Judge Holly J. Fujie, Case 22STCV15499 2022-09-01 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.

MOVING PARTIES: Defendants Aligned TeleHealth (“Aligned”), LLC, Asana Integrated Medical Group (“Asana”), Theresa Miller, Mona Karaguozian (collectively, the “Aligned Defendants”), and Motion Picture and Television Fund (“MPTF”)[1]

On May 10, 2022, Plaintiff filed a complaint (the “Complaint”) alleging 14 causes of action arising out of an employment relationship. On June 10, 2022, the Aligned Defendants filed a motion to compel arbitration and stay the proceedings (the “Motion”) on the grounds that Plaintiff signed a written agreement that contains a binding arbitration provision (the “Arbitration Agreement”) which requires that her current claims be adjudicated in binding arbitration. On August 2, 2022, MPTF filed a joinder to the Motion asserting that it is entitled to enforce the Arbitration Agreement despite not being a signatory to the agreement under the doctrine of equitable estoppel and the agency exception, and as a third-party beneficiary thereof.

Plaintiff’s evidentiary objections are OVERRULED in their entirety. Although the Motion exceeds the 15-page limit provided for by California Rules of Court, rule 3.113(d), the Court exercises its discretion and has considered the entirety of the Motion.

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.)

California law, like federal law, favors enforcement of valid arbitration agreements. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97 (“Armendariz”).) Under California Code of Civil Procedure (“CCP”) section 1281, 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.) 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 ruling on a petition to compel arbitration, the trial court first decides whether an enforceable arbitration agreement exists between the parties, and then determines whether the plaintiff’s claims are covered by the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.) The trial court may resolve a motion to compel arbitration in summary proceedings. (Gamma Eta Chapter of Pi Kappa Alpha v. Helvey (2020) 44 Cal.App.5th 1090, 1097.) Factual issues may be submitted on declarations and affidavits, or by oral testimony in the court’s discretion. (Juen v. Alain Pinel Realtors, Inc. (2019) 32 Cal.App.5th 972, 978.) When the enforceability of an arbitration clause may depend upon which of two sharply conflicting factual accounts is to be believed, the better course would normally be for the trial court to hear oral testimony and allow the parties the opportunity for cross-examination. (See Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 414.)

In support of the Motion, the Aligned Defendants provide evidence of an employment contract (the “Employment Contract”) entered into between Plaintiff and Asana on November 15, 2019. (See Declaration of Theresa Miller (“Miller Decl.”), Exhibit A.) The Employment Contract contains the Arbitration Agreement. (Id.) The Arbitration Agreement provides in part:

Mutual Agreement to Arbitrate. Unless expressly otherwise provided herein or as required by applicable law, all disputes that relate to or arise from the employment relationship between Employee and Company shall be resolved through binding arbitration on the terms and conditions set forth in this Article V. EXCEPT AS PROVIDED HEREIN, EMPLOYEE AND COMPANY EACH WAIVE ANY RIGHT TO FILE A LAWSUIT, HAVE A TRIAL BY JURY, PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS RELATED TO ANY CLAIM SUBJECT TO ARBITRATION, OR RESOLVE SUCH A DISPUTE IN ANY OTHER FORUM. The parties understand and agree that their only remedy for any disputes covered by this Agreement shall be through binding arbitration, and that they cannot proceed with such a dispute in court or any similar forum. Nevertheless, nothing in this Agreement shall prevent Employee from filing a charge or claim with a non-adjudicatory governmental agency, including but not limited to the United States Equal Employment Opportunity Commission, the United States Department of Labor, or their state equivalents. (Id. at § 5.1 (emphasis in original).)

The Motion also provides that Asana employs and contracts with clinicians who provide psychiatric telehealth services and Aligned provides administrative services to Asana. (Miller Decl. ¶ 2.) MPTF operates the Samuel Goldwyn, Jr. Center for Behavioral Health (“CBH”), a psychiatric hospital located in Woodland Hills, California. (Miller Decl. ¶ 4.) In 2017, MPTF and Aligned entered into an Independent Consulting Agreement (the “ICA”) pursuant to which Aligned agreed to provide a program director to work at CBH. (Id.) Plaintiff was first hired by Aligned as an independent contractor to occupy the program director role at CBH. (Id.) In or around March 2018, Plaintiff became an employee of Aligned and assumed the title of Director of Nursing (“DON”). (Id.) In November 2019, while continuing to work as a DON for MPTF, Plaintiff’s employment transferred from Aligned to Asana. (Id.) The Employment Contract was entered into when Plaintiff transitioned to employment with Asana. (Id.) The Employment Contract’s purpose was to provide for Plaintiff to continue working at CBH pursuant to the ICA. (Miller Decl. ¶ 6.) On or around August 21, 2020, MPTF sent a Notice of Termination of the ICA to Aligned, which terminated the DON role which was provided by Aligned. (Miller Decl. ¶ 6.) Thereafter, the Aligned Defendants terminated Plaintiff’s employment because her position no longer existed after the termination of the ICA and there were no alternative positions available for her. (Id.)

As a threshold matter, the Court finds that the Aligned Defendants have satisfied their burden to show an agreement to arbitrate.

Plaintiff does not dispute the existence of the Arbitration Agreement; rather, Plaintiff argues that the Arbitration Agreement is unconscionable and therefore unenforceable. Plaintiff also argues that MPTF failed to satisfy its burden to show that it is entitled to enforce the Arbitration Agreement.

Plaintiff declares that she began working for Aligned in 2018 and began working for Asana in 2019. (Declaration of Kimberly O’Connor (“O’Connor Decl.”) ¶ 2.) Plaintiff understood Aligned and Asana to be affiliated with one another due to their shared corporate leadership and business resources. (Id.) Throughout her employment with Asana, Plaintiff provided DON services directly to MPTF. (Id.) Moving Defendants never provided Plaintiff with a copy of the Arbitration Agreement or informed her that she had the ability to negotiate its terms. (O’Connor Decl. ¶ 3.) Plaintiff believed that her ability to negotiate the terms of her employment was limited to issues regarding, for example, compensation and sick leave and did not extend to any arbitration terms. (Id.) Plaintiff neither understood nor intended that MPTF was to be a beneficiary to the Arbitration to the Agreement. (Id.)

An entity seeking to compel arbitration must generally establish it was a party to an arbitration agreement. (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236.) Only in limited circumstances may an arbitration agreement be enforced by a nonsignatory. (See id.) One such circumstance is where a benefit is conferred on the nonsignatory as a result of the agreement, making the nonsignatory a third party beneficiary of the arbitration agreement. (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 301.) Another is when the equitable estoppel doctrine applies and a nonsignatory is allowed to enforce an arbitration clause because the claims against the nonsignatory are dependent on, or inextricably intertwined with, the contractual obligations of the agreement containing the arbitration clause. (Jarboe v. Hanlees Auto Group (2020) 53 Cal.App.5th 539, 549.)

By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement. (Boucher v. Alliance Title Company, Inc. (2005) 127 Cal.App.4th 262, 272.) That the claims are cast in tort rather than contract does not avoid the arbitration clause. (Id.) When asserting claims against two defendants that “rely on, make reference to, and presume the existence of” an employment agreement, the Plaintiff is estopped from avoiding arbitration of his causes of action against the nonsignatory defendant. (Id.) A plaintiff’s claims for violation of the Labor Code were held to be intimately founded in and intertwined with his employment relationship with the signatory employment agency, and therefore the nonsignatory client company could compel arbitration of those same claims. (See Garcia v. Pexco (2017) 11 Cal.App.5th 782, 787.)

The Complaint identifies Aligned, Asana and MPTF as the “Entity Defendants” and alleges that they both directly and indirectly employed plaintiff O’Connor, as defined in the Fair Employment and Housing Act (“FEHA”). (Complaint ¶ 5.) In relevant part, the Complaint alleges: each entity aided and abetted discrimination and acted as agents of the other. (Complaint ¶¶ 6-7.) Plaintiff was hired by Entity Defendants on January 2, 2018 and worked at MPTF. (Complaint ¶ 11.) Each of the 14 causes of action in the Complaint is alleged against Moving Defendants without distinguishing them from one another. (See generally Complaint ¶¶ 31-123.)

The Court finds that MPTF and Aligned may enforce the Arbitration Agreement under the doctrine of equitable estoppel because Plaintiff’s claims against them are inextricably intertwined with the Employment Contract. Plaintiff’s allegations rely upon and presume an employment agreement between Plaintiff, Aligned and MPTF because without an employment agreement, Moving Defendants’ conduct would not be covered by FEHA.

Unconscionability has both a procedural and a substantive element, with the former focusing on oppression or surprise due to unequal bargaining power and 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, supra, at 24 Cal.4^th 114.)

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 1322, 1330.) Substantive unconscionability considers whether the agreement reallocates the risks of the bargain in an objectively unreasonable or unexpected manner. (Id.) Arbitration agreements intended to apply to claims arising under FEHA must: (1) provide for neutral arbitrators; (2) provide for more than minimal discovery; (3) require a written award; (4) provide for all of the types of relief that would otherwise be available in court; and (5) not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum. (Armendariz, supra, 24 Cal.4th at 102.) These requirements may apply to non-FEHA employment claims. (See Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 254 (applying the Armendariz factors in the context of claims under the Labor Code).)

Plaintiff argues that the Agreement is substantively unconscionable because: (1) it lacks mutuality; (2) it limits the employers’ liability for attorney’s fees and costs; (3) it limits Plaintiff’s remedies with respect to attorney’s fees and costs; (4) it requires that employees submit claims to an employer dispute resolution program before initiating arbitration proceedings; (5) it contains a confidentiality agreement that limits disclosures regarding the arbitration; and (6) it limits arbitrable claims to those relating to employment, which favors the employer.

Waiver. Company may waive its right to require Employee to arbitrate a claim initiated by Employee that would otherwise be covered by this Agreement. Company may waive its right to require an Employee to share in the filing fee expense, as described in Section 5.4.2 above. In either case, such a waiver shall not be deemed a waiver or relinquishment of Company's right to enforce those rights against Employee in the future or any other employee of Company. (Miller Decl., Exhibit A at § 5.6.)

Although this provision facially appears to grant Moving Defendants certain rights that are not afforded to Plaintiff, the Court finds that this provision is not substantively unconscionable because it does not functionally abridge Plaintiff’s rights. In practice, Plaintiff could waive her rights to require Moving Defendants to arbitrate their claims if Moving Defendants decided to adjudicate any hypothetical claims in a court.

Arbitration shall be conducted in accordance with the Federal Arbitration Act ("FAA") and the National Rules for the Resolution of Employment Disputes (the "Rules") of the American Arbitration Association ("AAA") which are then in effect. The matter shall be heard and determined by one arbitrator mutually selected by the patties as set forth in the Rules. The arbitration shall take place in the city where Employee performs or performed the majority of services for Company or another location if mutually agreed upon by Company and Employee. The law of the State of California and any applicable federal law shall govern the dispute. The arbitrator shall have the authority to order any remedies, legal or equitable, which a party could obtain from a court of competent jurisdiction based on the claims asserted (except attorneys' fees and costs), and nothing more; provided, however, there shall be no authority for a dispute to be arbitrated on a class action basis, nor shall consolidation or joinder with the claims of another person be permitted. The arbitrator shall prepare a written decision setting forth his or her findings of fact and law. Subject to the FAA and other applicable law, the arbitrator's award shall be final and binding, without right of appeal. Any party may seek to have judgment entered upon the award by a court of competent jurisdiction.” (Miller Decl., Exhibit A at § 5.3.)

The abridgement of the right to recover attorney’s fees contravenes Armendariz as it limits Plaintiff’s potential recovery should she prevail on her FEHA claims. Contrary to Plaintiff’s position, however, the Employment Contract contains a severability clause that allows the Court to excise this limitation on recovery from the Arbitration Agreement. The Court finds that the limitation on recovery of attorney’s fees is severable from the Arbitration Agreement.

The Arbitration Agreement provides that discrimination claims “should” be raised before initiating arbitration proceedings but does not require that an employee actually utilize an internal procedure before initiating an arbitration proceeding. (See Miller Decl., Exhibit A at § 5.22.) The Court therefore finds that this provision does not demonstrate substantive unconscionability.

Confidentiality. Everything related to the arbitration proceeding, including, without limitation, discovery, the hearing, the record of the proceeding, and all communications and correspondence regarding the arbitration, are confidential and shall not be open or disclosed to any third party or the public except to the extent both parties agree otherwise in writing, to the extent required in any other proceedings between the parties, or to the extent required in response to a governmental agency or legal process. (Miller Decl., Exhibit A at § 5.5.)

In Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 398, 408 (“Sanchez”), the court of appeal found that an arbitration clause which provided that the arbitration (including the hearing and record of the proceeding) be confidential and not open to the public unless the parties agreed otherwise, or as appropriate in any subsequent proceeding between the parties, or as otherwise may be appropriate in response to governmental or legal process was not substantively unconscionable. The Court finds that the confidentiality provision at issue in this atter is analogous to the provision in Sanchez and therefore finds that it is not unconscionable.

The Arbitration Agreement states that it applies to all claims arising out of Plaintiff’s employment and is not, as Plaintiff suggests, limited to claims involving alleged employer misconduct. As the Arbitration Agreement extends to potential claims brought by Plaintiff and Moving Defendants, the Court finds that the scope of arbitrable disputes provided for in the Arbitration Agreement is not unconscionable.[2]

The Court finds that the Arbitration Agreement is not substantively unconscionable since the limitation on attorney’s fees is severable from the rest of the Arbitration Agreement. Based on the lack of substantive unconscionability, the Court need not analyze procedural unconscionability.

Plaintiff requests that the Court allow her to depose Miller and conduct an evidentiary hearing in order to gather information about Moving Defendants’ evidence concerning the Arbitration Agreement. The Court finds that Plaintiff has not raised arguments or presented evidence that raise a factual dispute regarding the enforceability of the Arbitration Agreement. The Court therefore declines Plaintiff’s request. (See Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 414.)

The Court therefore GRANTS the Motion. The Court sets a status conference on March 2, 2023 at 8:30 a.m. in this department. The parties are ordered to file a joint status report by February 23, 2023. This action is STAYED pending the conclusion of the arbitration proceedings.

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 Court refers to Moving Parties collectively as “Moving Defendants.”

[2] Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 486, which Plaintiff cites in the Opposition, is distinguishable because the arbitration agreement involved a provision that specifically applied to claims arising from the plaintiff’s termination, rather than all claims arising out of the plaintiff’s employment.