Judge: David S. Cunningham, Case: 23STCV27464, Date: 2024-03-19 Tentative Ruling

Case Number: 23STCV27464    Hearing Date: March 19, 2024    Dept: 11

Casas (23STCV27464)

 

Tentative Ruling Re: Motion to Compel Arbitration

 

Date:                           3/19/24

Time:                          2:30 pm

Moving Party:           Secret Charm LLC (“Secret Charm” or “Defendant”)

Opposing Party:        Trisha Casas (“Plaintiff”)

Department:              11       

Judge:                        David S. Cunningham III

________________________________________________________________________

 

TENTATIVE RULING

 

The hearing on Defendant’s motion to compel arbitration is continued.  The Court’s intention is to hold an evidentiary hearing with live testimony.

 

BACKGROUND

Secret Charm manufactures clothes for women.

 

Plaintiff is a former employee.  She alleges that she and other current and former employees were subjected to numerous wage-and-hour violations.

 

Here, Secret Charm 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.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 February 2018.  (See Edwards Decl., ¶ 5; see also Plaintif Decl., ¶ 3.)  During the onboarding process, which took place online, Defendant’s third-party vendor, MyStaffingPro, presented multiple documents to Plaintiff, including the Employee Handbook.  (See Edwards Decl., ¶¶ 6-7; see also Plaintiff Decl., ¶¶ 5-7.)  It is undisputed that Plaintiff acknowledged receiving the Employee Handbook by e-signing the Employee Handbook Acknowledgment Form.  (See Edwards Decl., ¶¶ 6-8; see also Plaintiff Decl., ¶¶ 5-7.)

 

The last few pages of the Employee Handbook allegedly contained a document called the Employee Acknowledgment and Agreement.  (See Edwards Decl., ¶¶ 6-7.)  The Employee Acknowledgment and Agreement contains an arbitration provision.  The document states:

 

EMPLOYEE ACKNOWLEDGMENT

AND AGREEMENT

 

This will acknowledge that I have received my copy of the Secret Charm, LLC 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 provision below (“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 a writing signed 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 wand that my employment, position, and compensation at 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.  Both the Company and I agree that any claim, dispute, and/or controversy that either I may have against the Company (or its owners, directors, officers, managers, employees, agents, and partis affiliated with its employee benefit and health plans) or the Company may have against me, arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Ac, 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 claim, or as otherwise is 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 retired California Superior Court Judge, or 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 motion for summary judgment, judgment on the pleadings, and judgment under Code of Civil Procedure Section 631.8 shall apply and be observed.  The Company shall bear full responsibility for the arbitrator’s fees and costs.  Each party shall pay for its own costs and attorneys’ fees, if any.  However, if any party prevails on a statutory claim which affords the prevailing party attorneys’ fees, or if there is a written agreement providing for fees, the arbitrator may award reasonable fees to the prevailing party.  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 I and the Company give up our right to trial by jury of any claim that I or 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 an 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.  No manager or representative of the Company, other than its President, 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 or after I was hired 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.

 

MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I HAVE READ, UNDERSTAND, AND AGREE TO BE LEGALLY BOUND TO ALL OF THE ABOVE TERMS.  DO NOT SIGN UNTIL YOU HAVE READ THE ABOVE ACKNOWLEDGMENT AND AGREEMENT.

 

(Id. at Ex. A [Employee Acknowledgment and Agreement, pp. 1-2], emphasis in original.)

 

Facts and terms like these usually suffice to establish an agreement to arbitrate; however, Plaintiff raises an assent challenge.  She claims she does not remember “seeing an arbitration agreement in the documents [she] signed.”  (Plaintiff Decl., ¶ 8.)  She contends the motion should be denied because the arbitration provision is unsigned and needs her signature to be enforceable.  She cites 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.4th 1164, and Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th 1497 in support.  (See Opposition, pp. 3-7.)

 

Donohoe and Morse are unpublished decisions.  They cannot be cited, so the Court declines to consider them.

 

Defendant contends Mitri and Gorlach are distinguishable.  There, Defendant asserts that the employee handbooks obligated the employees to execute arbitration agreements that were separate from the handbooks.  Defendant claims the courts denied arbitration because the evidence failed to show that the employees signed the separate agreements.  Here, differently, Defendant contends the evidence shows assent because the arbitration provision was part of the Employee Handbook, and Plaintiff e-signed the Employee Handbook Acknowledgment Form, acknowledging reception of the Handbook.  (See Reply, pp. 4-5.) 

 

Several cases, in addition to Mitri and Gorlach, address this issue.  The cases generally recognize that 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.  The acknowledgment’s language is one important factor to evaluate.  (See Mitri, supra, 157 Cal.App.4th at 1173; see also Gorlach, supra, 209 Cal.App.4th at 1507-1511; Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 381-385; Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 788-792; Sparks v. Vista Del Mar Child & Family Services (2012) 207 Cal.App.4th 1511, 1519-1522; Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 782-791; Romo v. Y-3 Holdings, Inc. (2001) 87 Cal.App.4th 1153, 1158-1160; Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 68-70; Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 804-806.)

 

On one hand, the cases support Defendant’s position because:

 

(1) Page 6 of the Employee Handbook “note[s] that Secret Charm utilizes a system of binding arbitration for resolving disputes with employees that cannot be resolved by other means, and which would otherwise be subject to resolution in court” (Edwards Decl., Ex. A [Employee Handbook, p. 6]); 

 

(2) the arbitration provision appears in the Employee Acknowledgment and Agreement (see id. at Ex. A [Employee Acknowledgment and Agreement, pp. 1-2]);

 

(3) Defendant’s human resources manager declares that Defendant included the “Employee Acknowledgment and Agreement . . . within the last pages of the Employee Handbook” (id. at ¶ 6);

 

(4) the “Purpose” section of the Handbook states that the Employee Acknowledgment and Agreement is “enclosed[,]” (id. at Ex. A [Employee Handbook, p. 5], emphasis in original);

 

(5) Plaintiff affirmed reception of the Handbook (see id. at Ex. B [Employee Handbook Acknowledgment Form, p. 1]; see also Plaintiff Decl., ¶ 7);

 

(6) Plaintiff’s assertion – she does not remember seeing an arbitration agreement – is not a defense;

 

(7) the arbitration provision states that the FAA applies (see Edwards Decl., Ex. A [Employee Acknowledgment and Agreement, p. 1]); and

 

(8) federal and California policy favor arbitration.

 

On the other hand, the cases support Plaintiff’s position because:

 

(1) the table of contents in the Handbook does not reference a section or page pertaining to arbitration (see id. at Ex. A [Employee Handbook, pp. 1-2]);

 

(2) while page 6 of the Handbook “note[s] that Secret Charm utilizes a system of binding arbitration for resolving disputes with employees that cannot be resolved by other means, and which would otherwise be subject to resolution in court” (Edwards Decl., Ex. A [Employee Handbook, p. 6]), and while the “Purpose” section states that the Employee Acknowledgment and Agreement is “enclosed[,]” the Handbook also states that it “should not be construed as creating any kind of ‘employment contract’” and only constitutes “a summary of the benefits, policies and procedures in effect at the time of its publication” (id. at Ex. A [Employee Handbook, p. 5], emphasis in original); see also Opposition, p. 7 [discussing Mendoza, supra, 75 Cal.App.5th 748]);

 

(3) though Plaintiff’s name and e-signature appear on the Handbook acknowledgment of receipt, there is no mention of either the Employee Acknowledgment and Agreement or the arbitration provision (see Edwards Decl., Ex. B [Employee Handbook Acknowledgement Form, p. 1]);

 

(4) Plaintiff expressly initialed five policies and agreements to confirm that she had reviewed them; the arbitration provision was not one of them (see id. at Ex. B [Policies and Agreements, p. 1]); and

 

(5) the email from MyStaffingPro to Defendant stating that Plaintiff completed the onboarding process says nothing about arbitration (see id. at Ex. C).

 

The Court finds that the matter should be continued.  Additional evidence is needed to resolve the assent issue.  The Court intends to hold an evidentiary hearing with live testimony to further develop the record.

 

Plaintiff attempts to create an issue about pagination.  She contends the arbitration provision is separate from the Handbook since the pagination differs; instead of following the Handbook’s page numbering, the arbitration provision’s two pages are numbered 1 and 2.  (See id. at Ex. A [Employee Acknowledgment and Agreement, pp. 1-2].) 

 

Yes, the pagination differs, but the key question is whether the arbitration provision – separate or not – was presented to Plaintiff with the Handbook.  The Court expects the parties to discuss this issue at the evidentiary hearing.

 

Plaintiff argues that the one-sentence reference to arbitration on page 6 of the Handbook is not itself an arbitration agreement.  The Court agrees for the reasons stated in her opposition (see Opposition, pp. 7-10), yet the outcome is the same.  A continuance to hold an evidentiary hearing is necessary.

 

Enforcement

 

“[U]nconscionability has both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.”  (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, internal quotation marks omitted.)  “The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.”  (Ibid.)  “But they need not be present in the same degree.”  (Ibid.)  “Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.”  (Ibid.)  “In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”  (Ibid.) 

 

For procedural unconscionability, Plaintiff argues that the arbitration agreement is a contract of adhesion and that the sentence on page 6 of the Handbook mentioning arbitration is buried, creating surprise and oppression.  (See Opposition, pp. 13-14.)

 

The argument is premature. 

 

As a matter of guidance, though, the Court disagrees.  An arbitration agreement “is not invalid merely because it is imposed as a condition of employment.” (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1122–1123.)  “[T]he mandatory nature of an arbitration agreement does not, by itself, render the agreement unenforceable.”  (Ibid.; see also Knight, supra, at ¶ 5:146 [“The mere fact an adhesion contract is involved does not per se render the arbitration clause unenforceable.  Rationale: Such contracts are ‘an inevitable fact of life for all citizens – businessman and consumer alike.’”], emphasis in original.)  Moreover, Plaintiff’s reference to page 6 of the Handbook is unavailing.  The arbitration provision is in the Employee Acknowledgment and Agreement, which was enclosed with the Handbook.  Defendant’s declarant affirms that it was included with the Handbook in the onboarding process.  (See Edwards Decl., ¶¶ 6-7.)

 

For substantive unconscionability, Plaintiff claims the sentence on page 6 is inadequate because it fails to state the arbitration terms.  (See Opposition, p. 15.)

 

The argument is off point.  Again, the arbitration agreement is not the sentence on page 6; it is the arbitration provision in the Employee Acknowledgment and Agreement.  Plaintiff does not identify any substantive unconscionability in the Employee Acknowledgment and Agreement.

 

Accordingly, in the event an agreement to arbitrate is found to exist, the Court intends to find it enforceable.

 

Stay

 

Defendant fails to identify a class waiver in the arbitration provision.

 

If an agreement to arbitrate ends up being found to exist, the Court intends to grant Plaintiff’s counsel leave to conduct discovery to try to locate a new class representative for the class. The case would be stayed as to the class claims for all other purposes.