Judge: Douglas W. Stern, Case: 22STCV41024, Date: 2023-11-28 Tentative Ruling

Case Number: 22STCV41024    Hearing Date: January 9, 2024    Dept: 68

Ben Baca III vs. Knights of Columbus., 22STCV41024

Motion to Compel Arbitration

Moving Party – Defendant Knights of Columbus

Opposing Party – Plaintiff Ben Baca III

Background and Moving Party’s Position

This matter was initially heard on November 28, 2023.  Because Plaintiff had raised the argument in his Opposition that the parties’ agreement obligated the parties to mediate, Defendant had provided evidence with its Reply by way of the Declaration of Aaron Buckley showing that Defendant had offered to mediate.  The Court continued this motion and granted Plaintiff the right to “submit its evidence responsive to the Buckley Declaration.”  (Nov. 28, 2023 Minute Order.)

Plaintiff apparently misunderstood the intended breadth of the Order, as Plaintiff has submitted materials that do not respond to the Buckley Declaration.  The Court has reviewed the Declaration of Patrricia Poole regarding an audio recording – that contained no facts relevant to the Buckley Declaration.  The Court reviewed the Declaration of Steve Michlik, which also contained nothing responsive to the Buckley Declaration.  Even the Declaration of Plaintiff submitted January 4, 2024 contains nothing responsive to the Buckley Declaration.  Finally, counsel Michael Cohen submitted a declaration that addressed his desire to depose Defendant’s attorney, Aaron Buckley, but otherwise provided nothing to address the Buckley Declaration.

The Court, on its own motion, orders the Declarations of Poole, Michlik and Cohen filed January 4, 2024 stricken as not having been authorized by the Court.

Plaintiff submitted nothing responsive to the Buckley Declaration.

The Motion

Plaintiff Ben Baca III (Plaintiff) sued Defendant Knights of Columbus (Defendant) for breach of contract and other causes of action related to Plaintiff’s employment. Plaintiff filed the lawsuit on December 30, 2022. Defendant filed its motion to compel arbitration on September 1, 2023.

In October 2018, the parties signed a General Agent Agreement. That Agreement included an arbitration provision that reads as follows:

The Parties agree that any legal disputes or claims between the Parties, including any regarding this Agreement or its termination (including but not limited to the interpretation, enforceability, revocability, or validity of the Agreement, or the arbitrability of any dispute) that cannot be resolved informally or through mediation within thirty days of the first mediation session shall be submitted to binding arbitration in the state in which this Agreement was performed. The Parties understand and agree that they anticipate gaining the benefits of an efficient, less-formal, impartial, final and binding dispute resolution procedure through the use of binding arbitration.

(Lane Decl., Ex. A, p. 7, ¶ 32.) Defendant argues that the arbitration provision covers Plaintiff’s claims. Further, Defendant argues that there is no procedural or substantive unconscionability in the agreement. Finally, Defendant requests that the case be stayed pending arbitration.

Opposing Party’s Position

Plaintiff opposes the motion for several reasons. First, he argues that the parties had to participate in a mediation before arbitration can be held. Next, he argues that the arbitration agreement is procedurally unconscionable because it was presented on a take-it-or-leave-it basis. Finally, Plaintiff argues that the agreement is substantively unconscionable because of the fee provisions regarding mediations and because the rules do not permit minimal discovery during arbitration.

Reply

Defendant argues in its reply that the parties mutually waived any conditions precedent to arbitration, including mediation. Next, Defendant argues that the agreement is not procedurally unconscionable because contracts of adhesion are enforceable, and there was no oppression or surprise regarding the agreement. Finally, Defendant argues that the agreement is not substantively unconscionable because Defendant pays all the arbitration fees unless Plaintiff’s claims are frivolous. Additionally, the Commercial Arbitration Rules of the American Arbitration Association do permit discovery.

Analysis

I.                   Legal Standard

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-972.) The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) The Court is empowered by CCP § 1281.2 to compel parties to arbitrate disputes pursuant to an agreement to do so.   

Code of Civil Procedure § 1281.2 states that: 

“The court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: 

(a) The right to compel arbitration has been waived by the petitioner; or  

(b) Grounds exist for the revocation of the agreement. 

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.” (CCP § 1281.2.) 

The party petitioning to compel arbitration under written arbitration agreement bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence. The trial court acts as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence. (CCP § 1281.2.)

A.    Existence of an Agreement

Plaintiff does not appear to dispute the existence of an agreement.

B.     Conditions Precedent to Arbitration

Plaintiff argues that before the parties may proceed to arbitration, they needed to mediate their dispute based on the terms of the arbitration agreement.

The portion of the agreement that Plaintiff is referencing states that “If the Parties cannot resolve the dispute themselves within thirty days, the Parties agree to a non-binding mediation…” (Lane Decl., Ex. A, p. 7, ¶ 32.)

Defendant contends in its reply that the parties waived the mediation condition, and Defendant submitted an email chain with Plaintiff’s then-counsel to support this contention. (Buckley Decl., ¶ 3, Ex. A.) In this email chain, Defendant’s counsel and Plaintiff’s then-counsel discussed waiving mediation and proceeding straight to arbitration.

Plaintiff filed an objection to this email chain after Defendant filed its reply. Plaintiff objects on the basis that Defendant failed to bring up this email chain in its original motion. Plaintiff does not object to it on any other basis. However, this was not an issue until Plaintiff argued it in his opposition, so Defendant would have had to anticipate that this would be an issue.

Based on the email chain, the Court finds that Plaintiff waived the mediation.

C.    Unconscionability

Plaintiff argues that the arbitration agreement is procedurally and substantively unconscionable.

1.      Procedural Unconscionability

First, Plaintiff’s argument that the arbitration provision is procedurally unconscionable because it was presented on a take-it-or-leave-it basis does not hold up. California courts have found that mandatory arbitration policies in employment are not per se procedurally unconscionable. (See Baltazar v. Forever 21, Inc., (2016) 62 Cal. 4th 1237, 1245 (“take-it-or-leave-it” employment arbitration agreement not procedurally unconscionable absent “surprise or other sharp practices”); Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 175 (high degree of procedural unconscionability not present where employee was neither threatened nor bullied into signing agreement); Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1127 (“the cases uniformly agree that a compulsory pre-dispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis”).)

Plaintiff has not presented any evidence that there was surprise or oppression (threats or bullying) prior to his signing the arbitration agreement. His only argument in support of procedural unconscionability is that he is the weaker party. That is not enough to make an agreement procedurally unconscionable.

The arbitration provision is not procedurally unconscionable.

2.      Substantive Unconscionability

For substantive unconscionability, the California Supreme Court held in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 that an agreement to arbitrate employment-related statutory claims, such as claims under the FEHA, is subject to certain minimal requirements: (1) the arbitration agreement may not limit the damages normally available under the statute; (2) there must be discovery sufficient to adequately arbitrate their statutory claim; (3) there must be a written arbitration decision and judicial review sufficient to ensure the arbitrators comply with the requirements of the statute; and (4) the employer must pay all types of costs that are unique to arbitration. (Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665, 677 (citing Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th at 101-113).)

The provision regarding the mediation fees is not relevant for the conscionability of the arbitration agreement. However, even if it were relevant, the Court would not find it substantively unconscionable because it requires Defendant to pay the mediation fees. The only instance where Plaintiff might pay the fees is if his claims are deemed frivolous. Even if this provision were unconscionable, it could be severed from the agreement.

As for Plaintiff’s argument regarding discovery, Defendant points out in its reply that Rule 23 of the AAA’s Commercial Arbitration Rules gives the arbitrator authority to manage the discovery process and does not bar discovery. The Commercial Arbitration Rules comply with the requirements of Armendariz and allow for discovery.

The arbitration provision is not substantively unconscionable.

ORDER

1.      Defendant Knights of Columbus’s Motion to Compel Arbitration is GRANTED.

2.      The action is stayed pending arbitration.

3.      The Court, on its own motion, orders the Declarations of Poole, Michlik and Cohen filed January 4, 2024 stricken as not having been authorized by the Court.