Judge: Donald F. Gaffney, Case: "Peczon v. Velox Holdings Inc, LLP", Date: 2022-08-17 Tentative Ruling

TENTATIVE RULING:         

For the reasons set forth below, Defendant Velox Clearing LLC’s Motion to Compel Arbitration is GRANTED.

The Employment Agreement is attached to the Motion Declaration of Bingshan Song as Ex. A.  The Arbitration Agreement [“Agreement”] is in ¶11(k). By the terms of ¶11(k)(iii), the Agreement is to be enforced under the terms of the Federal Arbitration Act [“FAA”].  Under FAA 9 USCA §2, a written agreement to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract . . . .”  In CA, those grounds include unconscionability. There is no dispute there is a written agreement to arbitrate.  The only issue is whether it is unconscionable.

Both procedural and substantive unconscionability must be present before a court can refuse to enforce an arbitration provision based on unconscionability.  Armendariz v.  Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4^th 83, 114  Procedural unconscionability focuses on oppression or surprise due to unequal bargaining power; substantive unconscionability focuses on overly harsh or one-sided results.   Sonic-Calabasas A. v. Moreno (2013) 57 Cal.4^th 1109,1133 Unconscionability is determined on a sliding scale.  “The more substantively oppressive the contract, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”  [Armendariz, supra, at 114]

The burden of proving unconscionability rests on the party asserting it.  Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4^th 889, 912

Peczon says the Agreement is substantively unconscionable because:

• Agreement §11(h) provides for payment to the prevailing party of costs, including attorney’s fees.  This violates the provisions of FEHA §12965.

• Agreement ¶11(g)(iv) waives the right to seek to disqualify counsel who have been involved in the negotiations or other transactions under the agreement if they act as counsel in subsequent proceedings.  “This allocates an unreasonable burden on plaintiff,” who may want to disqualify defendant’s counsel.

Peczon says The Agreement is procedurally unconscionable because:

• It refers to misnumbered provisions
• Agreement provisions 11(f) and 11(g) conflict

Without reference to unconscionability, Peczon says he was fraudulently induced into entering the Agreement because it was “hidden.”

The court finds The Agreement is not substantively unconscionable.  As to the payment of fees/costs issue, Peczon conveniently leaves off the last clause of the paragraph of §11(h).  Prevailing party costs, including attorney’s fees are payable “except to the extent that such Litigation is based upon claims where the recovery of such fees or costs is not permitted by law.”  This clause requires that the arbitrator follow the provisions of Government Code §12965 with respect to whether fees will be paid by Peczon if he loses.  Otherwise, it protects Peczon’s statutory right under the section to recovery of his costs and attorney’s fees.

As to the disqualification waiver, the apparent intent of the provision is to prevent either party from making a motion to disqualify attorneys who have been involved in the negotiation of the Employment Agreement, the Arbitration Agreement, or transactions under the agreements, from representing the parties in subsequent proceedings.  The argument that this benefits defendant over plaintiff makes no sense.  It is a mutual waiver that benefits or burdens either side.  Further, no authority is cited supporting Peczon’s position.

Since The Agreement is not substantively unconscionable, analysis of procedural unconscionability is not required.  The only thing left is the claim that fraud in the inducement renders The Agreement void.  [CCP §1281.2(b)]  Fraud in the inducement has not been shown.  Peczon says he was surprised by the arbitration clause, that he  intended to establish an “employment relationship,” and that he did not knowingly agree to arbitrate or sign the arbitration agreement.  This argument is not persuasive.

Peczon signed the Employment Agreement, of which The Agreement is a part.  There was no separate signature for The Agreement required.  All the information was before Peczon when he signed the Employment Agreement; the Agreement was not “hidden.”  If he missed it when he was reading the Agreement before he signed it, he offers no explanation about how such a thing could happen to someone who was being hired at a high level position where he was in charge of corporate strategy.  Fraud in the inducement has not been proven by a preponderance of the evidence.

Finally, Peczon asks that the entire action be ordered to arbitration.  This is not a proper request and is not addressed further.  Unless all parties stipulate to arbitration, each defendant will have to bring a separate motion.

The Motion to Compel Arbitration is granted.  The Court stays this action pending arbitration under the authority granted it by CCP §128(a)(3) and CCP §128(a)(8).

Defendant to give notice.