Judge Holly J. Fujie, Case 22STCV10615 2022-08-15 Tentative Ruling

DEPARTMENT 56 JUDGE HOLLY J. FUJIE, LAW AND MOTION RULINGS. The court makes every effort to post tentative rulings by 5.00 pm of the court day before the hearing. The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)], and are also available in the courtroom on the day of the hearing [see CRC 3.1308(b)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) call Dept 56 by 8:30 a.m. on the day of the hearing (213/633-0656) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no telephone call is necessary and all parties should appear at the hearing in person or by Court Call. Court reporters are not provided, and parties who want a record of motions and other proceedings must hire a privately retained certified court reporter.

This action arises out of an employment relationship. Plaintiff’s complaint (the “Complaint”) asserts representative claims on behalf of himself and other aggrieved employees pursuant to the Private Attorneys General Act (“PAGA”).

Moving Defendant filed a motion to compel arbitration (the “Motion”) on the grounds that when Plaintiff began his employment, he signed a binding arbitration agreement. The Motion additionally seeks the dismissal of the Complaint once Plaintiff’s claims are ordered to arbitration.

The purpose of the Federal Arbitration Act (“FAA”) is to move the parties in an arbitrable dispute out of court and into arbitration as quickly and easily as possible. (Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp. (1983) 460 U.S. 1, 23.) The FAA is consistent with the federal policy to ensure the enforceability, according to their terms, of private agreements to arbitrate. (Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 57.) A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable, and irrevocable, save upon such grounds as exist for the revocation of any contract. (CCP § 1281.) California law, like federal law, favors enforcement of valid arbitration agreements. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97.) 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 unless grounds exist not to compel arbitration. (CCP § 1281.2.)

In support of the Motion, Moving Defendant provides evidence of its agreements to arbitrate that Plaintiff signed on February 3, 2020 as a condition of his employment and February 4, 2020, as a condition of his continued employment (the “Arbitration Agreement”). (See Declaration of Zoran Jovanovic (“Jovanovic Decl.”), Exhibits B-C.)[1]

“I agree to submit to final and binding arbitration any and all claims and disputes (except for charges filed with the National Labor Relations Board) that are related in any way to my employment or the termination of my employment with the AMERCO entity that has hired me.

I acknowledge that I received and reviewed a copy of the U-Haul Employment Dispute Resolution Policy ("EDR"), and have been advised to consult a legal advisor of my own choice about the EDR. I agree that it is my obligation to make use of the EDR. I understand that, unless otherwise required by law or contract, final and binding arbitration will be the sole and exclusive remedy for any such claim or dispute against AMERCO or its subsidiary or affiliated companies or entities, and each of its and/or their employees, officers, directors or agents ("U-Haul") and that, by agreeing to use arbitration to resolve my dispute, both U-Haul and I agree to forego any right we each may have had to a judge or jury trial on issues covered by the EDR, and forego any right to bring claims as a representative or as a member of a class.

Unless otherwise prohibited by law, U-Haul and I additionally agree to forego and waive any right to bring an action or claim in a private attorney general capacity.”

The Court finds that Moving Defendant has provided sufficient evidence of the Arbitration Agreement. Furthermore, Plaintiff’s allegations arise out of his employment and are therefore governed by the Arbitration Agreement, and the Arbitration Agreement specifically provides for the waiver of the right to pursue a PAGA claim.

Plaintiff argues that the Arbitration Agreement is unenforceable because it is both procedurally and substantively unconscionable and alternatively argues, that should the Court find his individual PAGA claim severable, the remainder of Plaintiff’s claims brought in a representative capacity should be stayed rather than dismissed.

Unconscionability refers to the absence of meaningful choice on the part of one of the parties together with the contract terms which are unreasonably favorable to the other party. (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145.) Unconscionability 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. (Sanchez v. Valencia Holding Company, LLC (2015) 61 Cal.4th 899, 910.) Though both procedural and substantive unconscionability need to be shown, they need not be present to the same degree; 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. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)

Substantive unconscionability addresses the unfairness of the terms of the contract itself—whether the terms are unduly oppressive, overly harsh, so one-sided as to shock the conscience, or unreasonably favorable to the more powerful party. (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1349.) Factors to consider include: (1) the fairness of the terms; (2) the charge for the service rendered; (3) the standard in the industry; and (4) the ability to accurately predict the extent of future liability. (Id.)

Plaintiff argues that the Arbitration Agreement is substantively unconscionable because it requires the waiver of the rights to bring a PAGA claim.

An employment agreement that compels the waiver of representative claims under the PAGA is contrary to public policy and unenforceable as a matter of state law. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 384 (“Iskanian”).) Under the rule set forth in Iskanian, an employee’s individual PAGA claims are not arbitrable even if the parties had agreed to arbitrate individual claims. (See id.)

The U.S. Supreme Court recently overturned this restriction, holding that “Iskanian’s prohibition on contractual division of PAGA actions into constituent claims unduly circumscribes the freedom of parties to determine the issues subject to arbitration and the rules by which they will arbitrate . . . and does so in a way that violates the fundamental principle that arbitration is a matter of consent.” (Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1923 (“Viking River”).) The U.S. Supreme Court found that Iskanian’s rule was improper because it coerced parties to litigate all PAGA claims even where the parties agreed to arbitrate claims arising out of Labor Code violations suffered by the Plaintiff. (Id. at p. 1924.)

Here, Plaintiff and Moving Defendant agreed to arbitrate all claims relating to Plaintiff’s employment. The parties have agreed to arbitrate the claims underlying Plaintiff’s individual PAGA claims. Under the old rule set forth in Iskanian, Plaintiff’s individual PAGA claims would have been indivisible from the representative claims, thus precluding arbitration of the individual claims. Under Viking River, this division is now permitted, and the agreement to arbitrate Plaintiff’s individual claims must be enforced.

Accordingly, the Court finds that the Arbitration Agreement is not substantively unconscionable due to the provision that waives Plaintiff’s right to bring a PAGA cause of action, because under Viking River, the clause is enforceable to the extent that Plaintiff’s individual claims are subject to arbitration.

The oppression that creates procedural unconscionability arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice. (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1347-48.) The most common way to establish procedural unconscionability is with an adhesion contract. (McCaffrey Group, Inc. v. Superior Court (2014) 224 Cal.App.4th 1330, 1349.) In the absence of an adhesion contract, procedural unconscionability can be established by the totality of the circumstances surrounding the negotiation and formulation of the contract. (Zonic-Calabasas A, Inc. v. Moreno 2012) 57 Cal.4th 1109, 1125.) Factors to consider include: (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney. (See Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 796.)

Plaintiff indicates that the Arbitration Agreement was one of various documents he was provided with to sign as part of the onboarding process. (Declaration of Clyde Malbrough (“Malbrough Decl.”) ¶ 3.) Plaintiff asserts that he was unaware that one of the documents he was signing was an agreement to arbitrate his claims and that he was told by one of Moving Defendant’s representatives that he needed to sign the documents quickly in order to begin working. (Id.) Plaintiff claims that he did not receive instruction or explanation regarding the content or substance of many of the onboarding documents. (Id.) He also asserts that he was not provided with a copy of the Arbitration Agreement and did not have the opportunity to ask questions about the document or speak to a representative regarding its terms. (Malbrough Decl. ¶ 4.) Plaintiff declares that he did not have the opportunity to consult with an attorney regarding the onboarding documents. (Id.) Plaintiff was unfamiliar with the term “arbitration” when he signed the Arbitration Agreement and was unaware that the employment documents he was signing may have legal implications. (Malbrough Decl. ¶ 6.) At the time he signed the Arbitration Agreement, Plaintiff believed that his refusal to sign any of the documents would deprive him of the employment opportunity. (Malbrough Decl. ¶ 5.)

As the Court has found that the Arbitration Agreement is not substantively unconscionable, it need not analyze its procedural unconscionability. The Court will, however, consider Plaintiff’s arguments to the extent that they imply that the Arbitration Agreement is invalid due to lack of mutual assent.

Every contract requires mutual assent or consent under Civil Code sections 1550 and 1565, and ordinarily one who signs an instrument which on its face is a contract is deemed to assent to all its terms. (Marin Storage & Trucking, Inc. v. Benco Contracting and Engineering, Inc. (2001) 89 Cal.App.4th 1042, 1049.) Generally, a party cannot avoid the terms of a contract on the grounds that they were unfamiliar with its language or failed to read it before signing. (See id.; Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 914.)

The Court is not persuaded by Plaintiff’s argument that the circumstances underlying its execution are sufficiently procedurally unconscionable to negate his assent to the Arbitration Agreement. His failure to read or understand the terms, by itself, is insufficient to establish his lack of assent. Further, the Arbitration Agreement was not buried in small print or otherwise concealed from Plaintiff. While Plaintiff indicates that he felt rushed to sign the documents, he does not indicate that he attempted to seek clarification of their terms or that any of Moving Defendant’s representatives mislead him about their meaning.

The Court therefore finds that Plaintiff’s individual claims are subject to arbitration.

Moving Defendant argues that the Court should dismiss the representative action for lack of standing once Plaintiff’s individual claim is sent to arbitration. Plaintiff argues that the representative claim should be stayed rather than dismissed pursuant to Kim v. Reins (2020) 9 Cal.5th 73 (“Kim”). Although the majority opinion in Viking River Cruises interprets Kim to state that once the individual’s claim is removed, there would be no standing to continue the representative action, this is an interpretation of California state law. The U.S. Supreme Court lacks the authority to make a binding interpretation of California law. (See, e.g., Cole v. Richardson (1972) 405 U.S. 676, 697; Wisconsin v. Mitchell (1993) 508 U.S. 476, 483.)

Kim held that an individual who settled her individual claim, but specifically excluded the PAGA claim, could continue to pursue the PAGA claim despite the individual claim being settled. (See Kim, supra, 9 Cal.5th at 91.) The issue here is whether the PAGA claim may proceed when Plaintiff’s individual claim has been sent to binding arbitration. Kim discussed the legislative intent of PAGA and found that it deliberately limited suits to only those able to be brought by those with an individual injury. (Id. at 90.) The Kim Court additionally held, however: “Nothing in the legislative history suggests the Legislature intended to make PAGA standing dependent on the existence of an unredressed injury, or the maintenance of a separate, unresolved claim.” (Id. at 90-91.) The Court further found that the individual’s PAGA claim’s settlement did not preclude the Plaintiff’s ability to pursue the PAGA claim in the same lawsuit. (Id. at 92.)

The entirety of Viking River’s discussion of the effect of splitting off the individual claim is reproduced here:

“The remaining question is what the lower courts should have done with Moriana's non-individual claims. Under our holding in this case, those claims may not be dismissed simply because they are “representative.” Iskanian’s rule remains valid to that extent. But as we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA's standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action. See Cal. Lab. Code Ann. §§ 2699(a), (c). 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. See Kim, 9 Cal.5th at 90, 259 Cal.Rptr.3d 769, 259 Cal.Rptr.3d, 459 P.3d at 1133 (“PAGA's standing requirement was meant to be a departure from the ‘general public’ ... standing originally allowed” under other California statutes). As a result, Moriana lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.” (Viking River Cruises, supra, 142 S.Ct. at 1925)

The Court declines to apply the persuasive reasoning of the Supreme Court of the United States on how to interpret state law, which it clearly appears to be doing by interpreting the California Labor Code and Kim. The Court therefore finds that under Kim, Plaintiff may continue to pursue the PAGA representative action to continue despite the individual action’s adjudication in another forum. The Court therefore declines to dismiss the representative action.

In addition, the Court notes that Viking River did not specifically overrule the prohibition in Isakanian on “wholesale waiver of PAGA claims.” (See Viking River, supra, 142 S.Ct. at 1924.) Rather, it limited the ruling to prohibiting the splitting up of the individual claims and the representative claims when a valid arbitration agreement exists. (Id. at 1924-25.)

The Court therefore GRANTS the Motion in part. The Court sets a status conference on February 15, 2023 at 8:30 a.m. in this department. The parties are ordered to file a joint status report by February 8, 2023. Plaintiff’s representative action is STAYED pending the conclusion of the arbitration of his individual claims.

In consideration of the current COVID-19 pandemic situation, the Court strongly encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative. If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to SMC_DEPT56@lacourt.org stating your intention to appear in person. The Court will then inform you by close of business that day of the time your hearing will be held. The time set for the hearing may be at any time during that scheduled hearing day, or it may be necessary to schedule the hearing for another date if the Court is unable to accommodate all personal appearances set on that date. This rule is necessary to ensure that adequate precautions can be taken for proper social distancing.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court

[1] The documents in Exhibits B and C contain identical language.