Judge Jill Feeney, Case Number: 22STCV10500, Date: 2023-10-26 Tentative Ruling

This is an action for violation of the California Private Attorneys General Act (“PAGA”) arising from alleged Labor Code violations. Plaintiff alleges that she began working as a delivery driver for Defendant in September 2019. (Compl., ¶11.) Plaintiff and other aggrieved employees worked over eight hours a day, over twelve hours a day, and over forty hours a week without receiving overtime pay. (Compl., ¶12.) Defendant did not establish a legitimate alternative work week pursuant to California Labor Code and relevant industrial wage orders by failing to provide affected employees with a written agreement with a proposed alternative schedule. (Compl., ¶13.) Plaintiff and other aggrieved employees were denied rest periods, meal periods, and payment of minimum, regular, and overtime compensation in violation of California Labor Code. (Compl., ¶14.)

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, California Code of Civil Procedure 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 [citations omitted]; Code Civ. Proc. § 1281.2.)

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 party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) The trial court “sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Id.) General principles of contract law govern whether parties have entered a binding agreement to arbitrate. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236; see also Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

Whether there is a written agreement to arbitrate is a matter of contract, and courts must enforce arbitration contracts according to their terms. (Banc of California, National Association v. Superior Court of Los Angeles County (2021) 69 Cal.App.5th 357, 366.) A party cannot be required to submit to arbitrate any dispute to which he has not agreed to arbitrate. (Id.)

Plaintiff objects to the declaration of Sonya White. The objections are overruled because White is Defendant’s Executive Director who has access to and has reviewed Defendant’s business records, onboarding documents, and onboarding processes. Therefore, White would have personal knowledge of the contents of these records. Additionally, White properly authenticates each of the exhibits attached to her declaration.

MANDATORY ARBITRATION. THE EMPLOYE AND COMPANY AGREE THAT ANY COVERED CLAIM (DEFINED BELOW), WHETHER BASED IN CONTRACT, TORT, STATUTE, COMMON LAW, FRAUD, MISREPRESENTATION OR ANY OTHER LEGAL THEORY OR EQUITABLE THEORY SHALL BE SUBMITTED TO INDIVIDUAL BINDING ARBITRATION.

Without limiting the above, the Employee and the Company each specifically acknowledges and agrees that all claims involving minimum wages, overtime, unpaid wages, expense reimbursement, wage statements, and claims involving meal and rest breaks shall be subject to arbitration under this Agreement.

Defendant’s executive director, Sonya White, testifies that Plaintiff executed the arbitration agreement on August 16, 2019. (White Decl., ¶3.) Defendant’s employees complete the onboarding process by downloading an application and completing each required task, including the arbitration agreement. (Id., ¶¶11-14.) After the employee starts the arbitration agreement, the employee is required to scroll through the whole agreement, the employee can tap the “I Agree and Accept” button and then tap “Continue.” (Id., ¶15.) The application then displays a green checkmark indicating the employee accepted the agreement. (Id.) The application gives the employee as much time as they wish to review the terms of the agreement and includes an employee acknowledgment above the “I Agree and Accept” button. (Id., ¶¶16-17.) The employee acknowledgement explains that by tapping the button, the employee agrees to be bound by the terms of the agreement. (Id.)

Plaintiff accepted the agreement on August 16, 2019 using her own unique username, email, account, and password. (Id., ¶19.) Defendant provides the online records showing Plaintiff’s unique transporter identification number and the date and time Plaintiff’s unique username and password were used to complete the agreement. (Id., ¶19, Exh. 2.)

“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.” (Civ. Code, § 1633.9, subd. (a).) “The effect of an electronic record or electronic signature attributed to a person under subdivision (a) is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including the parties' agreement, if any, and otherwise as provided by law.” (Id., subd. (b).)

“Contracts formed on the Internet come primarily in two flavors: ‘clickwrap’ (or ‘click-through’) agreements, in which website users are required to click on an “I agree” box after being presented with a list of terms and conditions of use; and ‘browsewrap’ agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.” (Nguyen v. Barnes & Noble, Inc. (9th Cir. 2014) 763 F.3d 1171, 1176.) Browsewrap agreements are generally unenforceable where the hyperlinks to terms and conditions do not require the user to manifest assent. (Ibid.) California courts have generally found that clickwrap agreements are enforceable. (Sellers v. JustAnswer LLC (2021) 73 Cal.App.5th 444, 466; Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 862; Swift v. Zynga Game Network, Inc. (N.D. Cal. 2011) 805 F.Supp.2d 904, 912United States v. Drew (C.D.Cal. 2009) 259 F.R.D. 449, 462 n.22.)

Here, it appears that Defendant’s agreement is a clickwrap agreement requiring employees to click on the “I Agree and Accept” box after scrolling through the entirety of the agreement. The employee acknowledgement above the click box would put a reasonably prudent person on notice that clicking the box and submitting the form communicated assent to the Terms of Use. (See Specht v. Netscape Communications Corp. (2d Cir. 2002) 306 F.3d 17, 29-30 [“a consumer’s clicking on a download button does not communicate assent to contractual terms if the offer did not make clear to the consumer that clicking on the download button would signify assent to those terms”]; see also Fteja v. Facebook, Inc. (S.D.N.Y. 2012) 841 F.Supp.2d 829, 835 [where the sentence “By clicking Sign Up, you are indicating that you have read and agree to the Terms of Service” appeared immediately below the “Sign Up” button and the “Terms of Service” was underlined and hyperlinked, the court held plaintiff “was informed of the consequences of his assenting click and he was shown, immediately below, where to click to understand those consequences. That was enough.”].)

Accordingly, the Court finds an arbitration agreement exists between Plaintiff and Defendant. The scope of the arbitration agreement also covers the instant action because this is a claim involving overtime, unpaid wages, and meal and rest breaks which are explicitly covered under the agreement.

A motion to compel arbitration based on the FAA must show not only that that the employer engaged in interstate commerce but also that “the employment relationship involved interstate commerce.” (Lane v. Francis Capital Management LLC, supra, 224 Cal.App.4th at pp. 687-688.) Courts have found that where the FAA is found not to apply, the California Arbitration Act (Code Civ. Proc. § 1280 et seq.) applies. (See Valencia v. Smyth, supra, 185 Cal.App.4th at p. 178.)

Here, Plaintiff argues that an FAA exemption applies because, as a transportation worker, she is a “last mile” package delivery driver and is therefore exempt from the FAA. (Rittmann v. Amazon, Inc. (9th Cir. 2020) 971 F.3d 904. (“Rittman”).)

“[A]ny class of workers directly involved in transporting goods across state or international borders falls within [9 United States Code] § 1’s exemption” for contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce. (Southwest Airlines Co. v. Saxon (2022) 142 S.Ct. 1783, 1789 (“Saxon”); see also 9 U.S. Code § 1 [FAA exemption].) The Supreme Court has confined the “class of workers” language to exempt only “contracts of employment of transportation workers.” (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 119, emphasis added.) Subsequently, several courts have held that “transportation workers” were workers “who are actually engaged in the movement of interstate or foreign commerce or in work so closely related thereto as to be in practical effect part of it.” (Singh v. Uber Techs. Inc. (3d Cir. 2019) 939 F.3d 210, 220-221, quoting Tenney Engineering, Inc. v. Electric Workers (3d Cir. 1953) 207 F.2d 450, 452).

In Rittman, plaintiffs provided delivery service for a subsidiary of defendant Amazon.com. (Rittmann, supra, 971 F.3d at p. 907.) Defendant argued that the workers were solely involved in intrastate commerce not interstate commerce as they only made deliveries within a small area. (Id. at p. 909) The court rejected this theory and stated that workers engaged in interstate commerce need not cross state lines. (Id. at p. 915.) The court then articulated that Amazon’s business model is premised on delivering goods which can and do arrive from other states and until delivered those goods were in the stream of interstate commerce. (Id.) Thus, the plaintiffs were transportation workers engaged in interstate commerce. (Id.) Delivery drivers who worked on the “last mile”—final leg of shipment of interstate goods to customers who ordered the shipped good—were part of the interstate transaction by virtue of their participation in the conclusion of the interstate transaction of the goods.

Plaintiff argues that, like Rittman, here, she was a transportation worker who was engaged in interstate commerce because she delivered Amazon packages exclusively and those packages were a part of interstate commerce. Plaintiff testifies that her primary job duty was to make “last-mile delivery” of Amazon packages from the warehouse to the final destination address. (Lipsey Decl., ¶3.) Plaintiff believed the packages she transported to their final destination were delivered to the Amazon warehouse from all over the country. (Id.)

Defendant argues that Plaintiff is subject to the FAA because Defendant is a company independent of Amazon that makes local deliveries for its clients. However, Defendant does not dispute Plaintiff’s assertion that her primary duties were to deliver packages from an Amazon warehouse to local addresses and that the packages originated from all over the country. Even if Defendant itself makes local deliveries and does not exclusively deliver Amazon packages, Plaintiff’s specific duties were similar to those of the plaintiff in Rittman. Because Plaintiff completed the last leg of shipments of interstate goods to customers, Plaintiff was part of the interstate transaction. Plaintiff has established she is a transportation worker subject to exemption under FAA § 1.

Although Plaintiff is exempt from the FAA, the arbitration agreement states “the Federal Arbitration Act (“FAA”) and federal common law applicable to arbitration shall govern the interpretation and enforcement of this Agreement. If, for any reason, the FAA or federal common law is found not to apply to this Agreement (or its agreement to arbitrate), then applicable state law shall govern.” (White Decl., Exh. 1, p.3.) Because the FAA no longer applies, California law shall govern the interpretation and enforcement of the arbitration agreement. California law does not have an exception for interstate commerce employees. (See Code Civ. Proc., § 1280, et seq.) Thus, the arbitration agreement is enforceable under California law.

Plaintiff argues that Defendant waived its right to enforce the arbitration agreement because it has been more than a year since it filed its Answer to file this motion. Both parties have engaged in litigation, propounded and responded to discovery, incurred costs for this discovery, taken depositions, and set a date for trial. Plaintiff also argues she will be prejudiced if she is forced to arbitrate because she will incur more fees and costs if this matter is further delayed.

“As with any other contractual right, the right to arbitration may be waived.” (Chase v. Blue Cross of California (1996) 42 Cal.App.4th 1142, 1151 [citing Code Civ. Proc. § 1281.2(a)].) “A party seeking to prove waiver of a right to arbitration must demonstrate (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1203.) Further, a petition to compel arbitration "should be brought within a reasonable time." (Zamora v. Lehman (2010) 186 Cal.App.4th 1, 17.) However, what constitutes a “reasonable time” is a question of fact depending on the situation of the parties, the nature of the transaction, the facts of the case, and any prejudice suffered by the opposing party. (See, e.g., Spear v. California State Auto. Ass'n (1992) 2 Cal.4th 1035, 1043.)

The party seeking to establish waiver has a heavy burden of proof and must show prejudice. (St. Agnes Med. Ctr. v PacifiCare of Cal. (2003) 31 C4th 1187, 1195.) A court must resolve any doubts about whether a party’s conduct has waived the party’s right to compel arbitration in favor of arbitration. (Franco v Arakelian Enters., Inc. (2015) 234 CA4th 947, 958.) A party does not waive its right to arbitrate merely by participating in litigation. (Gamma Eta Chapter of Pi Kappa Alpha v. Helvey (2020) 44 Cal.App.5th 1090, 1101.) Prejudice arises when a party’s conduct substantially undermines the public policy favoring arbitration, such as using discovery to gain information that party could not have gained in arbitration or waiting until the eve of trial to seek arbitration. (Id.)

Here, Plaintiff’s counsel testifies that the parties have already begun the discovery process. Plaintiff received Defendant’s responses to Plaintiff’s Requests for Admissions and two sets of Form Interrogatories. (Cox Decl., ¶¶2-3.) Additionally, Plaintiff’s counsel took a full-day deposition of Defendant’s Person Most Knowledgeable. (Id., ¶4.) Finally, the parties scheduled a mediation date for July 20, 2023, which was canceled by Defendant. (Id., ¶5.)

Plaintiff fails to provide evidence of prejudice. Although the parties have been participating in litigation for over a year, there is no evidence that Defendant obtained discovery that it could not have obtained during arbitration. Even if Plaintiff incurred costs related to discovery, Plaintiff would likely have incurred these costs even if the parties arbitrated this matter. Trial is set for July 2024, nearly a year from now.

Plaintiff fails to meet her burden of showing Defendant has waived its right to arbitrate. Defendant’s mere participation in discovery does not waive its right to arbitrate. Although Defendant waited more than a year to file the instant motion, the facts do not show that this was not a reasonable time. Trial is still far in the future and the parties have not completed discovery. Thus, Defendant did not waive its right to arbitrate.

The doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.”¿¿(Sonic-Calabasas A, Inc. v. Moreno (2013)¿57 Cal.4th 1109, 1133.) It consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.”¿¿Id.¿ Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present to the same degree.¿(Armendariz v. Found. Health¿Psychcare¿Servs., Inc. (2000)¿24 Cal.4th 83, 114 (abrogated in-part on other grounds by¿Concepcion, 563 U.S. 333).)¿¿¿

“Essentially a sliding scale is invoked 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.¿ [Citations.]¿ In other words, the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”¿¿(Id.) “The party resisting arbitration bears the burden of proving unconscionability.”¿(Pinnacle Museum Tower¿Ass’n¿v. Pinnacle Market Dev. (US) (2012) LLC,¿55 Cal.4th 223, 247.¿

Procedural unconscionability “pertains to the making of the agreement.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) Procedural unconscionability “focuses on two factors: ‘oppression’ and ‘surprise.’ ‘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 supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.” (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484.) “The circumstances relevant to establishing oppression include, but are not limited to (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.”¿¿(Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc.¿(2015) 232 Cal.App.4th 1332, 1348, fn. omitted.)¿

A contract of adhesion typically denotes a standardized contract imposed and drafted by the party of superior bargaining strength which relegates to the subscribing party only the opportunity to adhere to the contract or reject it. (Armendariz, supra, 24 Cal.4th at 113.) The adhesive nature of a contract is one factor that the courts may consider in determining the degree of procedural unconscionability. (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84 fn.4.)

Here, the arbitration agreement was a contract of adhesion because the agreement allowed Plaintiff to either adhere to it or reject it by tapping the “I Agree and Accept” box or refusing to tap the button. However, the arbitration agreement was a separate document from the other onboarding tasks, was not concealed, and was clearly delineated with bold text. Thus, the arbitration agreement has a minimal degree of procedurally unconscionable.

An agreement is substantively unconscionable if it imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably favorable,” or “so one-sided as to ‘shock the conscience.’”¿(Sanchez v. Valencia Holding Co., LLC¿(2015) 61 Cal.4th 899, 910-911¿(Sanchez).)¿“All of¿these formulations point to the central idea that unconscionability doctrine is concerned not with ‘a simple old-fashioned bad bargain’ [citation], but with terms that are ‘unreasonably favorable to the more powerful party.’ [Citation.]”¿(Id. at p. 911.)¿“These include ‘terms that impair the integrity of the bargaining process or otherwise contravene the public interest or public policy; terms (usually of an adhesion or boilerplate nature) that attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law, fine-print terms, or provisions that seek to negate the reasonable expectations of the¿nondrafting¿party, or unreasonably and unexpectedly harsh terms having to do with price or other central aspects of the transaction.’ ”¿(Id. at p. 911.)

The arbitration agreement contains a provision requiring a waiver of representative action claims. Additionally “[i]n the event that the waiver of representative actions is found to be unenforceable in whole or in part, then the representative action will be heard in court and all remaining claims covered by the agreement would remain subject to arbitration.

The California Supreme Court has held that a waiver of representative claims under PAGA in an employment agreement is unenforceable and that this rule is not preempted by the FAA. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 382-383, 388-389 (overruled on other grounds).) However, the unenforceability of the PAGA waiver was not determined by an unconscionability analysis but rather a public policy analysis. (Id. at pp. 382-384.) In Iskanian, the California Supreme Court analyzed two statutes from which the doctrine of “unwaivability of certain statutory rights” derives – Civil Code section 16682 and Civil Code section 3513.3 (Id. at pp. 382-838.) Based on this analysis, the California Supreme Court held that an employee’s right to bring a PAGA action is not waivable as against public policy because “PAGA was clearly established for a public reason, and agreements requiring the waiver of PAGA rights would harm the state’s interests in enforcing the Labor Code and in receiving the proceeds of civil penalties used to deter violations.” (Id. at p. 383.)

Defendant also moves to dismiss Plaintiff’s representative PAGA claims on the grounds that Plaintiff will no longer have standing to represent others under PAGA’s statutory scheme. However, since this motion was filed, the California Supreme Court ruled that even if a court compels a PAGA representative to arbitrate his individual claims, the representative is not enjoined from pursuing the PAGA claim because the arbitrated individual claims remain part of the same lawsuit as the representative claims remaining in court and the representative remains an “aggrieved employee” who may continue the PAGA claims. (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104.) Here, Plaintiff is not precluded from litigating her representative claims in Court even if her individual claims must be arbitrated.

If an application has been made to a court of competent jurisdiction, whether in this State or not, for an order to arbitrate a controversy which is an issue involved in an action or proceeding pending before a court of this State and such application is undetermined, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until the application for an order to arbitrate is determined and, if arbitration of such controversy is ordered, until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.

The Court may except any severable issues (such as a PAGA claim) from a stay. The last line of Code Civ. Proc., § 1281.4 indicates that a court may choose to decline to issue a stay (even a mandatory one) if an issue is severable. Although the representative PAGA claim is severable from Plaintiff’s individual claim, the parties do not dispute that the two claims will involve overlapping issues. Since the arbitration of Plaintiff’s individual claim will involve overlapping issues with the representative claim to remain in court, the action is stayed pending arbitration of Plaintiff’s individual claims.