Judge: Gary Y. Tanaka, Case: 22TRCV01185, Date: 2023-04-13 Tentative Ruling

Case Number: 22TRCV01185    Hearing Date: April 13, 2023    Dept: B

LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT

 

 

Honorable Gary Y. Tanaka                                                                                         Thursday, April 13, 2023

Department B                                                                                                                           Calendar No. 10

 

 

PROCEEDINGS

 

Gary Gomez v. Noarus Investments, Inc., et al.

            22TRCV01185

1.      Noarus Investments, Inc.’s Motion to Compel Arbitration

 

TENTATIVE RULING

 

            Noarus Investments, Inc.’s Motion to Compel Arbitration is granted.

 

Background

           

            Plaintiff filed the Complaint on November 9, 2022. Plaintiff alleges the following facts. Plaintiff is a former employee of Defendant. Plaintiff alleges that he was subjected to discriminatory and retaliatory conduct based on disability. Plaintiff alleges the following causes of action: 1. Discrimination Based on Disability in Violation of FEHA (Cal. Gov’t Code § 12900, et seq.) 2.  Retaliation (FEHA) 3. Failure to Prevent Harassment, Discrimination, and Retaliation 4. Retaliation in Violation of Labor Code Sections 6. Wrongful Constructive Discharge in Violation of Public Policy.

 

            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 claims, and for an order to stay the action pending completion of arbitration.  The motion is made pursuant to Code of Civil Procedure §1281 et seq. on the grounds Plaintiff is bound by a written agreement to arbitrate the subject matter of the Complaint.

 

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). 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.

 

Defendant has established the existence of a valid arbitration agreement between Plaintiff and Defendant. (Decl., Brian Twoomey, ¶¶ 3-4, Exs. 1,2.)  The agreement states that it is enforceable under the FAA and both parties agreed “that any claim, dispute, and/or controversy arising from, or relating in any way to, Employee's employment relationship or application or consideration for employment with the Company, including without limitation, any claim or controversy brought on behalf of or against the Company or any or (sic) its subsidiaries, parents, affiliates, servants, agents, owners, directors, officers, employees, representatives, insurers, and attorneys of the Company, which would otherwise be brought in court, including, but not limited to, all alleged violations of federal, state, or local law, shall be submitted to, and shall be resolved through, final and binding arbitration before an arbitrator selected in accordance with the procedures of the arbitration service selected by the party against whom the claim is brought from among the following: Alternative Dispute Resolution Services, Judicial Arbitration and Mediation Services, or such other service to which the parties agree.” (Id. at Ex. 2.)  The agreement covers “claims of discrimination ... breach of any alleged contract or covenant (express or implied), tort claims, wage payment claims, violation of public policy claims, or any other alleged violation of statutory, contractual or common-law rights.”  (Id.)

 

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 his burden to show that the arbitration agreement should not be enforced.

 

Plaintiff 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.

 

 “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 required to sign the agreements as a condition of employment and was not given an opportunity to negotiate the terms.  (Decl., Gary Gomez, ¶¶ 2-3.)  Thus, Plaintiff freely admits that he signed the arbitration clause.  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.  Merely because an arbitration agreement was signed as a condition of continued employment does not establish procedural unconscionability.

 

“[C]ourts, including ours, have used various nonexclusive formulations to capture the notion that unconscionability requires a substantial degree of unfairness beyond a simple old-fashioned bad bargain. This latter qualification is important. Commerce depends on the enforceability, in most instances, of a duly executed written contract. A party cannot avoid a contractual obligation merely by complaining that the deal, in retrospect, was unfair or a bad bargain. Not all one-sided contract provisions are unconscionable; hence the various intensifiers in our formulations: ‘overly harsh,’ ‘unduly oppressive,’ ‘unreasonably favorable.’ 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.” Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245 (internal citations and quotations omitted; emphasis in original). Plaintiff freely signed the agreement based on his wish to be employed by Defendant.  The required level of surprise is lacking here. The Court does acknowledge, however, that the agreement does mirror a contract of adhesion, and, therefore, contains the slightest indicia of procedural unconscionability.  Therefore, the Court will analyze the agreement to determine whether the agreement is substantively 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.  First, the Court notes that Plaintiff submitted no competent evidence to support the substantive unconscionability element. The only evidence provided by Plaintiff was his own declaration which merely addressed procedural unconscionability.  Plaintiff merely set forth arguments in the points and authorities.

 

First, Plaintiff argues that the agreement does not ensure that Plaintiff will not bear the costs of arbitration above that which would normally be incurred in court.  Plaintiff also argues that there is no provision that ensures Plaintiff will be entitled to all the types of relief that would be available in Court.  In addition, Plaintiff contends that there is no provision for the issuance of a written arbitration award.

 

However, Plaintiff’s arguments are not availing, and his concerns are allayed by the express language in Exhibit 2 which states that arbitration will be controlled by the FAA and by the terms of the California Arbitration Act.  The FAA and the CAA provides Plaintiff the protective aspects regarding the bearing of costs, the right to discovery, written awards, right to judicial review, and neutrality of arbitrators.  CCP §§ 1280 et seq.  In addition, in Exhibit 1, the parties agreed that the arbitrator can be subject to disqualification and that all rules of pleading and evidence would apply to the arbitration. (Defendant’s Ex. 1.)  Thus, the Court finds that the level of substantive unconscionability required to invalidate the arbitration clause is lacking.

 

Therefore, the Motion to Compel Arbitration is granted.  The court action is ordered stayed pending completion of arbitration.  An OSC re: status of arbitration is set for ________________.

 

Defendant is ordered to give notice of this ruling.