Judge Holly J. Fujie, Case Number: 23STCV16799, Date: 2024-03-18 Tentative Ruling

This is an employment dispute. On July 18, 2023, Plaintiff Colina Marbella Monteon (“Plaintiff”) filed this action against Defendant Apro, LLC, a Delaware Corporation, dba United Pacific (“Defendant”), and Does 1 through 50, alleging causes of action for: (1) disability discrimination; (2) failure to provide reasonable accommodation; (3) failure to engage in good faith interactive process; (4) retaliation; (5) violation of California Family Rights Act; (6) retaliation; (7) wrongful termination; (8) failure to pay wages for rest break periods; (9) failure to pay wages for meal break periods; (10) waiting time penalties; and (11) unfair business practices.

On January 19, 2024, Defendant filed a motion to compel arbitration. On March 5, 2024, Plaintiff filed an opposition. On March 11, 2024, Defendant filed a reply.

The Court OVERRULES each of Defendant’s evidentiary objections to the Declaration of Colin Marbella Monteon.

Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿(Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.) A party moving to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-357.) A party seeking to compel arbitration meets their initial burden of establishing the existence of a valid arbitration agreement by attaching a copy to the motion or petition to compel arbitration. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts involving interstate commerce. (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

“[T]he FAA's procedural provisions (9 U.S.C. §§ 3, 4, 10, 11) do not apply unless the contract contains a choice-of-law clause expressly incorporating them. [Citation.] [T]he question is not whether the parties adopted the CAA’s procedural provisions: The state's procedural statutes (§§ 1281.2, 1290.2) apply by default because Congress intended the comparable FAA sections (9 U.S.C. §§ 3, 4, 10, 11) to apply in federal court. The question, therefore, is whether the parties expressly incorporated the FAA’s procedural provisions into their agreements.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345, italics in original, internal citations and quotation marks omitted.)

“[P]revious cases have held that when an arbitration agreement provides that its ‘enforcement’ shall be governed by California law, the California Arbitration Act (CAA) governs a party's motion to compel arbitration. It follows that when an agreement provides that its ‘enforcement’ shall be governed by the FAA, the FAA governs a party's motion to compel arbitration.” (Victrola 89, LLC, supra, 46 Cal.App.5th at p. 346.)

Defendant contends the FAA governs this motion to compel arbitration. The Court disagrees. The arbitration provision at issue only indicates that arbitration under that agreement is governed by the FAA. (Raynor Decl., Ex. A, ¶ 1.) This is insufficient. Absent language in an arbitration agreement expressly incorporating the FAA’s procedural provisions, the CAA applies by default to a motion to compel arbitration filed in a California state court. (Victrola 89, LLC, supra, 46 Cal.App.5th at p. 345.) This is a California state court, and none of the language in the Arbitration Agreement (defined below) expressly incorporates the procedural provisions of the FAA. (Raynor Decl., Ex. A.)

“[T]he petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) “If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation [citation]—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.” (Ibid.) The moving party meets their initial burden of proving the existence of a valid arbitration agreement by attaching a copy to the motion. (Espejo, supra, 246 Cal.App.4th at p. 1060.)

Defendant attached a copy of an arbitration agreement (the “Arbitration Agreement”) to its moving papers, which contains an arbitration clause regarding disputes arising out of Plaintiff’s employment with Defendant. (Raynor Decl., Ex. A.) Accordingly, Defendant has met its initial burden. The burden now shifts to Plaintiff to challenge the validity of the Arbitration Agreement.

Plaintiff does not dispute the existence of the Arbitration Agreement or that it covers Plaintiff’s claims. Plaintiff does, however, dispute the validity of the Arbitration Agreement, contending that Plaintiff ticked the opt-out box on the agreement and thereby rejected its terms. (Monteon Decl., ¶ 13; ¶¶ Chu Decl., Ex. A.) Plaintiff contends this is sufficient to avoid its enforcement.

In its reply papers, Defendant contends that Plaintiff did not complete all necessary steps to opt out of the Arbitration Agreement. Specifically, Plaintiff did not send an email or separate written document to Defendant indicating her intent to opt out per Paragraph 3 of the Arbitration Agreement. (Raynor Decl., Ex. A, ¶ 3; Monteon Decl., ¶¶ 7-9.) Defendant contends the plain language of the Arbitration Agreement makes clear that its terms apply unless Plaintiff completed the opt-out procedure. Defendant notes that Plaintiff does not dispute she failed to send the email or separate written notice within 30 days of her receipt of the Arbitration Agreement, and that by continuing to work for Defendant, she assented to the terms of the Arbitration Agreement.

The Court finds that on its face, Defendant is correct that the Arbitration Agreement did require Plaintiff to provide a separate email or written notice to Defendant indicating her rejection of the Arbitration Agreement beyond the opt-out box she ticked on that agreement. (Raynor Decl., Ex. A, ¶ 3.) However, the Court finds that Plaintiff’s opposition raises issues concerning unconscionability as a defense to enforcement of the Arbitration Agreement, even if she does not expressly claim it is unconscionable. For example, she contends she is unsophisticated and uneducated, and that there was not much explanation or guidance surrounding the events of her executing the Arbitration Agreement. (Monteon Decl., ¶¶ 5-11.) Accordingly, the Court will analyze whether the Arbitration Agreement is unconscionable.

“[P]rocedural 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.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.) The courts invoke a sliding scale 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, i.e., the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa. (Id., at p. 114.) Plaintiff bears the burden of proving that the provision at issue is both procedurally and substantively unconscionable.

“Procedural unconscionability focuses on the elements of oppression and surprise. [Citations] ‘Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice … Surprise involves the extent to which the terms of the bargain are hidden in a ‘prolix printed form’ drafted by a party in a superior bargaining position.’ [Citations]” (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469.)

“Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create ‘overly harsh’ or ‘‘one-sided’ results’ [Citations] that is, whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner. [Citation] Substantive unconscionability ‘may take various forms,’ but typically is found in the employment context when the arbitration agreement is ‘one-sided’ in favor of the employer without sufficient justification, for example, when ‘the employee’s claims against the employer, but not the employer’s claims against the employee, are subject to arbitration.’ [Citations]” (Roman, supra, 172 Cal.App.4th at pp. 1469-1470.)

As noted above, Plaintiff contends that she ticked the opt-out box on the Arbitration Agreement indicating that she was rejecting it, and that this should be sufficient to avoid its enforcement. (Monteon Decl., ¶¶ 12-14; ¶¶ Chu Decl., Ex. A.) Plaintiff also contends that she is unsophisticated and uneducated, and that there was not much explanation or guidance surrounding the events of her executing the Arbitration Agreement. (Monteon Decl., ¶¶ 5-11.)

Defendant contends the Arbitration Agreement is not unconscionable because it provides for a neutral arbitrator, adequate discovery, all types of relief otherwise available in court, a written arbitration award, and the employer must pay all fees unique to arbitration. (Motion, 18:3-20.) Defendant also contends the arbitration language was not hidden or buried among other documents, and that it spells out the terms in great detail with clearly labeled subheadings. (Id., 17:3-10.)

On balance, the Court finds the Arbitration Agreement is unconscionable. Plaintiff clearly manifested her rejection of its terms when she ticked the opt-out box on the form, which expressly indicated that she was opting out of the agreement and was not subject to its terms. (Chu Decl., Ex. A.) The Court finds no reasonable justification for requiring Plaintiff to reiterate her rejection of those terms in a separate email or written notice to Defendant within 30 days of her receipt of the Arbitration Agreement, other than to lay a trap for unsophisticated persons like Plaintiff. This requirement is objectively unreasonable and one-sided in Defendant’s favor. (Roman, supra, 172 Cal.App.4th at pp. 1469-1470.)

The Court further notes that Defendant does not dispute Plaintiff’s lack of sophistication or education or the circumstances surrounding her execution of the Arbitration Agreement, which the Court construes as a tacit admission that Plaintiff’s argument is meritorious on this point. (Holden v. City of San Diego (2019) 43 Cal.App.5th 404, 418; C. Opposing the Motion—and Rebutting the Opposition, Cal. Prac. Guide Civ. Pro. Before Trial Ch. 9(I)-C, ¶ 9:105.10.)

Accordingly, the Court DENIES Defendant’s motion to compel arbitration and motion to stay Plaintiff’s complaint for damages.

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 further notes that the parties’ respective briefs discuss multiple federal cases concerning arbitration. However, federal cases are not binding on matters of state law. (Goba v. Dick’s Sporting Goods, Inc. (2015) 238 Cal.App.4th 1251, 1267.) The Court therefore declines to address the parties’ arguments with respect to those cases.