Judge: Douglas W. Stern, Case: 22STCV12372, Date: 2022-09-16 Tentative Ruling
Case Number: 22STCV12372 Hearing Date: September 16, 2022 Dept: 52
Tentative Ruling:
Defendant
WDW Joint Venture dba Downey Community Health Center’s Motion to Compel
Arbitration and Stay Proceedings
Defendant WDW Joint Venture moves to compel
arbitration and stay this case. Plaintiff
Jessica Gomez opposes the motion on two grounds.
Evidentiary Objections
Plaintiff
makes three objections to the declaration of Elsa Custodio. All three objections are overruled.
Existence of Agreement
First,
plaintiff argues she never agreed to arbitration because she never received the
Employment Dispute Resolution booklet. Even if plaintiff never received the
booklet, she agreed to it by communicating her consent to defendant. “Contract
formation is governed by objective manifestations, not the subjective intent of
any individual involved. The test
is what the outward manifestations of consent would lead a
reasonable person to believe.” (Allen v. Smith (2002)
94 Cal.App.4th 1270, 1277, internal quotes and alterations omitted.) “[O]rdinarily one who
signs an instrument which on its face is a contract is deemed to assent to all
its terms.” (Marin Storage &
Trucking, Inc. v. Benco Contracting and Engineering, Inc. (2001) 89
Cal.App.4th 1042, 1049–1050; see Williston on Contracts § 4:19 (4th ed. 2020)
[“what is essential is not assent, but rather what the person to whom a
manifestation is made is justified as regarding as assent”].)
Plaintiff
signed a document titled, “Employment Dispute Resolution Program
Acknowledgement.” (Custodio Decl., Ex. 1.) It states, “I acknowledge that I have
received my copy of the Employee Dispute Resolution (EDR) Program booklet. … My
signature below acknowledges that: * It is my responsibility to familiarize
myself with its contents and have had the opportunity to ask questions about
its contents. If I have further
questions, I will ask my Supervisor. * I
understand I am bound to use the EDR Program to resolve my employment related
disputes as described within the booklet.”
(Ibid.)
Regardless
of whether plaintiff received the booklet or “mistakenly” signed the
acknowledgement, she signed it. Doing so
is the quintessential outward manifestation of consent. Signing it would lead a reasonable person to
believe she agreed to its terms. The
parties therefore entered this arbitration agreement.
Unconscionability
Second, plaintiff argues the agreement is
unconscionable and therefore unenforceable.
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
court finds the agreement is not enforceable because it has moderate procedural
unconscionability and high substantive unconscionability.
1.
Procedural Unconscionability
Procedural
unconscionability focuses on “‘oppression’ or ‘surprise’ due to unequal
bargaining power.” (Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) “Procedural
unconscionability occurs when the stronger party drafts the contract and
presents it to the weaker party on a ‘take it or leave it basis.’ ” (Trivedi
v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 393, disapproved of
on other grounds by Baltazar v. Forever
21, Inc. (2016) 62 Cal.4th 1237.)
The
arbitration agreement has moderate procedural unconscionability. The parties’ unequal bargaining power renders
it oppressive. Signing the EDR
acknowledgement is part of defendant’s standard onboarding process. (Custodio Decl., ¶¶ 3, 5.) “During new hire orientation in 2019, the new
hires” received defendant’s “employment forms and policies, including the EDR
Booklet and acknowledgment form, to review and complete.” (Id., ¶ 5.) Plaintiff states, “[A]s part of my
onboarding, I was required to review and sign a multitude of paperwork” (Gomez
Decl., ¶ 1), including the EDR acknowledgment (Id., ¶ 2).
The
EDR Booklet also states, “Your decision to accept employment or to continue
employment with the Company constitutes your agreement to be bound by the EDR
Program.” (Custodio Decl., Ex. 1, p. 1.) The arbitration agreement is a classic take
it or leave it adhesion contract imposed by the employer on the employee as a
condition of employment.
2.
Substantive Unconscionability
The
agreement is highly substantively unconscionable because it is not mutual. “In assessing substantive unconscionability,
the paramount consideration is mutuality.” (Pinela v. Neiman Marcus Group, Inc. (2015)
238 Cal.App.4th 227, 241, internal quotations and citations omitted.)
The
Supreme Court of California has stated, “Given the lack of choice and the
potential disadvantages that even a fair arbitration system can harbor for
employees, we must be particularly attuned to claims that employers with
superior bargaining power have imposed one-sided, substantively unconscionable
terms as part of an arbitration agreement.”
(Armendariz, supra, 24 Cal.4th
at p. 115.) “Given the disadvantages
that may exist for plaintiffs arbitrating disputes, it is unfairly one-sided
for an employer with superior bargaining power to impose arbitration on the
employee as plaintiff but not to accept such limitations when it seeks to
prosecute a claim against the employee, without at least some reasonable
justification for such one-sidedness based on ‘business realities.’” (Id.
at p. 117.)
The
agreement is one-sided because it only applies to disputes typically brought by
employees. “Courts repeatedly have found
an employer-imposed arbitration agreement to be substantively unconscionable
when it requires the employee to arbitrate the claims he or she is mostly
likely to bring, but allows the employer to go to court to pursue the claims it
is most likely to bring.” (Carbajal
v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 248.)
Here,
the EDR booklet provides that both parties “are bound to use the EDR Program as
the only means of resolving employment related disputes and to forego any right
either may have to a jury trial on issues covered by the EDR Program.” (Custodio Decl., Ex. 1, p. 1.) Though this agreement purports to be mutual,
the “issues covered by the EDR Program” are limited to claims brought by
employees.
The
agreement provides, “Disputes covered under the EDR program pertain to claims
such as discipline, discrimination, fair treatment, harassment, termination and
other legally protected rights. Disputes
not covered under the EDR Program relate to workers’ compensation, unemployment
benefits, health, welfare and retirement benefits and claims by the Company for
injunctive relief to protect trade secrets and confidential information.” (Custodio Decl., Ex. 1, p. 3.) Though the agreement excludes some forms of
employee claims, most of them are not arbitrable as a matter of law. (Mercuro v. Superior Court (2002) 96
Cal.App.4th 167, 176 (Mercuro).)
The
agreement is equivalent to others that have been held substantively
unconscionable. In Mercuro,
“[t]he arbitration agreement specifically cover[ed] claims for breach of
express or implied contracts or covenants, tort claims, claims of discrimination
based on race, sex, age or disability, and claims for violation of any federal,
state or other governmental constitution, statute, ordinance, regulation or
public policy.” (Id. at pp.
175-176.) But it “specifically
exclude[d] ‘claims for injunctive and/or other equitable relief for
intellectual property violations, unfair competition and/or the use and/or
unauthorized disclosure of trade secrets or confidential information…’ ” (Id. at p. 176.)
Similarly,
in Ramirez v. Charter Communications, Inc. (2022) 75 Cal.App.5th
365 (Ramirez), the court held an agreement was not mutual where it “specifically
cover[ed] claims ‘related to pre-employment, employment, employment termination
or post-employment-related claims, whether the claims are dominated as tort,
contract, common law, or statutory claims,’ including … whistleblowers;
unlawful termination; … violations of wage and hour laws; [and] unlawful
discrimination and harassment,” among others.
(Id. at p. 383.) “On the
other hand, the arbitration agreement specifically exclude[d] ‘claims for
injunctive or other equitable relief related to unfair competition and the
taking, use or unauthorized disclosure of trade secrets or confidential
information.’ The agreement further
excludes claims: arising under separate or severance agreements or non-compete
agreements; for theft or embezzlement or any other criminal conduct; and over
the validity of any party’s intellectual property rights.” (Ibid.)
Here,
the parties’ agreement specifically applies only to claims normally brought by
employees. Its only reference to any
claim normally brought by employers is to exclude “claims by the Company for
injunctive relief to protect trade secrets and confidential information.” (Custodio Decl., Ex. 1, p. 3.)
Defendant
offers no business justification for the agreement’s lack of mutuality. The agreement is therefore highly
substantively unconscionable.
Severability
Severance
cannot fix the agreement’s lack of mutuality.
“[I]n the case of the agreement’s lack of mutuality, such permeation is
indicated by the fact that there is no single provision a court can strike
or restrict in order to remove the unconscionable taint from the
agreement. Rather, the court would have
to, in effect, reform the contract, not through severance or restriction, but
by augmenting it with additional terms.”
(Armendariz, supra, 24 Cal.4th at pp. 124-125.)
Here,
there is no single term or provision that could be stricken. Making the agreement enforceable would
require augmenting it with additional terms—which the court cannot do.
Disposition
The motion is denied.