Judge Edward B. Moreton, Jr., Case 23SMCV00653 2023-05-23 Tentative Ruling

Judge: Edward B. Moreton, Jr., Case: 23SMCV00653, Date: 2023-05-23 Tentative Ruling

Superior Court of California

County of Los Angeles – West District

Beverly Hills Courthouse / Department 205

JANE DOE,

Plaintiff,

SECOND STREET CORPORATION dba THE HUNTLEY HOTEL & THE PENTHOUSE, et al.,

Defendants.

Case No.: 23SMCV00653

Hearing Date: May 23, 2023

[TENTATIVE] ORDER RE:

DEFENDANTS’ MOTION TO

COMPEL ARBITRATION AND STAY

PROCEEDINGS

MOVING PARTY: Defendants Second Street Corporation dba The Huntley Hotel, Manju Raman and Eman Rivani

RESPONDING PARTY: Plaintiff Jane Doe

This case arises from an employment dispute. Plaintiff Jane Doe was employed as a server for Defendant The Huntley Hotel (the “Huntley”) from 2016 until her constructive termination on May 13, 2022. (First Amended Complaint (“FAC”) ¶¶18, 45.)

In October 2019, Plaintiff was attacked and sexually assaulted by Defendant Ryan Jackson (“Jackson”), a co-worker, outside of work. (FAC ¶ 18.) At a party at Plaintiff’s house, Jackson forced himself on Plaintiff. (FAC ¶ 27.) She reported the incident to her manager and also that Jackson had been asking her for rides and would try to touch her on these rides. (FAC ¶¶ 20, 27.)

Plaintiff’s manager started scheduling Plaintiff and Jackson on different shifts to avoid any contact. (FAC ¶¶ 20, 23.). Plaintiff’s manager reported to a general manager that Jackson “was violent with Plaintiff, grabbing Plaintiff by the neck, attempting to be sexual”, but no investigation was conducted. (FAC ¶¶21, 23.)

In October 2021, Huntley hired Defendant Eman Rivani as its food & beverage director. (FAC ¶27.) Plaintiff’s manager told Rivani that Plaintiff and Jackson were not to be scheduled together. Plaintiff’s manager explained to Rivani that Jackson had forced himself physically on Plaintiff outside of work. (FAC ¶ 27.) Plaintiff herself disclosed to Rivani that Jackson had sexually assaulted her, after Rivani forced her to explain why she and Jackson should not be scheduled together. (FAC ¶ 31.) No investigation was conducted, and worse still, Rivani scheduled Plaintiff and Jackson for the same shifts. (FAC ¶¶ 31-32.) Rivani told another co-worker that his plan was to make Plaintiff so uncomfortable that she would quit. (FAC ¶42.)

Plaintiff also alleges Rivani was demeaning to female employees. (FAC ¶ 29.) Rivani was allegedly sexist, assigned shifts based on the attractiveness of female servers, scheduled female servers on shifts they requested not to be scheduled on, and was treating female employees with disdain. (FAC ¶ 36.)

Defendant Manju Raman is the general manager of the Huntley. (FAC ¶ 4.) When another manager complained to Raman that Rivani was scheduling Plaintiff and Jackson on the same shifts, Raman responded that Plaintiff was sleeping with Jackson. (FAC ¶¶ 36-37.) When Plaintiff learned of the statement, she confronted Raman and also reported Rivani’s sexist and harassing conduct towards her and other female employees. Again, no investigation was initiated. (FAC ¶39.) Instead, Raman told Plaintiff to “toughen up and grow a thick skin.” (FAC ¶40.) Raman also threatened Plaintiff that if she continued to make waves, “you need to ask yourself if the risk is going to be worth the reward.” (Id.)

On April 29, 2022, Plaintiff ran into Jackson who was not on schedule to work that day. That sent her into a tail spin and caused her to contemplate suicide by jumping off the roof but luckily she did not have the door code for the roof. Rivani saw Plaintiff crying and hyperventilating, but he just looked her up and down with disdain, rolling his eyes in disgust and walked away abandoning her. (FAC ¶43.)

On May 13, 2022, Plaintiff wrote the owners of the Huntley to file a formal complaint of sexual harassment and retaliation and informed them of her constructive discharge. Plaintiff detailed Jackson’s sexually unwelcome conduct and Raman’s defamatory statement about an alleged consensual affair. (FAC ¶ 45.) Plaintiff also informed the owners that Raman and Rivani knowingly created intolerable working conditions such that she could not return to work. (Id.) Three nights later, Huntley responded via its owner that it was conducting an investigation, but Plaintiff was never interviewed. (FAC ¶47.)

A day later, Plaintiff called a suicide hotline reporting that she was suicidal due to the stress of what was happening to her at work. The police arrived at Plaintiff’s home and took her under a 5150 hold. (FAC ¶49.)

The operative (first amended) complaint alleges 18 causes of action for (1) sexual harassment, (2) sex/gender discrimination, (3) failure to prevent discrimination and harassment in violation of FEHA, (4) retaliation in violation of FEHA, (5) constructive wrongful termination, (6) intentional infliction of emotional distress, (7) negligent supervision and retention, (8) violation of Labor Code § 1102.5, (9) violation of Labor Code § 6310, (10) failure to pay minimum wages, (11) failure to pay overtime wages, (12) failure to provide meal periods, (13) failure to authorize or permit rest periods, (14) failure to provide and maintain compliant wage statements, (15) illegal split shifts premium, (16) slander per se, (17) libel per se and (18) unfair business practices.

This hearing is on Defendants’ motion to compel arbitration. Defendants seek to compel Plaintiff to arbitrate pursuant to an arbitration provision in an employee handbook and to stay all proceedings pending completion of the arbitration. The arbitration provision in the employee handbook states: “[a]rbitration shall be the exclusive method for resolving any dispute”, and it defines dispute to include “wrongful termination … claims for unlawful discrimination and/or harassment … and claims for violation of any federal, state, or other governmental law, statute, regulation or ordinance[.]” (Ex. B to Raman Decl.) Plaintiff signed an acknowledgment that she received a copy of the handbook, and the acknowledgment states: “I further understand and agree that I am bound by the provisions of the Handbook particularly the provision relating to the mandatory, binding arbitration of any employment related dispute. I understand that by agreeing to arbitration, I am waiving the right to a trial by jury of the matters covered by the ‘Arbitration’ provisions of the Handbook.” (Ex. A to Raman Decl. (emphasis in original).)

EVIDENTIARY OBJECTIONS

The Court sustains the objections to paragraphs 2, 3, 8 of the Declaration of Manju Raman and overrules the objections to paragraphs 4, 6. The Court sustains the objections to Exhibits B, D, E and F and overrules the objections to Exhibits A and C to the Declaration of Raman. The Court overrules the objections to the Declaration of Geoffrey Lee, including to Exhibits G and H.

The¿FAA¿applies to contracts that involve interstate commerce (9 U.S.C. §§ 1,¿2), but since arbitration is a matter of contract, the¿FAA¿also applies if it is so stated in the agreement. (See¿Victrola 89, LLC v. Jaman Properties 8 LLC¿(2020) 46 Cal.App.5th 337, 355 [260 Cal. Rptr. 3d 1]¿(“[T]he presence of interstate commerce is not the only manner under which the¿FAA¿may apply. … [T]he parties may also voluntarily elect to have the¿FAA¿govern enforcement of the Agreement”].)

Here, the arbitration provision in the employee handbook states: “The arbitrability of any controversy, dispute or claim under this policy shall be determined by application of the substantive provisions of the Federal Arbitration Act (9 U.S.C. sections 1 and 2) and by application of the procedural provisions of the California Arbitration Act.” (Ex. B to Raman Decl.). The language of this provision is unambiguous: the parties specified that the¿FAA¿governs the arbitration agreement.¿(Cf.¿Victrola 89, LLC, 46 Cal.App.5th at 343, 348¿(contracting parties’ explicit “reference to ‘enforcement’ under the¿FAA required the court to consider the [defendants’] motion to¿compel arbitration under the¿FAA.”).)

Under the FAA, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration …”. (Moses H. Cone Memorial Hospital v. Mercury Constr. Corp.¿(1983) 460 U.S. 1, 24–25.) This federal policy favoring arbitration preempts any state law impediments to the policy’s fulfillment. If a state law interferes with the FAA’s purpose of enforcing arbitration agreements according to their terms, the FAA preempts the state law provision, no matter how laudable the state law’s objectives. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 352.)

However, while the arbitration agreement here is governed by the FAA, the agreement may be enforced via the summary procedures provided by California arbitration law. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal. 4th 394, 409-410.) It is a “general and unassailable proposition . . . that States may establish the rules of procedure governing litigation in their own courts,” even though the controversy is governed by substantive federal law. (Felder v. Casey¿(1988) 487 U.S. 131, 138.) By the same token, however, a state procedural rule must give way “if it impedes the uniform application of the federal statute essential to effectuate its purpose, even though the procedure would apply to similar actions arising under state law.” (McCarroll v. L.A. County etc. Carpenters¿(1957) 49 Cal. 2d 45, 61, 62.)

“We think it plain¿the California procedures for a summary determination of the petition to compel arbitration serve to further, rather than defeat, the enforceability policy of the [FAA.]” ¿(Rosenthal, 14 Cal. 4th at 409.) Code Civ. Proc. § 1281.2 and¿1290.2¿are neutral as between state and federal law claims for enforcement of arbitration agreements. (Id.) “They display no hostility to arbitration as an alternative to litigation; to the contrary, the summary procedure provided, in which the existence and validity of the arbitration agreement is decided by the court in the manner of a motion, is designed to further the use of private arbitration as a means of resolving disputes more quickly and less expensively than through litigation.” (Id.)

As with federal law, under California¿law,¿public policy favors arbitration as an efficient and less expensive means of resolving private disputes. (Moncharsh¿v.¿Heily¿&¿Blase¿(1992) 3 Cal.4th 1, 8-9;¿AT&T Mobility LLC v. Concepcion,¿563 U.S. at 339.)¿ To further that policy, Code Civ. Proc. §1281.2 requires a trial court to enforce a written arbitration agreement unless it finds (1) no written agreement to arbitrate exists, (2) the right to compel arbitration has been waived, (3) grounds exist for rescission of the agreement or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues.

When seeking to compel arbitration, the initial burden lies with the moving party to demonstrate the existence of a valid arbitration agreement by a preponderance of evidence.¿ (Ruiz v. Moss Bros. Auto Group (2014) 232 Cal.App.4th 836, 841-42; Gamboa v. Northeast Community Clinic (2021), 72 Cal.App.5th 158, 164-65.)¿ It is sufficient for the moving party to produce a copy of the arbitration agreement or set forth the agreement’s provisions.¿ (Gamboa, 72 Cal.App.5th at 165.)¿ The burden then shifts to the opposing party to prove by a preponderance of evidence any defense to enforcement of the contract or the arbitration clause.¿ (Ruiz, 232 Cal.App.4th at 842; Gamboa, 72 Cal.App.5th at 165.) The trial court then weighs all the evidence submitted and uses its discretion to make a final determination.¿ (Id.)¿

If the court orders arbitration, then the court shall stay the action until arbitration is completed.¿ (See Code Civ. Proc., § 1281.4.)

The Court first considers whether even assuming an arbitration agreement exists, it is barred by the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”). The EFAA amends the FAA by invalidating any pre-dispute mandatory arbitration clause as it applies to an individual “alleging conduct constituting a sexual harassment dispute or sexual assault dispute.” 9 U.S.C. § 401. The EFAA was intended to curtail the use of arbitration agreements to stifle sexual assault and harassment claims.

The EFAA, which became effective on March 3, 2022, applies to “any dispute or claim that arises or accrues on or after” that date. 9 U.S.C. § 401. The parties dispute when Plaintiff’s claims accrued. Defendants argue that Plaintiff’s claims accrued at the latest in February 2022 when she complained to Raman about a sexually hostile work environment. (Motion at 9-10.) Plaintiff argues that her claims accrued on May 13, 2022, the day her employment was constructively terminated. (Opp. at 1.) The Court agrees with Plaintiff.

On a claim for sexual harassment that results in a constructive discharge, “the statute of limitations runs from the date of the constructive termination. It does not run from the earlier date of the assault and initial complaints to management in 2020 and 2021, because such acts continued culminating through the date of the unlawful constructive discharge – the last adverse employment action arising from the sexual harassment – which had not yet ‘occurred.’” (Romano v. Rockwell Int’l Inc. (1996) 14 Cal.4th 479, 493.) Thus, “the date that triggers the running of the statute of limitations period under the FEHA is the date of actual termination.” (Id. at 495.)

Here, Plaintiff’s constructive termination occurred on May 13, 2022, after EFAA went into effect. Therefore, the EFAA applies here and voids the arbitration agreement.

Defendants’ reliance on Walters v. Starbucks Corp. (SDNY 2002) 2022 U.S. Dist. Lexis 153228, is misplaced. There, the plaintiff did not contest that her claims accrued prior to March 3, 2022, and in fact the court noted that her claims of discrimination, harassment and retaliation occurred at the latest by December 2021 when she left her job. (Id. at *7.) The court cited in support to Flaherty v. Metromail Corp. (2nd Cir. 2000) 235 F.3d 133, 138 which held that wrongful discharge claim accrues when the employee gives “definite notice of her intent to quit.” (2022 U.S. Dist. Lexis 153228 at *7.)

Defendants argue that Plaintiff’s allegations of a constructive discharge in the FAC should be disregarded because Plaintiff was not permitted to file a First Amended Complaint during the pendency of Defendant’s motion to compel arbitration. Defendants filed a request for an automatic stay under Civ. Proc. Code § 1281.4, and this statute “requires that the trial court stay an action pending before it while an application to arbitrate the subject matter of the action is pending in a court of competent jurisdiction.” (Twentieth Century Fox Film Corp. v. Sup. Ct. (2000) 79 Cal.App.4th 188, 192.) However, whether to permit new claims or new parties during the stay is a matter of court discretion. (Cook v. Sup. Ct. (1966) 243 Cal.App.2d 622, 624 (“Whether to permit the filing of an amended and supplemental complaint, thus bringing new issues and new parties in the pending action which has been stayed pending arbitration, or to require that petitioners get these matters before the court by filing a new complaint and after the issues are joined move for consolidation for trial, is a matter that rests in the sound judgment of the trial judge.”) The Court exercises its discretion to allow the FAC.

Defendants also argue that Plaintiff’s allegations of a constructive discharge in May 2022 are inconsistent with her original complaint which alleged she was still employed but on medical leave. (Compl. ¶54.) Even if correct, Plaintiff still alleges that her harassment continued through May 2022. (Compl. ¶¶21, 47-48.) For purposes of the EFAA, “hostile work environment claims could—in accordance with well-established continuing violation precedent—accrue as of the date of the last act that is part of the hostile work environment.” (Olivieri v. Stifel, Nicholaus & Co., Inc. (EDNY March 31, 2023) 2023 U.S. Dist. Lexis 57001 at *13 (quoting Walters v. Starbucks Corp. (SDNY Aug. 25, 2022) 2022 U.S. Dist. Lexis 153228 at *7); DeSuze v. Carson (E.D.N.Y. 2020) 442 F. Supp 3d. 528, 544,¿aff'd sub nom.¿DeSuze v. Ammon, 990 F. 3d 264 (2d. Cir. 2021)¿(“a claim alleging an ongoing policy or practice accrues at the time of the last action in furtherance of it”);¿Hauff v. State Univ. of New York (E.D.N.Y. 2019) 425 F. Supp 3d. 116, 134¿(a hostile work environment claim does “not accrue until the last act in furtherance of the allegedly discriminatory practice”);¿Rosen v. N.Y.C. Dep't of Educ. (S.D.N.Y. Aug. 27, 2019) 2019 U.S. Dist. LEXIS 145380 at *12¿(last act that “contributed to the hostile working environment” considered “the data of accrual”). Here, the date of the last act is May 12, 2022 (FAC ¶44), and therefore, Plaintiff’s claims accrued as of that date. Additionally, is notable that the original complaint includes alleged acts contributing to a hostile work environment as late as June 2022.

Defendants further argue that EFAA applies only to arbitration agreements governed by the FAA. (Motion at 10.) But Defendants themselves argue that the arbitration agreement here is governed by the FAA: “Here, the FAA clearly applies, as the Huntley is a luxury hotel that, [by] its nature, provides lodging for travelers from out of state.” (Motion at 7.) Even setting aside Defendants’ own concession that the FAA applies, the arbitration provision clearly states it is governed by the FAA: “The arbitrability of any controversy, dispute of claim under this policy shall be determined by application of the substantive provisions of the FAA and by application of the procedural provisions of the California Arbitration Act.” (Ex. B to Ramos Decl.)

Defendants next argue that the EFAA only applies to two of Plaintiff’s claims such that her non-sex based claims should still be arbitrated. This same argument was rejected by the U.S. District Court for the Southern District of New York in Johnson v. Everyrealm, Inc. (SDNY 2023) 2023 U.S. Dist. LEXIS 31242.

In Johnson, the court noted that EFAA makes an arbitration agreement invalid and unenforceable with respect to a “case.” (Id. at 41.) “It keys the scope of the invalidation of the arbitration clause to the entire ‘case’ relating to the sexual harassment dispute. It thus does not limit the invalidation to the claim or claims in which that dispute plays a part.” (Id. at 41.) The text of the EFAA “makes clear that its invalidation of an arbitration agreement extends to the entirety of the case relating to the sexual harassment dispute, not merely the discrete claims in the case that themselves either allege such harassment or relate to a sexual harassment dispute[.]” (Id. at 41.)

In reaching this holding, the Johnson court reasoned that case law underscores the difference between a “case” which is an “overall legal proceeding” and a “claim” which refers to “specific assertable or asserted right within such a proceeding.” (Id. at 42.) The court also noted that the EFAA used the narrower term “claim” in a surrounding provision (to set the EFAA’s effective date), suggesting the drafters intended a different meaning when they used the broader term “case” to describe the scope of the invalidation of the arbitration clause. (Id.) “The reading of the EFAA that lends coherence to the use of these separate terms assigns distinct meanings to ‘case’ and ‘claim,’ with the former referring to the entirety of the lawsuit in which claim(s) implicating a sexual harassment dispute are brought.” (Id.)

The Court finds persuasive the reasoning in Johnson and follows it here. The EFAA invalidates an arbitration clause as to the entire case, and therefore, the arbitration provision here cannot be enforced against any of Plaintiff’s claims, not just those alleging sexual harassment.

Defendants’ authorities are not persuasive as they do not address the argument raised by Plaintiff here and considered by the Court in Johnson. Dixon v. Dollar Tree (WDNY March 7, 2023) 2023 U.S. Dist. Lexis at *17 simply concluded in one sentence and without any analysis that the EFAA “does not preclude arbitration of claims under other sex and¿age discrimination claims, such as Dixon's allegations of disparate treatment because of her age and gender, that do not allege sexual assault or harassment.” Similarly, Silverman v. DiscGenics, Inc. (D. Utah Mar. 13, 2023) addressed whether the court had discretion to preclude arbitration of claims that accrued before the effective date of the EFAA where there were also claims that accrued after the effective date of the EFAA. Silverman did not consider whether the EFAA’s invalidation clause applied to the entire “case” as opposed to only claims for sexual harassment or sexual assault.