the validity, enforceability or interpretation of the provisions pertaining to class, collective, and representative action waivers. The arbitrator must resolve all other disputes, including the arbitrability of claims pursuant to such other provisions.

Neutral Arbitrator. The arbitration will be administered by an independent and neutral arbitrator from the American Arbitration Association (“AAA”) in accordance with the AAA Employment Arbitration Rules and Mediation procedures (“AAA Rules”) available online at www.adr.org/employment (or to be provided upon request). If, however, the AAA Rules are inconsistent with the terms of this Agreement, the terms of this Agreement shall govern. The arbitrator has no relationship with the Company and, just as a judge in a lawsuit would, provides an impartial resolution to the dispute. The arbitrator will be selected by mutual agreement of the parties from a list of arbitrators provided by the AAA. If for any reason the AAA will not administer the arbitration, the party seeking arbitration may initiate the arbitration with JAMS (www.jamsadr.com) or other recognized arbitration services provider.

Claims Procedure. A demand for arbitration must be in writing and filed with AAA. Written notice of any Company claim will be delivered by certified or registered mail, return receipt requested, to the last known address of Employee. The written notice shall identify and describe the nature of all claims asserted and the facts upon which such claims are based. Written notice of arbitration shall be initiated within the same time limitations that federal or state law applies to those claim(s).

Arbitration Fees and Costs. The Employee will pay $200 towards any arbitration filing fee, and the Company will pay all other arbitration filing fees as well as the arbitrator’s fees. If any party prevails on a statutory claim that affords the prevailing party attorneys' fees and costs, or if there is a written agreement providing for attorneys' fees and costs, the party can recover attorneys’ fees and costs to the same extent as if the claim had been brought in court. Any dispute as to the reasonableness of any fee or cost shall be resolved by the arbitrator.

· Interpretation and Enforcement of the Agreement: The Federal Arbitration Act (“FAA”) and federal common law applicable to arbitration shall govern the interpretation and enforcement of this Agreement. If, for any reason, the FAA or federal common law is found not to apply to this Agreement (or its agreement to arbitrate), then applicable state law shall govern.

· Pre-hearing Motions: Only claims that are recognized under existing law may be heard by the arbitrator. Any party to the arbitration shall have the right to file a motion to dismiss and/or a motion for summary judgment, which the arbitrator shall decide by application of the standards under the Federal Rules of Civil Procedure governing such motions.

· Substantive Law: The arbitrator shall apply the substantive state or federal law (and the law of remedies, if applicable) applicable to the claim(s) asserted.

· Written Decisions and Awards: The arbitrator shall render a written decision explaining his or her findings and conclusions. The arbitrator's decision shall be final and binding upon the parties to the arbitration, subject only to review under the FAA (or applicable state law).

· No Preclusive Effect: The arbitrator’s decisions and awards shall have no preclusive effect as to issues or claims in any other arbitration or court proceeding, unless all of the parties in the other proceeding were also a named party in the arbitration in which the award or decision was issued.

Severability. If any provision of this Agreement to arbitrate is adjudged to be void or otherwise unenforceable, in whole or in part, the void or unenforceable provision shall be severed and such adjudication shall not affect the validity of the remainder of this Agreement to arbitrate. The only exception is that this Agreement is not, and shall never be construed as, reformed to be, or enforced as if it were, an agreement to arbitrate claims on a class, collective, consolidated, or representative basis. Stated differently, under no circumstance will a claim be allowed to proceed in arbitration as a class action, collective action, consolidated action, or representative action.

Waiver of Trial by Jury. Each of the Employee and the Company understands and fully agrees that by entering into this Agreement to arbitrate, each agrees to resolve all claims through arbitration and is giving up the right to have a trial by jury and the right of appeal following the rendering of a decision except on the grounds for reviewing an arbitration award under the Federal Arbitration Act (“FAA”) or applicable state law.

Term of Agreement. This Agreement to arbitrate shall survive the termination of Employee's employment.

Entire Agreement. This Agreement constitutes the entire agreement between the Company and Employee regarding the subject matter herein and supersedes any and all prior agreements and understandings regarding the subject matter. This Agreement cannot be amended or modified except by a written agreement between the parties.

Employee Acknowledgment. I understand that by clicking on the “I Agree and Accept” Button below that I agree to the terms of, and agree to be bound by, this Agreement. I further agree and acknowledge that my acceptance of or continuing employment with the Company provides further evidence of my agreement to accept and be bound by the terms of this Agreement. I understand that this Agreement will remain in effect after my employment ends and that nothing in this Agreement modifies the at-will nature of my employment.

Facts and terms like these normally suffice to establish an agreement to arbitrate; however, Plaintiff contends the motion should be denied because Buzz’s evidence fails to show that Plaintiff signed the agreement. (See Opposition, pp. 11-12 [claiming Buzz’s documents do not bear Plaintiff’s signature].)

In reply, Buzz asserts that the evidence is sufficient to authenticate the agreement and Plaintiff’s e-signature.

The Court agrees with Buzz. “Authentication of a writing means [1] the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or [2] the establishment of such facts by any other means provided by law.” (Knight, supra, at ¶ 5:321.1 [quoting Evidence Code section 1400].) “An ‘electronic signature is attributable to a person if it was the act of the person’ and this may be shown in any manner.” (Id. at ¶ 5:321.3.) “[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.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5^th 541, 545.) There is no e-signature on the agreement itself, but Al-Chabaoun’s declaration and supplemental declaration provide the required information and show that Plaintiff “complete[d] the onboarding process” and “review[ed] and accept[ed]” the agreement. (Supp. Al-Chabaoun Decl., ¶ 7; see also id. at Ex. 4; Al-Chabaoun Decl., ¶¶ 5-14, 16-17, Ex. 1.)

Buzz’s showing is based, in part, on reply evidence. Although the Court believes the showing is adequate to meet Buzz’s burden, if Plaintiff continues to contest authentication, the Court will give Plaintiff a chance to respond to the evidence.

Last point. Plaintiff admits that she e-signed the onboarding documents (see Jones Decl., ¶ 4) yet claims she does not remember “signing anything that required [her] to waive any rights.” (Id. at ¶ 9.) Lack of memory is not a defense. Nor is failure to read. (See, e.g., Ramos v. Westlake Services LLC (2015) 242 Cal.App.4^th 674, 687 [“[T]he fact that [the plaintiff] signed a contract in a language he may not have completely understood would not bar enforcement of the arbitration agreement. If [the plaintiff] did not speak or understand English sufficiently to comprehend the English Contract, he should have had it read or explained to him.”].)

Buzz’s agreement states that “[t]he Federal Arbitration Act (‘FAA’) and federal common law applicable to arbitration shall govern the interpretation and enforcement of this Agreement.” (Al-Chabaoun Decl., Ex. 1, p. 3.)

Notwithstanding this language, Plaintiff contends the Court should find the FAA inapplicable, and apply the California Arbitration Act instead, due to an exception. She claims the FAA does not apply to transportation workers. She asserts that Buzz employed her as a transportation worker and that her work duties (delivering packages) affected interstate commerce. (See Opposition, pp. 3-5.)

Buzz claims workers who “driv[e] items from pickup spots within California to delivery destinations within California do[] not qualify” for the exception. (Reply, p. 1; see also id. at pp. 2-3.)

Section 1 of the FAA “exempts . . . ‘contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce[]’” – i.e., transportation workers – “from the statute’s ambit[.]” (Southwest Airlines Co. v. Saxon (2022) 596 U.S. 450, 454 (“Southwest”).) “The party opposing arbitration bears the burden of demonstrating that the exemption applies.” (Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4^th 1233, 1241.) To establish the exemption, the opposing party must show that the agreement is “both a ‘contract of employment’ and one entered into with a ‘worker’ of the type described in” section 1. (Amos v. Amazon Logistics, Inc. (4^th Cir. 2023) 74 F.4^th 591, 596.)

Buzz’s agreement is titled “MUTUAL AGREEMENT TO INDIVIDUALLY ARBITRATE DISPUTES[.]” (Al-Chabaoun Decl., Ex. 1, p. 1, emphasis in original.) The only other documents are the employee handbook, which states, emphatically, that it “IS NOT A CONTRACT OF EMPLOYMENT” (Supp. Al-Chabaoun Decl., Ex. 3, p. 1, emphasis in original), Plaintiff’s on-line acceptance of Buzz’s agreement (see id. at Ex. 4), and two minute orders. (See Aradi Decl., Exs. 1, 2.) On the current record, none of them appears to constitute a contract of employment.

The next question is whether Plaintiff was a transportation worker. “‘Transportation workers’ are those workers ‘engaged in the movement of goods in interstate commerce’” (Knight, supra, at ¶ 5:58 [citing Southwest, supra, 596 U.S. 450]), but a qualification exists. “[T]he more related to the transportation industry an enterprise is, the less necessary it becomes for the employee to be directly transporting goods.” (Garrido v. Air Liquide Industrial U.S. LP (2015) 241 Cal.App.4^th 833, 840.) Buzz operates a delivery business. (See, e.g., Al-Chabaoun Decl., ¶ 2.) Buzz hired Plaintiff to make local-only deliveries “from an Amazon warehouse in Santa Ana, California[.]” (Ibid.) A post-Saxon decision from the Fifth Circuit Court of Appeals holds that local-only delivery drivers do not qualify for the transportation-worker exemption. (See Lopez v. Cintas Corp. (5^th Cir. 2022) 47 F.4^th 428.)

On the other hand, the Court found a case disagreeing with the Fifth Circuit (see Brock v. Flowers Food, Inc. (D. Colo. 2023) 673 F.Supp.3d 1180) and also found First Circuit cases that determined that “last-mile delivery drivers for Amazon were engaged in interstate commerce, even though their ‘role in transporting the goods occurred entirely within a single state.’” (Fraga v. Premium Retail Services, Inc. (1^st Cir. 2023) 61 F.4^th 228, 238; see also Waithaka v. Amazon.com, Inc. (1^st Cir. 2020) 966 F.3d 10.)

Ultimately, the Court does not need to decide whether Plaintiff satisfies the transportation-worker exception. The motion to compel must be denied because Buzz’s agreement is unconscionable.

Unconscionability is a contract defense. (See Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5^th 485, 492.) Under the FAA (assuming it applies), unconscionability can be utilized to “invalidate [an] arbitration agreement[].” (Ibid.) Courts apply state law to test whether the agreement is unconscionable. (See, e.g., Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4^th 1105, 1119.)

“[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, internal quotation marks omitted.) “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 “was a contract of adhesion, presented to the employee with no opportunity for negotiation[.]” (Opposition, p. 6.)

“[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.) Stated another way, “the 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.)

At most, the evidence demonstrates a low degree of procedural unconscionability. (See Jones Decl., ¶ 4 [“When I created my account and signed into the link, the application for each page scrolled automatically to the ‘agree’ tab, making it difficult for me to read the documents it was referring to. I could not move on to the next section of the required documents without agreeing to the section before it. I was informed that if I did not agree to all the documents, then I could not start working.”]; cf. Al-Chabaoun Decl., ¶ 15 [stating that “[t]he Agreement allows the individual to acknowledge an agreement to it by clicking ‘I Agree and Accept[]’” and quoting the agreement’s “Employee Acknowledgment” paragraph], emphasis in original.)[1]

Plaintiff argues that the agreement contains an unfair cost requirement and is overbroad scope-wise and duration-wise. She also challenges the class and representative waivers. (See Opposition, pp. 7-10.)

Plaintiff contends the agreement requires the employee to pay a $200.00 filing fee. (See Opposition, pp. 8-9.)

Because the agreement is unenforceable for other reasons, the Court declines to decide this issue.

Citing Cook v. University of Southern California (2024) 102 Cal.App.5^th 312, Plaintiff claims the agreement’s:

* scope is “unlimited” in that “it covers ‘all past, current, and future grievances, disputes, claims, issues, or causes of action . . .’ [citation], whether or not they relate to [Plaintiff’s] employment” (Opposition, p. 10); and

* duration is “indefinite” in that “the agreement survives [Plaintiff’s] termination.” (Ibid., emphasis in original.)

The Court disagrees. Buzz only devotes one sentence to the preemption argument. The argument is conclusory. (See ibid.)

The Court also reiterates that, even when the FAA governs, unconscionability is determined under state law. (See Lagatree, supra, 74 Cal.App.4^th at 1119; see also Dr.’s Assocs, Inc. v. Casarotto (1996) 517 U.S. 681, 687; Sandler v. Modernizing Medicine, Inc. (S.D. Cal. Oct. 9, 2024, No. 24-cv-00812-AJB-BJC) 2024 WL 4469217, at *2.)

As to scope, Buzz contends Cook is distinguishable because Buzz’s agreement only covers employment-related claims. (See Reply, pp. 7-8.)

As to duration, Buzz claims the duration “is limited by the types of” covered claims “and their respective statutes of limitation.” (Id. at p. 8.)

Cook is a May 2024 decision from the Second District Court of Appeal. There, the trial court found the arbitration agreement substantively unconscionable in three ways and held that the unconscionable provisions could not be severed. The Second District affirmed all three points. First, the panel found the scope unconscionable because the agreement covered all claims, not just employment-related claims. (See Cook, supra, 102 Cal.App.5^th at 321-325.) Second, the duration was unconscionable because the agreement stated that it would survive Cook’s employment and could only be “revoked” if Cook and USC’s president signed a written termination request that “expressly mention[ed] the arbitration agreement.” (Id. at 326; see also id. at 325.) Third, the agreement lacked mutuality because it “require[d] Cook to arbitrate . . . all claims she [] ha[d] against USC” and USC’s “related entities” without requiring the “‘related entities’ to arbitrate their claims against [her].” (Id. at 326; see also id. at 327-328.)

On balance, the Court finds Cook analogous because Buzz’s agreement appears to have the same three defects:

SCOPE – “[b]y its express terms,” the Cook agreement covered “all claims, whether or not arising out of Employee’s University employment, remuneration or termination, that Employee may have against the University or any of its related entities . . . ; and all claims that the University may have against Employee.” (Cook, supra, 102 Cal.App.5^th at 321.) “The plain language of the agreement require[d] Cook to arbitrate claims that [were] unrelated to her employment with USC.” (Ibid.; see also id. at 325 [“The arbitration agreement drafted by USC applies to all claims ‘whether or not arising out of Employee's University employment, remuneration or termination.’ If USC had been concerned about capturing termination or retaliation claims related to Cook’s employment, it simply could have limited the scope of the agreement to claims arising out of or relating to her employment or termination. It is difficult to see how it is justified to expect Cook—as a condition of her employment at the university—to give up the right to ever sue a USC employee in court for defamatory statements or other claims that are completely unrelated to Cook's employment.”].)

DURATION – to repeat, the Second District found the duration of the USC agreement unconscionable because it survived Cook’s employment and could only be “revoked” if Cook and USC’s president signed a written termination request that “expressly mention[ed] the arbitration agreement.” (Cook, supra, 102 Cal.App.5^th at 326.)

Buzz’s agreement states that it “survive[s] termination of [Plaintiff’s] employment” (Al-Chabaoun Decl., Ex. 1, p. 3), and it requires a “written agreement between the parties” to “amend[] or modi[y.]” (Ibid.)

The trial court also found the agreement was unconscionable because it lacked mutuality. The agreement requires Cook to arbitrate any and all claims she may have against USC “or any of its related entities, including but not limited to faculty practice plans, or its or their officers, trustees, administrators, employees or agents, in their capacity as such or otherwise.” However, the agreement does not require USC's “related entities” to arbitrate their claims against Cook.

Under Armendariz, a modicum of bilaterality is required in arbitration agreements. Still, nothing in Armendariz supports the conclusion that the presence of a modicum of bilaterality renders an agreement per se conscionable. The presence of a modicum of bilaterality will not save a clause that is, in practical effect, unjustifiably one-sided. There is no question that it is more difficult for a party to enforce an arbitration agreement against a nonsignatory than it is for a nonsignatory to enforce an arbitration agreement against a party. This is intentional, as arbitration is “a voluntary means of resolving disputes, and this voluntariness has been its bedrock justification.” [Citation.] “Arbitration is consensual in nature. The fundamental assumption of arbitration is that it may be invoked as an alternative to the settlement of disputes by means other than the judicial process solely because all parties have chosen to arbitrate them. [Citations.] Even the strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such an agreement.” [Citation.]

As a result, nonsignatories may enforce an arbitration agreement against a party to the agreement simply by showing they are intended third-party beneficiaries of the arbitration agreement. [Citation.] Where the agreement requires arbitration of claims against certain classes of third parties, nonsignatories can make “a prima facie showing sufficient to allow them to enforce the arbitration clause as third party beneficiaries” simply by showing they fall within one of the classes of beneficiaries identified by the contract. [Citation.]

Conversely, for Cook to enforce the arbitration agreement against USC's agents or employees as third-party beneficiaries, she would have to show they actually accepted a benefit under the agreement. [Citation.] It is difficult to imagine how Cook could carry this burden to compel USC's employees and agents to arbitration unless those specific agents or employees first moved to compel arbitration under the agreement. While it is theoretically possible for Cook to make this showing, it is unlikely. [Citation.]

The plain language of the arbitration agreement thus provides a significant benefit to USC's related entities without any reciprocal benefit to Cook.

USC has offered no justification for this one-sided treatment. [Citation.] We find the trial court did not err in holding the arbitration agreement was substantively unconscionable for lack of mutuality in the claims that are subject to arbitration.

(Al-Chabaoun Decl., Ex. 1, p. 1.) Plaintiff’s obligation to arbitrate is a one-way obligation. The “Covered Parties” do not need to arbitrate their claims.

The final question is whether these defects can be severed. The answer is no. (See Cook, supra, 102 Cal.App.5^th at 328-330.)

Consequently, Buzz’s agreement is unconscionable and unenforceable, and the motion to compel is denied.

* the agreement requires arbitration on an individual basis and does not permit class claims to be arbitrated (see Motion, pp. 9-11); and

* the individual Private Attorneys General Act (“PAGA”) claim should be arbitrated and the representative claim should be dismissed or stayed. (See Motion, pp. 9-12.)

In light of the preceding analysis, the Court does not need to rule on these issues.

According to Plaintiff, Labor Code section 229 bars arbitration of Plaintiff’s wage-based causes of action. (See Opposition, pp. 12-13.)

Amazon is a nonsignatory but contends it qualifies as a third-party beneficiary. (See Joinder, pp. 1-2.)

[1] Plaintiff claims Labor Code section 432.6 “prevents an employer requiring, ‘as a condition of employment, continued employment, or the receipt of any employment-related benefit’ to require an employee to ‘waive any right, forum, or procedure’ for a violation of the California Fair Employment Housing Act or the Labor Code.” (Opposition, p. 6, emphasis in original.) The FAA preempts section 432.6. (See Chamber of Commerce of the United States of America v. Bonta (9^th Cir. 2023) 62 F.4^th 473, 490.) If the Court ends up finding the FAA applicable, Plaintiff would not be able to rely on section 432.6.