Judge Holly J. Fujie, Case Number: 23STCV30816, Date: 2024-06-07 Tentative Ruling

This is an action for wrongful termination against a former employer. On December 18, 2023, Plaintiff Nancy Mallco Gavilan (“Plaintiff”) filed a complaint (the “Complaint”) against Defendants FAM, LLC, a California limited liability company and FAMBRANDS, LLC, a California limited liability company (jointly “Defendants”) alleging the following: violations under Government Code §§12940 et seq (1) discrimination; (2) retaliation; (3) failure to prevent discrimination and retaliation; (4) failure to provide reasonable accommodations; (5) failure to engage in a good faith interactive process; and (6) wrongful termination in violation of public policy and (7) failure to permit inspection of personnel and payroll records under the California Labor Code. Plaintiff requests relief in the form of declaratory judgment and demands over $25,000 and a jury trial.

On February 19, 2024, Defendants filed the instant Motion to Compel Arbitration (the “Motion”). On May 28, 2024, Plaintiff filed opposition papers to the Motion and on May 31, 2024, Defendants filed a reply.

Plaintiff’s evidentiary objections to the Declaration of Kasey Konkright Nos. 1-10 are overruled.

Defendants specially appear and pray for an order compelling Plaintiff to submit to binding arbitration pursuant to the parties' written contract which expressly provides that all complaints or disputes between the parties are to be arbitrated.

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) Under Code of Civil Procedure 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.”

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such 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:

(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 right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. (Marcus & Millichap Real Estate Inv. Brokerage Co. v. Hock Inv. Co. (1998) 68 Cal.App.4th 83, 88.) When presented with a petition to compel arbitration, the trial court's first task is to determine whether the parties have in fact agreed to arbitrate the dispute. (Id.)

“Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394 explained: ‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. 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 (see §1281.2(a), (b))—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ (Rosenthal, supra, at 413.) According to Rosenthal, facts relevant to enforcement of the arbitration agreement must be determined ‘in the manner . . . provided by law for the . . . hearing of motions.’ (Rosenthal, supra, at 413, quoting §1290.2.) This ‘ordinarily mean[s] the facts are to be proven by affidavit or declaration and documentary evidence, with oral testimony taken only in the court’s discretion.’ (Rosenthal, supra, at 413–414; . . .).” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 761-62.)

Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) “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.)

Defendants provide the parties’ Arbitration Policy Statement and Agreement (“Agreement”) which states that:

My signature herein acknowledges that I understand the above Arbitration Policy and agree to abide by its terms. . . Furthermore, I also agree, in accordance with the Company’s Arbitration Policy, I shall submit any dispute, including but not limited to, termination of my employment, which arise or are related to my employment with the Company, to binding arbitration within a period of one (1) year as of the date the dispute arose. I agree that arbitration shall be the sole way to resolve all disputes arising from my employment with the Company or which are related to my employment or its termination."

Mr. Konkright, Defendants’ Director of Talent from November 7, 2017 to December 31, 2019 and its Head of Talent and Human Resources from January, 2020 to the present, states that as part of Plaintiff’s employment as a warehouse associate, Plaintiff entered into the Agreement on March 1, 2017. (Konkright Decl. ¶¶ 4, 7.) Because Mr. Konkright was not hired until November 1, 2017, Plaintiff was onboarded by HR professional, Maxbell Galindo, who speaks English and Spanish, who presented the form to Plaintiff during a customary 1-hour onboarding session for new hires in which they are encouraged to ask questions and have 48 hours to return the signed agreements. (Id. ¶ 8.) Mr. Konkright identified Plaintiff’s signature on the Agreement through a comparison of Plaintiff's securely maintained personnel files. (Id. ¶ 9.) Plaintiff does not recall reading the Agreement and asserts that no one ever reviewed or discussed the Agreement’s provisions with her during a 20-minute onboarding meeting in Maxbell Galindo’s office. (Declaration of Nancy Mallco Gavilan ¶¶ 5-6.) Plaintiff contends that Mr. Konkright’s declaration is founded on inadmissible hearsay because it lacks personal knowledge at the time of Plaintiff’s hiring and refers to general hiring practices observed by Mr. Konkright months after Plaintiff’s onboarding was complete. (Opp’n., p. 5.) Nonetheless, Plaintiff does not contest that the signature on the Agreement belongs to her. (Gavilan Decl., ¶ 5.) Therefore, the Court finds that there exists an agreement to arbitrate.

Here, the Agreement states that any dispute concerning labor shall be resolved by binding arbitration. As pleaded in the Complaint, the dispute arises from the Defendants’ alleged failure to accommodate Plaintiff’s work restrictions and alleged retaliatory termination of Plaintiff’s employment as an order-picker and packager at Defendants’ clothing and fashion item warehouse. (Compl., ¶¶ 18-25.)

In fact, the Defendants correctly point out that Plaintiff’s opposition specifically calls out the Agreement as a condition of employment with Defendants. (Gavilan Decl., ¶4.) Plaintiff’s contentions around the vagueness and application of the Agreement are unpersuasive as the Agreement specifies that it applies to labor disputes. Thus, the Court finds the dispute subject to the Agreement.

In opposition, Plaintiff argues that the Agreement is unenforceable on unconscionability grounds.

“Unconscionability” is one of the principal defenses to a request for arbitration. It is a generally applicable contract defense under California law (Civ. Code, § 1670.5). Two elements must be shown: (1) “procedural” unconscionability and (2) “substantive” unconscionability. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 C4th 83, 113-115.) The issue is reviewed in the context of when the contract was signed. (Bakersfield College v. California Comm. College Athletic Ass'n (2019) 41 CA5th 753, 762.) “The procedural element of unconscionability focuses on whether the contract is one of adhesion. Procedural unconscionability focuses on whether there is “oppression” arising from an inequality of bargaining power or “surprise” arising from buried terms in a complex printed form. The substantive element addresses the existence of overly harsh or one-sided terms. An agreement to arbitrate is unenforceable only if both the procedural and substantive elements are satisfied. However…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.” (McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87.) (internal quotations and citations omitted).

Procedural unconscionability focuses on the elements of oppression and surprise. (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469.) ‘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.’ (Roman, p. 1469.) Arbitration contracts imposed as a condition of employment are typically adhesive. (Armendariz, pp. 114-115.)

Plaintiff argues that the Agreement is procedurally unconscionable to a high degree because Plaintiff was required to consent to arbitration as a “take it or leave it” condition of employment, thereby making the signed Agreement an unenforceable and procedurally unconscionable adhesion contract. (Opp’n p. 7; McManus, p. 101.) Plaintiff addresses the plain language of the Agreement which states “By simply accepting or continuing your employment with Defendants, you automatically agree that arbitration is the exclusive remedy.” (Opp’n p. 8; Konkright Decl., Exh. B, emphasis added.) Moreover, Plaintiff asserts that the terms of the Agreement were never explained to Plaintiff, and the Agreement required her to “go to another source to learn the full ramifications of the arbitration agreement and rules of the forum.” (Opp’n p.8; Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 721.)

Plaintiff does not submit evidence suggesting she did not actually have time to review the documents, ask questions about the documents, or actually read the documents. Plaintiff submits no evidence that the agreement was provided on a “take it or leave it basis.” (Opp’n p. 8.) On the other hand, Defendants argue that they avoided unconscionable procedures by providing the one-page Agreement in Spanish with 48 hours to review and ask questions to the HR professional. (Reply, p .5.)

The circumstances surrounding Plaintiff’s signing the Agreement present low procedural unconscionability because despite Plaintiff’s claims that no one reviewed the Agreement with her, told her the terms were negotiable, or that opting out was an option, this does not demonstrate procedural unconscionability. (See Sanchez v. Valencia Holding Co. (2015) LLC, 61 Cal.4^th 899, 914 [(“Valencia was under no obligation to highlight the arbitration clause of its contract, nor was it required to specifically call that clause to Sanchez’s attention. Any state law imposing such an obligation would be preempted by the FAA.”].) The Agreement cannot be held to be a contract of adhesion because Plaintiff was able to reject the Agreement and could have bargained for terms of her choice if she so desired. The Court finds there is no procedural unconscionability.

Plaintiff argues that the Agreement is substantively unconscionable because it: (1) provides for arbitration to be administered by the American Arbitration Association (“AAA”), allowing only Defendants to ask the AAA to appoint an arbitrator thereby limiting the Plaintiff’s ability to select a neutral arbitrator; (2) fails to discuss the available forms of relief in arbitration, (3) it does not provide for adequate discovery, adequate judicial review, or a written arbitration award, (4) it impermissibly shifts cost to Plaintiff, and (5) limits the three year statute of limitations for Fair Employment and Housing Act (“FEHA”) claims to (1) year as to the date of termination, or (1) year as if the alleged incident(s) for termination disputes asserting discrimination, as seen in the instant action. (Opp’n. pp. 9-10; Konkright Decl., Exh. B.)

In reply, Defendants cite the AAA Employment Rules as authority for the requirements that Plaintiff alleges are silent in the agreement. (Reply, p. 6.) Armendariz requires an arbitration agreement to meet certain minimum requirements, including the provision of adequate discovery. (Armendariz at 90, 104-106.) In Armendariz, the court stated that the parties were entitled to discovery sufficient to vindicate their claims. (Armendariz, supra, 24 Cal.4th p. 106.) The court also acknowledged that discovery limitations are an integral and permissible part of the arbitration process. (Id.) ‘‘[A]dequate’’ discovery does not mean ‘unfettered’ discovery. (Id. pp. 105-106.) Armendariz specifically recognized that parties may agree to something less than the full panoply of discovery permitted under the California Arbitration Act, C.C.P §1283.05. (Id.) Therefore, the Court finds there is no substantive unconscionability.

The Court further finds that a stay of the action is appropriate in this case once the motion is granted, as Code of Civil Procedure § 1281.4 stipulates that the Court shall stay the action until arbitration is completed. (Code Civ. Proc., § 1281.4.) Therefore, the Court GRANTS the Defendants’ Motion to Compel Arbitration and STAYS the proceeding pending a final resolution of Plaintiff’s claims through arbitration and sets a Status Conference re Arbitration for March 31, 2025 at 8:30 a.m..

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