Judge: Gary Y. Tanaka, Case: 22TRCV00039, Date: 2022-09-22 Tentative Ruling

Case Number: 22TRCV00039    Hearing Date: September 22, 2022    Dept: B

LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT

Honorable Gary Y. Tanaka                                                                                                Thursday, September 22, 2022

Department B                                                                                                                                                 Calendar No. 8

PROCEEDINGS

Edward Jackson v. Wash Multifamily Laundry Systems, LLC, et al.

            22TRCV00039

1. Wash Multifamily Laundry Systems, LLC’s Motion to Compel Arbitration

TENTATIVE RULING

            Wash Multifamily Laundry Systems, LLC’s Motion to Compel Arbitration is granted.

Background

            Plaintiff filed the Complaint on January 14, 2022. Plaintiff alleges the following facts. Plaintiff is a former or current employee of Defendants. Plaintiff, individually, and on behalf of other similarly aggrieved employees, asserts a single cause of action for civil penalties under the Private Attorneys General Act (“PAGA”) for Labor Code violations that allegedly occurred during Plaintiff’s employment with Plaintiff’s employer.

            Request for Judicial Notice

            Plaintiff’s request for judicial notice is granted pursuant to Evidence Code Section 452(d).

            Objections

            Plaintiff’s objections 1 to 12 are overruled.

            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. 

Defendant moves for an order compelling arbitration of Plaintiff’s individual PAGA claims 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 grounds 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 individual PAGA action, and that binding authority now compels dismissal of Plaintiff’s representative PAGA claims.

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).

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 and Plaintiff also refutes the making of the arbitration agreement by stating that he cannot recall making the agreement. Some of the latter argument also relates 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 on two separate occasions. Defendant provided proper foundation for the existence of the agreement and the facts evidencing Plaintiff’s signing of the agreement. Plaintiff’s self-serving statement that he, now, after being confronted with this motion, cannot recall signing the agreement is defeated by Defendant’s substantial evidence showing that 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.

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 non-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.

Plaintiff also requests that the Court not dismiss the representative PAGA claim for lack of standing. Plaintiff argues that pursuant to Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, Plaintiff can settle and dismiss all of his individual claims and still have standing to pursue a PAGA claim in court. Plaintiff states 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.

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.4^th 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.4^th 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.4^th 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.4^th 899, 912. 

            To support his procedural unconscionability argument, Plaintiff states that he was handed several documents without explanation, was not told what they were, was not given an opportunity to review, but nonetheless signed. Then, as to the second signature – the online portal, Plaintiff states that he has no recollection of the events leading to his online signature.

Plaintiff freely admits that he was handed several documents on his first day of employment, which he signed. 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, Defendant has 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 acknowledged that that “[he has] had sufficient time and opportunity to review this Agreement and understand its terms. [He] also understands that [he] has the opportunity to consult with independent legal counsel before entering into this Agreement.” (Renteria Decl. ¶ 7, Ex. A. p. 3, “Review”.)  The agreement contained a provision that allowed Plaintiff to opt out of the agreement. (Renteria Decl. ¶ 7, Ex. A. p. 3, “Alaska . . . Employees”.) Plaintiff signed the agreement and did not opt-out within the time provided. 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.

            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.

Defendant is ordered to give notice of this ruling.