Judge David S. Cunningham, Case Number: 24STCV11643, Date: 2024-11-20 Tentative Ruling

Judge: David S. Cunningham, Case: 24STCV11643, Date: 2024-11-20 Tentative Ruling

Case Number: 24STCV11643 Hearing Date: November 20, 2024 Dept: 11

Mendez (24STCV11643)

Tentative Ruling Re: Motion to Compel Arbitration

Date: 11/20/24

Time: 10:00 am

Moving Party: Great Hire Inc. (“Great Hire”)

Joinders: CR Creative Services, LP (“CR”) and MVP Payroll Financing, LLC (“MVP”)

Opposing Party: Alfredo Mendez (“Plaintiff”)

Department: 11

Judge: David S. Cunningham III

________________________________________________________________________

TENTATIVE RULING

The hearing is continued. The Court intends to conduct an evidentiary hearing with live testimony regarding the transportation-worker exception.

BACKGROUND

Great Hire is a staffing agency.

CR is a packing, shipping, and warehousing company.

MVP is a provider of human resources.

Great Hire assigned Plaintiff to work for CR “from January through December 2023.” (Motion, p. 6.)

Plaintiff claims Great Hire, CR, and MVP jointly employed him at that time and subjected him and other current and former employees to numerous wage-and-hour violations.

Great Hire moves to compel arbitration.

CR and MVP seek to join the motion.

DISCUSSION

Existence, Assent, and Applicability

“[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.)

As noted above, Plaintiff worked for CR “from January through December 2023.” (Motion, p. 6; see also Complaint, ¶ 4.)

“In April 2024, Plaintiff . . . returned to Great Hire” to get a new work assignment. (Motion, p. 56.) He e-signed Spanish-language onboarding documents, including an arbitration agreement, during the assignment process. (See, e.g., Opposition, p. 1 [conceding that Plaintiff signed the documents].)

The arbitration agreement is attached to the declaration of Great Hire’s recruiting professional, Maria Alvarez, at exhibit 2. The English-language version states:

Arbitration Agreement

This arbitration agreement (“Agreement”) is made and entered into as of the date on which this agreement is signed by the employee on page 4 (the “Effective Date”) by and between Great Hire Inc., a California corporation (the “Employer”), and the name of employee printed on page 4 of this document, an individual (the “Employee”). (The Client and the Employee are collectively referred to herein as the “Parties”.)

* * *

1. Intent of the agreement. It is the intent of the Employee and the Employer that this Agreement shall govern the resolution of all disputes, claims, and any other matter at hand arising from or relating to the employment relationship between the Parties. The Parties shall resolve all conflicts arising from their employment relationship in accordance with the provisions of this Agreement.

2. Mandatory arbitration. The Client and the Employee agree that any claim, complaint or dispute related in any way to the employment relationship between the Parties, whether based on contract, tort, statute, fraud, misrepresentation or any other legal theory, will be submitted to binding arbitration administered by JAMS pursuant to its Employment Rules and Procedures then in effect (“JAMS Rules”). The JAMS Rules are available online at jamsadr.com/rules-employment-arbitration. The Parties can also call JAMS at (800) 352-5267 if they have questions about the arbitration process. The Client shall provide the Employee with a printed copy of the JAMS Rules upon written request by the Employee. If the JAMS Rules are inconsistent with the terms of this Agreement, the terms of the Agreement shall prevail.

3. Claims covered. This Agreement covers all complaints, disputes, claims or causes of action (collectively, “Legal Objectives”) in any local, state or federal court or agency, under applicable local, state or federal law, arising from the Employee’s employment with the Employer and the termination thereof, including any claims the Employee may have against the Employer or any entity to which the Employee may provide services on behalf of the Employer, or against its o icers, directors, administrators, supervisors, managers, members, shareholders, employees or agents, acting in such capacity or otherwise, or which the Client may have against the Employee. Claims covered by this Agreement include but are not limited to claims for breach of any contract or covenant (express or implied), tort claims, claims for wrongful dismissal (constructive or actual) in violation of public policy, claims for discrimination, retaliation or harassment (including, among others, harassment and retaliation), or discrimination based on race, sex, gender, religion, national origin, age, marital status, medical condition, psychological condition, mental condition, disability or sexual orientation, claims based on the violation of any state or federal law, statute, regulation or ordinance, or other government, including but not limited to claims arising under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the California Fair Employment and Housing Act, the Consolidated Omnibus Budget Reconciliation Act of 1985, and the Employment Retirement Income Security Act. The Parties specifically agree that all individual claims under the California Labor Code, including but not limited to overtime, unpaid wage and meal and rest break claims, shall be subject to this Agreement.

4. Claims not covered. Not covered by this Agreement are workers’ compensation claims, claims for unemployment compensation benefits, administrative charges for unfair labor practices filed with the National Labor Relations Board, Excluded Claims (as defined in paragraph 5 below) or any other claim that, by law, the Parties cannot agree to arbitrate. Nothing in this Agreement shall be construed to prevent employees filing complaints in courts under state or federal law in relation to disputes for sexual harassment/assault, or complaints with the California Department of Fair Employment and Housing and/or the federal Equal Employment Opportunity Commission and the National Labor Relations Board.

5. Class and representative action waiver. With the exception of representative claims that cannot be waived under applicable law and which are, therefore, excluded from this Agreement (“Excluded Claims”), the Employee and the Client expressly intend and agree that (a) class and representative action procedures are waived and shall not be asserted or apply in any arbitration under this Agreement; (b) The Employee shall not assert any class or representative action against the Client in arbitration or otherwise; and (c) The Employee shall only submit the Employee’s own individual claims to arbitration, including but not limited to individual claims under the California Labor Code Private Attorneys General Act of 2004 (“PAGA”), and shall not seek to represent the interests of any other person. To the extent that the Parties’ dispute involves both Excluded Claims, filed in a timely manner, and claims subject to this Agreement, the Parties agree to bifurcate and stay such Excluded Claims for the duration of the arbitration proceedings.

6. Claim procedure. Arbitration will be initiated by express notice in writing by either party. The injured party must give written notice of any claim to the other party. Written notice of a claim by the Employee is to be sent by certified or registered mail, return receipt requested, addressed to the employer’s president at 14241 Firestone Blvd #400, La Mirada, CA 90638 (“Address for Service”). Written notice of a claim by the Employer will be sent to the Employee at the Employee’s last known address. The written notice shall identify and describe the nature of all claims filed, the facts upon which such claims are based, and the remedy sought. Written notice of arbitration shall be initiated within the California statute of limitations applicable to such claim(s), and the Parties are encouraged to notify any claim in writing as soon as possible after the event or events in dispute so that arbitration of any difference may take place promptly.

7. Selection of the arbitrator. The arbitrator shall be selected pursuant to the JAMS Rules.

8. Venue of arbitration. Unless otherwise agreed, the arbitration hearing shall take place “in person” in the county in which the Employee was last employed by the Employer. Either party, at that party’s exclusive expense in the first instance, may arrange and pay for a court reporter to provide a stenographic record of proceedings.

9. Discovery. The JAMS Rules regarding the exchange of information, the issuance of subpoenas for witnesses or documents, and depositions and written discovery shall apply to arbitration under this Agreement, except to the extent modified by this paragraph. Each party shall be entitled to take depositions from up to three fact witnesses and any expert witness designated by another party. The arbitrator selected under this Agreement shall decide all discovery disputes and may grant additional depositions and written discovery if the arbitrator finds that the party has shown a need for such discovery to adequately arbitrate the claim, taking into account the parties’ mutual desire for a dispute resolution mechanism that is fast, less formal, and cost-effective.

10. Substantive law. The arbitrator shall apply substantive state or federal law (and the law of remedies, if applicable) as applicable to the claim(s) asserted, including but not limited to the enforcement of the applicable statutes of limitation. The arbitrator has no jurisdiction to apply any other substantive law or law of remedies. The Federal Rules of Evidence shall apply. The arbitrator shall conduct and preside over an arbitration hearing of a reasonable duration, to be determined by the arbitrator. The arbitrator shall provide the Parties with a written decision explaining the arbitrator’s findings and conclusions. The arbitrator’s decision will be final and binding on the Parties.

11. Interstate commerce. The Parties agree that the Client is engaged in business that substantially affects interstate commerce and that the Employee’s job is in relation to such interstate commerce. The Parties further agree that procedures to enforce this Agreement and/or to confirm, modify or vacate any award will be controlled and performed in accordance with the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and applicable state law.

12. Motions. The arbitrator shall have jurisdiction to hear and decide disputes prior to a hearing and is authorized to hold pre-hearing conferences by telephone, by Zoom video conference or in person, as may be deemed necessary by the arbitrator. The arbitrator shall have the authority to set time limits to complete discovery and file motions for summary judgment, and to set briefing schedules for any motion. The arbitrator shall have the authority to adjudicate any cause of action, or the entire claim, pursuant to a motion for summary adjudication and/or summary judgment, and, in deciding such motions, shall apply the law of the State of California.

13. Mandatory arbitration/enforcement of award. Either party may take court action to compel arbitration under this Agreement and confirm, vacate or enforce an arbitral award, and each party shall bear its own attorneys’ fees and costs and other expenses in said action. The Parties further agree that the question of arbitrability of any class or representative action will be decided by a federal or state court.

14. Fees and costs. The Client shall be responsible for paying any arbitration filing fee and the arbitrator’s fees and costs. In contrast, each party shall pay its own attorneys’ fees and costs. However, if either party prevails in a legal claim that provides for the prevailing party’s attorneys’ fees and costs, the arbitrator may award reasonable attorneys’ fees and costs to the prevailing party, following the same standards as a court would apply under applicable law to the claim(s) in question. Any dispute as to the reasonability of any fee or cost shall be resolved by the arbitrator.

15. Term of agreement. This Agreement shall survive termination of Employee’s employment and the expiration of any benefit plan. It may only be revoked or amended by written agreement signed by both Parties and specifically indicating their intention to revoke or amend this Agreement.

16. Severability. If any provision of this Agreement is deemed void or unenforceable, in full or in part, such void or unenforceable provision shall be severed, and such adjudication shall not affect the validity of the remainder of the Agreement. All other provisions shall remain in full force and effect based on the Parties’ mutual intent to establish a binding agreement to arbitrate their disputes.

17. Entire and sole agreement. This is the compensation agreement between the Parties on the subject matter hereof. However, if this Agreement is deemed unenforceable for any reason, any previous arbitration agreement between the Parties shall govern. Neither of the parties is relying on any oral or written representation on the effect, enforceability or meaning of this Agreement, except as specifically set forth in the Agreement.

18. Consideration. The Parties’ promises to arbitrate their differences, rather than litigating them in court, are made mutually, and continued employment shall serve as evidence of the Parties’ consent to this Agreement in the event that the Agreement is not signed.

19. Jury trial waiver. The Parties fully understand and agree that by executing this Agreement, they are waiving their constitutional right to a trial by jury and their normal appeal rights after a decision has been issued, except where California law provides for a judicial review of arbitration proceedings. The Parties anticipate that by executing this Agreement, they will obtain the benefits of a fast, less costly dispute resolution procedure.

I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I UNDERSTAND ITS TERMS, THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN ME AND THE COMPANY IN RELATION TO THE SUBJECTS COVERED IN THE AGREEMENT ARE CONTAINED IN IT, AND THAT I HAVE ENTERED INTO THE AGREEMENT VOLUNTARILY WITHOUT RELIANCE ON ANY PROMISE OR REPRESENTATION BY THE COMPANY NOT CONTAINED IN THIS AGREEMENT. I UNDERSTAND THAT BY ACCEPTING THIS AGREEMENT, I AM WAIVING MY RIGHT TO A JURY TRIAL.

I FURTHER ACKNOWLEDGE THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND I HAVE AVAILED MYSELF OF THIS OPPORTUNITY TO THE EXTENT I WISH TO DO SO. SIGNING THIS AGREEMENT IS VOLUNTARY AND NOT A CONDITION OF EMPLOYMENT OR ANY EMPLOYMENT BENEFIT AND THERE WILL BE NO RETALIATION IF THE EMPLOYEE CHOOSES NOT TO SIGN THIS AGREEMENT.

(Alvarez Decl., Ex. 2, emphasis in original, footnotes omitted.)

Facts and terms like these suffice to establish an agreement to arbitrate.

Nevertheless, Plaintiff asserts that the motion to compel should be denied. He contends the agreement does not apply to his claims given that he e-signed it months after he stopped working for CR. He claims the agreement was meant to cover claims related to a potential new work assignment with a different company. (See Opposition, pp. 1-2, 4-7.)

In response, Great Hire makes two arguments. One, the plain language is broad; it states that the agreement covers “all disputes” and does not indicate that claims arising “prior to the signing” are excluded. (Reply, p. 8.) Two, Plaintiff signed another arbitration agreement in January 2023, which also covers his claims. (See id. at pp. 2, 8.)

The Court agrees with the first argument. “[A]n arbitration agreement may be applied retroactively to transactions which occurred prior to execution of the arbitration agreement.” (Salgado v. Carrows Restaurants, Inc. (2019) 33 Cal.App.5^th 356, 361.) Retroactive effect depends on the agreement’s scope. (See Knight, supra, at ¶ 5:8.12.) Great Hire’s 2024 agreement provides:

(Alvarez Decl., Ex. 2, footnotes omitted.) The plain language is broad and does not “contain[] a limitation or restriction based on the age of the claim.” (Salgado, supra, 33 Cal.App.5^th at 361; see also Franco v. Greystone Ridge Condominium (2019) 39 Cal.App.5^th 221, 229 [agreeing with Salgado].) Paragraphs 1, 2, and 3 support retroactive application.

The second argument is unavailing. Great Hire moved pursuant to the 2024 agreement, not the 2023 one. It is improper to invoke the 2023 agreement for the first time in reply.

Moreover, the 2023 agreement does not appear to qualify as an arbitration agreement. There is only one sentence, and there are no terms: “GHI promotes a voluntary system of alternative dispute resolution, which uses binding arbitration to settle all disputes that may arise in the context of employment.” (Bivins Supp. Decl., Ex. 3, footnote omitted.)

Still, the 2024 agreement applies retroactively, so Great Hire’s burden is satisfied.

Federal Arbitration Act (“FAA”)

The 2024 agreement states:

11. Interstate commerce. The Parties agree that the Client is engaged in business that substantially affects interstate commerce and that the Employee’s job is in relation to such interstate commerce. The Parties further agree that procedures to enforce this Agreement and/or to confirm, modify or vacate any award will be controlled and performed in accordance with the [FAA], 9 U.S.C. § 1 et seq. and applicable state law.

(Alvarez Decl., Ex. 2.)

Notwithstanding this wording, Plaintiff contends the Court should find the FAA inapplicable, and apply the California Arbitration Act instead, due to an exception. He claims the FAA does not apply to transportation workers. He argues that his warehouse work for CR constituted transportation work and affected interstate commerce. (See Opposition, pp. 7-9 [discussing Ortiz v. Randstad Inhouse Services, LLC (9^th Cir. 2024) 95 F.4^th 1152 and Nieto v. Fresno Beverage Co., Inc. (2019) 33 Cal.App.5^th 274].)

Great Hire disagrees. Great Hire claims “Plaintiff was a warehouse worker involved with the transportation not of goods traveling in interstate commerce, but the transportation and storage of individuals’ own property.” (Reply, p. 6; see also id. at p. 7.)

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.4^th 1233, 1241.) To establish the exemption, the opposing party must show that the 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. (4^th Cir. 2023) 74 F.4^th 591, 596.)

Contract of Employment

The 2024 agreement is titled “Arbitration Agreement[.]” (Alvarez Decl., Ex. 2, emphasis in original.)

The only other documents in the record are the untranslated application (see Bello Decl., Ex. 3) and the untranslated employment contract. (See Bivins Supp. Decl., Ex. 3.)

Plaintiff does not demonstrate that the 2024 agreement is a contract of employment as opposed to a standalone agreement.

Transportation Worker

“‘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.4^th 833, 840.)

Plaintiff describes what he did at CR this way:

As a warehouse worker, my duties primarily involved opening packages and boxes of goods that were brought into the warehouse for storage and shipment, checking the goods against paperwork indicating what was coming through, inspecting the items for damages, bringing the goods that were damaged to the workers who would document any damage, and moving the inspected goods into the area of the warehouse where other workers would organize the goods within the warehouse. At times, when it was busy, on approximately a weekly basis, I would also assist with unloading goods from trucks, preparing goods to be shipped out, or loading goods onto trucks. There were approximately 60 to 80 workers performing similar duties to me handling and organizing goods within the warehouse at CR[’s] . . . Los Angeles location. As part of my job, I would receive paperwork identifying the goods passing through the receiving department and the paperwork would also indicate the goods’ final destination which would include locations in California but often included out-of-state locations.

(Mendez Decl., ¶ 3.)

In Ortiz, the plaintiff worked at a warehouse that stored and shipped Adidas products that “were still moving in interstate commerce[.]” (Ortiz, supra, 95 F.4^th at 1162.) The plaintiff:

* “ensured that goods would reach their final destination by processing and storing them while they awaited further interstate transport” (ibid.); and

* “handled [the products] as they went through the process of entering, temporarily occupying, and subsequently leaving the warehouse.” (Ibid.)

The Ninth Circuit found him exempt. (See id. at pp. 1161-1165.)

Additional evidence is necessary to determine whether Ortiz is analogous. CR’s president declares that the employees at the Los Angeles warehouse “managed, catalogued, stored, and then packaged and shipped” “home furnishings and art” “within California, throughout the United States, and internationally.” (Katz Decl., ¶ 2.) According to Great Hire, the home furnishings and art were personal properties belonging to clients. (See Reply, pp. 6-7.) The intimation is that CR is more a moving business than a company shipping merchandise for sale. The Court cannot tell if this is true and if it makes a difference.

Summary

On the current record, Plaintiff fails to establish the transportation-worker exception.

The Court is inclined to hold an evidentiary hearing with live testimony. The transportation-worker exception is a fact-intensive exception. The evidentiary hearings that the Court has held in other cases were fruitful in revealing the true facts.

Unconscionability and Enforcement

Plaintiff contends:

* Labor Code section 432.6 bars arbitration of Labor Code claims (see Opposition, pp. 9-11);

* the claim for unpaid wages in the sixth cause of action is inarbitrable (see id. at pp. 11-13); and

* the class waiver is unenforceable under Gentry v. Superior Court (2007) 42 Cal.4^th 443. (See id. at pp. 13-15.)

For now, the Court declines to rule. The outcome of each of these arguments depends on whether the FAA applies.

CR and MVP

CR and MVP are nonsignatories. They claim they can enforce the 2024 agreement because the complaint alleges agency, joint-employer, and alter-ego theories. They also rely on equitable estoppel. (See, e.g., MVP Joinder, p. 8.)

Plaintiff did not respond. This portion of the motion is unopposed.

“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] 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.)

In light of these rules, the Court tends to agree with CR and MVP; however, the FAA issue needs to be decided before a final ruling on the right to enforce can be made.