Judge: Gary Y. Tanaka, Case: 20TRCV00424, Date: 2023-01-10 Tentative Ruling

Case Number: 20TRCV00424    Hearing Date: January 10, 2023    Dept: B

LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT

 

 

Honorable Gary Y. Tanaka                                                             Tuesday, January 10, 2023

Department B                                                                                                     Calendar No. 4

 

 

 

PROCEEDINGS

 

Agustin Gutierrez v. Panera, LLC, et al.

          20TRCV00424

1.      Panera, LLC, et al.’s Motion to Compel Arbitration and to Dismiss PAGA Claim

 

TENTATIVE RULING

 

          Panera, LLC, et al.’s Motion to Compel Arbitration and to Dismiss PAGA Claim is granted.  

 

Background

         

          Plaintiff filed the Complaint on June 15, 2020.  Plaintiff’s First Amended Complaint was filed on August 19, 2020.  Plaintiff alleges the following facts.  Plaintiff is a former employee of Defendants. Defendants failed to provide proper break and rest periods. Defendants failed to compensate Plaintiff at the required rate for all the hours worked. Defendants failed to accommodate Plaintiff’s disability.  Plaintiff was wrongfully terminated when he had to take care of his sick wife.  Plaintiff alleges the following causes of action: 1. Unpaid missed rest breaks and untimely meal breaks (Labor Code Section 226.7 and IWC Wage Order No. 10-2001, 5- 2001 section 11, 12); 2. Failure to pay for all overtime worked (Labor Code Sections 510 and 1194); 3. Failure to pay minimum wage and pay for all wages earned (Labor Code Section 204, 1194 and 1197); 4. Failure to maintain accurate payroll records (Labor Code Sections 226 and 1174); 5. Failure to pay wages upon separation (Labor Code Sections 201 – 203) 6. Unlawful Discrimination Based on Cal. Gov. Code § 12940; 7. Wrongful Termination in Violation of Public Policy; 8. Wrongful Termination-Retaliatory Termination [Govt. Code § 12940(h)]; 9. California Government Code § 12940 (m) – Wrongful Termination Failure to Accommodate; 10. Violation of California Government Code § 12940 (n) – Wrongful Termination Failure to Engage in the Interactive Process; 11. Failure to pay for sick days (Lab Code §246(a)); 12. Violation of California (Violation of Labor Code §233 – Wrongful Termination; 13. Violation of California Business and Professions Code §17200, et seq.; 14. Civil Penalties Pursuant to Labor Code section 2699, et seq. (PAGA penalties).

 

          Request for Judicial Notice

 

          Defendants’ request for judicial notice is granted pursuant to Evidence Code Section 452(h).

 

          Motion to Compel Arbitration

 

          “California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes.  [Citation.]  To further that policy, [Code of Civil Procedure] section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies.  [Citation.]  Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.  (§ 1281.2, subds. (a)–(c).)”  Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967.

 

“The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.  In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.”  Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.

 

“The party opposing arbitration has the burden of demonstrating that an arbitration clause cannot be interpreted to require arbitration of the dispute.  Nonetheless, this policy does not override ordinary principles of contract interpretation.  [T]he contractual terms themselves must be carefully examined before the parties to the contract can be ordered to arbitration: Although [t]he law favors contracts for arbitration of disputes between parties, there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate.”  Rice v. Downs (2016) 247 Cal.App.4th 1213, 1223 (internal citations and quotations omitted).

 

In Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1286, the Court of Appeal found that “a nonsignatory sued as an agent of a signatory may enforce an arbitration agreement.”  Id. at 1286.  In addition, “a nonsignatory who is the agent of a signatory can even be compelled to arbitrate claims against his will.”  Id. at 1285, citing Harris v. Superior Court (1986) 188 Cal.App.3d 475, 477–78.  Further, “in many cases, nonparties to arbitration agreements are allowed to enforce those agreements where there is sufficient identity of parties.”  Valley Casework, Inc. v. Comfort Construction, Inc. (1999) 76 Cal.App.4th 1013, 1021.  This includes nonparties as agents of a party as well as “a third party beneficiary of an arbitration agreement.”  Ibid. 

 

Defendants move for an order to compel Plaintiff’s claims to arbitration.  Alternatively, Defendants move for an order to compel Plaintiff’s individual PAGA claim to arbitration and a dismissal of Plaintiff’s representative PAGA claims.  The motion is made pursuant to Code of Civil Procedure § 1281 et seq. and the FAA, on the ground that Plaintiff is bound by a written agreement to arbitrate the subject matter of the Complaint.  Defendants argue that a valid arbitration agreement exists between the parties that requires arbitration of the claims, including the individual PAGA action, and that binding authority now compels dismissal of Plaintiff’s representative PAGA claims. Defendants contend that the parties have already stipulated to arbitrate all claims other than the PAGA action.

 

Code Civ. Proc., § 1281.2 states, in relevant part: “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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[. . .]” “Generally, an arbitration agreement must be memorialized in writing. A party's acceptance of an agreement to arbitrate may be express, as where a party signs the agreement. A signed agreement is not necessary, however, and a party's acceptance may be implied in fact or be effectuated by delegated consent. An arbitration clause within a contract may be binding on a party even if the party never actually read the clause.” Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (internal citations omitted).

 

Defendants established the existence of a valid arbitration agreement between Plaintiff and Defendants.  (Decl., Meghan Atilano, ¶¶ 4-11, Exs. A, B.)  The Arbitration Agreement requires that “[a]ny claim, dispute or controversy . . . arising out of or relating to the employment relationship between the parties shall be resolved by one neutral arbitrator through binding arbitration . . .”  (Id. at Ex. A, p. 3, ¶ 4.3.)  The agreement also contains a representative waiver provision providing that: “Any claim must be brought in the Employee's individual capacity . . . and not as a plaintiff for class member in any purported class, collective, representative, multiple plaintiff or similar proceeding (“Class Action”). The parties expressly waive any ability to maintain any Class Action in any forum.  The arbitrator shall not have the authority to combine or aggregate similar claims or conduct any Class Action nor make an award to any person or entity not a party to the arbitration.”  (Id., Ex. A, p. 3 ¶ 4.4 (“Class Action Waiver”).)  The Class Action waiver is expressly defined to preclude any “representative” action, such as this case.  Defendants argue that the agreement was signed on October 29, 2018.  In addition, Defendants established Plaintiff’s refusal to arbitrate.  (Decl., Adam C. Hackett, ¶ 5.)

 

Plaintiff first argues that no valid arbitration agreement exists between the parties.  Plaintiff contends that Defendant’s evidence does not support the existence of an arbitration agreement. Plaintiff states that Defendant’s evidence lacks foundation.  Plaintiff also refutes the making of the arbitration agreement by stating that he cannot recall making the agreement. In addition, Plaintiff also states that the arbitration agreement is dated January 2016 and he did not work for Defendants prior to October 2018.  (Decl., Gutierrez, 1-4.)  Some of these arguments also relate to Plaintiff’s unconscionability argument which will be addressed in greater detail below.

 

The Court finds that Defendant’s evidence is competent to demonstrate the existence of an arbitration agreement between the parties.  Defendant provided competent evidence to show that Plaintiff signed the arbitration agreement.  Defendant provided proper foundation for the existence of the agreement and the facts evidencing Plaintiff’s signing of the agreement. (Supplemental Decl., Atilano, dated Oct. 20, 2022, ¶¶ 1-10.)  Declarant also clarifies that the 2016 date is the date that the agreement was created for use by Manna and not the date that the agreement was signed. (Id. at ¶ 11.)  Plaintiff’s self-serving statement that he, now, after being confronted with this motion, cannot recall signing the agreement is defeated by Defendant’s evidence showing the making and signing of the agreement.  It is not an adequate defense to enforcement that Plaintiff failed to read and understand the agreement before signing the agreement. Caballero v. Premier Care Simi Valley LLC (2021) 69 Cal.App.5th 512, 519.

 

Plaintiff also disputes the time frame of the alleged signatures stating that there are discrepancies in the timing because Defendants appear to indicate that the agreement was signed two hours earlier than the time indicated on the time stamps.  However, Defendants have adequately explained that the time stamps were automatically generated utilizing Central Standard Time, which was the time zone of the software portal vendor.  (Supplemental Decl., Atilano, dated November 18, 2022, ¶¶ 4-6.)  Plaintiff also states that there was no date next to the signature in the arbitration agreement.  However, simply because no date is set forth next to the signatures on this agreement does not meaningfully refute the contention that this agreement was signed on October 29, 2018, with all the other agreements signed on that date. In fact, Plaintiff does not specifically dispute this contention himself, only, stating that he cannot recall signing the agreement.

 

Therefore, the burden shifts to Plaintiff to show that the arbitration clause should not be enforced.  Rice, supra, 247 Cal.App.4th at 1223.  Plaintiff did not meet her burden to show that the arbitration agreement should not be enforced.

 

Plaintiff opposes the motion on the ground that the request to arbitrate is contrary to California law as the California courts have determined that PAGA is a distinct, non-arbitrable cause of action that asserts a substantive right of the State of California.  However, on June 15, 2022, the United States Supreme Court issued its opinion in Viking River Cruises, Inc, v. Moriana, 142 S.Ct. 1906 (2022). The Supreme Court held that employees who sign valid arbitration agreements are subject to arbitration of the PAGA actions on an individual basis. Viking River Cruises overruled the cases primarily relied upon by Plaintiff, including Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348.  The cases relied upon by Plaintiff followed the previously binding, but now overruled authority in Iskanian.

 

Plaintiff attempts to distinguish Viking River Cruises by arguing that it only invalidated 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, 142 S.Ct. 1906, 1924 (2022).  Plaintiff argues that, in the instant action, there was no agreement to split the individual and-individual PAGA claims.  However, Plaintiff misreads Viking River Cruises.  The U.S. Supreme Court expressly overruled California law which rejected splitting individual and representative PAGA claims.  The U.S. Supreme Court stated that the “prohibition on contractual division of PAGA actions into constituent claims unduly circumscribes the freedom of parties” to determine the scope of their arbitration.  Id. at 1923.  Thus, the U.S. Supreme Court held that the Defendants were entitled to enforce arbitration agreements that “mandate[] arbitration of [an] individual PAGA claim.”  Id. at 1924-25.  “We hold 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.  This holding compels reversal in this case.”  Id. at 1924.

 

The Court acknowledges existing California authority, pursuant to Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, which holds that Plaintiff can settle and dismiss all of his individual claims and still have standing to pursue a PAGA claim in court.  The Court is aware that the California Supreme Court has granted review of this issue in Adolph v. Uber Techs., Inc. No. G059860 (Cal. Ct. App. Apr. 11, 2022), 2022 WL 1073583 (review granted (July 20, 2022).

 

However, the instant Court finds that the clear, explicit holding of Viking River Cruises requires dismissal of Plaintiff’s non-individual PAGA claims. “When an employee’s own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit. … As a result, [a plaintiff] lacks statutory standing to continue to maintain her nonindividual claims in court, and the correct course is to dismiss her remaining claims.” Id. at 1925. The instant Court must be guided by the U.S. Supreme Court’s ruling. The Court is aware that the California Supreme Court has granted review of Adolph, but to stay the ruling of this motion until the California Supreme Court’s decision would be unduly prejudicial to the parties as a ruling is not anticipated until sometime in 2023. In any event, by granting review, the California Supreme Court has undoubtedly realized the tenuous nature of the holding of Kim. The Court is also guided by new authority in Lewis v. Simplified Labor Staffing Solutions, Inc., Case No. B312871 (Dec. 5, 2022) which held that arbitrator must determine whether the arbitration agreement extends to nonindividual PAGA claims.

 

Plaintiff also argues that the arbitration clause is both procedurally and substantively unconscionable.  A court can invalidate an arbitration agreement when it is unconscionable or against public policy.  See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 99.  Unconscionability contains two elements:  procedural unconscionability and substantive unconscionability. 

 

“[U]nconscionability has both a procedural and a substantive' element, the former focusing on ‘oppression' or 'surprise' due to unequal bargaining power, the latter on 'overly harsh' or 'one-sided' results.  The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability." But they need not be present in the same degree. 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.  In other words, 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.”  See Armendariz, 24 Cal.4th at 114.     

 

“The traditional standard of unconscionability . . . is that the inequality amounting to fraud must be so strong and manifest as to shock the conscience and confound the judgment of any man of common sense.   Subsequent decisions have defined an unconscionable contract in varying but similar terms, such as a contract that no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.”  See California Grocers Assn. v. Bank of America (1994) 22 Cal.App.4th 205, 214-15 (internal citations omitted).

 

Procedural unconscionability may be established by showing oppression and surprise.  Oppression occurs where the parties have unequal bargaining power and the contract is not the result of meaningful negotiations.  Surprise recognizes the extent to which the agreed upon terms were hidden. Here, Plaintiff has not provided sufficient evidence to show procedural unconscionability.

 

 “In many cases of adhesion contracts, the weaker party lacks not only the opportunity to bargain but also any realistic opportunity to look elsewhere for a more favorable contract; he must either adhere to the standardized agreement or forego the needed service.”  Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 711. Simply because a contract may have elements of an adhesion contract does not render the agreement procedurally unconscionable.  “The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in view of all relevant circumstances, that a court should withhold enforcement.”  Sanchez v. Valencia Holding (2015) 61 Cal.4th 899, 912. 

 

To support his procedural unconscionability argument, Plaintiff states that he was mandated to sign several documents without explanation, was not told adequately what arbitration meant, was not explained his rights, and, he, as mentioned earlier, refutes the one signature on the arbitration clause and reiterates that he does not recall signing it.  (Decl., Gutierrez, 1-10.)  

 

As noted earlier, Defendants have adequately established that Plaintiff signed the arbitration agreement. Plaintiff’s self-serving statement of poor recollection cannot defeat Defendants’ substantial evidence. Otherwise, every potential litigant could avoid arbitration by simply stating that he did not recall signing and arguing that the signature on the agreement is not his signature. It is not an adequate defense to enforcement that Plaintiff failed to read and understand the agreement before signing the agreement. Caballero v. Premier Care Simi Valley LLC (2021) 69 Cal.App.5th 512, 519. In addition, Defendants have no obligation to highlight, explain, or discuss the terms of the arbitration agreement as any such requirement would be contrary to the FAA. Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal. 4th 899, 914-15. By signing the agreement, Plaintiff “expressly acknowledge[d] that he or she has read the preceding Agreement, understands its provisions, and agrees with all terms.  Employee also understands that the statements made in this Agreement are the sole representations made by the Company with regard to the specified terms of employment, and Employee agrees that he or she is not relying upon any other statements or promises in entering into this Agreement.”  (Decl., Atilano, Ex. A, page 5.)  The required level of oppression and surprise is lacking here.  Therefore, the Court finds that the arbitration was not procedurally unconscionable.

 

As noted above, both procedural and substantive unconscionability must exist for the Court to exercise its discretion to refuse to enforce the arbitration provision. Because the Plaintiff must establish both procedural and substantive unconscionability, the instant Court declines to analyze whether the arbitration clause is substantively unconscionable. However, the Court notes that Plaintiff’s substantive unconscionability argument appears to simply mirror his argument regarding the applicability of Viking River Cruises to the instant action. The Court has already determined that the holding of Viking River Cruises mandates the compelling of arbitration of Plaintiff’s individual PAGA claims and the dismissal of Plaintiff’s representative PAGA claims.

 

The Court notes that moving party submitted additional evidence with the Reply filed on January 3, 2023. The Court declines to consider this new evidence as it was not necessary for the Court’s ruling, and another continuance to allow Plaintiff to respond to this new evidence is not required.

 

Therefore, the Motion to Compel Arbitration is granted. The individual PAGA claim is ordered to proceed through arbitration. The instant action, which would now only encompass representative PAGA claims, is ordered dismissed.

 

Defendants are ordered to give notice of this ruling.