Judge: Jon R. Takasugi, Case: 22STCV13194, Date: 2022-10-20 Tentative Ruling

Case Number: 22STCV13194    Hearing Date: October 20, 2022    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendants’ motion to compel arbitration is GRANTED as to all claims but for the severed sexual harassment and the associated NIED/IIED claim.

On 4/20/2022, Plaintiff S.E. filed suit against University of Southern California, Keck Medicine of USC, and Sangeeta Parekh, alleging: (1) sexual harassment; (2) harassment; (3) violation of FEHA; (4) discrimination; (5) retaliation; (6) violations of Labor Code; (7) failure to provide reasonable accommodation; (8) failure to engage in timely, good, interactive process; (9) failure to prevent violations of FEHA; (10) violation of public policy; (11) intentional/negligent infliction of emotional distress; (12) intentional/negligent infliction of emotional distress; (13) failure to pay statutorily mandated wages; and (14) unlawful, unfair and/or fraudulent arbitration agreements.

Now, Defendants move to compel arbitration of Plaintiff’s Complaint.

Legal Standard

Where the Court has determined that an agreement to arbitrate a controversy exists, the Court shall order the petitioner and the respondent to arbitrate the controversy …unless it determines that…  grounds exist for rescission of the agreement.” (Code Civ. Proc., § 1281.2.) Among the grounds which can support rescission are fraud, duress, and unconscionability. (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) The Court may also decline to compel arbitration wherein there is possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2 (c).)

Discussion 

The party moving to compel arbitration “bears the burden of proving [the] existence [of an arbitration agreement] by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) The moving party also bears the burden of demonstrating that the claims fall within the scope of the arbitration agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.)

A.    Existing Agreement

Here, Defendants submitted evidence that Plaintiff commenced working at USC on or about 7/17/2000. Over the course of her employment, Plaintiff executed multiple arbitration agreements, reflecting Plaintiff’s knowledge, intent and assent to arbitrate disputes with Defendants. (Rahn Decl., Exhs. B-E & G; Vachhani Decl., Exhs. A & B.) On 2/20/2018, Plaintiff executed the most recent and operative Arbitration Agreement between the parties. Rahn Decl., ¶¶ 9-10, Exh. G; Vachhani Decl., ¶¶ 1-11, Exh. B.)

The Arbitration Agreement provides that S.E. and Defendant USC “agree to the resolution by arbitration of all claims,” including any claim Plaintiff may have against USC or its “officers, trustees, administrators, employees or agents. . . .” Rahn Decl., Exh. G, ¶ 2. The Arbitration Agreement expressly applies to all claims, whether or not they arise out of Plaintiff’s employment. (Id. at Exh. G, ¶ 2.) In particular, the claims covered by the Arbitration Agreement include, but are not limited to: claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); claims for personal, physical, or emotional injury, or for any tort; claims for discrimination or harassment (including, but not limited to race, sex, religion, national origin, age, marital status, sexual orientation, gender identity or expression, military and veteran status, or medical condition or disability); claims for “whistleblowing” or retaliation; and claims for violation of any federal, state or other government law, statute, regulation or ordinance.

In opposition, Plaintiff argues that the agreement is not enforceable due to USC’s status as a defense contractor and based on her sexual harassment cause of action.

Title 48 CFR § 222.7402 states (emphasis added):

Departments and agencies are prohibited from using funds appropriated or otherwise made available by the Fiscal Year 2010 Defense Appropriations Act or subsequent DoD appropriations acts for any contract (including task or delivery orders and bilateral modifications adding new work) in excess of $1 million, unless the contractor agrees not to – (1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee agree to resolve through arbitration . . . (ii) any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment or negligent hiring, supervision, or retention.

            In its motion, Defendant argues that the Franken Amendment does not prohibit USC, as a defense contractor within the meaning of the statute, from conditioning employment on an arbitration agreement. Rather, Defendant argues that the Franken Amendment prohibits a government contractor from receiving Department of Defense appropriations if the contractor requires arbitration of claims under Title VII of the Civil Rights Act of 1964 and related torts. (See 48 C.F.R. § 222.7402.) Based on this distinction, Defendant argues that the amendment does not prohibit arbitration by itself, and it does not create a defense to arbitration by private litigants. Rather, only the Department of has standing to assert a claim arising out of a purposed defense contract between USC and the Department of Defense.

            However, in support of this position, Defendants do not cite any binding precedent wherein this same interpretation was advanced. Rather, they cite a single judge’s ruling on a similar motion in an unpublished opinion, and urge this Court to adopt the same interpretation. However, under Defendants’ theory, the Franken Amendment would be, in effect, pointless. The very purpose of the Franken Amendment was to leverage the Federal Government’s relationships with a very large number of employers receiving DoD appropriations as to way to advance a social objective—i.e., remove sexually-based claims from the scope of arbitration. To suggest that the Franken Amendment was meant only to be enforced by the Department of Defense would mean that the adopters contemplated that the Department of Defense would review the arbitration agreements of every single defense contractor implicated by the Amendment, determine which arbitration agreements violated the Amendment, and then file and litigate individual suits against each and every violating defense contractor to enforce the terms of the Amendment. Such an interpretation is simply unreasonable.

            This leaves only the question of whether or not Plaintiff’s sexual harassment and associated NIED/IIED claim is subject to arbitration. While the Court agrees with Defendants that Plaintiff’s supporting allegations fall below what is required to state a claim for sexual harassment, such a determination is appropriately made in demurrer. This is because Plaintiff could possibly amend the Complaint to allege sufficient facts to support the two causes of action. As such, the Court cannot compel Plaintiff to arbitrate a cause of action otherwise excluded from arbitration on the basis that the cause of action is insufficiently pled. This conclusion is reinforced by the fact that if Plaintiff’s claim is without merit as Defendants contend, and she is unable to allege sufficient facts to support these causes of action, they can be dismissed without leave to amend.

Still, the Court agrees with Defendants that the sexual harassment/associated NIED/IIED claim can be severed from the remaining claims. This leaves only the question of whether or not Plaintiff’s remaining causes of action are subject to an enforceable arbitration agreement. 

            In opposition, Plaintiff also argued that her FEHA and Labor Code claims are not arbitrable because of Labor Code section 432.6 which provides that an employer may not, as a condition of employment, continued employment, or the receipt of an employment-related benefit, require "waiver of" any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act (FEHA; Gov.C. §12900 et seq.; or the Labor Code, including the right to file and pursue a civil action or a complaint.")

            However, this section is not retroactive and applies only to contracts for employment entered into, modified, or extended on or after 1/1/2020. Here, Plaintiff executed the most recent and operative Arbitration Agreement between the parties on 2/20/2018. (Rahn Decl., ¶¶ 9-10, Exh. G; Vachhani Decl., ¶¶ 1-11, Exh. B.)

B.    Covered Claims

The Arbitration Agreement provides:

[T]he University and the faculty or staff member named below (“Employee”) agree to the resolution by arbitration of all claims, whether or not arising out of Employee’s University employment, remuneration of termination, that the Employee may have against the University or any of its related entities, including but not limited to faculty practice plans, or its or their officer, trustees, administrators, employees or agents, in their capacity as such or otherwise; and all claims that the University may have against Employee. Any claim that otherwise would have been decidable in a court of law – whether under local, state or federal law – will instead be decided by arbitration, except as specifically excluded by this Agreement. The claims covered by this Agreement include, but are not limited to, claims for wages or other compensation due, claims for breach of any contract or covenant (express or implied; claims for personal, physical, or emotional injury, or for any tort; claims for discrimination or harassment (including, but not limited to race, sex, religion, national origin, age, marital status, sexual orientation, gender identity or expression, military and veteran status, or medical condition or disability; claims for “whistleblowing” or retaliation; and claims for violation of any federal, state or other governmental law, statute, regulation, or ordinance.

As such, the arbitration agreement expressly includes the claims asserted by Plaintiff.

Given that Defendants have established by a preponderance of the evidence that an arbitration agreement exists, and that Plaintiff’s claims are covered by that agreement, the burden shifts to the Plaintiff to establish that the arbitration clause should not be enforced. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236. (Pinnacle).)

II.               Plaintiff’s Burden 

The party opposing arbitration bears the burden of proving, by a preponderance of the evidence any defense, such as unconscionability or duress. (Pinnacle, supra, 55 Cal.4th at p. 236.) Here, Plaintiff argues the arbitration agreement is invalid because it is unconscionable.

“Unconscionability has both procedural and substantive elements. Although both must appear for a court to invalidate a contract or one of its individual terms, they need not be present in the same degree: ‘[T]he 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.’”  (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469. (Roman).) Where the degree of procedural unconscionability is low, “the agreement will be enforceable unless the degree of substantive unconscionability is high.” (Ajamian v. CantorCO2e (2012) 203 Cal.App.4th 771, 796 (Ajamian).)

Here, Plaintiff argues that the agreement is procedurally unconscionable because it is an adhesion contract. Plaintiff argues that the agreement is substantively unconscionable because of USC’s improper relationship with JAMS, the arbitration forum.

As for the procedural unconscionability, where pre-employment adhesion contracts are involved, a degree of procedural unconscionability is always present. This is because, “the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration agreement.” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071 (Little).)  However, where “there is no other indication of oppression or surprise, the degree of procedural unconscionability of an adhesion agreement is low, and the agreement will be enforceable unless the degree of substantive unconscionability is high.” (Ajamian, supra, 203 Cal.App.4th at p. 796.)

While Plaintiff cites OTO, L.L.C., v. Kho (2019) 447 P.3d 680, 720 in support, there the Court found evidence of “substantial oppression” where the plaintiff was approached at his workstation by a human resources “porter” three years after beginning his employment. The porter “asked him to sign several documents. [Plaintiff] was required to sign them immediately and returned them to the porter, who waited in the workstation. It took Kho three or four minutes to sign them all. He had no opportunity to read them, nor were their contents explained.” (Kho, supra, 447 P.3d at p. 720.) Kho did not speak English as a first language, was not given copies of the documents in either language, and the agreement’s test was “visually impenetrable” and “challenge[d] the limits of legibility.” (Ibid at. P. 685.) Here, by contrast, while Plaintiff was presented with a pre-employment adhesion contract, there is no evidence to suggest that Plaintiff was not provided sufficient time to review the document or was unable to understand the document due to language barriers or the formatting of the agreement. Indeed, she consented to several arbitration provisions over the course of her employment.

As for substantive unconscionability, Plaintiff argues that USC has an improper relationship with JAMS. However, Plaintiff does not submit any admissible evidence to establish this by a preponderance of evidence nor does she identify any authority in which an arbitration provision was invalidated based on an analogous argument or set of facts.

The Court concludes that Plaintiff has failed to show any evidence of substantive unconscionability. Therefore, while Plaintiff has demonstrated a degree of procedural unconscionability, she has not demonstrated any degree of substantive unconscionability. As a result, the Court finds that the arbitration agreement is enforceable. (Ajamian, supra, Cal.App.4th at p. 796.)

            Based on the foregoing, Defendants’ motion to compel arbitration is granted as to all claims but for the severed sexual harassment and associated NIED/IIED claim.

It is so ordered.

Dated:  October    , 2022

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar. 

            Due to Covid-19, the court is strongly discouraging in-person appearances.  Parties, counsel, and court reporters present are subject to temperature checks and health inquiries, and will be denied entry if admission could create a public health risk.  The court encourages the parties wishing to argue to appear via L.A. Court Connect.  For more information, please contact the court clerk at (213) 633-0517.  Your understanding during these difficult times is appreciated.