Judge: David S. Cunningham, Case: 23STCV24281, Date: 2024-05-23 Tentative Ruling


Case Number: 23STCV24281    Hearing Date: May 23, 2024    Dept: 11

Vela (23STCV24281)

 

Tentative Ruling Re: Motion to Compel Arbitration

 

Date:                           5/23/24

Time:                          11:00 am

Moving Party:           Harbor Rail Services of California, Inc. (“Defendant” or “Harbor Rail”)

Opposing Party:        Arturo Vela (“Plaintiff”)

Department:              11

Judge:                        David S. Cunningham III

________________________________________________________________________

 

TENTATIVE RULING

 

The hearing on Defendant’s motion to compel arbitration is continued for supplemental evidence and briefing as to the employment-contract issue.

 

BACKGROUND

 

Harbor Rail is a company that performs inspections and repairs for railroad clients.  Plaintiff used to work for Harbor Rail as a mechanic.  He contends Harbor Rail subjected him and other current and former employees to numerous wage-and-hour violations.

 

Here, Harbor Rail moves to compel arbitration.  The main issue is whether the Federal Arbitration Act (“FAA”) or the California Arbitration Act (“CAA”) applies.

 

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.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.)

 

Defendant’s arbitration agreement is attached to declaration of Defendant’s chief operations officer, Thomas Broderick, at exhibit 2.  The agreement states:

 

MUTUAL AGREEMENT TO ARBITRATE

 

Agreement to Arbitrate Claims. Harbor Rail Services of California, Inc. and Coast Truck Centers, and all of their related entities and subsidiaries (hereinafter “Company”) and I (hereinafter “Employee”) voluntarily agree to the resolution by arbitration of all claims, disputes, and/or controversies (collectively “claims”), whether or not arising out of Employee’s employment or its termination, that Company may have against Employee or that Employee may have against Company, its subsidiaries or affiliated entities, or against its employees or agents in their capacity. The claims covered by this Arbitration Agreement include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination or harassment, including, but not limited to, any federal or state civil rights laws, ordinances, regulations or orders, based on charges of discrimination or harassment on account of race, color, religion, sex, sexual orientation, age, citizenship, national origin, mental or physical disability, medical condition, genetic predisposition, marital status, pregnancy or any other discrimination prohibited by such laws, ordinances, regulations or orders; claims for benefits (except where an employee benefit or retirement plan specifies that its claims procedures shall culminate in an arbitration procedure different from this), and claims for violation of any federal, state, or other governmental law, statute, regulation or ordinance, except claims excluded below.

 

Mediation. The Company and Employee agree that they shall first attempt to resolve their differences by voluntary, non-binding, mediation. The mediator shall be selected as follows: The parties shall first attempt to select a mediator by mutual agreement. If the parties cannot mutually agree, each party must nominate a single potential mediator (a “Nominee”), and the Nominees shall jointly select some other person to be the mediator. The mediator, and each Nominee (if applicable), shall be either (a) a retired judge who presided in the jurisdiction where the mediation will be held, or (ii) an attorney licensed to practice law in the state where the mediation will take place. Each party in such mediation shall bear his or her own costs and attorneys’ fees incurred in connection with the mediation, provided, however, that the Company will pay the costs of the mediation process, including payment of the fees of the mediator. Neither party may initiate any arbitration or legal action prior to the conclusion of the mediation. The location of the mediation shall be in the city where Employee works or last worked for the Company.

 

Class and Representative Action Waiver. Except as otherwise required under applicable law, Employee and Company expressly intend and agree that each will also forego pursuing any covered dispute on a class, collective, or representative basis and will not assert class, collective, or representative action claims against the other in arbitration or otherwise. Nor will class or collective action procedures apply pursuant to this Agreement. Employee and Company shall only submit their own, individual claims in arbitration, and shall be entitled to seek dismissal of any such class, collective, or representative claims and otherwise assert this Agreement as a defense in any proceeding. The Company and Employee further agree that any question regarding class or collective arbitrability shall be decided by a court of law and not an arbitrator.

 

This waiver does not apply to representative actions under the California Private Attorneys General Act or any class, collective, or representative claims that cannot be waived as a matter of law.

 

Claims Not Covered by the Agreement. Claims that Employee may have for workers’ compensation or for unemployment compensation benefits, or that Company or Employee may have for injunctive relief are not covered by this Agreement. If either Company or Employee have more than one claim against the other, one or more of which is not covered by this Agreement, such claims shall be determined separately in the appropriate forum for resolution of those claims. Nothing in this Agreement shall preclude the parties from agreeing to resolve claims not covered by this Agreement pursuant to the provisions of this Agreement. This Agreement does not cover and is inapplicable to claims which have been filed as civil lawsuits in any court prior to the execution of this Agreement.

 

Required Notice of Claims. All statutory claims for or related to employment discrimination or harassment must be filed with the California Department of Fair Employment and Housing and/or the federal Equal Employment Opportunity Commission within the time limits set forth by applicable state and federal law, prior to being submitted to arbitration, or such claims are waived. If Employee or Company does not make a written request for arbitration within the limitations period applicable to a claim under applicable federal or state law, the party has waived its right to raise that claim, in any forum, arising out of that issue or dispute. Written notice of a claim against Company, its subsidiaries, affiliated entities, officers, directors, employees or agents shall be sent to the then-current Company agent located at [insert contact information]. Written notice of a claim against Employee shall be sent to Employee.

 

Arbitration Procedure. Company and Employee agree that, except as provided in this Agreement, any arbitration shall be in accordance with the [FAA], 9 U.S.C. § 1, et seq., in conformity with the procedures of the [CAA], California Code of Civil Procedure § 1280, et seq. Employee shall initiate the arbitration process by the delivery of a demand for arbitration on the then-current Company representative located at [insert contact information], via certified mail return receipt and within the time limits which would apply to the filing of a civil complaint in court. Company shall initiate the arbitration process by the delivery of a demand for arbitration on Employee via certified mail return receipt and within the time limits which would apply to the filing of a civil complaint in court. A late request will be void.

 

Selection of Arbitrator. The Arbitrator shall be selected as follows: The parties shall first attempt to select a neutral arbitrator by mutual agreement. If the Parties cannot mutually agree, each Arbitration Agreement Party must nominate a single potential arbitrator (a “Nominee”), and the Nominees shall jointly select some other person to be the Arbitrator. The Arbitrator, and each Nominee (if applicable), shall be either (a) a retired judge who presided in the jurisdiction where the arbitration will be held, or (ii) an attorney licensed to practice law in the state where the arbitration is convened.

 

Governing Law. The Arbitrator shall apply the substantive law (and the law of remedies, if applicable) of California, or federal law, or both, as applicable to the claim(s) asserted. The Arbitrator shall have the authority to award all remedies and relief that would otherwise have been available if the claim had been brought by way of a civil complaint in court. The arbitration shall be final and binding upon the parties. The Arbitrator should utilize the Federal Rules of Evidence as a guide to the admissibility of evidence. The parties retain the right to conduct a reasonable amount of discovery guided by the Federal Rules of Civil Procedure, and the Arbitrator shall have the power to decide any discovery disputes between the parties. Either party, upon request at the close of hearing, shall be given leave to file a post-hearing brief. The time for filing such a brief shall be set by the Arbitrator.

 

Location of Arbitration. The parties agree that any arbitration shall take place in the State of California in the county in which Employee works or worked for Company, unless such venue is inconvenient to the majority of witnesses expected to be necessary to the case or unless the parties agree to some other locale.

 

Arbitration Award. Within ninety (90) days following the hearing and the submission of the matter to the Arbitrator, the Arbitrator shall issue a written opinion and award which shall be signed and dated. The Arbitrator’s award shall include factual findings and the reasons upon which the award is based. Either party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and to enforce an arbitration award.

 

Arbitration Fees and Costs. The cost of the Arbitrator and other incidental costs of arbitration shall be borne by Company. The parties shall each bear their own costs for legal representation in any arbitration proceeding, provided, however, that the Arbitrator shall have the authority to require either party to pay the fee for the other party’s representation during the arbitration, as is otherwise permitted under federal or state law, as part of any remedy that may be ordered.

 

Requirements for Modification or Revocation. The Agreement to arbitrate shall survive the termination of Employee’s employment. It can only be revoked or modified by a writing signed by the parties that specifically states an intent to revoke or modify this Arbitration Agreement.

 

Sole and Entire Agreement. This is the complete Agreement of the parties on the subject of arbitration of disputes, except for any arbitration agreement in connection with any retirement or benefit plan. This Arbitration Agreement supersedes any prior or contemporaneous oral or written understanding on the subject. No party is relying on any representations, oral or written, on the subject of the effect, enforceability or meaning of this Arbitration Agreement, except as specifically set forth in this Arbitration Agreement.

 

Construction. If any provision of this Agreement is adjudged to be void or otherwise unenforceable, in whole or in part, such adjudication shall not affect the validity of the remainder of the Agreement.

 

Not an Employment Agreement. This Arbitration Agreement is not, and shall not be construed to create, any contract of employment, express or implied. Nor does this Agreement in any way alter the “at-will” status of Employee’s employment.

 

Voluntary Agreement. Employee acknowledge that Employee have carefully read this Arbitration Agreement, that Employee understand its terms, that all understandings and agreements between Company and Employee relating to the subjects covered in the Agreement are contained in it, and that Employee have entered into the Agreement voluntarily and not in reliance on any promises or representations by Company other than those contained in this Agreement.

 

EMPLOYEE UNDERSTAND THAT BY SIGNING THIS AGREEMENT, COMPANY AND EMPLOYEE HAVE BOTH WAIVED THEIR RIGHT TO A JURY TRIAL AND THEIR RIGHT TO APPEAL WITH RESPECT TO ALL CLAIMS COVERED BY THIS AGREEMENT. Employee initials: _______

 

EMPLOYEE FURTHER ACKNOWLEDGES THAT EMPLOYEE HAS BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH EMPLOYEE’S PRIVATE LEGAL COUNSEL AND HAS AVAILED HIMSELF OR HERSELF OF THAT OPPORTUNITY TO THE EXTENT EMPLOYEE WISHES TO DO SO.

 

(Broderick Decl., Ex. 2, pp. 1-3, emphasis in original.)

 

Plaintiff signed the agreement on May 10, 2021.  (See id. at Ex. 2, p. 3; see also Lux Decl., ¶ 1; Opposition, p. 2.)

 

Assent is uncontested.

 

The Court finds that these terms and facts suffice to establish an agreement to arbitrate.

 

FAA

 

Defendant’s agreement provides that “any arbitration” conducted pursuant to the agreement “shall be” governed by the FAA.  (Broderick Decl., Ex. 2, p. 2.)

 

Despite this language, Plaintiff contends the Court should find the FAA inapplicable – and apply the CAA instead – based on an exception.  He claims the FAA does not apply to railroad employees and transportation workers.  He asserts that Defendant employed him as a railroad employee or transportation worker and that his work duties “played a necessary role in the free flow of goods in interstate commerce.”  (Opposition, pp. 3-7.)

 

Defendant claims the exception is unsatisfied because Defendant’s railroad clients never employed Plaintiff, and he never worked as a railroad employee or transportation worker.  (See Motion, pp. 8-11.)

 

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.4th 1233, 1241.)

 

The Court finds that Plaintiff fails to meet his burden.  To establish the exemption, Plaintiff must show that Defendant’s 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. (4th Cir. 2023) 74 F.4th 591, 596.)  However, Defendant’s agreement states that it “is not, and shall not be construed to create, any contract of employment, express or implied.”  (Broderick Decl., Ex. 2, p. 3, emphasis added.)  It is the only contractual document in the record.  Indeed, there is no employment contract attached to Plaintiff’s two pieces of evidence, nor is one discussed.  (See Vela Decl., ¶¶ 1-6; see also Lux Decl., ¶¶ 1-4.)  On the current record, Plaintiff fails to show that Defendant’s agreement should be interpreted as part of an employment contract as opposed to a standalone agreement.

 

The Court intends to continue the hearing to give Plaintiff a chance to supplement the record and to allow the parties to brief this issue.

 

The next question is whether Plaintiff qualified as a railroad employee.  The answer appears to be no.  Defendant employed Plaintiff; the railroad clients did not.  (See Vela Decl., ¶ 2; see also Broderick Decl., ¶¶ 2-3, 5-6.)  He cannot rely on the independent-contractor contract between Defendant and Pacific Harbor Line to prove his alleged railroad-employee status.  (See Amos, supra, 74 F.4th at 596.)

 

The last question is whether Plaintiff qualified as a transportation worker.  This is a closer call.  “‘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.4th 833, 840.)  Defendant’s business is substantially related to the railroad industry.  (See, e.g., Broderick Decl., ¶¶ 4-5.)  Defendant hired Plaintiff to do inspections and mechanic work on Defendant’s behalf for the railroad clients.  (See id. at ¶ 6.)  Given these facts, Plaintiff’s burden is met, even though he did not transport goods across state lines.

 

In summary, the Court:

 

* continues the hearing for supplemental evidence and briefing as to the employment-contract issue;

 

* finds Plaintiff’s burden unmet as to the railroad-employee issue; and

 

* finds Plaintiff’s burden met as to the transportation-worker issue.

 

Class Waiver

 

Plaintiff claims the agreement’s class waiver is unenforceable under Gentry v. Superior Court (2007) 42 Cal.4th 459.  (See Opposition, pp. 7-11.)

 

This issue is premature.  It will not be ripe unless and until the FAA-exemption issue is resolved, and only if it is resolved in Plaintiff’s favor.

 

Stay of Arbitrable Claims

 

Plaintiff asks the Court to litigate the nonarbitrable claims first and to stay arbitration of the arbitrable claims.  (See id. at pp. 11-13.)

 

This issue is also premature.