Judge: David S. Cunningham, Case: 23STCV17285, Date: 2024-02-02 Tentative Ruling

Case Number: 23STCV17285    Hearing Date: February 2, 2024    Dept: 11

Velez (23STCV17285)

Tentative Ruling Re: Motion to Compel Arbitration

Date:                           2/2/24

Time:                          10:00 am

Moving Party:           Down Dog Lodge, LLC (“Defendant”)

Opposing Party:        David Velez (“Plaintiff”)

Department:              11       

Judge:                        David S. Cunningham III

________________________________________________________________________

TENTATIVE RULING

Defendant’s motion to compel arbitration of Plaintiff’s individual claims is granted.

The class waiver is enforceable.  Plaintiff’s class claims are stricken.

The representative Private Attorneys General Act (“PAGA”) claim is stayed until the arbitration is complete.

BACKGROUND

Defendant is a company that provides daycare, boarding, and grooming for dogs.

Plaintiff is a former employee.  He alleges that Defendant subjected him and other current and former employees to numerous wage-and-hour violations.

Here, Defendant moves to compel arbitration of Plaintiff’s individual claims.

DISCUSSION

Existence and Assent

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

Defendant’s arbitration agreement is attached to the declaration of Defendant’s managing member, Ryan Siegelman, at Exhibit A.  The agreement states:

ARBITRATION AGREEMENT

Employee and [COMPANY] (“Company”) agree to utilize binding arbitration as the sole and exclusive means to resolve all disputes that may arise between them, including but not limited to disputes regarding termination of employment and compensation. Employee specifically waives and relinquishes his/her right to bring a claim against Company, in a court of law, and this waiver shall be equally binding on any person who represents or seeks to represent Employee in a lawsuit against Company in a court of law. Similarly, Company specifically waives and relinquishes its right to bring a claim against Employee in a court of law, and this waiver shall be equally binding on any person who represents or seeks to represent Company in a lawsuit against the Employee in a court of law.

Employee and Company agree that any claim, dispute, and/or controversy that Employee may have against Company (or its owners, directors, officers, managers, employees, or agents), or that Company may have against Employee, shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act (“FAA”), in conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec. 1280 et seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights to discovery).  The FAA applies to this agreement because Company’s business involves interstate commerce.

Included within the scope of this Agreement are all disputes, whether based on tort, contract, statute (including, but not limited to, any claims of discrimination, harassment and/or retaliation, whether they be based on the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, as amended, or any other state or federal law or regulation), equitable law, or otherwise.  The only exception to the requirement of binding arbitration shall be for claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, claims for medical and disability benefits under the California Workers’ Compensation Act, Employment Development Department claims, or as may otherwise be required by state or federal law.  However, nothing herein shall prevent Employee from filing and pursuing proceedings before the California Department of Fair Employment and Housing, or the United States Equal Employment Opportunity Commission (although if Employee chooses to pursue a claim following the exhaustion of such administrative remedies, that claim would be subject to the provisions of this Agreement).  By this binding arbitration provision, Employee and Company give up their right to trial by jury of any claim Employee may have against Company, or of any claim Company may have against Employee.  This agreement is not intended to interfere with Employee's rights to collectively bargain, to engage in protected, concerted activity, or to exercise other rights protected under the National Labor Relations Act.

In addition to any other requirements imposed by law, the arbitrator selected shall be a retired California Superior Court Judge, or an otherwise qualified individual to whom the parties mutually agree, and shall be subject to disqualification on the same grounds as would apply to a judge of such court.  All rules of pleading (including the right of demurrer), all rules of evidence, all rights to resolution of the dispute by means of motions for summary judgment, judgment on the pleadings, and judgment under Code of Civil Procedure Section 631.8 shall apply and be observed.  The arbitrator shall have the immunity of a judicial officer from civil liability when acting in the capacity of an arbitrator, which immunity supplements any other existing immunity.  Likewise, all communications during or in connection with the arbitration proceedings are privileged in accordance with Cal. Civil Code Section 47(b).  As reasonably required to allow full use and benefit of this agreement’s modifications to the Act’s procedures, the arbitrator shall extend the times set by the Act for the giving of notices and setting of hearings.  Awards shall include the arbitrator’s written reasoned opinion. 

All claims brought under this binding arbitration Agreement shall be brought in the individual capacity of Employee or Company.  This Agreement shall not be construed to allow or permit the consolidation or joinder of other claims or controversies involving any other employees, and will not proceed as a class or collective action.  No arbitrator shall have the authority under this agreement to order any such class or collective action.  Employee and Company further understand and acknowledge that the terms of this Agreement include a waiver of any substantive or procedural rights that Employee may have to bring an action on a class, collective, or other similar basis against Company; or that Company may have to bring an action on a class, collective, or other similar basis against Employee.  If under applicable law a representative claim under the California Private Attorney General Act (“PAGA”) is found to unwaivable and such an action is pursued in court, Employee and Company agree that any such PAGA claim will be severed and stayed pending resolution of claims that are arbitrable.  Due to the nature of this waiver, Company has provided Employee with the ability to choose to retain these rights by affirmatively checking the box at the end of this paragraph.  Accordingly, Employee expressly and voluntarily agrees to waive any right that he or she may have to bring an action on a class, collective, or other similar basis, unless Employee checks this box:  [ ]

Resolution of all disputes shall be based solely upon the law governing the claims and defenses pleaded, and the arbitrator may not invoke any basis (including, but not limited to, notions of “just cause”) other than such controlling law.  Within thirty days of the arbitrator’s final written opinion and order, the opinion shall be subject to affirmation, reversal or modification, at either party’s written request, following review of the record and arguments of the parties by a second arbitrator who shall, as far as practicable, proceed according to the law and procedures applicable to appellate review by the California Court of Appeal of a civil judgment following court trial.

Any agreement contrary to the foregoing must be entered into, in writing, by Employee and President of Company.  Oral representations made before or after employment do not alter this Agreement.  If any term or provision, or portion of this Agreement is declared void or unenforceable it shall be severed and the remainder of this Agreement shall be enforceable.

EMPLOYEE’S SIGNATURE BELOW ATTESTS TO THE FACT THAT EMPLOYEE HAS READ, UNDERSTANDS, AND AGREES TO BE LEGALLY BOUND TO ALL OF THE ABOVE TERMS.

DO NOT SIGN UNTIL YOU HAVE READ THE ABOVE ACKNOWLEDGMENT AND AGREEMENT.

(Siegelman Decl., Ex. A, pp. 93-94, capitalizing, bolding, and underlining in original.)

Provisions like these usually suffice to establish an agreement to arbitrate, but Plaintiff raises an assent challenge.  He contends:

* he does not recall signing the agreement (see Plaintiff Decl., ¶ 3);

* he did not understand that he was agreeing to arbitration (see ibid.);

* he did not receive an opportunity to negotiate (see ibid.); and

* the agreement is ambiguous regarding Company’s identity.  (See Opposition, pp. 3-6.)

The Court disagrees with the first three points.

First point – Plaintiff signed “multiple new hire documents” (Plaintiff Decl., ¶ 3), his name is written on the signature line of the agreement (see Siegelman Decl., Ex. A, p. 94), and he does not dispute that it is his signature.  In light of these facts, his lack of memory is inadequate to create a factual issue.  (See Iyere v. Wise Auto Group (2023) 87 Cal.App.5^th 747, 756.)

Second point – Plaintiff’s ability to read English is uncontested, and, anyway, lack of understanding is not a defense. (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.”].)

Third point – Plaintiff does not declare that he actually asked to negotiate the terms, or consult an attorney, and was denied.  Moreover, his argument is belied by the language above the signature line:

EMPLOYEE’S SIGNATURE BELOW ATTESTS TO THE FACT THAT EMPLOYEE HAS READ, UNDERSTANDS, AND AGREES TO BE LEGALLY BOUND TO ALL OF THE ABOVE TERMS.

DO NOT SIGN UNTIL YOU HAVE READ THE ABOVE ACKNOWLEDGMENT AND AGREEMENT.

(Siegelman Decl., Ex. A, p. 94, capitalizing and bolding in original.)

Moving to the fourth point, the agreement states that Employee and Company agree to binding arbitration.  Plaintiff contends Defendant’s motion should be denied because the agreement fails to define who Company is.  In support, he cites Flores v. Nature’s Best Distribution, LLC (2016) 7 Cal.App.5^th 1.  (See Opposition, pp. 4-5.)

Defendant claims Flores is distinguishable because the Flores agreement had several defects, not just a failure to identify the contracting parties.  (See Reply, p. 8.)

In Flores, the Court of Appeal affirmed the denial of a motion to compel arbitration because the agreement did not:

* define the terms Employee and Company (see Flores, supra, 7 Cal.App.5^th at 9);

* delineate the disputes “subject to arbitration before the AAA” versus the disputes “subject to resolution through the grievance and arbitration procedure contained in a collective bargaining agreement” (id. at 10); and

* “identify which set of the AAA rules would apply to binding arbitration.”  (Ibid.)

This Court considered the Flores issue in two prior cases – Padilla v. Partners Personnel-Management Services, LLC (21STCV03616) and Browning v. Theatre Box-San Diego, LLC (22STCV27174).  In Padilla, the defendant tried to distinguish Flores on the same grounds as Defendant tries here.  Following supplemental briefing, the Court found Flores analogous since the Padilla agreement failed to define Employee and Company.  (See 1/10/22 Padilla Ruling Re: Supplemental Briefs Re: Motion to Compel Arbitration, pp. 2-3.)  In Browning, by contrast, the Court found Flores distinguishable because the Browning arbitration agreement expressly stated that it applied to all of the defendants’ entities.  (See 7/10/23 Browning Ruling Re: Motion to Compel Arbitration, pp. 7-8.)

At first glance, the situation here seems more like the situation in Padilla.  The agreement does not mention Defendant’s true name even once, and Company is undefined.

However, on 9/19/23, the Court of Appeal reversed the Padilla ruling.  Relevantly, the opinion states:

Partners Personnel contends it is possible to identify the parties to the agreement despite the agreement’s failure to define the terms “Company” and “Employee.” It follows, according to Partners Personnel, that the trial court erred by finding no valid arbitration agreement exists between it and Padilla. For the reasons discussed below, we agree.

Although the arbitration agreement certainly could have been clearer by simply defining “Company” and “Employee,” when reviewing the arbitration agreement as a whole, as we must (see Civ. Code, § 1641), it is at the very least “possible to identify” the parties. (See Civ. Code, § 1558 [“It is essential to the validity of a contract, not only that the parties should exist, but that it should be possible to identify them”].) The company’s name is referenced several times in the agreement, beginning with the title: “Partners Personnel Dispute Arbitration and Resolution Program[.]” The Partners Personnel logo is also prominently placed in the top left corner of the first page of the agreement. Finally, although the first paragraph of the agreement concerns matters other than arbitration, such as Padilla’s at will-status, it contains 11 references to “Partners Personnel.” For example, the fourth sentence states: “I understand that my employment at Partners Personnel is on an at-will basis and that I can terminate it at any time, with or without reason, and with or without notice, either by me or by Partners Personnel.” (Bold text omitted.) No other company is referenced in the four-page document.

Moreover, it is undisputed Padilla signed the agreement the day he was hired by Partners Personnel, and the agreement was retrieved from Padilla’s personnel file. Thus, under the terms of the agreement, Padilla “waive[d] [his] right to have any dispute, claim or controversy . . . decided by a judge or jury in a court.” (Bolded text and capitalization omitted.) Padilla also acknowledges he was employed by Partners Personnel, alleging in his complaint that it should be “deemed an employer” because Partners Personnel “hired, placed and paid [him].” That Partners Personnel “does [not] address why it failed to define the term ‘Company’ at any point in the four-page document[,]” as Padilla argues, has no bearing on the issue before us (i.e., whether it is possible to identify the parties to the arbitration agreement). Although defining the terms would have undoubtedly made the agreement clearer, failing to do so does not render the agreement unenforceable in every instance based on the standard set forth in Civil Code section 1558.

The sole case relied on by both Padilla and the trial court, Flores v. Nature’s Best Distribution, LLC (2016) 7 Cal.App.5th 1 (Flores), is distinguishable. In Flores, the court noted that “although not specifically raised by the parties, . . . the Agreement states it is between ‘employee and Company[ ]’” but the Agreement “does not define either term.” (Id. at p. 9.) The court observed that the agreement, therefore, “does not identify with which entity or entities plaintiff had agreed to submit ‘all legal, equitable and administrative disputes’ to the AAA for mediation and binding arbitration.” (Ibid.) The court went on to hold that it “cannot conclude the parties reached agreement on the matter of submitting any or all of plaintiff’s claim to . . . arbitration as contemplated by the Agreement” because “[v]iewing the Agreement as a whole [citation], the Agreement is ambiguous regarding (1) whether the arbitration provision of the Agreement (not a grievance and arbitration procedure of a collective bargaining agreement) applied to any or all of plaintiff’s claims against any or all of defendants in the instant action and (2) the governing rules and procedures for any such arbitration.” (Id. at p. 11.) Flores, therefore, does not stand for the proposition that the parties to a written contract must be specifically defined in the text to prove the existence of an agreement. Rather, perhaps because the argument was not developed by the parties, and/or because the court found the agreement in Flores was ambiguous in two other respects, the Flores court did not analyze whether it was “possible to identify” (Civ. Code, § 1558) the parties to the agreement despite the undefined terms. As discussed above, because here it is possible to identify the parties to the arbitration agreement based on the context (including, most notably, the title of the arbitration agreement), the trial court erred by denying Partners Personnel’s petition to compel arbitration on the sole ground that it failed to define the terms “Company” and “Employee.”

(9/19/23 Padilla Slip Op., pp. 6-8, emphasis in original, underlining of case names added.)

The reversal is unpublished, but the Court finds it helpful and persuasive because it provides insight into how the Second District interprets Flores.

The key question is whether the reversal is analogous or distinguishable.  It appears to be both:

On balance, the Court finds the reversal analogous.  Near the end of the analysis section, the opinion states: “Flores, therefore, does not stand for the proposition that the parties to a written contract must be specifically defined in the text to prove the existence of an agreement.”  (9/19/23 Padilla Slip Op., p. 8, emphasis and underling of case name added.)  The requisite inquiry is whether “it is possible to identify the parties . . . based on the context[.]”  (Ibid.)  While titles and words matter, they are not dispositive.  Here, similar to the reversal, the record shows that Defendant employed Plaintiff, that he signed the agreement on the day he was hired, and that Defendant obtained the agreement from his personnel file.  These facts, combined, demonstrate an agreement to arbitrate between Plaintiff and Defendant.[1]

Enforcement

Plaintiff does not claim the agreement is unconscionable.

The Court finds the agreement enforceable and that it covers Plaintiff’s claims.

Accordingly, the motion to compel arbitration is granted.

Class Waiver

As noted above, the agreement contains a class waiver.

Plaintiff does not assert that the class claims should not be stricken.

The Court finds the class waiver enforceable, especially because the agreement states that the FAA applies, and strikes the class claims.

Stay Request and Representative PAGA Claim

Defendant asks the Court to stay the representative PAGA claim until the arbitration of Plaintiff’s individual claims is finished.

Plaintiff contends the stay request should be denied.

Prior to Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (“Viking River”), the applicable law was Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.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 Federal Arbitration Act (“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 defendant is allowed to compel the plaintiff’s individual PAGA claim to arbitration; and

* once the plaintiff’s individual PAGA claim is compelled to arbitration, he or she lacks standing to maintain the representative PAGA claim.

The High Court’s standing ruling is nonbinding.  The California Supreme Court reversed it in a case called Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5^th 1104.

Given Iskanian, Viking River, and Adolph, and because the FAA applies, the Court finds that Plaintiff’s individual PAGA claim should be arbitrated and that the representative PAGA claim should be stayed pending completion of the arbitration.