Judge: Frank M. Tavelman, Case: 21BBCV00927, Date: 2024-03-15 Tentative Ruling

REQUESTING ORAL ARGUMENT PER CRC 3.1308

The Court will attempt to post all Tentative Rulings at least the day prior to the hearing by 3:00 p.m.; however, the Court does not post Tentative Rulings for all matters.  

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Court will indicate in the Tentative Ruling whether the Court is requesting oral argument.  For cases where the Court is not requesting argument, then pursuant to
California Rules of Court, Rule 3.1308(a)(1) notice of intent to appear is
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argument will be permitted unless a “party notifies all other parties and the
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to appear and argue.  The tentative ruling will become the ruling of the
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Notice
may be given either by email at BurDeptA@LACourt.org or by telephone at (818)
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Notice of the ruling must be served as indicated in the tentative.  Remote appearances are permitted for all law and motion unless otherwise indicated by the Court.  

Case Number: 21BBCV00927    Hearing Date: March 22, 2024    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

MOTION TO COMPEL ARBITRATION & STAY ACTION

NOTICE:

The Court is not requesting oral argument on this matter.  Pursuant to California Rules of Court, Rule 3.1308(a)(1) notice of intent to appear is required.  Unless the Court directs argument in the Tentative Ruling, no argument will be permitted unless a “party notifies all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no notice of intent to appear is received.”  

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

ALLEGATIONS: 

Roberto Chaidez, on behalf of the State of California and other aggrieved persons (Plaintiff), brings this action under the Private Attorney General Act (PAGA) against Pitfire Artisan Pizza & Deluxe Foods, LLC (Defendants). Plaintiff alleges that he and other employees of Defendants were subject to several violations of the California Labor Code.

Defendants now move to compel Plaintiff’s individual PAGA claims to arbitration. Plaintiff opposes arguing that Defendants have waived their right to compel arbitration. In the alternative, Plaintiff argues that the agreement cannot be compelled to arbitration because it is unconscionable.

ANALYSIS: 

I.                    LEGAL STANDARD 

Motion to Compel

C.C.P. § 1281.2 states: “[o]n 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 arbitrate the controversy exists.”

A party seeking to compel arbitration has the initial burden to prove, by a preponderance of the evidence, the existence of a valid and enforceable arbitration agreement. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) If the moving party has met its initial burden, then the burden shifts to respondents to prove the falsity or unenforceability of the arbitration agreement. (Id.) 

Stay

Once arbitration has been compelled, in whole or in part, a stay of proceedings is mandatory if the issues in the arbitration and the pending action overlap. (C.C.P. § 1281.4 (if a court “has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.”)) 

“The purpose of the statutory stay [under section 1281.4] is to protect the jurisdiction of the arbitrator by preserving the status quo until arbitration is resolved. In the absence of a stay, the continuation of the proceedings in the trial court disrupts the arbitration proceedings and can render them ineffective.” (Federal Ins. Co. v. Superior Court (1998) 60 Cal.App.4th 1370, 1374-1375 [citations omitted].) 

II.                 MERITS

Request for Judicial Notice

Defendants request judicial notice of several filings with this Court throughout the course of this litigation. Defendants state the Court may take notice of these filings as proceedings under Evid. Code § 452.

Defendants request judicial notice of these documents for the purpose of proving they did not waive their right to arbitrate and have asserted it throughout litigation. These filings are unnecessary for the Court’s determination of the waiver matter. Further Defendant does not provide a copy of the material, as they are required to do by California Rules of Court. (California Rules of Court, Rule 5.115 [“A party requesting judicial notice of material under Evidence Code section 452 or 453 must provide the court and each party with a copy of the material.”].) Accordingly, Defendants request is DECLINED.

Objections

Plaintiff objects to the declaration of Jaime Boalbey (submitted with the motion in its entirety), on grounds of lack of foundation and lack of firsthand knowledge. Plaintiff also objects to the portions of the declaration which attest that Defendants’ arbitration agreement is voluntary on the same grounds. As Vice President of Human Resources for Defendants, Boalbey is appropriately positioned to testify as to the forms used by Defendants in hiring individuals. Whether signing the arbitration provision is a condition for employment is a matter which would logically be within her knowledge. Accordingly, Plaintiff’s objections are OVERRULED.

The Agreement

Neither party disputes that an arbitration agreement exists in the agreements between the parties; however, Plaintiff believes it is not enforceable. Plaintiff executed an Alternative Dispute Resolution Agreement (the Agreement) on December 27, 2019. (Mot. Exh. 1.)

Waiver

Defendants argue that they have not waived arbitration because they were precluded from compelling arbitration of individual PAGA claims under California law. Defendants argue that after the United States Supreme Court decision in Viking River Cruises, Inc. v. Moriana, they now have a valid right to compel arbitration. The Court agrees that no waiver has occurred here.

Under the Federal Arbitration Act, a party waives its right to compel arbitration if it (1) knows of an existing right to arbitration and (2) acts inconsistently with that right. (See Morgan v. Sundance (2022) 142 S.Ct. 1708, 1714.)

Prior to the ruling in Viking River, there was no “individual component to a PAGA action, because “every PAGA action is a representative action on behalf of the state.” (Kim v. Reins Int’l California, Inc. (2020) 9 Cal. 5th 73, 87, quoting Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal. 4th 348, 387). As a result, various courts have held that employers may not require employees to “split” PAGA actions in a manner that puts individual and non-individual components of a PAGA claim into bifurcated proceedings. (See, e.g., Perez v. U-Haul Co. of California (2016) 3 Cal.App.5th 408, 420-421; Williams v. Superior Court (2015) 237 Cal.App.4th 642, 649; Reyes v. Macy’s Inc. (2011) 202 Cal.App.4th 1119, 1123-1124.)

Viking River determined that “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Viking River Cruises, Inc. v. Moriana (2022) 142 S. Ct. 1906, 1924.) Thus, the arbitration of a plaintiff’s individual claims in a PAGA action is now permitted.

Prior to the decision in Viking River, the relief Defendants now seek was barred by controlling precedent of the California Supreme Court. (See Iskanian supra, 59 Cal.4th 348.) In short, there was no existing right to arbitration for Defendants to knowingly waive.

Unconscionability

Agreements to arbitrate will not be enforced if they are unconscionable. Unconscionability has two components: procedural and substantive. (Little v. Auto Stigler, Inc. (2003) 29 Cal.4th 1064, 1071.) Both procedural and substantive unconscionability must be present to avoid arbitration but need not be present to the same degree. (Armendariz v. Foundation Health Psychcare Services (2002) 24 Cal.4th 83, 115.)

Though both types of unconscionability must be present, they do not need to be present in equal amounts. The Supreme Court of California expressed that procedural and substantive unconscionability work as a sliding scale, so "the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa." (Armendariz supra, 24 Cal.4th at 114.)

Procedural Unconscionability

Plaintiff first argues that the Agreement is procedurally unconscionable because it is a contract of adhesion. The Court disagrees with this categorization.

Procedural unconscionability focuses on the oppression or surprise due to unequal bargaining power between the parties generally demonstrated by a contract of adhesion which is “imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1280-1281 [internal quotations omitted].)

Here, Defendants have demonstrated that the Agreement was not one of adhesion because it was not presented as a condition of Plaintiff’s employment. Defendants provide the declaration of Boalbey in support. Boalbey declares that the arbitration program included in the Agreement is voluntary and that signature on the arbitration agreement is not a condition of employment. (Boalbey Decl. ¶ 7.) Plaintiff’s argument that the papers were not explained to him may speak to procedural unconscionability, but he does not go so far as to declare that his employment was contingent on his signing the Agreement or that he even requested the provision to be explained to him. Plaintiff presents no evidence that the Agreement was required for his employment. The Court finds the contract is not one of adhesion.

Plaintiff also argues that the Agreement was unconscionable as the result of not being presented in Spanish. Plaintiff declares that he is a native Spanish speaker, and his understanding of English is extremely limited. (Chaidez Decl. ¶ 6.) As noted by Plaintiff, courts have found procedural unconscionability to result where an agreement was not presented to the signee in a language they could read. In Nunez v. Cycad Management LLC, the California Court of Appeal for the Second district found that an employer’s failure to present an arbitration agreement in Spanish, when the employer knew he did not understand English, amounted to a showing of oppression. (Nunez v. Cycad Management LLC (2022) 77 Cal.App.5th 276, 284.) However, the same district in Caballero v. Premier Care Simi Valley LLC previously held that “Generally, a party may not avoid enforcement of an arbitration provision because the party has limited proficiency in the English language. If a party does not speak or understand English sufficiently to comprehend a contract in English, the Court of Appeal opined that it is incumbent upon the party to have it read or explained to him or her.” (Caballero v. Premier Care Simi Valley LLC (2021) 69 Cal.App.5th 512, 518-519.)

The discrepancy between the rulings in Caballero and Nunez need not be resolved to adjudicate this motion. Defendant has provided evidence which rebuts Plaintiff’s declaration. In Boalbey’s supplemental declaration, she states that was the one to interview Plaintiff for his position of cook, and she conducted this interview in English experiencing no communication issues. (Boalbey Supp. Decl. ¶ 3.) Boalbey also states that Plaintiff informed her he had prior management experience and a desire to grow with the company. (Id.) Further, Boalbey attests that it is company policy to provide ample time to complete the onboarding process, and that their policy is to provide a Spanish translator to those employees who request it. (Boalbey Supp. Decl. ¶¶ 4-5.) The Court notes that Plaintiff’s declaration is silent as to the time he was provided to review and sign the documents, only that he was not allowed to take them home. (Chaidez Decl. ¶ 9.) Further, Plaintiff makes no representation that he voiced concerns about being unable to read the paperwork.

In light of Defendant’s declarations, the Court finds that the failure to provide a Spanish language translation was not indicative of oppression or surprise. Given Plaintiff’s performance in the interview with Boalbey, Defendants had no reason to believe that Plaintiff lacked an understanding of English sufficient to review the documents and raise any concerns. Further, to the extent that Defendants were mistaken as to Plaintiff’s language proficiency, Plaintiff never raised concerns to them along these lines. In light of the foregoing, the Court finds no procedural unconscionability results.

Lastly, Plaintiff argues there is additional procedural unconscionability because Defendant did not provide a copy of the JAMS rules with the proposed arbitration agreement. The Court of Appeal in Cisneros Alvarez stated, "the failure to provide a copy of the arbitration rules generally raises procedural unconscionability concerns only if there is a substantively unconscionable provision in the omitted rules." (Cisneros Alvarez v. Altamed Health Services Corporation (2021) 60 Cal.App.5th 572, 590.) While the Cisneros Alvarez decision concerned the American Arbitration Association rules, rather than JAMS, the difference is not determinative of the holding. Here, Plaintiff does not argue that any of the provisions of the JAMS rules are unconscionable, nor did he argue why the link to those rules were insufficient.   In modern times here in California, internet connection via cell phones or free Wi-Fi is ubiquitous.   There is no added procedural unconscionability for failure to provide the JAMS rules to Plaintiff with the Agreement, especially when the link to those rules were provided to the Plaintiff.   The failure to provide a hyper-link that would have taken the Plaintiff to the rules via an electronic device is of little consequence to support a claim for unconscionability.

As a finding of both procedural and substantive unconscionability is required to prevent enforcement, the Court finds that there was no procedural unconscionability and as such the motion to compel arbitration is GRANTED.

Substantive Unconscionability

Although the Court has already determined no procedural unsociability exists, the Court will still engage in an analysis regarding substantive unconscionability.   

Plaintiff first argues that the Agreement is substantively unconscionable because the Agreement renders the arbitration process inaccessible.

Plaintiff cites to OTO, L.L.C. v. Kho. In OTO the California Supreme Court held that the arbitration process of an employer was substantively unconscionable because it made the arbitration process virtually inaccessible to employees. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 131.) The OTO court found that the process was confusing and the agreement in question did not provide instructions on how to initiate the arbitral process. (Id.) Nor did the OTO agreement contain an explanation of where arbitration rules could be found. (Id.) Plaintiff states that the Agreement here is much the same, in that it provides no information to the signee as to how to initiate the arbitration process.

The Court finds this situation distinguishable from OTO. First, the procedure in the OTO court was non-standard arbitral process created by the employer. (Id. at 119.) The Court contrasted the complex process in OTO with the relatively simple Berman Process, which provided easier access to employees. (Id. at 131.) Where the Berman process consisted of standardized rules, the employer’s process was completely silent as to how to initiate an arbitration, file a claim, or how to contact an arbitrator. (Id.) Here, the Agreement provides that the JAMS rules will govern the conduct of arbitration. The Agreement provides a link to the current JAMS rules. (See Mot. Exh. 1, p. 6.) Plaintiff argues that because the Agreement was provided in paper, the link is useless as a tool to inform employees about the arbitral process. The Court finds this argument speaks more to procedural unconscionability than substantive. Substantive unconscionability is concerned with the content of an agreement, not the circumstances in which it is presented. The Agreement provides that disputes are submitted before a single and neutral arbitrator from a JAMS panel and using the JAMS procedural rules for the resolution of employment disputes. Unlike in OTO, there is no cryptic process or obfuscation of the rules that apply to arbitration under this Agreement. The Agreement establishes that a widely known arbitral body with standardized rules governs the agreement and directs employees to their website. The Court does not find this to be indicative of substantive unconscionability.

Lastly, Plaintiff argues that the Agreement is substantively unconscionable because it seeks to compel arbitration of claims which only apply to employees. Plaintiff cites to the relatively recent Appellate decision in Hasty v. American Automobile Assn. etc. In Hasty the California Court of Appeal for the Third District held that a provision which precluded class/representative actions was substantively unconscionable. (Hasty v. American Automobile Assn. etc. (2023) 98 Cal.App.5th 1041, 1063.) The court reasoned that because employees were the only parties likely to bring a representative/class action, the inclusion of this waiver was unilateral to an unconscionable degree. (Id.)

The Court notes that Hasty did not hold the preclusion of representative/class actions to be sufficient to show substantive unconscionability on its own. The Hasty court has already found its agreement to be substantively unconscionable by virtue of a unilateral confidentiality clause. (Id. at 1060.) The Hasty court also found a significant degree of procedural unconscionability by virtue of the agreement appearing in an adhesion contract and the hiding of the arbitration provision with the use of small type face and dense conditions. (Id. at 1057.)

Here, the Court must reconcile the holding in Hasty with the realities of this case. The provision waiving representative/class actions is clearly one-sided, as Defendants would likely never seek to bring this kind of action against an employee. However, the Agreement concerns a great deal of disputes which would apply to both parties including non-payment of wages, discrimination, and wrongful termination. “Arbitration agreements that primarily require arbitration of the type of claims only employees bring against employers are substantively unconscionable as being “one-sided and harsh.” (Navas v. Fresh Venture Foods, LLC (2022) 85 Cal.App.5th 626, 636 [emphasis added].) The Court does not find the Agreement is intended primarily to require arbitration of representative/class actions. While the provision renders the Agreement somewhat unconscionable, it is not to a high degree.

Conclusion & Stay

The Court finds that Defendants have not waived their right to arbitration, as they were required to wait for the decision in Viking River. While Plaintiff has demonstrated a modicum of procedural unconscionability, he has not demonstrated substantial substantive unconscionability so as to render the Agreement unenforceable. Accordingly, the motion to compel arbitration is GRANTED.

As concerns Defendants’ requested stay, the Court find staying the nonindividual PAGA claims until the arbitration is completed is the approach supported in the California Supreme Court's recent decision in Adolph v. Uber Technologies, Inc. (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1123-24 ["First, the trial court may exercise its discretion to stay the non-individual claims pending the outcome of the arbitration pursuant to section 1281.4 of the Code of Civil Procedure…Uber makes no convincing argument why this manner of proceeding would be impractical or would require relitigating Adolph's status as an aggrieved employee in the context of his non-individual claims, and we see no basis for Uber's concern."].)

Further, allowing the claims to proceed in tandem is less efficient given Plaintiff may ultimately be found to lack PAGA standing. (See Rocha v. U-Haul Co. of California (2023) 88 Cal.App.5th 65, 77-78 ["[A]n adjudication that determines that a violation has not occurred, like the arbitrator's finding regarding U-Haul's alleged violations in this case, does not merely address injury or redress, but finally determines 'the fact of the violation itself-precisely the situation the California Supreme Court noted was not present in Kim. Once the Labor Code violations based on which a plaintiff seeks to qualify for PAGA standing have been finally adjudicated, the extent to which that adjudication prevents a plaintiff from qualifying for standing will depend on general principles of issue preclusion."].) Such a finding of lack of standing would entirely waste any efforts and resources spent on litigating Plaintiff's representative claims if the claims proceeded concurrently.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

Pitfire Artisan Pizza & Deluxe Foods, LLC’s Petition to Enforce Arbitration came on regularly for hearing on March 22, 2024, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

THE MOTION TO COMPEL ARBITRATION OF PLAINTIFF’S INDIVIDUAL PAGA CLAIMS IS GRANTED.

THE ACTION IS STAYED WITH RESPECT TO PLAINTIFF’S REPRESENTATIVE PAGA CLAIMS UNTIL THE ARBITRATION IS RESOLVED.

THE COURT SETS AN OSC RE: ARBITRATION FOR OCTOBER 10, 2024 AT 9:00 A.M.

UNLESS ALL PARTIES WAIVE NOTICE, DEFENDANTS TO GIVE NOTICE.

IT IS SO ORDERED. 

DATE:  March 22, 2024                            _______________________________ 

                                                                        F.M. TAVELMAN, Judge 

Superior Court of California 

County of Los Angeles