Judge Elaine W. Mandel, Case Number: 23SMCV01332, Date: 2023-10-05 Tentative Ruling

Judge: Elaine W. Mandel, Case: 23SMCV01332, Date: 2023-10-05 Tentative Ruling

Case Number: 23SMCV01332 Hearing Date: October 5, 2023 Dept: P

Tentative Ruling

Poulton v. Network Capital Funding, Case No. 23SMCV01332

Hearing Date October 5, 2023

Defendant Network Capital Funding’s Petition to Compel Arbitration

Plaintiff Poulton alleges constructive termination by defendant Network Capital Funding in retaliation for complaints about working conditions, illegal practices and deceptive recruitment techniques. Defendant moves to compel arbitration, based on an arbitration agreement covering all disputes arising out of employment with NCFC.

There is a liberal federal policy favoring arbitration, requiring arbitration agreements to be put on equal footing with other contracts and requiring courts to resolve any doubts as to whether a dispute falls within an arbitration provision in favor of arbitration. AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. 333, 339; AT&T Tech., Inc. v. Comm Workers of Am. (1986) 475 U.S. 643, 650. A similar policy has been expressed by California courts. Hayes Children Leasing Co. v. NCR Corp. (1995) 37 Cal.App.4th 775, 788.

An arbitration agreement is substantively unconscionable if it unduly favors the side with greater bargaining power. Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 249. Procedural unconscionability exists when there are elements of surprise or oppression in the formation of the contract due to unequal bargaining power. Magno v. The Coll. Network, Inc. (2016) 1 Cal.App.5th 277, 284-287. A contract of adhesion – a standardized agreement drafted by the party with superior bargaining strength and granting the subscribing party no opportunity to negotiate its terms – is not per se unconscionable, but is subject to heightened scrutiny for one-sided terms or elements of surprise in its formation. Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1469-1470. Absent other elements of unconscionability, an arbitration agreement imposed as a condition of employment is enforceable. Serafin v. Balco Properties, Ltd., LLC (2015) 235 Cal.App.4th 165, 179.

Plaintiff signed an arbitration agreement and voluntary dispute resolution policy. Exhs. A and B. Both contain arbitration clauses. Plaintiff argues she was required to sign them to begin employment with NCFC. Poulton decl. ¶16. Though the agreements were contracts of adhesion, per Peng and Serafin, this fact alone does not render them unenforceable.

Plaintiff does not identify other meaningful indicia of unconscionability. The motion lists nine factors alleged to demonstrate procedural unconscionability, but seven essentially argue the contract was adhesive. The other two– the recruiter’s failure to explain the contents of the contract and failure to provide a copy of the contract– do not suggest unconscionability. There is no allegation the recruiter prevented plaintiff from reading the documents or asking questions about their contents or that she concealed their meaning or import from plaintiff. Plaintiff fails to show procedural unconscionability.

Plaintiff also argues the agreement is substantively unconscionable. It requires claims against “parent, subsidiary, or client entities” of NCFC’s “owners, directors, officers, managers, agents, contractors, attorneys, benefit plan administrators, and insurers,” to be arbitrated, requiring plaintiff to give up a broad swath of potential claims against unidentified third parties. Second, the agreement requires Poulton to arbitrate all claims against these third parties, not just employment-related claims. Id. Finally, Poulton argues the contract is one-sided, as it does not compel NCFC to waive claims against unidentified third parties.

These arguments mischaracterize the terms of the agreements. The dispute resolution agreement is bilateral, applying to both “[Poulton] and Network Capital Funding Corporation.” Baumann decl., Exhibit A ¶1. The agreement applies only to “claims that might arise out of or be related in any way to [Poulton’s] employment by the company,” not any other category of claim. Id., emphasis added. Further, absent one-sidedness, overbreadth alone is not a valid basis for declaring a contract unconscionable. The agreement is bilateral, and not substantively unconscionable.

GRANTED. The matter is referred to arbitration, and this action is stayed. The court will set a status conference regarding the status of arbitration out six to nine months.