Judge: Donald F. Gaffney, Case: Khairi v. Western Digital Corporation, Date: 2022-08-24 Tentative Ruling

TENTATIVE RULING

Motion to Compel Arbitration

Defendant Western Digital Corporation moves to compel Plaintiff Tahsin Khairi to arbitrate his claims in this action. For the following reasons, the motion is GRANTED.

In ruling on this motion, the court considered Plaintiff’s substantive objections to the Supplemental Declaration of Tom States (“States Reply Declaration”) (pp. 4-6), but did not consider any arguments in the “Sur-Reply” portion of Plaintiff’s filing (pp. 2-3). The Court of Appeal’s remittitur explicitly directed this court to: “Consider the supplemental reply declaration, rule on any substantive evidentiary objections to this new information, and then decide whether this unsigned agreement was authentic and enforceable against Khairi.” (Remittitur at p. 16.)

Plaintiff contends that the plain terms of the appellate court’s opinion direct this court to consider the new evidence on reply as well as substantive objections to that evidence. Defendant, on the other hand, contends that it properly submitted evidence as to the existence of the agreement with its reply, and Plaintiff chose not to file substantive objections to the reply evidence.

The appellate record included all documents then filed in connection with this motion, including all objections filed to date. (See ROA 103 [Appellant’s Notice Designating Record on Appeal].) That appellate record showed that Plaintiff objected to the States Reply Declaration on purely procedural grounds. Thus, the appellate court’s reference to “any substantive evidentiary objections” necessarily refers to objections the court contemplated may be filed in the future.

The appellate court remittitur neither mentions nor orders the trial court to consider further briefing other than any substantive evidentiary objections.

Evidentiary Objections

The court of appeal affirmed this court’s order SUSTAINING Plaintiff’s evidentiary objection No. 7.

In addition, Plaintiff’s objection no. 33 is SUSTAINED as to only the following language: “I note that, importantly, Mr. Khairi's Declaration does not suggest that anyone else accessed emTrain using his own unique username (which is a unique employee identification number that the company assigns to each employee) and password, which I descried in my previous Declaration. I also recognize that Mr. Khairi does not indicate that he ever provided his log-in credentials to any other employee.” Plaintiff’s evidentiary objection nos. 22, 23, 24, 26, and 34 are OVERRULED.

Defendant’s objection nos. 2, 3, 4, and 5 are OVERRULED.

The remainder of the objections are not material to the disposition of this motion.

Motions to Compel Arbitration

Contractual arbitration is a voluntary process by which the parties agree to submit their dispute to binding resolution by one or more impartial third persons. (Herman Feil, Inc. v. Design Ctr. of Los Angeles (1988) 204 Cal.App.3d 1406, 1414; see Air Line Pilots Ass’n v. Miller (1988) 523 U.S. 866, 876.) Both state and federal law provide for enforcement of arbitration agreements. (Code Civ. Proc., §§ 1280 et seq.; 9 U.S.C. §§ 1 et seq.)

A party moving to compel arbitration under Code Civil Procedure Section 1281.2 must prove by a preponderance of the evidence that: (1) the parties entered into a written agreement to arbitrate; (2) one or more of the claims at issue are covered by that agreement; and (3) the responding party refused a prior demand for arbitration under the agreement of the claims at issue. (Code Civ. Proc., § 1281.2; Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230.) If the moving party meets this burden, the burden shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud or unconscionability). (Villacreses v. Molinari, supra, 132 Cal.App.4th at 1230.)

Existence of Arbitration Agreement Covering Plaintiff’s Claims

It is undisputed here that Plaintiff did not electronically or physically sign any arbitration agreement. The dispositive issue here is whether Defendant submits sufficient evidence that Plaintiff was aware of the arbitration agreement, such that his failure to opt out of the agreement and his continued work for Defendant constitutes an implied agreement to arbitrate.

Continued employment may create an implied agreement to arbitrate where the employer makes clear that an arbitration agreement is mandatory absent an opt out; in those cases, an employee’s continued employment constitutes acceptance of the agreement. (Diaz v. Sohnen Enterprises (2019) 34 Cal.App.5th 126, 128-131; Gupta v. Morgan Stanley Smith Barney, LLC (7th Cir. 2019) 934 F.3d 705, 709.) At least one court found an employee’s continued employment to create an implied agreement to arbitrate. In Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, the court found a valid and enforceable arbitration agreement where the employee received an employee brochure that “explains the procedures as well as how the Dispute Resolution Program works as a whole” and admonishing the employee to: “Please take the time to read the material. IT APPLIES TO YOU. It will govern all future legal disputes between you and the Company that are related in any way to your employment.” (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 419.)

An electronic record or signature is attributable to a person if it was “the act of the person.” (Civ. Code, § 1633.9(a).) The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or signature was attributable. (Civ. Code, § 1633.9(a).) A defendant properly authenticates the plaintiff’s electronic signature on an arbitration agreement by providing a declaration (1) detailing defendant’s security precautions regarding the transmission and use of the plaintiff’s username and password; and (2) detailing the steps an applicant would have to take to create the electronic record. (Espejo v. S. Cal. Permanente Med. Group (20160) 246 Cal.App.4th 1047, 1062.)

Here, Defendant meets its burden to show an implied agreement to arbitrate. Defendant submits evidence establishing that in June 2014, Defendant presented its United States employees with an arbitration agreement via its emTrain online training and communication module. (Leahy Decl. ¶¶ 3, 3(a).) On 06/06/2014, someone using Plaintiff Khairi’s unique hyperlink, username, and password accessed the Dispute Resolution Agreement (the “Agreement”). (See States Decl. ¶¶ 5, 10.) That person then electronically acknowledged having reviewed the agreement. (Ibid.)

Defendant provides further evidence that employees are not supposed to share their passwords, and it would be improper for an employee to enter the log-in information of another employee. (See States Reply Decl. ¶ 7.) There is no evidence or contention that Plaintiff shared his unique hyperlink, user identification, or password with a third party. (See generally Khairi Decl.)

The declarant Tom States submits sufficient evidence laying a foundation for his personal knowledge of the emTrain system and the company’s policies and procedures for communications to employees using the emTrain system to support. (See States Reply Decl. ¶ 3.)

The arbitration agreement includes an opt-out provision. (Leahy Decl. ¶ 3, Ex. A.) Plaintiff did not submit an opt-out form (States Decl. ¶ 7), and it is undisputed he continued to work at Western Digital after 06/2014.

Whether Defendant sought electronic signatures via DocuSign for other employee agreements is irrelevant, as the company’s arbitration policy was designed and implemented such that employees were not required to sign the agreement.

Lastly, Plaintiff’s claims fall within the scope of the Agreement. The Agreement provides that:

This Agreement applies to any dispute (including but not limited to statutory, constitutional, contract, tort, equitable, and any common law claims) arising out of or related to Employee’s employment with or separation from Western Digital Technologies, Inc. or one of its affiliates, successors, subsidiaries or parent companies, including Western Digital Corporation, Western Digital (Fremont), LLC and WD Media, LLC (collectively the “Company”).

(Leahy Decl., Ex. A at § 1.) Here, Plaintiff’s claims relate to his employment at Western Digital Corporation.

Unconscionability

A court may refuse to enforce an arbitration agreement or any part thereof that is unconscionable. (Civ. Code §1670.5; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 122.) Whether a provision is unconscionable is a question of law. (Civ. Code §1670.5(a); Flores v. Transamerica (2001) 93 Cal.App.4th 846, 851.)

Unconscionability has a procedural and a substantive element: the procedural element focuses on the existence of oppression or surprise and the substantive element focuses on overly harsh or one-sided results. (Armendariz, supra, 24 Cal.4th at 114.) To be unenforceable, a contract must be both procedurally and substantively unconscionable, but the elements need not be present in the same degree. The analysis employs a sliding scale: “. . . 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.” (Armendariz, supra, 24 Cal.4th at 114; Mercuro v. Super. Ct. (2002) 96 Cal.App.4th 167, 174-175.)

Procedural Unconscionability

Here, there is some degree of procedural unconscionability, as the Agreement is a contract of adhesion and requires Plaintiff to affirmatively opt out.

Substantive Unconscionability

Mandatory arbitration clauses in employment contracts are enforceable if they provide essential fairness to the employee, including: a neutral arbitrator, adequate discovery, all types of relief otherwise available in court, a written arbitration award that permits limited judicial review, and the employer must pay all costs unique to arbitration.  (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal. 4th at pp. 90-91, 102, 118; Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665, 677.)

Here, the Agreement provides for a neutral arbitrator, all types of relief otherwise available in court, a written arbitration award that permits limited judicial review, and limits on arbitration costs and fees. The Agreement also provides for adequate discovery. Any ambiguity regarding discovery does not render the agreement unenforceable; to the contrary, mandatory employment arbitration agreements containing within their scope arbitration of FEHA claims impliedly permit the discovery necessary to vindicate those FEHA claims. (See Armendariz, supra, 24 Cal.4th at pp. 105-06, 113.) The class action waiver does not render the agreement substantively unconscionable. (See Viking River Cruises, Inc. v. Moriana (2022) __ U.S. __ , 142 S. Ct. 1906, 1924-1925 [holding that the FAA preempts California law insofar as it invalidates class action waivers under PAGA].)

In sum, Plaintiff shows procedural but not substantive unconscionability.

The court orders this action stayed pending the completion of the arbitration. An ADR Review Hearing is scheduled for 2/21/23 at 9:00 a.m. in Department N16.

Moving Defendant to give notice.