Judge: Jon R. Takasugi, Case: 22STCV37821, Date: 2023-11-22 Tentative Ruling

Case Number: 22STCV37821    Hearing Date: November 22, 2023    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Plaintiff’s motion to vacate the 7/18/2023 Order in its entirety is DENIED IN PART, GRANTED IN PART. The Court modifies its previous order, and orders the provisions identified as unconscionable by the Court of Appeal to be severed from the agreement. 

On 12/5/2022, Plaintiff Sylvia Gates Carlisle (Plaintiff) filed suit against Beaver Medical Group, P.C., Optum, Inc., UnitedHealth Group, Inc., Epic Management Services, LLC, and Raymond Chan (collectively Defendants), alleging: (1) whistleblower retaliation; (2) race discrimination; (3) gender discrimination; (4) failure to prevent and/or remedy harassment, discrimination, or retaliation; (5) retaliation; (6) defamation; and (7) adverse actions in violation of public policy.

            On 7/18/2023, the Court granted Defendant’s motion to compel arbitration.

            Plaintiff sought an alternative Writ of Mandate.

On 10/26/2023, the Court of Appeal determined that Plaintiff’s arbitration agreement with Defendant contained unconscionable provision. The Court of Appeal asked this Court to exercise its discretion to decide whether the arbitration agreement can be reformed “by means of severance or restriction … or whether the arbitration agreement is unenforceable in its entirety.” (Writ p. 4.)

            Now, Plaintiff moves for the Court to vacate the 7/18/2023 Order compelling arbitration on the grounds that the agreement is unenforceable in its entirety.

Discussion

            The Court of Appeal found the following provisions to be unconscionable:

-         Article 11.2 of the Employment Agreement forbidding Plaintiff from discussing the terms of the Agreement, which “violates Labor Code section 232.” (Writ p. 3; Ord. p. 6.)[1]

-         “[N]on-mutual equitable relief provisions entitling [Defendants], but not [Plaintiff], to obtain equitable or injunctive relief in a court of competent jurisdiction.” (Writ p. 3.)

-         Equitable relief provisions that “waive the employers’ need to obtain a bond before seeking an injunction, waive the employer’s need to show irreparable harm, and arguably require an employee to consent to imposition of an immediate injunction upon showing of a breach of the employee’s obligations.” (Writ pp. 2-3.)

-         “The provisions specify that both preliminary and permanent injunctions are available to [Defendants], exceeding the relief normally afforded to parties in Code of Civil Procedure section 1281.8 subdivision (b), which only authorizes a party to an arbitration agreement to seek a preliminary injunction upon a particularized showing.” Writ p. 3

As the Court of Appeal noted, “illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.” (Ex. 7 at 3-4 (citing Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 124.) Indeed, there is a “strong legislative and judicial preference … to sever the offending term and enforce the balance of the agreement.” (Dotson v. Amgen, Inc. (2010) 181 Cal. App. 4th 975, 986.)

Here, the Recitals of the Employment Agreement set forth the contract’s primary purpose: “BMG wishes to employ EMPLOYEE, and EMPLOYEE wishes to perform professional medical services for BMG under the terms and conditions set forth in the Employment Agreement.” (Ex. 1 at 1, Recitals.) When considering the entire Employment Agreement, the Court agrees with Defendant that the terms regarding equitable relief are collateral to the primary purpose of the Agreement—i.e. Plaintiff’s employment with and performance of physician services for BMG. Indeed, the unconscionable terms—the equitable relief provisions of Articles 9.3, 11.12, and 14.3, and the nondisclosure provision of Article 11.2 (which this Court already severed in its initial ruling)—constitute just four out of eighty-seven sub-articles contained in the Employment Agreement.

Moreover, the equitable relief provisions are collateral to the overall purpose of the arbitration agreement, which is to compel both parties to arbitrate, rather than litigate, claims arising out of the employment relationship.

As such, the question before the Court is whether or not the provisions identified by the Court of Appeal permeate the arbitration agreement to such a degree that none of the Agreement can be enforced.

The Court concludes that the offending provision can be severed, and the arbitration agreement can otherwise be enforced for several reasons.

 First, the carve-out provisions for equitable relief are collateral to the arbitration agreement’s “main purpose” of arbitrating claims, and can be easily severed from the Agreement without fundamentally altering the parties’ agreement regarding the scope of arbitration and the powers of the arbitrators to provide relief. (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1065.) Indeed, it does not appear from review of Plaintiff’s Complaint and the moving papers that equitable relief is at issue as a part of this action. That Plaintiff’s claims could be arbitrated without these provisions being implicated reinforces a conclusion that these provisions are collateral to the agreement’s purpose, and could be severed from the agreement without fundamentally altering the parties’ agreement.

Second, a severed arbitration agreement satisfies the fairness requirements set forth in Armendariz, namely: (1) the Arbitration Agreement provides the parties with mutual and equal rights and Petitioner was given ample time to review it, with full discretion as to whether to agree to its terms; (2) the Arbitration Agreement provides for a neutral arbitrator, sufficient discovery for the parties to vindicate employment related claims, and a written award issued by the arbitrator; and, (3) the Arbitration Agreement does not limit the remedies available to Petitioner by statute and states that employer will pay the arbitrator’s fees, arbitration expenses, and any other costs unique to the arbitration hearing. This reinforces a conclusion that the agreement is not so permeated by unconscionability that it is unenforceable in its entirety. 

Third, the only evidence of procedural unconscionability is that the contract is one of adhesion. As such, Plaintiff is required to establish a high degree of substantive unconscionability in order for the agreement to be unenforceable. (Ajamian v. CantorCO2e (2012) 203 Cal.App.4th 771, 796.) Given that the equitable relief provisions can be easily severed from the Agreement, the Court does not find a high degree of substantive unconscionability.

In sum, the Court in its discretion has determined that the arbitration agreement can be reformed by means of severance, given that the central purpose of the contract is not tainted with illegality.

Based on the foregoing, Plaintiff’s motion to vacate its 7/18/2023 Order in its entirety is denied in part, granted in part. The provisions identified by the Court of Appeal as unconscionable are ordered severed from the agreement.  The Order otherwise remains the same.

It is so ordered.

Dated:  November    , 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.  For more information, please contact the court clerk at (213) 633-0517.