Judge David S. Cunningham, Case Number: 24STCV13275, Date: 2025-01-16 Tentative Ruling

Judge: David S. Cunningham, Case: 24STCV13275, Date: 2025-01-16 Tentative Ruling

Plaintiff used to work for Defendant. He alleges that Defendant subjected him and other current and former employees to numerous wage-and-hour violations.

“[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.)

Plaintiff applied for employment in May 2023 and was eventually hired in December 2023. (See Makerian Decl., ¶¶ 3, 10, Ex. A, p. 4.) During the application process, Plaintiff e-signed a document titled “APPLICANT STATEMENT AND AGREEMENT[.]” (Id. at Ex. A, p. 1, emphasis in original.) The document contains an arbitration agreement. (See id. at Ex. A, pp. 1-4.)

The arbitration agreement is attached to the declaration of Defendant’s manager of human resources, Annie Makerian, at exhibit A. It states:

1. In the event of my employment to a position in this Company, I will comply with all rules and regulations of this Company. I understand that the Company reserves the right to require me to submit to a test for the presence of drugs in my system prior to employment and at any time during my employment, to the extent permitted by law. I also understand that any offer of employment may be contingent upon the passing of a physical examination. Further, I understand that at any time after I am hired, the Company may require me to submit to an alcohol test, to the extent permitted by law. I consent to the disclosure of the results of any physical examination and tests results to the Company. I also understand that I may be required to take other tests such as personality and honesty tests prior to employment and during my employment. I understand that should I decline to sign this consent or decline to take any of the above tests, my application for employment may be rejected or my employment may be terminated. I understand that bonding may be a condition of hire. If it is, I will be so advised either before or after hiring and a bond application will have to be completed. I hereby authorize the Company with which I have applied for employment to share my Application for Employment with other affiliated companies/employers, and hereby agree that all terms, conditions and/or agreements contained in this Applicant's Statement and Agreement, or any other documents pertaining to my application for employment, shall be enforceable by me and by such other companies/employers (including their managers, employees and agents), even though I have not signed a separate Applicant's Statement and Agreement for those other companies/employers.

2. By signing below, I acknowledge that the Company may contact my previous employers and I authorize those employers to disclose to the Company all records and information pertinent to my employment with them. In addition to authorizing the release of any information regarding my employment, I hereby fully waive any rights or claims I have or may have against my former employers, their agents, employees and representatives, as well as other individuals who release information to the Company, and release them from any and all liability, claims, or damages that may directly or indirectly result from the use, disclosure, or release of any such information by any person or party, whether such information is favorable or unfavorable to me. I authorize the persons named herein as personal references to provide the Company with any pertinent information they may have regarding myself. I further understand that as a condition of employment, I may be required to complete additional documentation which would permit the Company and its designated investigative Consumer Reporting Agency to conduct an investigation of my background, which may include inquiry into my past employment, education, and activities, including, but not limited to, credit, criminal background information and driving record.

3. By signing my name below and/or by accepting and/or continuing employment with the Company, I agree to pursue any claims I might have against the Company that currently exist or that may arise in the future exclusively through binding arbitration; similarly, the Company agrees to pursue any claims it might have against me that currently exist or that may arise in the future exclusively through binding arbitration. The only exceptions to this requirement are identified in Paragraph 5, below. Our agreement to submit all claims to binding arbitration includes any claims that either of us may have against any third-party beneficiaries as mentioned below. By agreeing to binding arbitration, we waive our rights to have any and all claims decided in an administrative hearing, in a judge/bench trial, and/or in a jury trial. I understand that our only recourse for pursuing claims is through binding arbitration according to the rules set forth herein and/or those rules incorporated by reference in this agreement. I understand I have the right to arrange for an attorney to represent me or to represent myself during the arbitration proceedings. I understand that neither I nor the Company may later decide that one of us does not want to arbitrate all such claims.

4. I understand that this agreement requires me to pursue all claims I bring against the Company (and any third-party beneficiaries) through binding arbitration and requires that the Company submit any claims it has against me to binding arbitration (except for those claims specifically excluded by this agreement). Our agreement to arbitrate includes any and all claims which arise out of the employment context or any other interaction/relationship we had, have or may have in the future. Those claims include, but are not limited to, any claim, dispute, and/or controversy that either party brings against the other (including, but not limited to, any claims of discrimination and harassment, whether they be based on the California Fair Employment and Housing Act, the Americans With Disabilities Act, Title VII of the Civil Rights Act of 1964, as amended, claims pursuant to the California Private Attorneys General Act ("PAGA") unless prohibited by controlling law, as well as all other applicable state or federal laws or regulations) which would otherwise require or allow resort to any court or other governmental dispute resolution forum between myself and the Company, as well as any third-party beneficiaries of the Company. Third-party beneficiaries include the Company's owners, directors, officers, managers, employees, agents, partners, attorneys, sister-companies, subsidiaries, parent companies, joint-venturers, affiliated persons/entities, independent contractors, and parties affiliated with its employee benefit and health plans. These claims also include any claims arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company or third-party beneficiaries, whether based on tort, contract, statute, equity or otherwise.

5. As the sole exceptions to the obligation to arbitrate our claims, I and the Company both agree that we do not have to arbitrate 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 and, at your option, claims involving Sexual Harassment and/or Sexual Assault Disputes. Sexual Assault Dispute means a dispute involving the allegation of a nonconsensual sexual act or nonconsensual sexual contact. The term Sexual Harassment Dispute means a dispute relating to allegations of unwelcome sexual advances, unwanted physical contact that is sexual in nature, unwanted sexual attention (including unwanted sexual comments and propositions for sexual activity), conditioning employment-related benefits on sexual activity, and retaliation for rejecting unwanted sexual attention. If you signed this arbitration agreement prior to the time · that your dispute first arose, you have the right to elect whether or not to proceed to arbitration regarding the Sexual Harassment/Sexual Assault Disputes. If you choose not to proceed to arbitration on such claims, then you agree to arbitrate all other arbitrable claims and to stay Sexual Harassment/Sexual Assault Dispute claims pending the completion of the arbitration proceedings. I understand and agree that nothing in this agreement precludes me from filing any administrative claim/charge with, or from participating in any investigation/administrative proceeding conducted by government agencies such as the Department of Fair Employment and Housing, the California Labor Commissioner and/or the Equal Employment Opportunity Commission. However, after I exhaust such administrative process/investigation, I understand and agree that I must pursue any such claims through binding arbitration for any final adjudication/award.

6. I acknowledge that the Company's business and the nature of my employment in that business affect interstate commerce. Thus, I agree that this agreement and my employment are governed by the Federal Arbitration Act (FM) (9 United States Code sec. 1, et seq). The binding arbitration proceedings shall be governed by the rules listed herein or as supplemented by the Federal Arbitration Act and/or the procedures of the California Arbitration Act (California Code of Civil Procedure sec. 1280 et seq., including sec. 1283.05 and all of the California Arbitration Act's other mandatory and permissive rights to discovery). The arbitrator shall have the same authority as a state or federal court would have to issue subpoenas to third parties for production of documents and for depositions, in addition to subpoenas to appear at any arbitration hearing. The California Arbitration Act shall only control the arbitration proceedings to the extent it is consistent with this agreement and/or the Federal Arbitration Act.

7. In addition to requirements imposed by law, any arbitrator herein shall be a retired state Superior Court or federal District Court judge and shall be subject to disqualification on the same grounds as would apply to a California Superior Court judge. The arbitrator shall have the immunity of a judicial officer from civil liability when acting in the capacity of an arbitrator, If applicable, 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 the Code of Civil Procedure section 631.8, that would apply in court or in an administrative proceeding where the actual claims would otherwise have been brought shall apply in the arbitration proceeding. The arbitrator shall apply only 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 to determine the dispute. The arbitrator shall have the authority to fashion the arbitration proceeding and the award to preserve any special protections afforded by the laws governing the claims. All communications during or in connection with the arbitration proceedings are privileged in accordance with California Civil Code sec. 47(b). The arbitrator shall have the right to extend the times set by the California Arbitration Act for the giving of notices and setting of hearings. Awards shall include the arbitrator's written reasoned opinion.

8. I understand that in most all circumstances the Company will pay all costs and arbitrator fees unique to the arbitration as required by controlling case law, such as for statutory claims for unpaid wages, discrimination, harassment, retaliation, etc. However, there are some instances where the costs of arbitration will be split between the parties as set forth in the California Arbitration Act, such as where the Company brings a claim against me for violation of trade secret rules, conflicts of interest, or other similar claims. The costs of arbitration may also be split unless the claims you bring involve unwaivable statutory rights where the controlling case law requires that the Company pay such costs (e.g., if you bring a breach of contract claim against the Company such fees may be split). You will not be required to share in any costs unique to arbitration until the arbitrator makes a specific ruling at the outset of the arbitration process that the claims at issue require you to share any portion of the cost of arbitration. It is further agreed that the Company shall not be responsible for paying the arbitrator's fees and costs for the arbitration hearing sooner than 60 days before the commencement of the arbitration hearing.

9. I agree that the arbitrator only has the authority to hear and adjudicate my individual claims and that the arbitrator does not have the authority to make the arbitration proceeding a class, representative or collective action, or to award relief to a group of employees in one proceeding, including claims brought pursuant to PAGA. This arbitration agreement shall not be construed to permit the consolidation or joinder of claims of other claimants, or to permit such claims to proceed as a class, representative or collective action (collectively "class claims"). I and the Company both agree that any challenge to the prohibition against consolidating the claims of others into a single proceeding, whether as a class, a collective action or otherwise, is a gateway issue and shall be determined by the trial court; and any substantive claims shall not be decided by the arbitrator until after the gateway determination is made by the court. By signing below, you expressly waive the right to bring a class, collective, representative or PAGA claim (unless prohibited by controlling law) seeking any relief on behalf of others. Both the Company and I agree that any arbitration proceeding must move forward under the FAA (9 U.S.C. sections 3-4) even though the claims brought in court or otherwise may name, involve and/or relate to persons/entities who are not parties to the arbitration agreement and/or claims that are not subject to arbitration (such as PAGA). Thus, the court may not refuse to enforce this arbitration agreement and may not stay the arbitration proceeding despite the provisions of the Code of Civil Procedure sec. 1281.2(c) and shall instead sever and stay the non-arbitrable claims pending the final adjudication of the arbitrable claims.

10. I understand that all I have to do to begin the arbitration process is to send a letter by United States Postal Service Certified Mail with Return Receipt requested to the Owner(s) of the Company, the President of the Company if the Company is a corporation, or the General Manager of the dealership stating that I have legal claims against the Company and/or any third-party beneficiaries, the nature of the legal claims and that I demand to pursue them via binding arbitration. I understand that my letter must be post-marked prior to the expiration of any statute of limitations that applies to my claims. The Company may similarly commence claims against you by making a similar demand and sending it to you in the same manner. The Company and you will engage in an interactive discussion to try to agree upon an arbitrator, and if an arbitrator cannot be mutually chosen, either party may petition the Superior Court to appoint an arbitrator pursuant to the California Arbitration Act (Code of Civil Procedure sec. 1281.6). I understand that I and the Company will be required to provide more details regarding my claims and causes of action after starting the arbitration process. The arbitrator will also set the timing for the Company to file and serve any responsive pleadings.

11. I further understand that I will not be disciplined, discharged, or otherwise retaliated against for exercising my rights under the National Labor Relations Act, including but not limited to challenging the limitation on a class, collective, representative, or joint action.

12. 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. Notwithstanding the same, the prohibition on the arbitrator hearing class claims and/or collective claims shall not be severable.

13. This is the entire agreement between the Company and me regarding dispute resolution and this agreement supersedes any and all prior agreements regarding this issue to the extent that they differ from the foregoing. It is further agreed and understood that any agreement contrary to the foregoing must be entered into, in writing, by both the Owner(s) and/or President of the Company and me. Oral promises shall not serve to modify and/or cancel this agreement.

14.1 UNDERSTAND THAT I AM GIVING UP THE RIGHT TO TRIAL BY JURY, BY A SITTING TRIAL COURT JUDGE AND/OR BY FINAL ADJUDICATION THROUGH AN ADMINISTRATIVE PROCESS BY AGREEING TO BINDING ARBITRATION.

15. I hereby state that all the information that I provided on this application or any other documents filled out in connection with my seeking employment, and in any interview is true and correct. I have withheld nothing that would, if disclosed, affect this application unfavorably. I understand that if I am employed and any such information is later found to be false or incomplete in any respect, I may be discharged from employment.

16. I agree as follows: My employment and compensation are terminable at will, are for no definite period, and my employment and compensation may be terminated by the Company (employer) at any time and for any reason whatsoever, with or without good cause at the option of either the Company or myself. Consequently, all terms and conditions of my employment, with the exception of the arbitration agreement, may be changed or withdrawn at Company's unrestricted option at any time, with or without good cause. No implied, oral or written agreements contrary to the express language of this agreement are valid unless they are in writing and signed by the President of the Company (or majority owner or owners if Company is not a corporation). No supervisor or representative of the Company, other than the President of the Company (or major owner or owners if Company is not a corporation), has any authority to make any agreements contrary to the foregoing. This agreement is the entire agreement between the Company and the employee regarding the rights of the Company or employee to terminate employment with or without good cause arid this agreement takes the place. of all prior and contemporaneous agreements, representations, and understandings of the employee and the Company.

17. If you have any questions regarding this statement, please ask a Company representative before signing. I hereby acknowledge that I have read the above statements and understand the same.

MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I HAVE BEEN GIVEN AN OPPORTUNITY TO READ AND CONSIDER THIS AGREEMENT, AND THAT I HAVE READ, UNDERSTAND, AND AGREE TO BE LEGALLY BOUND BY ALL OF THE ABOVE TERMS. I AGREE THAT THE COMPANY IS BINDING ITSELF TO THIS AGREEMENT BY PRESENTING THIS AGREEMENT TO ME FOR SIGNATURE.

Defendant asserts that the FAA controls because the agreement expressly states that the FAA governs and that Plaintiff engaged in interstate commerce. (See Reply, p. 10.)

Plaintiff contends Defendant’s evidence fails to show a connection between interstate commerce and Plaintiff’s job duties. (See Opposition, pp. 15-17.)

The Court agrees with Defendant. The FAA applies if the agreement’s wording says it applies or if “the underlying contract facilitates interstate commercial transactions or directly or indirectly affects commerce between states.” (Knight, supra, at ¶ 5:50.2, emphasis in original.) Sections 6 and 9 of Defendant’s agreement state not only that the FAA governs but also that Plaintiff agrees that “the Company’s business and the nature of [Plaintiff’s] employment in that business affect interstate commerce.” (Makerian Decl., Ex. A, p. 2, § 6, emphasis added; see also id. at Ex. A, p. 3, § 9.) These words render the FAA applicable.

Unconscionability is a contract defense. (See Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5^th 485, 492.) Under the FAA, unconscionability can be utilized to “invalidate [an] arbitration agreement[].” (Ibid.) Courts apply state law to test whether the agreement is unconscionable. (See, e.g., Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4^th 1105, 1119.)

“[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 contends the agreement constitutes a contract of adhesion. (See, Opposition, pp. 7-8.)

“[A] predispute 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.) Stated another way, “the 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.)

Plaintiff argues that the agreement is infinite in scope and duration and lacks mutuality. He cites Cook v. University of Southern California (2024) 102 Cal.App.5^th 312 as support. (See Opposition, pp. 8-10.)

Cook is a May 2024 decision from the Second District Court of Appeal. There, the trial court found the arbitration agreement substantively unconscionable in three ways and held that the unconscionable provisions could not be severed. The Second District affirmed all three points. First, the panel found the scope unconscionable because the agreement covered all claims, not just employment-related claims. (See Cook, supra, 102 Cal.App.5^th at 321-325.) Second, the duration was unconscionable because the agreement stated that it would survive Cook’s employment and could only be “revoked” if Cook and USC’s president signed a written termination request that “expressly mention[ed] the arbitration agreement.” (Id. at 326; see also id. at 325.) Third, the agreement lacked mutuality because it “require[d] Cook to arbitrate . . . all claims she [] ha[d] against USC” and USC’s “related entities” without requiring the “‘related entities’ to arbitrate their claims against [her].” (Id. at 326; see also id. at 327-328.)

The linchpin in Cook was that the scope was unlimited. (See id. at 321-325.) It was the overbroad scope that made the other defects (duration and mutuality) troublesome.

On balance, the Court finds Cook analogous because Defendant’s agreement appears to have two of the same defects, perhaps all three:

SCOPE – “[b]y its express terms,” the Cook agreement covered “all claims, whether or not arising out of Employee’s University employment, remuneration or termination, that Employee may have against the University or any of its related entities . . . ; and all claims that the University may have against Employee.” (Cook, supra, 102 Cal.App.5^th at 321.) “The plain language of the agreement require[d] Cook to arbitrate claims that [were] unrelated to her employment with USC.” (Ibid.; see also id. at 325 [“The arbitration agreement drafted by USC applies to all claims ‘whether or not arising out of Employee's University employment, remuneration or termination.’ If USC had been concerned about capturing termination or retaliation claims related to Cook’s employment, it simply could have limited the scope of the agreement to claims arising out of or relating to her employment or termination. It is difficult to see how it is justified to expect Cook—as a condition of her employment at the university—to give up the right to ever sue a USC employee in court for defamatory statements or other claims that are completely unrelated to Cook's employment.”].)

4. I understand that this agreement requires me to pursue all claims I bring against the Company (and any third-party beneficiaries) through binding arbitration and requires that the Company submit any claims it has against me to binding arbitration ( except for those claims specifically excluded by this agreement). Our agreement to arbitrate includes any and all claims which arise out of the employment context or any other interaction/relationship we had, have or may have in the future. Those claims include, but are not limited to, any claim, dispute, and/or controversy that either party brings against the other (including, but not limited to, any claims of discrimination and harassment, whether they be based on the California Fair Employment and Housing Act, the Americans With Disabilities Act, Title VII of the Civil Rights Act of 1964, as amended, claims pursuant to the California Private Attorneys General Act ("PAGA") unless prohibited by controlling law, as well as all other applicable state or federal laws or regulations) which would otherwise require or allow resort to any court or other governmental dispute resolution forum between myself and the Company, as well as any third-party beneficiaries of the Company. Third-party beneficiaries include the Company's owners, directors, officers, managers, employees, agents, partners, attorneys, sister-companies, subsidiaries, parent companies, joint-venturers, affiliated persons/entities, independent contractors, and parties affiliated with its employee benefit and health plans. These claims also include any claims arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company or third-party beneficiaries, whether based on tort, contract, statute, equity or otherwise.

DURATION – to repeat, the Second District found the duration of the USC agreement unconscionable because it expressly survived Cook’s employment and could only be “revoked” if Cook and USC’s president signed a written termination request that “expressly mention[ed] the arbitration agreement.” (Cook, supra, 102 Cal.App.5^th at 326.)

Defendant’s agreement does not say that it survives termination, but such survival seems implied since the agreement covers claims that “may arise in the future[.]” (Makerian Decl., Ex. A, p. 2, § 3 [“I agree to pursue any claims I might have against the Company that currently exist or that may arise in the future exclusively through binding arbitration; similarly, the Company agrees to pursue any claims it might have against me that currently exist or that may arise in the future exclusively through binding arbitration.”], emphasis added; see also id. at Ex. A, p. 2, § 4 [“Our agreement to arbitrate includes any and all claims which arise out of the employment context or any other interaction/relationship we had, have or may have in the future.”], emphasis added.)

13. This is the entire agreement between the Company and me regarding dispute resolution and this agreement supersedes any and all prior agreements regarding this issue to the extent that they differ from the foregoing. It is further agreed and understood that any agreement contrary to the foregoing must be entered into, in writing, by both the Owner(s) and/or President of the Company and me. Oral promises shall not serve to modify and/or cancel this agreement.

(Id. at Ex. A, p. 3, § 13, emphasis added.) Functionally, the emphasized words require a written agreement between the parties to amend or modify.

The trial court also found the agreement was unconscionable because it lacked mutuality. The agreement requires Cook to arbitrate any and all claims she may have against USC “or any of its related entities, including but not limited to faculty practice plans, or its or their officers, trustees, administrators, employees or agents, in their capacity as such or otherwise.” However, the agreement does not require USC's “related entities” to arbitrate their claims against Cook.

Under Armendariz, a modicum of bilaterality is required in arbitration agreements. Still, nothing in Armendariz supports the conclusion that the presence of a modicum of bilaterality renders an agreement per se conscionable. The presence of a modicum of bilaterality will not save a clause that is, in practical effect, unjustifiably one-sided. There is no question that it is more difficult for a party to enforce an arbitration agreement against a nonsignatory than it is for a nonsignatory to enforce an arbitration agreement against a party. This is intentional, as arbitration is “a voluntary means of resolving disputes, and this voluntariness has been its bedrock justification.” [Citation.] “Arbitration is consensual in nature. The fundamental assumption of arbitration is that it may be invoked as an alternative to the settlement of disputes by means other than the judicial process solely because all parties have chosen to arbitrate them. [Citations.] Even the strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such an agreement.” [Citation.]

As a result, nonsignatories may enforce an arbitration agreement against a party to the agreement simply by showing they are intended third-party beneficiaries of the arbitration agreement. [Citation.] Where the agreement requires arbitration of claims against certain classes of third parties, nonsignatories can make “a prima facie showing sufficient to allow them to enforce the arbitration clause as third party beneficiaries” simply by showing they fall within one of the classes of beneficiaries identified by the contract. [Citation.]

Conversely, for Cook to enforce the arbitration agreement against USC's agents or employees as third-party beneficiaries, she would have to show they actually accepted a benefit under the agreement. [Citation.] It is difficult to imagine how Cook could carry this burden to compel USC's employees and agents to arbitration unless those specific agents or employees first moved to compel arbitration under the agreement. While it is theoretically possible for Cook to make this showing, it is unlikely. [Citation.]

The plain language of the arbitration agreement thus provides a significant benefit to USC's related entities without any reciprocal benefit to Cook.

USC has offered no justification for this one-sided treatment. [Citation.] We find the trial court did not err in holding the arbitration agreement was substantively unconscionable for lack of mutuality in the claims that are subject to arbitration.

4. I understand that this agreement requires me to pursue all claims I bring against the Company (and any third-party beneficiaries) through binding arbitration and requires that the Company submit any claims it has against me to binding arbitration (except for those claims specifically excluded by this agreement). . . . Third-party beneficiaries include the Company’s owners, directors, officers, managers, employees, agents, partners, attorneys, sister-companies, subsidiaries, parent companies, joint-venturers, affiliated persons/entities, independent contractors, and parties affiliated with its employee benefit and health plans. . . .

(Makerian Decl., Ex. A, pp. 1, 2, §§ 3, 4, emphasis added.) The third-party beneficiaries are related to Defendant. Plaintiff’s obligation to arbitrate his claims against them is a one-way obligation; they do not need to arbitrate their claims against him.

The final question is whether these defects can be severed. The answer is no (see Cook, supra, 102 Cal.App.5^th at 328-330), so the agreement is unenforceable, and the motion to compel must be denied.[2]

Defendant’s request to strike the class claims and request to stay the case pending arbitration are denied.

The parties agree that the prevailing party on this motion is entitled to costs pursuant to Code of Civil Procedure section 1293.2. (See Motion, pp. 8-9; see also Opposition, pp. 18-19.)

The Court did find a few Court of Appeal decisions, some unpublished, that indicate that costs can be recovered by the prevailing party. (See Velasquez v. Khushf, 2007 WL 3409394, at *5 [First District stating that “[s]ection 1293.2 provides that a court shall costs upon any judicial proceeding relating to arbitration, which may include judicial proceedings to enforce an arbitration agreement (§§ 1281-1281.6) and postarbitration enforcement of the award (§ 1285)”], emphasis in original; see also Meyers v. Fitzgerald, 2009 WL 3981552, at *5 [Sixth District recognizing that “a ‘petition to compel arbitration under section 1281.2 is a judicial proceeding covered by [section 12932.2]’”]; Heimlich v. Shivji (2017) 12 Cal.App.5^th 152, 161-162 [Sixth District noting that “[s]ection 12932.2 has been the basis for awarding litigation costs to parties who succeeded in resisting motions to compel arbitration”]; Otay River Constructors v. San Diego Expressway(2008) 158 Cal.App.4^th 796, 807-808 [Fourth District finding that owner who successfully defeated general contractor’s motion to compel arbitration was a prevailing party and could recover costs].)

Considering these authorities, the Court intends to award Plaintiff the costs attributable to filing the opposition. At the hearing, the Court will give Plaintiff’s counsel an opportunity to make an offer of proof as to the amount.

[1] Section 5 of the agreement carves out a handful of claims that are required to be carved out by law – e.g., “claims arising under the National Labor Relations Act” and sexual-harassment claims. (Id. at Ex. A, p. 2, § 5.) The overall scope, however, is overbroad like the Cook agreement was.

[2] Plaintiff makes three more arguments. He claims the agreement is substantively unconscionable because (1) section 2 “require[es] [him] to waive claims against a host of third parties” (Opposition, p. 10), (2) section 5 “requires [him] to stay [sexual-harassment claims] in favor of arbitrable claims” (id. at p. 11), and (3) section 8 violates Code of Civil Procedure section 1281.98(a)(1) by “permit[ting] Defendant to delay payment of arbitration fees until 60 days prior to the commencement of the arbitration hearing[.]” (Id. at p. 12.)

In light of the Cook analysis, the Court does not need to decide these arguments.