Judge: Glenda Sanders, Case: 2019-01107906, Date: 2022-10-07 Tentative Ruling
Motion to Compel Arbitration
Defendants’ motion to compel Plaintiff Adam McClay-Lautoa to arbitrate the individual PAGA claim is granted. The remainder of the case is stayed pending the outcome of the arbitration. To the extent the motion seeks an order dismissing Plaintiff’s non-individual PAGA claim, the Motion is denied without prejudice to being renewed when the stay is lifted.
Legal Authority
A party moving to compel arbitration under Code Civil Procedure Section 1281.2 must prove by a preponderance of the evidence that: (1) The parties entered into a written agreement to arbitrate; (2) One or more of the claims at issue are covered by that agreement; and (3) The responding party refused a prior demand for arbitration under the agreement of the claims at issue. (Code Civ. Proc., § 1281.2; Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230.) If the moving party meets this burden, the burden shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud or unconscionability). (Villacreses, 132 Cal.App.4th at 1230.)
Merits
Defendants have their initial burden under CRC 3.1330 to prove the existence of an agreement to arbitrate. Defendants present evidence that Plaintiff signed a “Team Member Acknowledgment and Agreement” (the “Acknowledgment”) as part of his new hire packet. (Roberts Decl. ¶¶9-10, Exh. A). The Acknowledgment states that Plaintiff agreed to “utilize binding arbitration to resolve all disputes that may arise out of the employment context, as set forth more fully in the Arbitration Agreement.” (Exh. A). Defendants have also provided a copy of the Arbitration Agreement. (Roberts Decl. ¶8, Exh. B).
While Plaintiff does not deny signing the Acknowledgment, he argues that the Acknowledgment does not contain the terms of the purported Arbitration Agreement between the parties and that the reference to the Arbitration Agreement in the Acknowledgment is insufficient to create an Arbitration Agreement between the parties. The court disagrees. Numerous cases have held that parties may validly incorporate by reference into their contract the terms of another document.
To accomplish such an incorporation, the following requirements must be met: (1) the reference must be clear and unequivocal; (2) the reference must be called to the attention of the other party and he must consent thereto; and (3) the terms of the incorporated document must be known or easily available to the contracting parties.” (Shaw v. Regents of University of California (1997) 58 Cal.App.4th 44, 54). Here, the Acknowledgment clearly refers to an Arbitration Agreement, Plaintiff signed the acknowledgment consenting to utilize binding arbitration as set forth more fully in the Arbitration Agreement, and Plaintiff does not contend that he was denied access to the Arbitration Agreement. To the contrary, Defendants’ representative indicates that when a new employee is hired, they are free to ask the representative about the documents provided. (Roberts Decl. ¶9).
The court thus finds that Plaintiff entered into a valid arbitration agreement with Defendants, consisting of the Acknowledgment and the Arbitration Agreement.
The Arbitration Agreement includes the following relevant terms:
“I understand that, by entering into this Agreement, I am waiving my right to a court or jury trial, whether as an individual or a member of a class action or collective action. I further understand that both I and the Company are agreeing to submit only our own claims, and no others, to arbitration. Both I and the Company expressly intend and agree that class or collective action procedures shall not be asserted, nor will they apply, in any arbitration proceeding under the Agreement.” (Roberts Decl. Exh. B at ¶1).
“This Agreement is governed by the Federal
Arbitration Act, 9 U.S.C. §§ 1-16 because the Company is engaged in interstate commerce. The Company and I agree to resolve, by individual arbitration, to the fullest extent permitted by law, all claims or controversies between the Company and me, except as excluded in paragraph 5 below…” (Roberts Decl. Exh. B at ¶4).
Applicability of FAA
The parties’ agreement states that the FAA governs. Plaintiff offers no evidence or argument to the contrary. Accordingly, the Court finds the FAA applies.
Defenses to Enforcement
Plaintiff argues the Agreements are unenforceable because they are procedurally and substantively unconscionable. Plaintiff bears the burden of proof on this challenge to enforcement.
“Both procedural and substantive unconscionability must be shown for the defense to be established, but ‘they need not be present in the same degree.’” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125). “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to’ conclude that the term is unenforceable.” (Id. at 125-126). “Conversely, the more deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required.” (Id.).
Procedural Unconscionability
Plaintiff contends that the agreement is procedurally unconscionable because he was forced to sign the Acknowledgment during the onboarding process in order to be hired and did not have a meaningful opportunity to negotiate its terms. While it is true that virtually all “take it or leave it” contracts carry some degree of procedural unconscionability, that degree is presumptively low absent evidence the defendant actively interfered with plaintiff’s ability to review and understand the arbitration clause. (Samaniego v. Empire Today, LLC (2012) 205 Cal.App.4th 1138, 1145; Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1156).
Here, there is no evidence that Plaintiff was prevented from reviewing the Agreements or asking questions before signing them. (See Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394 [no fraud where there was opportunity to review agreement before signing].) To the contrary, Defendants have put forth evidence showing that Plaintiff was invited to do so. (Roberts Decl. ¶9). The procedural unconscionability here is therefore low.
Substantive Unconscionability
Plaintiff asserts that the Acknowledgment is substantively unconscionable because it does not contain the minimum fairness requirements set forth in Armendariz v. Found. Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. However, Plaintiff does not dispute that the requirements are met by the Arbitration Agreement, which is referenced by the Acknowledgment. Plaintiff’s unconscionability arguments are unavailing.
Waiver of Right to Arbitrate
Plaintiff argues that Defendants have waived their ability to compel arbitration by actively participating in litigation (including discovery) for years. The Court disagrees.
Under the Federal Arbitration Act (which governs these agreements), 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). Prejudice to the opposing party is not a consideration. (Id. at 1713). Prior to the United States Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, the relief Defendants now seek was barred by controlling precedent of the California Supreme Court. (See Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348.) There was no existing right to arbitration for Defendants to knowingly waive.
PAGA Waiver
In Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, the United States Supreme Court overruled Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 to the extent its holding was preempted by the FAA and concluded that (1) a PAGA claim could be split into “individual” and “representative” portions, and (2) the individual portion could be compelled to arbitration. However, Viking River Cruises did not overrule Iskanian to the extent it precludes “a wholesale waiver of PAGA claims.” (Id. at 1924-25.)
Plaintiff contends that the Acknowledgment does not contain a waiver of representative claims, and therefore the entire PAGA claim must be arbitrated. However, Plaintiff does not dispute that the Arbitration Agreement includes a waiver of representative claims.
Accordingly, under Viking River Cruises, Plaintiff may be compelled to arbitrate the individual portion of the PAGA claim.
Mandatory Stay
Under the FAA, the California Arbitration Act, and the at-issue agreements, this case must be stayed pending completion of Plaintiff’s arbitration. (9 U.S.C. § 3; CCP § 1281.4; Roberts Decl. Exh. B.)
Defendants urge dismissal of the non-individual PAGA claim. However, the California Supreme Court recently granted review in Adolph v. Uber Technologies, S274671, to answer the question “[w]hether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee [citation] maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ [citation] in court or in any other forum the parties agree is suitable.”
Accordingly, were the Court to dismiss the representative PAGA claims only for the California Supreme Court to reach a different conclusion in Adolph than the Supreme Court reached in Viking River Cruises, both the Court’s and the parties’ resources would be needlessly taxed. Additionally, the arbitrator may decide that Plaintiff did not suffer any of the Labor Code violations alleged and therefore would lack PAGA standing, irrespective of the outcome in Adolph. For these reasons, the Court denies the request to dismiss the non-individual portion of the PAGA claim without prejudice to Defendants renewing the issue when the individual arbitration concludes.
Please inform the clerk by emailing her before 12:00 p.m. on the day of the hearing at CX101@occourts.org if both parties intend to submit on the tentative.