Judge: Jon R. Takasugi, Case: 22STCV34846, Date: 2023-04-27 Tentative Ruling

Case Number: 22STCV34846    Hearing Date: April 27, 2023    Dept: 17

SUPERIOR COURT OF CALIFORNIA 

COUNTY OF LOS ANGELES 

DEPARTMENT 17 

Defendants’ Motion to Compel Arbitration and Stay Action Pending Arbitration is DENIED. 

Plaintiff Jennifer A. Aylward (“Plaintiff”) alleges that she worked for Defendants Brinker International, Inc., a Delaware corporation, Brinker International Payroll Co. LP, a Delaware limited partnership, and Brinker Restaurant Corporation, a Virginia corporation (collectively, “Brinker”) for over thirty years until her termination in July 2022. Defendant Paul Aoun (“Aoun”) was Plaintiff’s supervisor. Plaintiff filed this action on November 1, 2022 against Brinker and Aoun (both of whom may be collectively referred to herein as “Defendants”), alleging causes of action for: 

1.    Disability Discrimination in Violation of FEHA; 

2.    Wrongful Discharge in Violation of Public Policy; 

3.    Failure to Accommodate Disability in Violation of Government Code § 12940(m); 

4.    Failure to Engage in Interactive Process, California Government Code section 12940(N); 

5.    Retaliation Under FEHA; 

6.    Failure to Prevent Discrimination and Harassment; 

7.    Discriminatory Termination/Interference in Violation of California Family Rights Act, California Government Code § 12945.2; 

8.    Retaliation for Exercising the Right to CFRA Leave Under Government Code § 12945.2; 

9.    Wrongful Termination in Violation of Public Policy Based Upon CFRA 

10.                       Retaliation for Exercising the Right to CFRA Leave Under Government Code § 12945.2; 

11.                       Retaliation in Violation of Labor Code § 232.5; 

12.                       Retaliation in Violation of Labor Code § 1102.5; 

13.                       Harassment Based on Disability in Violation of FEHA; 

14.                       Declaratory Relief; 

15.                       Injunctive Relief; 

16.                       Failure to Allow Inspection of Personnel File; and 

17.                       Unfair Business Practices. 

On January 5, 2023, Defendants filed four separate motions to compel arbitration and stay action pending arbitration. On March 27, 2023, Plaintiff opposed Defendants’ motions. On April 3, 2023, Defendants replied. 

Legal Standard 

“[T]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence . . . .”¿ Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284). “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.”¿(Weeks v. Crow (1980) 113 Cal.App.3d 350, 353). “Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.” (California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205).¿¿¿ 

¿ 

“[A] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination.” (Giuliano, supra, 149 Cal.App.4th at p. 1284).¿ 

¿ 

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, 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 an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies. . . .”¿ (CCP § 1281.4.) 

“If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” (9 U.S.C. § 3.) 

Requests for Judicial Notice 

The Court grants Defendants’ requests for judicial notice in their entirety. 

Discussion  

Preliminary Issues 

It is unclear why Defendants filed four virtually identical motions to compel arbitration, with the only differences being the CRS reservation ID numbers and the initial hearing dates for each motion. Given that they are all otherwise identical, the Court will address these motions as one motion to compel arbitration. 

Defendants also attached an additional declaration with some exhibits to their reply. New evidence is generally not permitted on reply. (See Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537.) Defendants are attempting to introduce a different version of the Arbitration Agreement, which is different from the one upon which they based their motions. This constitutes new evidence on reply, which the Court declines to consider. 

Existence of Valid Arbitration Agreement and Covered Claims 

The initial burden of proving the existence of an arbitration agreement is on the moving party, which can be met by attaching a copy of the arbitration agreement to the moving papers. (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543-44 [“The party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the¿respondent's signature.”].) The burden then shifts to the opposing party to challenge the validity of that agreement. (Gamboa v. Northeast Community Clinic¿(2021) 72 Cal.App.5th 158, 165.) 

Defendants have attached copies of the arbitration agreement (the “Arbitration Agreement”) to their motions. (Fuller Decls., Ex. A.) The Arbitration Agreement indicates that it covers all claims relating to Plaintiff’s employment with Brinker. (Fuller Decls., Ex. A.) Defendants have thus met their initial burden of proving the existence of a valid arbitration agreement. They have also shown that Plaintiff’s claims are covered by the Arbitration Agreement and that all of the named Defendants, including those who are nonsignatories, may seek its enforcement. 

The burden then shifts to Plaintiff to challenge the validity of the Arbitration Agreement. Plaintiff does not dispute the existence of the Arbitration Agreement, that it bears her signature, that it covers her claims, or that the nonsignatory Defendants may seek its enforcement.

However, this motion was continued after Defendants submitted an additional arbitration agreement in reply which it claimed Plaintiff was bound by also. Given that Defendants claimed that this Arbitration Agreement lacked the unconscionability issues identified in the tentative ruling, the Court found it appropriate to continue the motion and allow the parties to submit supplemental briefing on the enforceability of this additional agreement.

After review, the Court finds that the newly submitted Arbitration Agreement does not alter the Court’s ruling because Defendant has not shown, by a preponderance of the evidence, that Plaintiff is bound by this agreement. The new Agreement was not signed by Plaintiff, the Agreement was never sent to Plaintiff for signature, and Defendants never told Plaintiff that she was bound by it. Rather, Defendants argue that this version of the Agreement should apply to Plaintiff because “[d]uring her tenure at Brinker as a manager and general manager, Aylward was required to review the policies with team members during their onboarding process and answer any questions they had including, but not limited to, questions about the arbitration agreement or the polices contained in the handbook. Based on my observations, my understanding is that this occurred every time a new team member was hired.” (Bullotta Decl., ¶ 3.) In other words, Defendants argue that Plaintiff became constructively bound by the most recent version of the Arbitration Agreement by virtue of her repeated reviews of that Agreement during her onboarding of new employees. Defendants do not cite any analogous case law which could demonstrate that Plaintiff implicitly agreed to a substantively different Arbitration Agreement by virtue of her review of this version of the Agreement during her onboarding of new employees.

Issue Preclusion 

Issue preclusion prevents relitigation of issues previously decided and may be raised by one who was not a party to the prior action. (DNK Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824.) Plaintiff contends that Defendants are barred from seeking enforcement of the Arbitration Agreement on the grounds that its unenforceability has been previously determined in other lawsuits, namely Liebrand v. Brinker Restaurant Corp. (2008) 2008 WL 2445544 and Hale v. Brinker International, Inc. (N.D. Cal. 2022) 2022 WL 2187397. Plaintiff argues that the courts in both prior lawsuits rejected Brinker’s attempts to enforce a similar arbitration agreement and their offer to waive the unconscionable provisions of their agreement. 

The Court does not find that issue preclusion applies here. Issue preclusion would be appropriate if the prior cases and this one were based on the same arbitration agreement, but Plaintiff has not presented evidence of them being the same. (See DNK Holdings LLC, supra, 61 Cal.4th at p. 824 [issue preclusion requires the issues to be identical] [emphasis added].) While there may be significant factual similarities between this case and the prior ones noted above, that is insufficient here. It is not enough for the agreements to be similar; they need to be the same. (See Id.) 

Accordingly, the Court rejects this argument against enforcing the Arbitration Agreement. 

Unconscionability 

“[P]rocedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102 (“Armendariz”).) The courts invoke a sliding scale 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, i.e., 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., at p. 114.)  Plaintiff bears the burden of proving that the provision at issue is both procedurally and substantively unconscionable.   

1.                  Procedural Unconscionability  

“Procedural unconscionability focuses on the elements of oppression and surprise. [Citations] ‘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.’ [Citations]” (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469.) 

Plaintiff contends there is procedural unconscionability based on the following language in the Arbitration Agreement evidencing an adhesion contract: 

“I understand that if 1 should become employed by Brinker International, or its related companies, such employment is conditioned upon this Agreement and | understand that this Agreement must be read and signed in order for me to be considered for employment with Brinker International or its related companies.” 

(Full Decls., Ex. A.)  

Plaintiff further contends that the Arbitration Agreement was presented on a “take-it-or-leave-it basis”. (Aylward Decl., ¶ 4.) 

Defendants concede that this was an adhesion contract and constitutes procedural unconscionability, but argue that it is insufficient to bar its enforcement because there is no evidence of oppression, surprise or other sharp practices. While the Court agrees that an adhesion contract by itself is not necessarily sufficient to establish unconscionability, it is still at least a factor for the Court to consider, especially since it is a sliding scale between procedural and substantive unconscionability for making an ultimate determination. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244.) 

The Court also disagrees regarding the purported lack of evidence regarding oppression, surprise or other sharp practices, as evidenced by the Liebrand and Hale cases discussed above, which ostensibly demonstrate a longstanding pattern of misconduct by Brinker in connection with its hiring practices. As such, the Court does find that this Arbitration Agreement is an adhesion contract and is evidence of procedural unconscionability. (See Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713, 723.) 

2.                  Substantive Unconscionability 

“Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create ‘overly harsh’ or ‘‘one-sided’ results’ [Citations] that is, whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner.  [Citation] Substantive unconscionability ‘may take various forms,’ but typically is found in the employment context when the arbitration agreement is ‘one-sided’ in favor of the employer without sufficient justification, for example, when ‘the employee’s claims against the employer, but not the employer’s claims against the employee, are subject to arbitration.’ [Citations]” (Roman, supra, 172 Cal.App.4th at pp. 1469-1470.) 

Plaintiff argues that the Arbitration Agreement is substantively unconscionable because: (1) it requires Plaintiff to pay for one-half of the costs of arbitration; (2) it requires the arbitration to be conducted in Texas; and (3) it restricts plaintiff’s right to recover attorney’s fees. The Court agrees that these provisions are substantively unconscionable and that when viewed in combination with the procedural unconscionability finding discussed above, renders the Arbitration Agreement unconscionable. 

The Arbitration Agreement provides that, “[t]he costs and expenses of the arbitration shall be borne evenly by the parties, unless otherwise awarded by the arbitrator in the final, written decision.” (Fuller Decls., Ex. A.) Such a provision is improper per Armendariz, which held that, “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any¿type¿of expense that the employee would not be required to bear if he or she were free to bring the action in court.” (Armendariz v. Found. Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 110–11) [emphasis in original].  

The Arbitration Agreement also provides that arbitration will take place in Dallas, Texas. (Fuller Decls., Ex. A.) This violates Labor Code section 925(a)(1), which provides that, “[a]n employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following: (1) Require the employee to adjudicate outside of California a claim arising in California.” (Lab. Code § 925(a)(1).) Adjudication under this code provision includes arbitration. (Id. § 925(d).) Plaintiff lived and worked in California during her employment with Brinker. (Aylward Decl., ¶ 7.) It would be unduly burdensome to require Plaintiff to travel to Texas to participate in the arbitration of this action. Additionally, the events in question arose in California, so it makes sense for this action to be adjudicated in California. 

The Arbitration Agreement further provides that Plaintiff is, “entitled to representation by an attorney throughout the proceedings at his or her own expense.” (Fuller Decls., Ex. A.) An arbitration agreement that requires the parties to bear their own attorney’s fees is substantively unconscionable when the employee might otherwise recover attorney’s fees under statutory claims. (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 250.) Plaintiff has asserted claims that provide for attorney’s fees if she prevails, such as Labor Code section 1198.5. Therefore, this provision is substantively unconscionable as well. 

Defendants contend that the unconscionable provisions can and should be severed from the Arbitration Agreement because they are not central to the Arbitration Agreement. The Court disagrees, as it finds that provisions dictating the location of the arbitration, who bears the expenses of the arbitration, and whether the employee is entitled to recover attorney’s fees for claims that otherwise provide for attorney’s fees are not collateral provisions. Moreover, Defendants overlook the procedural unconscionability that also permeates the Arbitration Agreement, which point the Defendants have conceded, because the Arbitration Agreement is an adhesion contract. Defendants also cannot save the Arbitration Agreement from being declared unconscionable by agreeing to forgo enforcement of its unconscionable provisions, especially where there is more than one as is the case here. (Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th 619, 636; Armendariz, supra, 24 Cal.4th 83 at p. 124.)  

Accordingly, the Court finds that the Arbitration Agreement is unenforceable on grounds of unconscionability. 

Conclusion 

The Court DENIES Defendants’ Motions to Compel Arbitration and Stay Action Pending Arbitration. 

Dated:  April    , 2023

   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. 

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