Barahona (23STCV22942)

 

Tentative Ruling Re: Motion to Compel Arbitration

 

Date:                           8/22/24

Time:                          9:00 am

Moving Party:           Kellwood Company, LLC (“Defendant” or “Kellwood”)

Opposing Party:        Melissa Barahona and Andy Bolanos (collectively “Plaintiffs”)

Department:              11

Judge:                         David S. Cunningham III

________________________________________________________________________

 

TENTATIVE RULING

 

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

 

* allow the parties to submit supplemental evidence and supplemental briefs regarding authentication and assent; and/or

 

* hold an evidentiary hearing with live testimony.

 

BACKGROUND

 

Plaintiffs used to work for Kellwood.  They claim Kellwood subjected them and other current and former employees to multiple wage-and-hour violations.

 

According to Kellwood, Plaintiffs’ actual employer was ASAP Staffing LLC (“ASAP”).  Kellwood asserts that ASAP assigned Plaintiffs to Kellwood “as temporary associates” but that ASAP processed Plaintiffs’ timecards and paid them for the work.  (Yap Decl., ¶ 3; see also Alvarado Decl., ¶¶ 2-3.)

 

Here, Kellwood moves to compel arbitration.  The motion is brought pursuant to ASAP’s arbitration agreements.  Kellwood contends it is a third-party beneficiary of ASAP’s agreements.

 

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.)

 

ASAP’s president, Paul Alvarado, declares that Plaintiffs signed arbitration agreements when ASAP hired them.  (See Alvarado Decl., ¶¶ 4, 5.)  The agreements are attached to Alvarado’s declaration at exhibits A and B.  (See id. at Exs. A, B.)  They state:

 

Mutual Arbitration Agreement

 

As a condition of employment, _________ (“Company”), and its successors and assigns and the undersigned Employee (the “Employee”) enter into this Mutual Arbitration Agreement (“Agreement”).  The parties acknowledge by their signatures below that this Agreement is supported by adequate consideration.  The parties acknowledge and understand that any company to whom Employee is assigned for work can enforce the provisions of this Agreement.

 

Agreement to Arbitrate Certain Disputes and Claims

 

With the sole exception of those claims specifically excluded from this Agreement, the Company and Employee mutually agree to arbitrate before a neutral arbitrator any and all disputes or claims, which would otherwise be subject to resolution in court, arising from or relating to Employee’s recruitment to or employment with the Company, or the termination of that employment, whether the disputes or claims arise in tort, contract, or pursuant to a statute, regulation, or ordinance now in existence or which may in the future be enacted or recognized, including, but not limited to, the following claims:

 

• alleged violations of federal, state and/or local constitutions, statutes or regulations, including, but not limited to Americans with Disabilities Act of 1990 ("ADA") (42 U.S.C. §§ 12101), any violation of the Civil Rights Act of 1964, as amended (42 U.S.C. §§ 2000e, et. seq.) ("Title VII"), the California Fair Act (“FEHA”), the Equal Pay Act of 1963 (29 U.S.C. § 2006(d)), any claims under 42 U.S.C. Section 1981, claims under the Employee Retirement Income Security Act ("ERISA"), any claims under the Age Discrimination in Employment Act of 1967 ("ADEA"), the Older Workers Benefit Protection Act ("OWBPA") and the Family and Medical Leave Act (29 U.S.C. § 2601, et. seq.)("FMLA") or its state law counterparts;

 

• claims based on any purported beach of a contractual obligation, including claims for fraud, promissory estoppel, breach of the covenant of good faith and fair dealing and for interference with contract and/or prospective economic advantage;

 

• claims based on any purported breach of a duty arising in tort, including violations of public policy and defamation.

 

• claims for wrongful termination of employment or constructive termination.

 

• claims for non-payment or incorrect payment of wages, commissions, bonuses, severance, employee fringe benefits, leave benefits, and stock options.

 

We further understand and agree that the following claims are not covered by this Agreement and shall therefore be resolved in any appropriate forum, including courts of law, as required by the laws then in effect: (1) workers’ compensation claims; (2) unemployment insurance benefits claims; (3) disputes or claims that are expressly excluded by statute, state law or applicable court decision from being resolved by mandatory arbitration; and (4) disputes that are expressly required to be arbitrated under a different procedure pursuant to the terms of an employee benefit plan.

 

This Agreement shall not prevent either party from seeking from a court the remedy of an injunction for a claimed misappropriation of a trade secret, patent right, copyright, trademark, or any other intellectual or confidential property.

 

Moreover, nothing in this Agreement should be interpreted as waiving the right or obligation of an Employee to file a charge or complaint with a federal, state, or local administrative agency charged with investigating and/or prosecuting complaints under any applicable federal, state or municipal law or regulation.  Any demand for arbitration by either the Employee or the Company shall be filed within the statute of limitations that is applicable to the claim(s) upon which arbitration is sought or required.  Any failure to demand arbitration within this time frame shall constitute a waiver of all rights to raise any claims arising out of any dispute that was subject to arbitration.

 

Class Action Waiver

 

Arbitration shall proceed solely on an individual basis without the right for any Claims to be arbitrated on a class action basis or brought in a purported representative capacity on behalf of others, to the extent permissible under applicable law. The arbitrator's authority to resolve and make written awards is limited to Claims between Employee and the Company alone. Claims may not be joined or consolidated unless agreed to in writing by all parties. No arbitration award or decision will have any preclusive effect as to issues or claims in any dispute with anyone who is not a named party to the arbitration. Notwithstanding any other provision in agreement, and without waiving either party's right of appeal, if any portion of this “Class Action Waiver and Other Restrictions” provision is deemed invalid or unenforceable, then the entire Arbitration Provision (other than this sentence) shall not apply.

 

Hearing Procedure

 

Except as provide herein, we understand and agree that the arbitration shall be conducted in accordance with the existing National Rules for the Resolution of Employment Disputes of the American Arbitration Association; provided, however, that the Arbitrator shall allow the discovery authorized y the Federal Rules of Civil Procedure or any other discovery required by applicable law in arbitration proceedings.

 

Awards Procedure

 

The Arbitrator shall issue a written award that sets forth the essential findings and conclusions on which the award is based.  The Arbitrator shall have the authority only to determine the issue(s) submitted to him/her.  The issue(s) must be identifiable in the “Request for Arbitration” or counterclaim(s).  Except as required by law, any issue(s) not identifiable in those documents is outside the scope of the Arbitrator’s jurisdiction and any award involving such issue(s), upon motion by a party, shall be vacated.

 

The Arbitrator shall adhere to the terms of this Agreement.  The Arbitrator shall have no power to add to or modify the terms of this Agreement.  In reaching a decision, the Arbitrator shall be bound by the law and applicable legal precedent, and shall have no power to vary from the law or legal precedent.  The Arbitrator’s award shall be final and binding, except that it shall be subject to correction, confirmation, or vacation, as provided by any applicable law setting for the standard of judicial review or arbitration awards.

 

Place of Arbitration

 

We understand and agree that the arbitration shall take place in Orange County, California.

 

Governing Law

 

We understand and agree that this Agreement and its validity, construction and performance, as well as disputes and/or claims arising under this Agreement shall be governed by the Federal Arbitration Act (“FAA”). 

 

In rendering the award, the arbitrator shall determine the rights and obligations of the parties according to the substantive and procedural laws of California, as though the arbitrator was a court of competent jurisdiction in California. The arbitrator will have the same power to award any remedies, including attorney’s fees and costs, as a California court would have in determining the dispute.  The parties further agree that the arbitrator shall not be empowered to add to, subtract from, or modify, alter or amend the terms of this Agreement.

 

Costs of Arbitration

 

The Company will bear the arbitrator’s fees and expenses of any arbitration pursuant to this agreement.  The arbitrator shall grant an award of attorneys’ fees if such an award is permissible or required by law.

 

Severability

 

We understand and agree that if any provision of this Agreement is determined to be . . . wholly or partially illegal, invalid, contrary to public policy or unenforceable, the legality, validity, and enforceability of the remaining parts, terms, or provisions shall not be affected thereby, and said illegal, unenforceable, or invalid part, term, or provision shall be first amended to give it/them the greatest effect allowed by law and to reflect the intent of the parties.

 

Knowing and Voluntary Agreement

 

We agree that we have read this Agreement carefully and understand that by signing it, we are waiving all rights to a trial or hearing before a court or jury of any and all disputes and claims subject to arbitration under this Agreement.  Nothing in this agreement alters the “at will” nature of employment with the Company.

 

(Id. at Ex. A, pp. 1-3, emphasis in original; see also id. at Ex. B, pp. 1-3 [same].)

 

Facts and terms like these normally suffice to demonstrate agreements to arbitrate; however, Plaintiffs make three arguments: (1) the agreements lack authentication (see Opposition, pp. 2-4);  (2) the “Company” did not sign the agreements (see id. at pp. 4-6); and (3) the agreements fail to name “Company.”  (See id. at pp. 6-7.)

 

The Court favors a continuance as to argument (1).  Defendant relies on Alvarado’s declaration to authenticate the agreements.  The declaration states that exhibits A and B constitute “true and correct cop[ies] of the Mutual Arbitration Agreement signed by” Plaintiffs (Alvarado Decl., ¶¶ 4, 5), yet it fails to include facts showing personal knowledge.  For example, it fails to address where ASAP found the agreements, how they were stored, and whether Alvarado saw Plaintiffs sign them.  These kinds of facts need to be provided to meet Defendant’s burden, so the Court is inclined to continue the hearing.

 

The Court also favors a continuance as to arguments (2) and (3).  The agreements state:

 

* “[t]he parties acknowledge by their signatures below that this Agreement is supported by adequate consideration” (id. at Ex. A, p. 1, emphasis added; see also id. at Ex. B, p. 1 [same]); and

 

* “[w]e agree that we have read this Agreement carefully and understand that by signing it, we are waiving all rights to a trial or hearing before a court or jury of any and all disputes and claims subject to arbitration under this Agreement.”  (Id. at Ex. A, p 3, emphasis added; see also id. at Ex. B, p. 3 [same].)

 

Despite the emphasized language, only Plaintiffs signed.  Neither agreement contains a signature from a “Company” representative, and “Company” is unnamed and undefined in both.  (See id. at Ex. A, pp. 1-3; see also id. at Ex. B, pp. 1-3.)  Considering these facts, the Court is inclined to give the parties a chance to submit supplemental evidence and/or to hold an evidentiary hearing.  (See, e.g., Flores v. Nature’s Best Distribution, LLC (2016) 7 Cal.App.5^th 1, 9 [affirming the denial of a motion to compel because, in part, the arbitration agreement did not define the terms “Employee” and “Company”].)

 

Notably, this Court has considered the Flores issue in three cases prior to today – Padilla v. Partners Personnel-Management Services, LLC (21STCV03616), Browning v. Theatre Box-San Diego, LLC (22STCV27174), and Velez v. Down Dog Lodge, LLC (23STCV17285).  In Padilla, the defendant tried to distinguish Flores on the same grounds as Defendants try here.  Following supplemental briefing, the Court found Flores analogous since the Padilla arbitration 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, the Court found Flores distinguishable because the Browning 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.)  In Velez, the Court distinguished Flores because “the record show[ed] that [d]efendant employed [p]laintiff, that [plaintiff] signed the agreement on the day he was hired, and that [d]efendant obtained the agreement from [plaintiff’s] personnel file.” (2/2/24 Velez Ruling Re: Motion to Compel Arbitration, p. 8.)  

 

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

 

On September 19, 2023, though, the Court of Appeal reversed the Padilla ruling.  Relevantly, the opinion states:

 

[Partners Personnel-Management Services, LLC (“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 [Trinidad] 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 Padilla reversal is unpublished, but it is helpful because it gives insight into how the Second District interprets Flores, and it is law of the case in a case on this Court’s docket.

 

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

 

Padilla Reversal Factors	Analogous	Distinguishable
The title of the agreement stated Partners Personnel’s name		X – Defendant’s and ASAP’s names are not stated in the agreement’s title
Partners Personnel’s logo appeared in the top left corner on the agreement’s first page		X – Defendant’s and ASAP’s logos do not appear on any page of the agreement
Although it did not concern arbitration, the first paragraph of the agreement referenced Partners Personnel by name 11 times		X – Defendant’s and ASAP’s names are not referenced in the first paragraph or anywhere else; there are 0 references
Padilla signed the agreement on the day Partners Personnel hired him	X – Alvarado declares that Plaintiffs signed the agreements on their hiring dates
Partners Personnel retrieved the agreement from Padilla’s personnel file		X – Defendant and ASAP fail to say where they found the agreements
Padilla acknowledged that Partners Personnel employed him	X – The complaint alleges that Defendant employed Plaintiffs	X – Plaintiffs do not admit that ASAP employed them, and the complaint does not discuss ASAP

 

Near the end of the analysis section, the Padilla reversal 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.)

 

Where did the agreements come from?  Did Defendant get them from ASAP?  Did ASAP find them in Plaintiffs’ personnel files?  Is it undisputed that ASAP employed Plaintiffs?  Supplemental evidence is needed to answer these questions.

 

Last point.  Plaintiffs’ assertion – the agreements cannot be enforced because the “Company” did not sign them – is based on Donohoe v. Orange County Global Medical Center, 2019 Cal. Super. LEXIS 58421, Morse v. Tesla Motors, 2023 Cal. Super. LEXIS 12664, Mitri v. Arnel Management Co. (2007) 157 Cal.App.4^th 1164, Gorlach v. Sports Club Co. (2012) 209 Cal.App.4^th 1497, and Alberto v. Cambrian Homecare (2023) 91 Cal.App.5^th 482.  (See Opposition, pp. 4-5.)  Donohoe and Morse are unpublished decisions.  Mitri and Gorlach analyze whether an unsigned arbitration agreement, which is part of, or provided in connection with, an employee handbook, can be enforced if the employee signed an acknowledgment of receipt.  Alberto skips over the assent question and just analyzes unconscionability.  Nevertheless, the Court is inclined to grant the parties leave to submit supplemental evidence on the intended meaning of “Company” and to brief whether, as a matter of law, ASAP was obligated to sign the agreements.

 

FAA

 

Concerning the FAA, the agreement’s wording is clear.  It states that “this Agreement and its validity, construction and performance, as well as disputes and/or claims arising under this Agreement shall be governed by the [FAA].”  (Id. at Ex. A, p. 3; see also id. at Ex. B, p. 3 [same].)

 

Because of the clear wording, the Court does not need to decide whether Defendant’s evidence shows an impact on interstate commerce.

 

Enforcement

 

Unconscionability

 

Plaintiff does not claim the agreements are unconscionable.  (See Opposition, pp. 1-10.)

 

Third-Party Beneficiary

 

Defendant is nonsignatory but contends it qualifies as a third-party beneficiary.  (See Motion, pp. 7-9.)

 

“Certain persons who did not sign the agreement to arbitrate may be entitled to enforce it and prosecute the arbitration in their own names.”  (Knight, supra, at ¶ 5:262.)  For example, third-party beneficiaries (see id. at ¶ 5:263), employees (see id. at ¶ 5:265.7), associates (see ibid.), agents (see id. at ¶ 5:266.5), and assigns.  (See id.at ¶ 5:266.7.)  Another example is when equitable estoppel applies.  (See id. at ¶ 5:266.15.)  “[A] a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are ‘intimately founded in and intertwined’ with the underlying contract obligations.”  (Marenco v. DirecTV LLC (2015) 233 Cal.App.4^th 1409, 1419-1420.) 

 

The third-party-beneficiary issue cannot be decided at this time.  The plain language says “[t]he parties acknowledge and understand that any company to whom Employee is assigned for work can enforce the provisions of this Agreement.”  (Alvarado Decl., Ex. A, p. 1, emphasis added; see also id. at Ex. B, p. 1 [same].)  For Defendant to qualify, the agreements must be authenticated, the signature and “Company”-identification issues must be resolved in Defendant’s favor.  These matters will not be resolved until after the continuance.

 

Class Waiver

 

Defendant asserts that the agreements waive class claims.  (See Motion, pp 11-12.)

 

Plaintiffs contend the class waivers should be stricken under California law.  (See Opposition, pp. 8-10.)

 

This issue is premature, but the Court tends to agree with Defendant.  The agreements contain class waivers (see Alvarado Decl., Ex. A, p. 2; see also id. at Ex. B, p. 2 [same]), the FAA governs, and the waivers are enforceable under the FAA.  (See, e.g., Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4^th 348, 359-360 [finding that the FAA preempts “a state’s refusal to enforce [] a [class] waiver on grounds of public policy or unconscionability”].)