Judge: H. Jay Ford, III, Case: 23SMCV00817, Date: 2023-09-28 Tentative Ruling

Case Number: 23SMCV00817    Hearing Date: September 28, 2023    Dept: O

Case Name:  Karissa Delaunay v. K & H Care, LLC, et al.

SUBJECT:                 MOTION TO COMPEL ARBITRATION AND STAY PROCEEDING

MOVING PARTY:   Defendant K & H Care, LLC and Joes Hernandez

RESP. PARTY:         None as of 9-19-23

TENTATIVE RULING

            Defendants K & H Care, LLC and Joes Hernandez’s Motion to Compel Arbitration is GRANTED. The action is stayed pursuant to CCP §1281.4 pending completion of arbitration.  Defendant presents an applicable arbitration agreement, the dispute falls within the scope of the arbitration provision, and the agreement is not unconscionable.

I.                Defendant establishes the existence of an applicable arbitration agreement 

“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, unless it determines that: 

(a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for rescission of the agreement. (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.”  CCP §1281.2. 

“The trial court may resolve motions to compel arbitration in summary proceedings, in which 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.  The party seeking arbitration bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability by a preponderance of the evidence.”  Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 718 (trial court properly decided plaintiff’s challenge to arbitration agreement despite delegation clause where plaintiff attacked contract formation and very existence of agreement to arbitrate).   

“Strong public policies favor enforcement of agreements to arbitrate disputes. A judge must order arbitration of any dispute that the judge determines is within the parties' arbitration agreement, unless the right to compel arbitration has been waived or the agreement is otherwise unenforceable.” ([§ 3.38] Determining Petition to Compel Arbitration:, Cal. Judges Benchbook Civ. Proc. Before Trial § 3.38.)

            Defendant submits a copy of the employment agreement between Defendant and Plaintiff. (Macdonald Decl., ¶ 5, Ex. A.) Defendant moves to compel arbitration pursuant to ¶ 10 on page six of the employment agreement which states:

ARBITRATION OF DISPUTES. Any controversy of claim arising out of or related to this Agreement, or the breach thereof, except for unlawful detainer actions or any dispute that arises from Employer’s actions to regain possession of the premises, or action brought for wages before the California Labor Commissioner or related to workers compensation, shall be settled in binding arbitration in accordance with the rules of the American Arbitration Association, which may be found at www.adr.org. The Employer will pay the costs for the arbitrator and hearing room. Any arbitration award rendered must be in writing, setting forth the reasons for the decision and may be entered as a judgment in any court of competent jurisdiction. Arbitration decisions/awards issued pursuant to this Agreement are final and binding.

Notwithstanding the foregoing, claims within the monetary limits of the small claims court shall be litigated in such court at the request of either party, so long as both disputes limit their right of recovery to the jurisdiction of the small claims court.

NOTE: By initialing in the space below, you are agreeing to have any dispute arising out of this Agreement decided by neutral arbitration as provided by law and you are giving up any rights you may possess to have the dispute litigated in a court or jury trial. The parties shall be allowed to conduct relevant discovery as is allowed under the California Code of Civil Procedure in arbitration matters and as further under the National Rules for Resolution of Employment Disputes.

If you refuse to submit to arbitration after agreeing to this provision, you may be compelled to arbitrate under the authority of applicable law. You agree that your agreement to this arbitration is voluntary.

(Macdonald Decl., ¶ 7, Ex. A.)

            The arbitration provision is signed by both Defendant and Plaintiff. (Macdonald Decl., ¶¶ 5, 6, Ex. A.) The arbitration provision is broad and applies to “[a]ny controversy of claim arising out of or related to this Agreement, or the breach thereof, except for unlawful detainer actions or any dispute that arises from Employer’s actions to regain possession of the premises, or action brought for wages before the California Labor Commissioner or related to workers compensation” (Id.)  The language of the arbitration clause is considered “very broad.” (See Larkin v. Williams, Woolley, Cogswell, Nakazawa & Russell (1999) 76 Cal.App.4^th 227, 230 (arbitration clause applicable to “any controversy or claim arising out of or relating to any provision” of partnership agreement was “very broad” and applied to plaintiff’s complaint for breach of partnership agreement, dissolution and accounting); Ramos v. Supr. Ct. (2018) 28 Cal.App.5^th 1042, 1052 (arbitration clauses using the phrase “arising out of or related to” are construed more broadly than arbitration clauses only using “arising from” or “arising out of an agreement”); Berman v. Dean Witter & Co., Inc.  (1975) 44 Cal.App.3d 999, 1003 (arbitration agreement applying to “any controversy arising out of or relating to this contract” was “certainly broad enough to embrace tort as well as contractual liabilities so long as they have their roots in the relationship between the parties which was created by the contract”).   

            The broad arbitration clause applies to the Plaintiff’s complaint. Plaintiff’s causes of action arise out of or are related to the employment agreement, and do not meet the exceptions provided in the arbitration agreement including unlawful detainer, regaining possession of the premises, an action for wages, or related to workers compensation. (Motion, pg. 6–7; Macdonald Decl., ¶ 8, Ex. B.) Plaintiffs claims are listed as labor code violations, but broad arbitration agreements apply to these types of claims as well. (See Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 786–87 [“Even though [Plaintiff’s] claims are styled as Labor Code violations, the arbitration agreement applies.”].) Furthermore, Plaintiff initialed the arbitration provision right underneath the bold words at the bottom of the arbitration provision. (Macdonald Decl., ¶ 7, Ex. A.).

            Defendant presents an applicable arbitration agreement and satisfies the initial burden as the party moving to compel arbitration.  The burden is therefore on Plaintiff to establish a defense to the arbitration agreement by a preponderance of the evidence.   

II.             Dispute falls under the scope of the arbitration agreement.

Plaintiff’s opposition does not dispute the existence if an arbitration agreement, so the analysis moves to whether the dispute falls within the scope of the arbitration agreement—the Court finds that it does. Plaintiff cites to Grey v. American Management Services (2012) 204 Cal.App.4th incorrectly, as that case is distinguishable from the case at bar. In Grey, the Court discussed an arbitration agreement with a clause that only stated “disputes arising out of an alleged breach,” is more limited than an agreement which includes “arising out of or related to.” (Grey v. American Management Services (2012) 204 Cal.App.4th 803, 809.) Here, the arbitration clause specifically states “[a]ny controversy of (sic) claim arising out of or related to this Agreement . . . shall be settled by binding arbitration . . .” (Macdonald Decl., ¶ 7.) Furthermore, the exceptions in the arbitration agreement are not related to the specific issues here. The complaint arises out of the Employment contract and is not related to “regaining possession of the premises,” an “action brought for wages before the Labor Commissioner,” and so forth. (Macdonald Decl.,¶ 7.)

III.           The Agreement is Not Unconscionable

Plaintiff asserts that the Agreement should not be enforced because it is unconscionable. California courts analyze unconscionability as having a procedural and a substantive element.” (Kinney v. United Healthcare Services, Inc. (1999) 70 Cal. App. 4th 1329.) “[B]oth elements must be present before a contract or contract provision is rendered unenforceable on grounds of unconscionability.” (Id.) The doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Id.) 

Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.) “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. [Citations.] In other words, the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Id.) “The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 247.) 

a.     Procedural Unconscionability

Plaintiff argues the Agreement is procedurally unconscionable because it is a contract of adhesion given to him  “take it or leave it basis” without opportunity for meaningful negotiation. However, an arbitration agreement offered on a “take it or leave it basis” does not render the agreement unenforceable. (See Legaltree v. Luce, Forward Hamilton & Scripps (1999) Cal.App.4th 1105, 1127 [“the cases uniformly agree that a compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a “take it or leave it” basis.”].)

Moreover, the fact Plaintiff felt he had to sign the Agreement as a condition of employment does not render the agreement unenforceable. Courts have upheld arbitration agreements, even if they were a contract of adhesion, “[w]hen, as here, there is no other indication of oppression or surprise, ‘the degree of procedural unconscionability of an adhesion agreement is low, and the agreement will be enforceable unless the degree of substantive unconscionability is high.’” (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 [internal citation omitted].)

Plaintiff’s cite to Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 99 fn. 6 is not correctly stated. The specific cite Plaintiff refers to states by agreeing to arbitrate a statutory claim, “a party does not forgo the substantive rights . . . it only submits to their resolution in an arbitral, rather than a judicial, forum.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 99 [quoting  Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth (1985) 473 U.S. 614, 628].) This cite does not state that one cannot arbitrate statutory claims, it only states one does not lose their substantive rights under an arbitral setting. Here, the arbitration clause provides for arbitration including all the necessary substantive rights afforded to a person in a judicial forum. (Macdonald Decl., ¶ 7.) Therefore, the Court does not find the Agreement to be procedurally unconscionable.

b.     Substantive Unconscionability

Substantive unconscionability focuses on the terms of the agreement and whether those terms are “so one sided as to “’shock the conscience.’” (Kinney v. United Healthcare Services, Inc. (1999) 70 Cal. App.4th 1329, 1330.)  “To reiterate, we assess unconscionability with a sliding scale approach. [Citation] In light of the high degree of procedural unconscionability, even a low degree of substantive unconscionability could render the arbitration agreement unconscionable.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85.)

Plaintiff uses the same argument for procedural unconscionability citing to Armendariz v. Foundation Health Psychcare Services, Inc.. but as explained above, this cite is not relevant to the argument Plaintiff is making. Further, Plaintiff argues that the arbitration clause is substantively unconscionable “because it is not bilateral,” and “affords greater rights to the stronger party.” (Motion, pg. 8.)  However, Defendant points out that the agreement “expressly states that the ‘Employer will pay for costs of the arbitrator,’” plus both parties “shall be allowed to conduct the relevant discovery as is allowed under California Code of Civil Procedure in arbitration matters.” (Opposition, pg. 7.) The agreement is not one sided as to shock the conscience since Defendants are paying for the arbitrator, and the agreement allows for all the proper procedures for both parties. Thus, there is very little to no substantive unconscionability.

            Thus, the motion to compel arbitration is GRANTED. The action is stayed pursuant to CCP §1281.4 pending completion of arbitration.