Judge Elaine Lu, Case 22STCV14477 2023-01-20 Tentative Ruling

On May 2, 2022, Plaintiff Mark Wilson (“Plaintiff”) filed the instant wrongful termination action against Defendants Hanmi Bank, Ron Santarosa, Patrick Carr, (collectively “Defendants”) and Ashley Sowa[1]. The complaint asserts five causes of action for (1) Discrimination based upon Race, National Origin, and/or Color in Violation of the Fair Employment and Housing Act (“FEHA”), (2) Harassment based upon Race, National Origin, and/or Color in Violation of FEHA, (3) Retaliation in Violation of FEHA, (4) Failure to Prevent Discrimination and Harassment, and (5) Wrongful Termination in Violation of Public Policy.

On December 19, 2022, Defendants filed the instant motion to compel arbitration. On January 6, 2023, Plaintiff filed an opposition. On January 12, 2023, Defendants filed a reply.

In reply, Defendants object to portions of the declaration of Mark Wilson. The Court rules as follows:

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (See Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) Under Code of Civil Procedure section 1281, a “written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.”

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, 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:

(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. . . .” (CCP §1281.2.)

The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. (Marcus & Millichap Real Estate Inv. Brokerage Co. v. Hock Inv. Co. (1998) 68 Cal.App.4th 83, 88.) When presented with a petition to compel arbitration, the trial court's first task is to determine whether the parties have in fact agreed to arbitrate the dispute. (Id.)

“Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394] explained: ‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see §1281.2(a), (b))—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ (Rosenthal, supra, at 413.) According to Rosenthal, facts relevant to enforcement of the arbitration agreement must be determined ‘in the manner . . . provided by law for the . . . hearing of motions.’ (Rosenthal, supra, at 413, quoting §1290.2.) This ‘ordinarily mean[s] the facts are to be proven by affidavit or declaration and documentary evidence, with oral testimony taken only in the court’s discretion.’ (Rosenthal, supra, at 413–414; . . .).” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 761-62.)

Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) “With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

“During the relevant time period in 2018, the new hire process was as follows: After [Lee] received the new hire’s information from the Recruiters to send a welcome email to a new hire and provided them with [Hanmi Bank]’s new hire forms. In the email, [Lee] included instructions on completing the new hire forms, and [Lee] requested the new hire bring certain documents on their first day including: their social security card, I-9 supporting original documentation, and a voided check or letter from their bank for the direct deposit form. [Lee] also instructed the new hire to complete and print out the new hire forms and to submit to HR. [Lee] informed the new hire that if a form does not allow for an e-signature, they could sign the forms on their first day of work. Finally, [Lee] informed the new hire that they could contact [Lee] if they had any questions about any of the forms.” (Lee Decl. ¶ 9.) In 2018, new hires would attend a training session where Lee would collect all of the new hire forms and make copies requested documents. (Lee Decl. ¶ 10.) Lee would then organize the new hire forms and check that each new hire form was completed. (Lee Decl. ¶ 11.) If a form was not completed, Lee would return the form to the new hire to be completed. (Lee Decl. ¶ 11.) These forms would then be submitted to another HR member who would audit the forms and place them in the new hires’ respective personnel files. (Lee Decl. ¶ 12.)

On June 11, 2018, Lee emailed Plaintiff, a new hire as First Vice President, Finance Systems Control Manager with a start date of June 18, 2018, a welcome email providing Plaintiff with the new hire forms which included an arbitration agreement entitled, “Mutual Agreement To Arbitrate Claims” (“Arbitration Agreement”). (Lee Decl. ¶¶ 15-16, Exh. 5.) Lee instructed Plaintiff to complete the forms and bring them with him on his first day. (Lee Decl. ¶ 16, Exh. 5.) On June 18, 2018, Plaintiff reported to Hanmi Bank for his first day and provided his new hire forms including the signed Arbitration Agreement. (Lee Decl. ¶ 17, Exh. 6.)

I recognize that differences may arise between Hanmi Bank (the “Company”) and me during or following my employment with the Company. I understand that, by signing this Mutual Agreement to Arbitrate Claims (this “Agreement”), both the Company and I are agreeing to resolve any differences between us through the arbitration procedures explained below. I understand that if I am not currently employed by the Company, my employment is consideration for my acceptance of this Agreement. I understand that if I am currently employed by the Company, my continued employment with the Company is consideration for my acceptance of this Agreement. In addition, the promises by the Company and by me to arbitrate claims, rather than litigate them before courts or other bodies, provide consideration for each other.

1. Claims Covered by this Agreement. To the maximum extent allowed by law, the Company and I mutually consent to the resolution by arbitration of all claims or causes of action that the Company may have against me or that I may have against the Company or the Company’s agents, owners, shareholders, current and former officers and directors, current and former employees, subsidiary and affiliated entities, all benefit plans, the benefit plans’ sponsors, fiduciaries, administrators, affiliates, and all successors and assigns of any of them. The claims covered by this Agreement include, but are not limited to: claims for breach of any contract or covenant; tort claims; claims for discrimination or harassment (including, but not limited to, race, sex, religion, national origin, age, medical condition, genetic information, gender identification, pregnancy, disability or sexual orientation); claims for retaliation; claims for violation of public policy; and claims for violation of any federal, state, or other law, statute, regulation or ordinance including, but not limited to, all claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, the Equal Pay Act, OSHA, the Americans with Disabilities Act, the California Fair Employment & Housing Act, the Family and Medical Leave Act, the California Family Rights Act, the California Labor Code, the Fair Labor Standards Act, and all similar federal and state statutes or local ordinances.

2. Claims Not Covered by this Agreement. Any claims I may have for workers’ compensation, unemployment compensation benefits, claims arising under ERISA (29 U.S.C. §§ 1001 et. seq.), provisional remedies under California Code of Civil Procedure section 1281.8(b), and claims which may not, as a matter of law, be subject to mandatory arbitration provisions are not covered by this Agreement. I also understand that I may only bring claims under this Agreement in my individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.

3. Waiver of Right to Jury Trial. I understand that, by signing this Agreement, both the Company and T are giving up any right we may have to a jury trial with respect to all claims we may have against each other, as described in Paragraph 1.

4. Required Notice of All Claims. The Company and I agree that if a dispute arises, the party who wants to pursue the dispute must give written notice of any claim to the other party. Written notice to the Company or its officers, employees or agents, shall be sent to: The Legal Department, 3660 Wilshire Blvd, Suite PH-A, Los Angeles, CA 90010. I will be given notice at the last address recorded in my personnel file (unless 1 send written notice to the Company notifying it of the need to use a different address). The written notice must describe the nature of all claims asserted and must detail the facts upon which the claims are based. The written notice must be sent to the other party by federal express (or another similar overnight mail service provider) or by certified or registered mail, return receipt requested.

5. Arbitration Procedures. The Company and I agree that, except as provided in this Agreement, any arbitration shall be governed by the Federal Arbitration Act (9 U.S.C. §1 et. seq.) and held in accordance with and under the auspices and rules of the Judicial Arbitration and Mediation Services, Inc. (“JAMS”) for the resolution of employment disputes. …

6. Arbitration Fees and Costs. I will be required to pay an arbitration fee to initiate any arbitration equal to what I would be charged as a court filing fee for a first appearance fee. Where I am asserting a claim under a state or federal statute prohibiting discrimination in employment, a public policy claim arising under a statute, or whereas otherwise required by applicable law to achieve the enforceability of this Agreement, the Company shall pay the remaining fees and administrative costs charged by the arbitrator and JAMS (or other mutually selected alternative dispute resolution service) to the extent such costs would not otherwise be incurred in a court proceeding. In all other circumstances, the Company and I agree to split equally the fees and administrative costs charged by the arbitrator and JAMS (or other mutually selected alternative dispute resolution service). Both the Company and I will pay our own costs and attorneys’ fees, if any. If, however, any party prevails on a statutory claim that affords the prevailing party attorneys’ fees, the arbitrator may award attorneys’ fees to the prevailing party, consistent with applicable law. If it is established, to the satisfaction of the arbitrator, or the Company agrees that I require a translator during my deposition or while I am testifying at the arbitration hearing itself, the Company agrees to pay the reasonable costs of a translator for me (which costs shall be approved by the Company in advance), for my deposition and during the time I am testifying at the arbitration hearing itself only.

I acknowledge that I have carefully read this Agreement and that I understand its terms. I acknowledge that, except as otherwise provided herein, I am waiving my right to have any claim adjudicated or settled by a court or jury.

I further acknowledge that I have been given the opportunity to discuss this Agreement with my private, legal counsel and have taken advantage of that opportunity to the extent I wanted to do so.

“[D]efendants may meet their 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; see also Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541 [“The party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent's signature.”].) Accordingly, Defendants have met their initial burden by attaching an arbitration agreement purportedly bearing Plaintiff’s signature.

In opposition, Plaintiff does not dispute that Plaintiff signed the Arbitration Agreement but rather contends that (1) the nonsignatory defendants cannot enforce the Arbitration Agreement, and (2) the Arbitration Agreement is unconscionable.

“A party seeking to enforce an arbitration agreement has the burden of showing FAA preemption.” (Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, 684.) California law provides that parties may expressly designate that any arbitration proceeding should move forward under the FAA's procedural provisions rather than under state procedural law.^{^[2]} (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal. 4th 376, 394). Otherwise, the FAA provides for enforcement of arbitration provisions in any “‘contract evidencing a transaction involving commerce.’ (9 USC § 2.)” (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 277.) Accordingly, “[t]he party asserting the FAA bears the burden to show it applies by presenting evidence establishing the contract with the arbitration provision has a substantial relationship to interstate commerce[.]” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 234, [italics added].) Moreover, as noted above, the California contract law applies to the validity of the arbitration agreement. (Winter, supra, 166 Cal.App.4th at p. 947.)

Here, the Arbitration Agreement specifically invokes the FAA. Specifically, the agreement states that “any arbitration shall be governed by the Federal Arbitration Act (9 U.S.C. §1 et. seq.) …” (Lee Decl., Exh. C.) Moreover, the agreement evidences a transaction involving interstate commerce as Hanmi Bank provides banking series in “nine states including California, Colorado, Georgia, Illinois, New Jersey, New York, Texas, Virginia, and Washington.” (Lee Decl. ¶ 6.)

The instant action includes various claims for discrimination, harassment, retaliation, and wrongful termination. Thus, all of Plaintiff’s claims arise from Plaintiff’s employment with Defendant Hanmi Bank and are expressly covered by the arbitration agreement. Accordingly, Plaintiff’s claims are within the scope of the arbitration agreements.

Though defendants Ron Santarosa and Patrick Carr are nonsignatories to the Arbitration Agreement, they are entitled to invoke the Arbitration Agreement.

“It is well established that a non-signatory beneficiary of an arbitration clause is entitled to require arbitration.” (Harris v. Superior Court (1986) 188 Cal.App.3d 475, 478.) “[A] third party — that is, an individual or entity that is not a party to a contract — may bring a breach of contract action against a party to a contract only if the third party establishes not only (1) that it is likely to benefit from the contract, but also (2) that a motivating purpose of the contracting parties is to provide a benefit to the third party, and further (3) that permitting the third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.” (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 821.)

“A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” (Civ. Code, § 1559.) “The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract. [Citation.] If the terms of the contract necessarily require the promisor to confer a benefit on a third person, then the contract, and hence the parties thereto, contemplate a benefit to the third person. The parties are presumed to intend the consequences of a performance of the contract.” (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1022.)

“[T]he third person need not be named or identified individually to be an express beneficiary.” (Id. at p.1023.) “‘A third party may enforce a contract where he shows that he is a member of a class of persons for whose benefit it was made.’” (Ronay Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 838-839.)

Here, the arbitration agreement expressly provides that, “the Company and I mutually consent to the resolution by arbitration of all claims or causes of action that the Company may have against me or that I may have against the Company or the Company’s agents, owners, shareholders, current and former officers and directors, current and former employees, subsidiary and affiliated entities, all benefit plans, the benefit plans’ sponsors, fiduciaries, administrators, affiliates, and all successors and assigns of any of them.” (Lee Decl., Exh. 6, [italics added].) The complaint concedes that Defendants Ron Santarosa and Patrick Carr are management employees of Defendant Hanmi Bank. (Complaint ¶¶ 4-5.) Thus, Ron Santarosa and Patrick Carr are express third party beneficiaries of the arbitration agreement.

Moreover, the complaint alleges that each of the Defendants were acting as an agent of each other when the alleged misconduct occurred. (Complaint ¶ 9.) (See 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1199–1200 [finding that in an action concerning a former employee’s claims against the employer and various employees for sexual harassment in the workplace, that while the employee defendants were not parties to the contract, they were entitled to the benefit of the arbitration agreement if, as the complaint alleged, they were acting as agents for the employer at the time of the alleged wrongful conduct.]; See also Jenks v. DLA Piper Rudnick Gray Cary US LLP (2015) 243 Cal.App.4th 1, 10 [finding that under both federal and California decisional authority, 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.].)

As stated in Thomas v. Westlake (2012) 204 Cal.App.4th 605, a plaintiff's allegations of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement. (Thomas, supra, 204 Cal.App.4th at pp.614-615.) By having alleged that all defendants acted as agents of one another, Plaintiff is bound by the legal consequences of their allegations because it would be unfair to the defendants to allow Plaintiff to invoke agency principles when it is to their advantage to do so but to disavow those same principles when it is not. (Id. at pp.614-615.)

“Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

“California courts analyze unconscionability as having a procedural and a substantive element.” (Kinney v. United Healthcare Services, Inc. (1999) 70 Cal.App.4th 1329.) “[B]oth elements must be present before a contract or contract provision is rendered unenforceable on grounds of unconscionability.” (Id.) The doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Ibid.) Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114.) “Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves. [Citations.] In other words, the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.) “The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 247.)

“Procedural unconscionability concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. It focuses on factors of oppression and surprise.” (Id.) “Surprise differs from oppression. Surprise is when a prolix printed form conceals the arbitration provision. [Citation.] Oppression, on the other hand, occurs when there is a lack of negotiation and meaningful choice. [Citation.] The presence of surprise or oppression requires higher scrutiny of the contract.” (Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5th 485, 493.)

Plaintiff contends that the arbitration agreement is procedurally unconscionable because it was contract of adhesion.

“Adhesion contracts are form contracts a party with superior bargaining power offers on a take-it-or-leave-it basis.” (Torrecillas, supra, 52 Cal.App.5th at p.493.) “Whether the agreement was or was not a contract of adhesion is not the core question. Rather, from the standpoint of determining whether there was procedural unconscionability, the core issues are surprise and oppression.” (Ibid.) In the absence of “surprise or other sharp practices”, Courts do not recognize that “adhesive” arbitration agreements establish a high degree of procedural unconscionability. (Baltazar v. Forever 21 Inc. (2016) 62 Cal.4th 1237, 1246.)

Here, Plaintiff states that on his first day of work -- June 18, 2018 – he received a large stack of documents to sign by an unknown employee of Hanmi Bank. (Wilson Decl. ¶ 3.) Plaintiff claims that he wasn’t given time to review the documents or consult an attorney as he was asked to work on pressing matter for Hanmi Bank and was not able to continue his employment with Hanmi Bank until he signed the documents including the Arbitration Agreement. (Wilson Decl. ¶ 3.) Plaintiff further claims that when he expressed hesitancy in signing the Arbitration Agreement, Plaintiff was told by Lee to sign the agreement in order to work there. (Wilson Decl. ¶ 3.) Plaintiff states that Lee never explained the documents. Nor was Plaintiff told what the documents were. (Wilson Decl. ¶ 3.)

Plaintiff’s claims are belied by Lee’s unrefuted statement that she provided the Arbitration Agreement with the new hire documents in an email ten days before Plaintiff started and invited Plaintiff to ask any questions. (Lee Decl. ¶ 16, Exh. 5.) Thus, Plaintiff had ample time to review the Arbitration Agreement before starting. Moreover, the fact that the arbitration agreement may have been presented on a take it or leave it basis or that there is unequal bargaining power only establishes at most a modest degree of procedural unconscionability. (Torrecillas, supra, 52 Cal.App.5th at p.493; Baltazar v. Forever 21 Inc., supra, 62 Cal.4th at p.1246.)

In sum, the Court finds that the arbitration agreements have at most a minimal degree of procedural unconscionability. However, “a finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915.)

“Substantive unconscionability” focuses on the terms of the agreement and whether those terms are “so one-sided as to ‘shock the conscience.’” (Kinney, 70 Cal.App.4th at p.1330.) “Where a party seeks to arbitrate nonwaivable statutory civil rights in the workplace, such as the FEHA claims and wrongful termination claim that are involved here, there are five minimum requirements for the lawful arbitration of such rights pursuant to a mandatory employment arbitration agreement. Such an arbitration agreement is lawful if it “(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum. Thus, an employee who is made to use arbitration as a condition of employment ‘effectively may vindicate [his or her] statutory cause of action in the arbitral forum.’ [Citation.]” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 102.) The Court finds the arbitration agreement here satisfies all of these Armendariz factors.

Plaintiff contends that the agreement is substantively unconscionable because (1) it requires an employee to give notice prior to pursuing a claim, (2) it contains a penalty provision for filing a lawsuit, (3) it contains a PAGA waiver, (4) there was no knowing and voluntary jury trial waiver, (5) it lacks mutuality, and (6) the fee sharing provision is unconscionable.

“[A] requirement that internal grievance procedures be exhausted before proceeding to arbitration is both reasonable and laudable in an agreement containing a mutual obligation to arbitrate. It plainly does not ‘shock the conscience’ so as to vitiate the arbitration agreement.” (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 710.)

Here, the Arbitration Agreement provides in relevant part that “[t]he Company and I agree that if a dispute arises, the party who wants to pursue the dispute must give written notice of any claim to the other party.” (Lee Decl., Exh. 6.) This mutual obligation to give notice of claims is not unconscionable. Nor does Plaintiff provide any authority to support such a contention.

“[W]hen an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 110–111.)

Here, the Arbitration Agreement includes a penalty fee shifting provision that provides “[s]hould any party to this Agreement pursue any arbitrable dispute by any method other than arbitration, the responding party shall recover from the initiating party all damages, costs, expenses and attorneys’ fees incurred as a result of such action.” (Lee Decl., Exh. 6.) This agreement requires Plaintiff to bear an expense – i.e., attorneys’ fees, costs, and expenses – that Plaintiff would not have to bear if he were free to bring the action in court. Thus, this clause is substantively unconscionable.

Plaintiff contends that the arbitration agreement is unconscionable because it contains a waiver of Plaintiff’s PAGA claims.

“[T]he FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract.” (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360 abrogated on other grounds by Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906.) Moreover, a waiver to bring a claim under PAGA is against public policy and unenforceable. (Id. at p.383.)

Here, the agreement provides that Plaintiff “may only bring claims under this Agreement in my individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.” (Lee Decl., Exh. 6, [Italics Added].) Plaintiff contends that this constitutes an improper PAGA waiver. The Court disagrees. The Arbitration Agreement expressly provides in the sentence before that “claims which may not, as a matter of law, be subject to mandatory arbitration provisions are not covered by this Agreement.” (Lee Decl., Exh. 6.) As the representative portion of a PAGA claims cannot be arbitrated as a matter of law, (See e.g., Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1925), there would be no waiver.

In Torrecillas v. Fitness International, LLC, the Court of Appeal analyzed a similar clause in an arbitration agreement that expressly indicated that it did not apply “where the law specifically forbids it”:

As for the claim about the Private Attorneys General Act, Torrecillas’s argument is odd because he did not sue under that law. Nonetheless, as to claims under both laws, the 2013 agreement resolves any conflict between the laws and arbitration by excluding arbitration “where the law specifically forbids [it].” So the agreement steers clear of what, in this case, is not an issue. This does not demonstrate unconscionability.”

Applying the rationale of Torrecillas here, any waiver of the representative PAGA claim is ineffective because the extent of the law would not allow any such waiver of the representative PAGA claim. Moreover, Plaintiff has not brought any claim under PAGA.

Plaintiff contends that the Arbitration Agreement “forces Plaintiff to waive his constitutional right to a jury trial without knowingly agreeing to such waiver.” (Opp. at p.8:1-2.)

“[T]he right to pursue claims in a judicial forum is a substantial right and one not lightly to be deemed waived.” (Marsch v. Williams (1994) 23 Cal.App.4th 250, 254.) However, “arbitration agreements are distinguishable from waivers of the right to jury trial in that they represent an agreement to avoid the judicial forum altogether.” (Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, 955.)

Here, as noted above, Plaintiff has agreed to arbitrate avoiding the judicial forum all together. Moreover, the Arbitration Agreement provides in bold next to the signature line that “I am waiving my right to have any claim adjudicated or settled by a court or jury.” (Lee Decl., Exh. 6.) Thus, Plaintiff was clearly made aware that there was a waiver of jury trial.

“‘An arbitration agreement is substantively unconscionable if it requires the employee but not the employer to arbitrate claims.’ [Citations.]” (Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 114.) “Of the greatest overall significance is the fact that it imposes on the employee only a unilateral obligation to arbitrate: ‘In assessing substantive unconscionability, the paramount consideration is mutuality.’” (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1287.)

Plaintiffs contend that the agreement is not mutual because “[t]here is not a single reference to a statutory or common law claim that an employer would bring.” (Opp. at p.8:24-26.) This contention is without merit as the Arbitration Agreement clearly states that it covers “claims for breach of any contract or covenant; tort claims; … and claims for violation of any federal, state, or other law, statute, regulation or ordinance …” (Lee Decl., Exh. 6.) Breach of contract claims, tort claims, and any statutory claims clearly cover all the claims that Hanmi Bank as the employer could bring. The fact that the agreement does not spell out all of the specific statutes that may be applicable does not show a lack of mutuality.

Plaintiff further contends that the Arbitration Agreement is unconscionable because there is no reference to who or where the employer is required to send the pre-lawsuit notice. However, the Arbitration Agreement expressly provides that “[the employee] will be given notice at the last address recorded in [their] personnel file (unless [the employee] send[s] written notice to the Company notifying it of the need to use a different address).” (Lee Decl., Exh. 6.)

Plaintiff contends that the fee sharing provision is unconscionable. The Court disagrees. The Arbitration Agreement provides that:

Notably, the agreement expressly provides in discrimination cases – such as the instant action – that all costs for commencing the arbitration – beside those otherwise incurred in a court proceeding – are to be borne by Hanmi Bank. Similarly, the clause providing that the prevailing party may be awarded attorneys’ fees is limited to those attorneys’ fees “consistent with law”. Thus, there is no improper shifting of costs or fees.

The Court notes that the Arbitration Agreement includes a severability clause. “If any provision of this Agreement is found to be unenforceable, in whole or in part, such finding shall not affect the validity of the remainder of this Agreement and this Agreement shall be reformed to the greatest extent possible to ensure that the resolution of all conflicts between the parties are resolved by neutral, binding arbitration.” (Lee Decl., Exh. 6.)

“[A] court should sever an unconscionable provision unless the agreement is so ‘permeated’ by unconscionability that it cannot be cured by severance. [Citation.] ‘An arbitration agreement can be considered permeated by unconscionability if it “contains more than one unlawful provision... Such multiple defects indicate a systematic effort to impose arbitration ... not simply as an alternative to litigation, but as an inferior forum that works to the [stronger party’s] advantage.” [Citations.]’ The overarching inquiry is whether the interests of justice would be furthered by severance.” (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 183–184.) Thus, the Court has the discretion to either sever unenforceable portions of an arbitration agreement and enforce the remainder of the arbitration agreement or, in the alternative, refuse to enforce the entire agreement. (Armendariz, supra, 24 Cal.4th at p.122 [finding that pursuant to Civil Code section 1670.5(a), a trial court has the discretion as to whether to sever or restrict an unconscionable provision of an arbitration agreement or whether to refuse to enforce the entire agreement.].) Refusing to enforce the entire agreement instead of simply severing an unenforceable provision “appears to be contemplate[d] . . only when an agreement is “permeated” by unconscionability. (Ibid.)

Here, there is only a minimal showing of procedural unconscionability based on adhesion. Thus, “a ‘high’ degree of substantive unconscionability is required to find the agreement unenforceable[.]” (Davis, supra, 53 Cal.App.5th at 917.) Plaintiff has failed to demonstrate the required high degree of substantive unconscionability.

Plaintiff has failed to put forth evidence establishing that the Arbitration Agreement was “permeated” by unconscionability. Moreover, the Court has found only one clause to be substantively unconscionable – the clause “8. Violation of this Agreement. Should any party to this Agreement pursue any arbitrable dispute by any method other than arbitration, the responding party shall recover from the initiating party all damages, costs, expenses and attorneys’ fees incurred as a result of such action.” (Lee Decl., Exh. 6.)

Based on the foregoing, Defendants Hanmi Bank, Ron Santarosa, and Patrick Carr’s motion to compel arbitration is GRANTED.

The clause “8. Violation of this Agreement. Should any party to this Agreement pursue any arbitrable dispute by any method other than arbitration, the responding party shall recover from the initiating party all damages, costs, expenses and attorneys’ fees incurred as a result of such action” is severed from the Arbitration Agreement.

This case is stayed in its entirety for all purposes pending arbitration pursuant to Code of Civil Procedure section 1281.4. A status conference regarding the progress of arbitration and the stay is set for May 4, 2023 at 8:30 am.

[1] On August 23, 2022, Plaintiff dismissed Ashley Sowa without prejudice.

[2] “But the parties may ‘expressly designate that any arbitration proceeding [may] move forward under the FAA's procedural provisions rather than under state procedural law.’ [Citation.] Absent such an express designation, however, the FAA’s procedural provisions do not apply in state court.” (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 174; see also Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122.)

Superior Court of California

County of Los Angeles

Department 26