Judge: David S. Cunningham, Case: 23STCV24004, Date: 2024-06-25 Tentative Ruling


Case Number: 23STCV24004    Hearing Date: June 25, 2024    Dept: 11

Lee (23STCV24004)

 

Tentative Ruling Re: Motion to Compel Arbitration

 

Date:                           6/25/24

Time:                          11:00 am

Moving Party:           Vizio Services, LLC (“Defendant”)

Opposing Party:        Jung Ho Lee (“Plaintiff”)

Department:              11

Judge:                        David S. Cunningham III

________________________________________________________________________

 

TENTATIVE RULING

 

The hearing on Defendant’s motion to compel arbitration is continued.  The Court intends to grant the parties leave to submit supplemental evidence and will hold an evidentiary hearing with live testimony.

 

BACKGROUND

 

“Defendant operates a Smart TV platform and related services[.]”  (Motion, p. 2.)  Plaintiff used to work for Defendant as an account executive.  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, Assent, and Enforcement

 

“[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable.”  (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)

 

“Under ‘both federal and state law, the threshold question . . . is whether there is an agreement to arbitrate.’”  (Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396, emphasis in original.)

 

The burden of proof rests with the petitioner.  (See Rosenthal, supra, 14 Cal.4th at 413 [requiring the petitioner to prove the existence of the agreement “by a preponderance of the evidence”].)  To meet the burden, “the provisions of the written agreement and the paragraph that provides for arbitration . . . must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.”  (Cal. Rules of Court, rule 3.1330; see also Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218 [same].)

 

“Competent evidence is required to establish both the existence of the arbitration agreement and any ground for denial.”  (Knight, et al., Cal. 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 Defendant in October 2022.  (See McLeod Decl., ¶ 5.)  During the onboarding process, which took place online, Plaintiff received several documents, including the 2021-2022 employee handbook and 2022 arbitration agreement.  (See id. at ¶¶ 6-11.)  It is undisputed that Plaintiff e-signed an acknowledgment page in which he acknowledged receiving the 2021-2022 handbook and 2022 agreement.  (See id. at ¶¶ 12, 14; see also Lee Decl., ¶ 8.)

 

The 2022 agreement appears on the 2022 acknowledgment page.  It states:

 

This will acknowledge that I have received my copy of the 2021-2022 VIZIO, Inc. (“the Company”) Employee Handbook, and that I will familiarize myself with its contents. I understand that this handbook represents the current policies, regulations, and benefits, and that except for employment at-will status and the Arbitration Agreement, any and all policies or practices can be changed at any time by the Company. The Company retains the right to add, change, or delete wages, benefits, policies, and all other working conditions at any time (except the policy of "at will employment" and Arbitration Agreement, which may not be changed, altered, revised or modified without signature by the President of The Company).

 

I further understand that nothing in the Employee Handbook creates or is intended to create a promise or representation of continued employment with the Company, and that my employment, position, and compensation with the Company are at-will, and may be changed or terminated at the will of the Company. I understand that I have the right to terminate my employment at any time, with or without cause or notice, and that The Company has a similar right. My signature below certifies that I understand the foregoing agreement that at-will status is the sole and entire agreement between the Company, and myself concerning the duration of my employment and the circumstances under which my employment may be terminated. It supersedes all prior agreements, understandings, and representations (whether written or oral) concerning my employment with the Company.

 

I further agree and acknowledge that the Company and I will utilize binding arbitration to resolve all disputes that may arise out of the employment context. The Company and I each agree that any claim, dispute, and/or controversy that either I may have against the Company (or their owners, directors, officers, managers, employees, agents, and parties affiliated with their employee benefit and health plans), or that the Company may have against me, arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, termination from, or other association with the Company 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). 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 and harassment, 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, with exception of 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 otherwise required by state or federal law. However, nothing herein shall prevent me from filing and pursuing proceedings before the California Department of Fair Employment and Housing, or the United States Equal Employment Opportunity Commission (although if I choose to pursue a claim following the exhaustion of such administrative remedies, that claim would be subject to the provisions of this Agreement). In addition to any other requirements imposed by law, the arbitrator selected shall be a qualified individual to whom 2 Version: April 2016 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. Resolution of the dispute 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. 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. I understand and agree to this binding arbitration provision, and both the Company, and I give up our right to trial by jury of any claim I, the Company may have against each other.

 

This is the entire agreement between the Company, and me regarding dispute resolution, the length of my employment, and the reasons for termination of employment, and this agreement supersedes any and all prior agreements regarding these issues. It is further agreed and understood that any agreement contrary to the foregoing must be entered into, in writing, by the President of the Company, to be binding against the Company. No supervisor or representative of the Company, other than the President of the Company, has any authority to enter into any agreement for employment for any specified period of time or make any agreement contrary to the foregoing. Oral representations made before I was hired do not alter this Agreement.

 

If any term, provision, or portion of this Agreement is declared void or unenforceable, it shall be severed and the remainder of this Agreement shall be enforceable.

 

(McCleod Decl., ¶ 11, Ex. A; see also Lee Decl., ¶ 8, Ex. 4.)

 

Facts and terms like these normally suffice to demonstrate an agreement to arbitrate; however, Plaintiff contends the motion to compel should be denied because:

 

(1) Plaintiff e-signed an acknowledgment in January 2023 that supersedes the 2022 agreement (see Opposition, pp. 2-4);

 

(2) Defendant is not a signatory to the 2022 agreement (see id. at pp. 4-5);

 

(3) Defendant lacks standing to enforce the 2022 agreement as a third-party beneficiary or under the doctrine of equitable estoppel (see id. at pp. 5-12); and

 

(4) “Plaintiff’s continued employment with Defendant” did not constitute implied assent to the 2022 agreement.  (Id. at p. 12.)

 

The Court finds that the hearing should be continued as to point (1).  The 2023 acknowledgment states:

 

This is to acknowledge that I have received a copy of the Employee Handbook and understand that it contains important information on VIZIO’s general personnel policies and on my privileges and obligations as an employee. I acknowledge that I am expected to have read, familiarized myself with, understood, and will adhere to all VIZIO policies set forth herein. I understand that I am governed by the contents of the handbook and that VIZIO may change, rescind or add to any policies, benefits or practices described in the handbook, other than the employment-at-will policy, from time to time in its sole and absolute discretion, with or without prior notice. VIZIO will advise employees of material changes within a reasonable time.

 

I also acknowledge that I have received a copy of the “Employee Privacy Notice and Policy” that is effective on January 1, 2023. If I am an employee in Colorado, New York, or Washington, I acknowledge that I have received a copy of a separate Addendum that is designed to supplement this Employee Handbook. If there is any conflict between the Addendum that applies to me and this Handbook, the Addendum will control. Furthermore, I understand that employment with VIZIO is not for a specified term and is at the mutual consent of the employee and the company. Accordingly, either the employee or the company can terminate the employment relationship at will, with or without cause, at any time. This represents a final and binding integrated agreement with respect to the at-will nature of the employment relationship and cannot be modified, unless it is modified in a written agreement signed by the president of the company and by me.

 

This is the entire agreement between the Company, and me regarding dispute resolution, the length of my employment, and the reasons for termination of employment, and this agreement supersedes any and all prior agreements regarding these issues. It is further agreed and understood that any agreement contrary to the foregoing must be entered into, in writing, by the CEO of the Company, to be binding against the Company. No supervisor or representative of the Company, other than the President of the Company, has any authority to enter into any agreement for employment for any specified period of time or make any agreement contrary to the foregoing. Oral representations made before I was hired do not alter this Agreement.

 

If any term, provision, or portion of this Agreement is declared void or unenforceable, it shall be severed and the remainder of this Agreement shall be enforceable.

 

(Lee Decl., ¶ 9, Ex. 4, emphasis added.)  The emphasized language tends to indicate that the drafters intended the 2023 acknowledgment to be the “entire agreement . . . regarding dispute resolution” and to “supersede[] . . . all prior agreements regarding” dispute resolution.  (Ibid.)  Admittedly, though, the term “dispute resolution” is ambiguous, and “VIZIO” is undefined.  Supplemental evidence and an evidentiary hearing on the meaning of these words are needed to decide the motion.

 

For now, Defendant’s cases do not change the result.  Defendant cites Ramirez-Baker v. Beazer Homes, Inc. (E.D.Cal. 2008) 636 F.Supp.2d 1008 and Thorup v. Dean Witter Reynolds, Inc. (1986) 180 Cal.App.3d 228, claiming a subsequent agreement that is silent concerning arbitration cannot supersede a prior agreement that expressly requires arbitration.  (See Reply, pp. 2-3.)  The subsequent integration clause in Ramirez-Baker did not have a “dispute resolution” term.  (Ramirez-Baker, supra, 636 F.Supp.2d at 1016.)  Thorup analyzes a different issue – “whether the employer waived its right to arbitrate by firing the employee before seeking arbitration.”  (Thorup, supra, 180 Cal.App.3d at 232.)  Both are distinguishable on the current record, so a continuance remains necessary.

 

Point (2) is unpersuasive.  The 2022 agreement provides that “the Company and [Plaintiff] will utilize binding arbitration to resolve all disputes that may arise out of the employment context.”  (McCleod Decl., ¶ 11, Ex. A.)  “Company” means “VIZIO, Inc.”  (Ibid.)  Defendant, on the other hand, is not mentioned and is not a signatory, but these facts, alone, are not enough to defeat the motion to compel.  Indeed, “[c]ertain 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.)

 

Which brings the Court to point (3).  The 2022 agreement identifies multiple beneficiaries, namely, “the Company[’s]” – i.e., VIZIO, Inc.’s – “owners, directors, officers, managers, employees, agents, and parties affiliated with their employee benefit and health plans[.]”  (McCleod Decl., ¶ 11, Ex. A, emphasis added.)  Defendant’s director of human resources declares that Defendant is VIZIO, Inc.’s subsidiary, that VIZIO, Inc.’s benefits plan applied to Defendant’s employees, and that Plaintiff was enrolled in the plan.  (See id. at ¶¶ 3, 15.)  The statement supports Defendant’s position, and there is no contrary evidence. If the Court ends up holding that the 2023 acknowledgment does not supersede the 2022 agreement, the Court intends to find that Defendant qualifies as a third-party beneficiary.

 

The motion to compel is moot as to agency, equitable estoppel, and point (4).  Defendant does not discuss these theories in reply.  (See Reply, pp. 2-8.)  They appear to be abandoned.

 

Unconscionability

 

Plaintiff does not argue that the 2022 agreement is unconscionable.  (See Opposition, pp. 1-12.)

 

Class Claims

 

Defendant contends the class claims should be stricken because the 2022 agreement does not authorize class arbitration.  Defendant asserts that “[c]lass or collective arbitration is not available when an arbitration agreement is silent on the issue.”  (Motion, p. 13.)

 

Plaintiff did not respond.  (See Opposition, pp. 1-12.)

 

Defendant’s contention puts the cart before the horse.  The 2022 agreement states that the FAA governs.  (See McCleod Decl., ¶ 11, Ex. A; see also Lee Decl., ¶ 8, Ex. 4.)  Case law holds, in FAA cases, that “the foundational issue – whether a particular arbitration agreement prohibits class arbitrations – must . . . be decided by the arbitrators, not the courts.”  (Garcia v. DIRECTV, Inc. (2004) 115 Cal.App.4th 297, 298; see also Knight, supra, at ¶ 5:356.5 [citing Green Tree Financial Corp. v. Bazzle (2003) 539 U.S. 444, noting that the United States Supreme Court “has held in a plurality opinion that when an arbitration provision does not expressly permit or prohibit classwide arbitration, the decision is for the arbitrator, not the court”]; Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233 [agreeing with the High Court’s plurality opinion].)  Consequently, if the 2022 agreement ends up being found to not be superseded, the arbitrator will need to decide whether the 2022 agreement allows class arbitration before the Court can address Defendant’s request to strike.   

 

Private Attorneys General Act (“PAGA”)

 

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.4th 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[.]”  (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[.]

 

(Id. at 1925, underlined case name added.)

 

Four takeaways stand out:

 

* 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.5th 1104.

 

In light of Iskanian, Viking River, and Adolph, if the 2002 agreement ends up being found binding and enforceable, the Court intends to compel Plaintiff’s individual PAGA claim to arbitration and to stay the representative PAGA claim until the arbitration is finished.