Judge Joel R Wohlfeil, Case 37-2023-00002667-CU-OE-CTL 2023-08-18 Tentative Ruling

Judge: Joel R Wohlfeil, Case: 37-2023-00002667-CU-OE-CTL, Date: 2023-08-18 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - August 15, 2023

08/18/2023 09:00:00 AM C-73 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Joel R. Wohlfeil

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Civil - Unlimited Other employment Motion Hearing (Civil) 37-2023-00002667-CU-OE-CTL CALIFORNIA LABOR & WORKFACE DEVELOPMENT AGENCY VS MADDEN CORPORATION [EFILE] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 04/18/2023

The Motion (ROA # 17) of Defendant MADDEN CORPORATION ('Defendant') for an order compelling Plaintiff GRISELDA M. QUEVEDO ('Plaintiff') to arbitrate her sole cause of action for penalties pursuant to the Private Attorneys' General Act ('PAGA') with Defendant on an individual basis, and for an order to stay Plaintiff's representative PAGA claim pending the California Supreme Court's ruling on Adolph v. Uber and stay her individual PAGA claim pending arbitration, is GRANTED.

Plaintiff's individual PAGA claim will be compelled to arbitration.

The representative action will be stayed pending completion of arbitration.

This ruling is based on the analysis se fort below.

Defendant's Request (ROA # 35) for judicial notice is GRANTED.

Individual PAGA Claim As set forth in the recent California Supreme Court opinion in Adolph v. Uber Technologies, Inc. (2023) 14 Cal. 5th 1104, Plaintiff's individual PAGA claim is subject to compelled arbitration. On the other hand, the representative action is not subject to arbitration and will be stayed pending completion of arbitration.

Breach and Waiver The Court can order the parties to arbitrate a controversy if it determines an agreement to arbitrate the controversy exists, unless it determines that the right to compel arbitration has been waived or grounds exist for rescission. Code Civ. Proc. 1281.2(a).

The subject arbitration agreement is attached to the declaration of Monique Arellano as 'Exhibit A.' This agreement includes the following language: 'The employee and the Company will select an arbitrator by mutual agreement. If the employee and the Company are unable to agree on a neutral arbitrator, either party may elect to obtain a list of arbitrators from the Judicial Arbitration and Mediation Service ('JAMS'), Alternative Dispute Resolution ('ADR'), or any other reputable dispute resolution organization. The employment rules for both JAMS and ADR may be obtained from the Human Resources department upon request or can be found online at http://www.jamsadr.com/ and http://www.adrservices.org/' Calendar No.: Event ID: TENTATIVE RULINGS

2962395 CASE NUMBER: CASE TITLE: CALIFORNIA LABOR & WORKFACE DEVELOPMENT AGENCY VS 37-2023-00002667-CU-OE-CTL Plaintiff argues Defendant cannot compel arbitration because it breached this specific provision when it refused Plaintiff's list of arbitrators. This argument is not persuasive. According to the declaration of Plaintiff's counsel, the initial decision to utilize an arbitrator through 'Signature Resolution' was Plaintiff's unilateral decision without any attempted 'mutual agreement.' As a result, it is not clear whether the parties were initially 'unable to agree,' the list Plaintiff provided to Defendant may have been premature, and Defendant may not have breached this provision. To the extent the list of arbitrators was created by Plaintiff's counsel and not transmitted from Signature Resolution, this is not in compliance with the arbitration agreement. The parties can restart this process after entry of this order compelling arbitration of the individual PAGA claim.

Unconscionability, Generally Plaintiff argues the arbitration agreement is unenforceable because it is unconscionable.

Unconscionability has both a 'procedural' and a 'substantive' element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.

Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 114.

Procedural and substantive unconscionability must both be present in order for the Court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. Id. But they need not be present in the same degree. Id. A sliding scale is utilized: 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. Id. Generally, an arbitration agreement is lawful if it: (1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum. Id. at 102.

Procedural Unconscionability The Armendariz Court noted that the employment agreement was adhesive and Plaintiff employee was in no position to refuse to accept the terms of the agreement. Id. at 114, 115.

Use of a contract of adhesion establishes a minimal degree of procedural unconscionability notwithstanding the availability of market alternatives. Walnut Producers of California v. Diamond Foods, Inc. (2010) 187 Cal. App. 4th 634, 646.

Procedural unconscionability focuses on oppression or surprise due to unequal bargaining power.

Gentry v. Superior Court (2007) 42 Cal. 4th 443, 468.

Where the parties to a contract have unequal bargaining power and the contract is not the result of real negotiation or meaningful choice, it is oppressive. Gutierrez v. Autowest, Inc. (2003) 114 Cal. App. 4th 77, 87.

Unfair surprise results from misleading bargaining conduct or other circumstances indicating that a party's consent was not an informed choice. Olvera v. El Pollo Loco, Inc. (2009) 173 Cal. App. 4th 447, 455.

In this action, Plaintiff has not presented the Court with any evidence as to the circumstances surrounding this agreement. Thus, Plaintiff has not demonstrated unfair surprise resulting from misleading bargaining conduct, or other circumstances indicating a lack of informed choice. On the Calendar No.: Event ID: TENTATIVE RULINGS

2962395 CASE NUMBER: CASE TITLE: CALIFORNIA LABOR & WORKFACE DEVELOPMENT AGENCY VS 37-2023-00002667-CU-OE-CTL other hand, the subject arbitration agreement was contained within an employee handbook, and not as a standalone agreement. The wording within this document demonstrates that it was presented on a take it or leave it basis. As a result, it is a contract of adhesion and this establishes a minimal degree of procedural unconscionability.

Substantive Unconscionability '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.

'Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided.' Little v. Auto Stiegler, Inc. (2003) 29 Cal. 4th 1064, 1071.

The substantive element of the unconscionability analysis focuses on overly harsh or one-sided results.

Walnut Producers of California v. Diamond Foods, Inc., supra at 647, 648.

Modification Plaintiff argues the 'employer's unilateral right to modify the arbitration agreement or alter its scope' renders the arbitration agreement substantively unconscionable. The subject arbitration agreement contains two references in which Defendant Madden reserves the ability to unilaterally modify the agreement via a signed writing as necessary to make the agreement 'enforceable.' An employee is expressly prohibited from modifying the agreement 'in any manner ... contrary to this [arbitration] policy.' In Casas v. Carmax Auto Superstores California LLC (2014) 224 Cal. App. 4th 1233, the Court concluded the arbitration agreement was illusory because CarMax could unilaterally modify or terminate the agreement by posting notification at all CarMax locations, without direct notification of employees.

Id. at 1236.

The appellate court disagreed, holding: 'The modification clause in the CarMax DRRP does not invalidate the arbitration agreement.' Id. at 1237.

'Under California law ..., even a modification clause not providing for advance notice does not render an agreement illusory, because the agreement also contains an implied covenant of good faith and fair dealing.' Id., see also Harris v. TAP Worldwide, LLC (2016) 248 Cal. App. 4th 373, 390 ('Hence, we conclude contrary to Sparks, the employer's right to change the Employee Handbook does not render the arbitration agreement illusory.').

Given this authority, Plaintiff's argument is not persuasive. This is especially true in this case where the unilateral power to modify is only permitted as necessary to make the agreement enforceable.

Adequate Discovery Plaintiff argues the agreement does not provide for adequate discovery because the arbitrator has the discretion to limit discovery. The agreement provides as follows: 'The parties shall be entitled to conduct all discovery to which they would have been entitled to had the parties' controversy been filed in court, provided, however, that the arbitrator shall have the discretion to issue protective orders or otherwise limit discovery where reasonably necessary, taking into account the parties' mutual desire to have a speedy, less-formal, cost-effective dispute-resolution mechanism.' This argument is not persuasive. As expressly stated in the agreement, the parties are entitled to conduct all discovery as in court. The arbitrator's discretion to limit discovery is the same discretion as the Court may exercise.

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2962395 CASE NUMBER: CASE TITLE: CALIFORNIA LABOR & WORKFACE DEVELOPMENT AGENCY VS 37-2023-00002667-CU-OE-CTL Judicial Review Plaintiff argues the arbitration agreement is substantively unconscionable because it does not permit for judicial review. The applicable provision states as follows: '[The decision] ... shall then be final and conclusive upon the parties, except to the extent rights for appeal are provided under the FAA or applicable state law. The final award may be appealed to another arbitrator who will be chosen by the parties in the same manner as the original arbitrator. All the rules governing judicial appeals of judgments from the Superior Court shall apply to any appeal of this award, including but not limited to the time frames, deadlines and the standards of review.' As drafted, the parties may, but are not required, to appeal the final award to another arbitration.

However, all awards can be judicially reviewed by a Superior Court. Thus, judicial appeal is permitted and this argument is not persuasive.

Attorneys' Fees and Costs Plaintiff argues the arbitration agreement is substantively unconscionable because it 'attempts to deny Plaintiff the right to attorneys' fees guaranteed under the labor code.' The applicable provision states as follows: 'The parties shall each bear their own costs and attorneys' fees in any arbitration proceeding, provided, however, that the arbitrator shall have the authority to require either party to pay the costs and attorneys' fees of the other party, as is permitted under federal or state law, as a part of any remedy that may be ordered.' Plaintiff's argument is not persuasive. In fact, the arbitration agreement does permit for this award if permitted under applicable law, which would include the Labor Code.

The Court sets a Status Conference on Friday June 28, 2024 at 2:30 PM, the limited purpose of which is to track the disposition of the arbitration.

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