Judge: Jon R. Takasugi, Case: 24STCV02234, Date: 2024-05-08 Tentative Ruling

Case Number: 24STCV02234    Hearing Date: May 8, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendant’s motion to compel arbitration is GRANTED. The provisions barring the recovery of punitive damages or injunctive relief, or the filing of administrative claims, are severed from the agreement.

This action is STAYED pending the completion of arbitration.

            On 1/29/2024, Plaintiff Abayomi Shambulia (Plaintiff) filed suit against Westlake Services, LLC, Hankey Investment Company, LP, and Hankey Finance Company, Inc. (collectively, Defendants), alleging: (1) race discrimination; (2) sex/gender discrimination; (3) race harassment; and (4) failure to prevent harassment and discrimination.

            On 3/4/2024, Defendant moved to compel arbitration and stay this action pending the completion of arbitration proceedings.

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

I.                   Defendants’ Burden

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 signed a dispute resolution agreement (DRA) on 4/11/2017. (Feldmeth Decl., Exh. C). In opposition, Plaintiff does not dispute that the signature is his.

Defendants also submitted evidence that Westlake periodically updates the DRA to comply with changes in California employment law. Plaintiff signed revised agreements in both April 2019 and August 2019. consistent with Westlake’s standard procedure that all new policies are launched and pushed out to current employees. Despite both DRAs containing opt-out provisions, Plaintiff did not opt out of either the April 2019 or August 2019 DRA Policies. (Feldmeth Decl., Exh. F.)

In opposition, Plaintiff contends that the April and August 2019 DRAs are not enforceable because they were not signed as required by the 2017 DRA. Indeed, the 2017 DRA provides:

This Agreement shall survive the employment relationship between the Company and the Employee and shall apply to any Claim whether it arises or is asserted during or after termination of the Employee's employment with the Company. This Agreement can be modified or revoked only by a writing signed by both parties that references this Agreement and specifically states an intent to modify or revoke this Agreement.

(Exh. 5, § 5, emphasis added.)

“If an employer has prescribed methods of policy modification and employee notice, it is incumbent upon the employer to abide by those methods.” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1093, citing Ferguson v. Countrywide Credit Indus., Inc. (9th Cir. 2002) 298 F.3d 778, 786 (holding that the unilateral modification of an arbitration agreement was not effective because the arbitration agreement between the parties stated it “can be modified or revoked only by a writing signed by the Employee and an executive officer of the Company that references this Agreement and specifically states an intent to modify or revoke this Agreement."). Here, because the April and August 2019 notices were not signed by Plaintiff, the Court agrees that only enforceable DRA is the 2017 DRA. 

B.    Covered Claims

There terms of the August 2017 DRA (the operative DRA), provides in part:

1.      AGREEMENT TO ARBITRATE AND CLASS ACTION WAIVER

Employee hereby agrees to submit to binding arbitration before a neutral arbitrator all disputes and claims arising out of submission of my employment application or any and all disputes that may arise out of or already exist related to my employment or relationship with Employer, whether during or after that employment, including, but not limited to claims for wages or other compensation due; claims for breach of any contract or covenant, express or implied; tort claims; claims for discrimination, including but not limited to discrimination based on race, sex, religion, national origin, age, marital status, sexual orientation, handicap, disability or medical condition; claims for benefits, except as excluded in the following paragraph; and claims for violation of any federal, state or other governmental constitution, statute, ordinance or regulation. I understand that this Agreement to Arbitrate applies to claims that pre-exist or may pre-exist the date of this Agreement. The claim will be submitted to binding arbitration before a neutral arbitrator. I understand and acknowledge that I am waiving my right to a jury trial

(Feldmeth Decl., Exh. F (emphasis in original).)

            Here, Plaintiff’s claims for race discrimination, sex/gender discrimination, race harassment, and failure to prevent harassment and discrimination all arise from the employment relationship of the parties.

Given that Defendant has 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, 55 Cal.4th at p. 236.)

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).)

A.    Procedural Unconscionability

Plaintiff argues that the arbitration agreement is procedurally unconscionable because it is an adhesion contract.

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.)

Therefore, while Plaintiff is correct that including the arbitration clause within a contract of adhesion indicates a degree of procedural unconscionability, there must be other indications of oppression or surprise to render the agreement unenforceable. (Little, supra, 29 Cal.4th at p.1071; Ajamian, supra, 203 Cal.App.4th at p. 796.)

B.    Substantive Unconscionability

Plaintiff argues the Agreement is substantively unconscionable because the DRA: (1) excludes punitive damages or injunctive relief as remedies that would be available to Plaintiff; (2) is illusory and one-sided; and (3) it alters the right to exhaust administrative remedies.

As to the first contention, the Court agrees that the exclusion of punitive damages or injunctive relief is unconscionable. (See Armendariz v. Foundation Health Psychcare Services (2000) 24 Cal. 4th 83, 103-113, identifying one of the minimum requirements of arbitration agreements is that is must provide for all types of relief that would otherwise be available in a non-arbitration forum.)

However, the Court finds that this provision can be easily severed from the agreement. (Armendariz, supra, 24 Cal.4th at p. 124.)

As for the second contention, the Court does not find the agreement to be illusory or one-sided. The claims not covered by the agreement include claims for workers compensations and claims for unemployment benefits which would benefit the employee. Given that the employer agrees to arbitrate all other claims, the Court disagrees that this carve-out renders the arbitration agreement so one-sided as to be substantively unconscionable.

Finally, as to the third contention, the 2017 DRA states that: “the Company and the Employee agree that neither party shall initiate or prosecute any lawsuit or administrative action which relates in any way to any Claim covered by this Agreement.” Plaintiff argues “the inability to proceed with administrative remedies prior to the commencement of arbitration precludes a Plaintiff’s entitlement to attorneys’ fees under Cal. Gov. Code § 12965(b). Section 12965(b) provides that civil actions brought within the one-year deadline to obtain a right-to-sue letter from the DFEH, a court may award reasonable attorney’s fees to the prevailing plaintiff.” (Opp., 10: 19-23.) The Court also strikes this provision from the arbitration agreement.

“Where appropriate, courts have discretion to sever or limit the application of unconscionable provisions and enforce the remainder of an arbitration agreement under Civil Code section 1670.5, subdivision (a).” (Ramos, supra, 28 Cal.App.5th at p. 1065.) Circumstances in which severability can be appropriate include where the unconscionability can be cured by striking the offending clause or clauses. (Id. at p. 1069.)

Conclusion

The Court concludes that Plaintiff has failed to show any evidence of substantive unconscionability, beyond the provisions limiting form of relief which have been severed from the agreement. Therefore, while Plaintiff has demonstrated a degree of procedural unconscionability, he 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.)

It is so ordered.

Dated:  May    , 2024

   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.