Judge: Douglas W. Stern, Case: 22STCV02586, Date: 2022-09-16 Tentative Ruling

Case Number: 22STCV02586    Hearing Date: September 16, 2022    Dept: 52

Tentative Ruling:

          Defendants Musicians Institute Incorporated, Campus Hollywood, Inc., Todd Berhorst, Takeshi Sakimoto, and Mary Marsh’s Motion to Compel Arbitration and Stay or Dismiss Proceedings

Defendants Musicians Institute Incorporated, Campus Hollywood, Inc., Todd Berhorst, Takeshi Sakimoto, and Mary Marsh move to compel arbitration of this action.

Plaintiff Richard Khanbabians opposes the motion on four grounds.

Evidentiary Objections      

          Plaintiff makes six objections to defendants’ evidence.  All six objections are overruled. 

Existence of Agreement

First, plaintiff denies signing the arbitration agreement.  The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties.  (CCP § 1281.2.)  It can meet the “initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party’s signature.”  (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060 (Espejo).)  Only after the opposing party “challenge[s] the validity of that signature” must the moving party “establish by a preponderance of the evidence that the signature was authentic.”  (Ibid.) 

The moving party can meet its ultimate burden of proving an electronic signature’s authenticity by showing the “security precautions regarding transmission and use of an applicant’s unique username and password, as well as the steps an applicant would have to take to place his or her name on the signature line.”  (Espejo, supra, 246 Cal.App.4th at p. 1062.) 

Defendants meet their burden of proving plaintiff electronically signed the arbitration agreement.  The agreement is included in paragraph two of a document titled “Employee Acknowledgment and Agreement.”  (Marsh Decl., Ex. E.)  The space for plaintiff’s signature on the last page states his name and includes a signature dated 10/29/2019.  (Ibid.) 

When plaintiff started working for Musicians Institute, it used the “Zenefits” human resources system.  (Wiley Decl., ¶¶ 1-2.)  It includes a “password protected online portal” (Id., ¶ 2) that requires new employees to “create and generate their usernames and unique passwords when they first create their account” (Id., ¶ 4).  “To electronically sign agreements and onboarding documents in the Zenefits platform, the new hire must draw their signature using the computer track pad.  The employee must then select the ‘Add Signature’ button, located under the drawn signature, generating the employee’s electronic signature and date.  After viewing the document with the added signature, the employee then selects the ‘Accept’ button.”  (Id., ¶ 6.) 

Zenefits “maintains an audit trail that reflects when the new hire logged into his/her account and when they accessed and signed each document.”  (Wiley Decl., ¶ 7.)  Wiley’s declaration authenticates images of the audit log showing plaintiff electronically signed the agreement on October 29, 2019, at 11:55 a.m.  (Id., ¶¶ 8-9, Ex. D.)

Plaintiff denies signing the agreement and describes differences between his signature and the one on the document.  (Khanbabians Decl., ¶ 6.)  Those differences, however, can be explained by the fact that the latter was done “using [a] computer” (Wiley Decl., ¶ 6) instead of a pen. 

Plaintiff also disputes that he could have signed the agreement at 11:55 a.m. on October 29, 2019, because he was “focused on” a “tight deadline” at work that day.  (Khanbabians Decl., ¶ 9.)  But he admits receiving an email from Zenefits that day at 11:51 a.m. stating, “Thank you for registering with Zenefits”, followed by another at 12:07 p.m. stating, “Thanks for submitting your information for the background check!”  (Id., ¶ 9, Ex. D.) 

Defendants’ burden of proof is the preponderance of the evidence.  It is more likely than not that plaintiff signed the agreement, rather than defendants engaging in a nefarious scheme to forge his electronic signature.  Plaintiff received those emails from Zenefits because he registered on the platform and filled out the required forms—including signing the arbitration agreement—between 11:50 a.m. and 12:07 p.m. on October 29, 2019.

Unconscionability

Second, plaintiff argues the agreement is unconscionable.  Unconscionability requires both procedural and substantive unconscionability using a sliding scale.  (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 185.)  The agreement features some procedural unconscionability as an adhesion contract required by an employer.  It is not, however, substantively unconscionable.  The agreement is therefore enforceable.

Plaintiff makes numerous meritless arguments as to why the agreement is substantively unconscionable.  He contends it is not mutual because defendant did not sign it.  It is well established that the drafting party can enforce an arbitration agreement it did not sign.  (See, e.g., Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 398.)  The issue is whether the employer intended to be bound, not whether it signed the document.  (Ibid.) 

Plaintiff contends the agreement is not mutual because it does not state defendant agrees to binding arbitration—which is not true.  It provides, “I and the Company agree to utilize binding individual arbitration as the sole and exclusive means to resolve all disputes… I and the Company each specifically waive and relinquish our respective rights to bring a claim against the other in a court of law and to have a trial by jury.  Both I and the Company agree that any claim, dispute, and/or controversy that I may have against the Company… or the Company may have against me, shall be submitted to and determined exclusively by binding arbitration.”  (Marsh Decl., Ex. E, ¶ 2.)

Plaintiff argues the agreement is unconscionable because it “is silent as to costs and fees.”  But “silence about costs in an arbitration agreement is not grounds for denying a motion to compel arbitration.”  (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1084.) 

Plaintiff argues the agreement only provides for minimal discovery.  It provides for arbitration “in conformity with the procedures of the California Arbitration Act (Cal. Code Civ.k Proc. Sec 1280 et seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights to discovery).”  (Marsh Decl., Ex. E, ¶ 2.)  Section 1283.05 provides for the same discovery as available in a civil action.

Plaintiff also argues the agreement is unconscionable because it includes a waiver of “any substantive or procedural rights that [he] may have to bring or participate in an action brought on a class or collective basis.”  (Marsh Decl., Ex. E, ¶ 3.)  Any unconscionability resulting from this provision is not relevant because this case is an individual action by plaintiff.  He does not assert any class action or PAGA representative cause of action.  Assuming this provision is unconscionable, the court would sever it and enforce the remainder of the agreement.

Other Defendants

Third, plaintiff argues he cannot be compelled to arbitrate his action as to defendants Campus Hollywood, Inc., Todd Berhorst, Takeshi Sakimoto, and Mary Marsh.  They may enforce the arbitration agreement via equitable estoppel.  Under that doctrine, “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.”  (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495.) 

Here, the arbitration agreement expressly provides that plaintiff agreed to resolve disputed he “may have against the Company (or its owners, directors, officers, managers, employees, or agents).”  (Marsh Decl., Ex. E, ¶ 2.)  Defendant Todd Berhorst is the “President and CEO” of Musicians Institute.  (Comp., ¶ 7.)  Defendant Takeshi Sakimoto is its “Vice President & Director of Human Resources.” (¶ 9.g.)  Defendant Mary Marsh is its “Human Resources Manager.”  (Ibid.) 

Plaintiff’s claims against all defendants are inextricably intertwined with the contract and with one another.  Plaintiff’s complaint alleges there is no distinction between Musicians Institute Incorporated and Campus Hollywood, Inc.  It only mentions them separately in the “summary”: “This is an action by plaintiff… whose employment with defendants Musicians Institute Incorporated and Campus Hollywood, Inc. (‘Entity Defendants’) was wrongfully terminated.”  (Comp., p. 1.)  The complaint makes zero separate allegations about either of the entities and instead exclusively refers to them as “Entity Defendants.”  It also alleges all defendants were alter egos of one another, that “[a]ll actions of all defendants … were taken on behalf of all defendants” (Comp., ¶ 4), and “all defendants acted as agents of all other defendants in committing the acts alleged herein (¶ 5).

Plaintiff cannot argue Musicians Institute Incorporated and Campus Hollywood, Inc. are identical when he seeks to hold both liable, only to change his tune when he seeks to avoid arbitration.  (See Civ. Code, § 3521 [“He who takes the benefit must bear the burden”].) 

Waiver

Finally, plaintiff argues defendants waived any right to compel arbitration.  “[A] party who resists arbitration on the ground of waiver bears a heavy burden [citation], and any doubts regarding a waiver allegation should be resolved in favor of arbitration.”  (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195 (St. Agnes).) 

Plaintiff argues for waiver on the grounds that defendants waited seven months before filing this motion, filed answers, filed case management statements, and opposed his ex parte application.  (Opp., p. 14.)  “[M]erely participating in litigation by itself” does not result in waiver.  (St. Agnes, supra, 31 Cal.4th at p. 1203.)  Delay alone is insufficient for waiver.  (Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651, 663 [14-month delay “insufficient to support the waiver”; Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 376 [no waiver despite three years of litigation].) 

In addition, defendants first demanded arbitration on February 23, 2022—only about two weeks after plaintiff served them with the complaint.  (Okleberry Decl., ¶ 3, Ex. B.)  Defendants have done nothing inconsistent with asserting their right to arbitration. 

Disposition

The motion is granted.  Plaintiff is ordered to arbitrate all causes of action against all defendants alleged in his complaint.  The court hereby stays the entire action until the conclusion of arbitration.