Judge Holly J. Fujie, Case Number: 23STCV26575, Date: 2024-07-08 Tentative Ruling

On October 30, 2023, Plaintiff filed the instant complaint (the “Complaint”) seeking civil penalties under the Private Attorneys General Act of 2024, Cal. Lab. Code, § 2698, et seq. (“PAGA”), individually and on behalf of similarly aggrieved employees, against Defendants DO & CO Los Angeles, Inc. (“DCLA”) and Express (collectively, “Defendants”), for alleged violations of the California Labor Code.

On April 19, 2024, Express filed a Motion to Compel Arbitration of Plaintiff’s Individual PAGA Claim and Stay Plaintiff’s Representative PAGA Claim (the “Motion”). Plaintiff filed an opposition to the Motion on June 24, 2024, and Express filed a reply on June 28, 2024.

Plaintiff’s objections to the Declaration of Harvey H.H. Homsey in Support of Express’ Motion are OVERRULED.

“California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967; Code Civ. Proc., § 1281.2.) Similarly, “under the FAA, the strong federal policy favoring arbitration agreements requires courts to resolve any doubts concerning arbitrability in favor of arbitration.” (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 176 (internal quotations omitted).)

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The opposing party has the burden to establish any defense to enforcement. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 579 [“The petitioner, T–Mobile here, bears the burden of proving the existence of a valid arbitration agreement and the opposing party, plaintiffs here, bears the burden of proving any fact necessary to its defense.”].)

Procedurally, a petition to compel arbitration or stay proceedings must state verbatim the provisions providing for arbitration, or must have a copy of them attached. (Cal. R. Ct., rule 3.1330.)

“With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Express provides a copy of the Mutual Arbitration Agreement (the “MAA”) that was electronically executed and signed by Plaintiff on April 22, 2022, when Plaintiff was hired as an associate. (Declaration of Harvey H.H. Homsey in Support of Express’ Motion (“Homsey Decl.”), ¶¶ 6-7, Exh. B.) The MAA provides, in relevant part:

“Except as provided below, both the Company and Individual (on behalf of himself/herself as well as his/her heirs, spouse, successors, assigns, and agents) agree all legal disputes and claims between them shall be determined exclusively by final and binding arbitration before a single, neutral arbitrator as described in this Agreement. Except as provided below, claims subject to this Agreement include without limitation all claims pertaining to Individual’s employment or other relationship with the Company (including application for or termination of employment or other relationship) and all claims for discrimination, harassment, or retaliation; wages, overtime, benefits, or other compensation; breach of any express or implied contract; violation of public policy; negligence or other tort claims including without limitation defamation, fraud, and infliction of emotional distress; and violation of any federal, state, or local law, statute, regulation, or ordinance. Except as provided below, Individual and the Company voluntarily waive all rights to trial in court before a judge or jury on all claims covered by this Agreement…”

Express adequately demonstrates that Plaintiff accepted the terms of the offer during Express’ hiring and onboarding process, and that the electronic record or electronic signature is attributable to Plaintiff. (Homsey Decl., ¶¶ 4-7; Cal. Civ. Code, § 1633.9 [“(a) An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.”].) In her opposition, Plaintiff does not dispute that she entered into an arbitration agreement by electronically signing the MAA. Rather, Plaintiff merely contends that the MAA is unenforceable due to its unconscionability. Thus, the Court finds Express met its burden to demonstrate the existence of an arbitration agreement.

The court also finds that the Plaintiff’s claims are covered within the scope of the MAA. The claims in the Complaint stem from her employment and Defendants’ alleged violations of state labor laws. (Compl. ¶ 14 [“Throughout Plaintiff’s employment, Defendants committed numerous labor code violations under state law.]; Homsey Decl., Exh. B, ¶ 1 [“claims subject to this Agreement include without limitation all claims pertaining to Individual’s employment or other relationship with the Company… and violation of any federal, state, or local law…”].)

To be enforceable, an arbitration agreement in an employment contract must comply with the requirements of Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. The Armendariz requirements are that: “(1) the arbitration agreement may not limit the damages normally available under the statute; (2) there must be discovery sufficient to adequately arbitrate their statutory claim; (3) there must be a written arbitration decision and judicial review sufficient to ensure the arbitrators comply with the requirements of the statute; and (4) the employer must pay all types of costs that are unique to arbitration.” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076.)

Here, the MAA does not limit the damages available to Plaintiff, does not limit discovery, requires a written award, and requires the employer to pay all costs unique to arbitration. (Homsey Decl., Exh. B, ¶¶ 6, 8.) The MAA complies with the requirements of Armendariz.

Regardless of the claim asserted, arbitration agreements are only enforceable if they are not unconscionable. (Armendariz, supra, 24 Cal.4th at 113; Baxter v. Genworth N. Am. Corp., (2017) 16 Cal.App.5th 713, 721.) “Both procedural and substantive unconscionability must be present for a court to refuse to enforce a contract, although they need not be present in the same degree.” (Baxter, supra, 16 Cal.App.5th at 721 (citing Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243.) Procedural unconscionability focuses on (1) “oppression” resulting from unequal bargaining power that adheres the weaker party to nonnegotiable terms and (2) “surprise” involving “the extent to which the supposedly agreed-upon terms are hidden in a prolix printed form drafted by the party seeking to enforce them.” (Flores v. Transamerica HomeFirst, Inc., (2001) 93 Cal.App.4th 846, 853.) Substantive unconscionability “focuses on overly harsh or one-sided results [that lack substantial justification].” (Baxter, supra, 16 Cal.App.5th at 724; Armendariz, supra, 24 Cal.4th at 117-18.)

As initial matter, the Court notes that far from being a hidden arbitration provision, the MAA is a standalone two-page document entitled “Mutual Arbitration Agreement,” highlighting for Plaintiff that she was signing an arbitration agreement and that by signing the Agreement, Plaintiff agreed to arbitrate all arbitrable claims. (Homsey Decl., Exh. B.) Plaintiff’s sole argument regarding procedural unconscionability is that the arbitration agreement is a contract of adhesion as a mandatory condition of employment. A mandatory arbitration agreement in the employment context establishes a small degree of procedural unconscionability. (Armendariz, supra, 24 Cal.4th at 113 (“The term [contract of adhesion] signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.”); Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 (“It is well settled that adhesion contracts in the employment context, that is, those contracts offered to employees on a take-it-or-leave-it basis, typically contain some aspects of procedural unconscionability.) Plaintiff’s opposition does not establish any other basis for finding the agreement procedurally unconscionable.

Accordingly, Plaintiff has demonstrated minimal procedural unconscionability and must “make a strong showing of substantive unconscionability to render the arbitration provision unenforceable.” (Gatton, supra, 152 Cal.App.4th at 586.)

Plaintiff contends that the MAA is substantively unconscionable mainly due to its overbroad scope, unlimited duration and lack of mutuality.

Foremost, the Court finds that the MAA between Plaintiff and Defendants is mutual as it binds both parties to arbitrate any controversy arising out of Plaintiff’s employment, and that both parties waive all rights to trial in court before a judge or jury on all claims covered by the MAA. (Homsey Decl., Exh. B, ¶ 1; Baltazar, supra, 62 Cal.4th at 1248 (“Baltazar argues that the arbitration agreement at issue is unfairly one-sided because it lists only employee claims as examples of the types of claims that are subject to arbitration. . . . We disagree. The arbitration agreement at issue here makes clear that the parties mutually agree to arbitrate all employment-related claims”).) Similarly, here, the agreement is mutual, and Plaintiff’s argument does not establish substantive unconscionability.

The Court also notes that the scope of the MAA is explicitly limited to claims “pertaining to [Plaintiff’s] employment or other relationship” with Express. (Homsey Decl., Exh. B, ¶ 1.) Plaintiff’s only relationship with Express is as an employee or applicant; as such, this proviso does not contribute to substantive unconscionability. Additionally, the MAA covers claims arising from Plaintiff’s employment. Thus, notwithstanding the provision that the MAA remains in effect even after termination of Plaintiff’s employment, the MAA will last only until the statute of limitations on Plaintiff’s potential employment-based claims has lapsed, and is not infinite in duration as Plaintiff suggests.

Plaintiff further argues that the MAA is substantively unconscionable due to the inclusion of non-arbitrable claims, lack of provision for judicial review, inclusion of pre-dispute jury waiver, and improper imposition of stay. These arguments lack merit. Regarding the agreement to stay any claim in court while the arbitrable claims undergo arbitration, it is well within the Court’s power to do so as contemplated by both courts and the Legislature, and thus does not contribute to unconscionability. (Cal. Civ. Proc., § 1281.4; Adolph v. Uber Technologies, Inc., 14 Cal.5th 1104, 1123-24 (2023).

The lack of provision expressly allowing for judicial review does not equate to the MAA barring any judicial review, and thus does not render the MAA unconscionable. Plaintiff cites no authority requiring arbitration agreements to expressly provide for judicial review.

Plaintiff also points to the failure to exclude sexual harassment and assault claims among the covered claims, which goes against the Labor Code section 432.6 and the Federal Ending Forced Arbitration of Sexual Assault and Harassment Act of 2021, which prohibit the compelled arbitration of such claims. Suffice it to state that Plaintiff is not alleging any of these claims that she contends are exempt from arbitration.

Regarding the contention that the MAA contains an unlawful pre-dispute jury waiver, the MAA provides that jury trial will be waived “to the maximum extent permitted by law.” (Homsey Decl., Exh. B, ¶ 9.) Thus, the MAA contemplates that this waiver will not be allowed if it is not permitted by law. Thus, Plaintiff has failed to demonstrate any substantive unconscionability.

Accordingly, the Court finds Plaintiff failed to meet her burden of establishing that the arbitration provisions are unenforceable as unconscionable.

Finally, since the MAA itself specified that it included claims against Express’ alleged joint or co-employer (such as DCLA in this case), Plaintiff’s claims against DCLA are likewise subject to arbitration. (Fuentes v. TMCSF, Inc., 26 Cal. App. 5th 541, 549 (2018). (“The arbitration clause itself specified the entities to which it applied.”)

The Motion is GRANTED. Plaintiff’s individual PAGA claim is hereby compelled to arbitration, and Plaintiff’s representative PAGA claim is stayed pending completion of arbitration. The Court sets a Status Conference for January 6, 2025, regarding the status of arbitration.

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