Judge: Joseph Lipner, Case: 23STCV17056, Date: 2024-02-15 Tentative Ruling
Case Number: 23STCV17056 Hearing Date: February 15, 2024 Dept: 72
SUPERIOR COURT OF CALIFORNIA
COUNTY OF LOS ANGELES
DEPARTMENT 72
TENTATIVE
RULING
|
FABIOLA JASMINA CASASOLA, Plaintiff, v. AVF-SLATE, INC., et al., Defendants. |
Case No:
23STCV17056 Hearing Date: February 15, 2024 Calendar Number: 4 |
Defendant AVF-Slate, Inc. (“Slate”) moves for an order
compelling Plaintiff Fabiola Jasmina Casasola to arbitrate her claims against
Slate and staying this action.
The Court GRANTS Slate’s motion. The parties shall arbitrate the claims at
issue in this case. The case is stayed
pending arbitration.
The Court sets a status conference for November 4, 2024 at
8:30 a.m. to discuss the status of the arbitration
This action arises out of Plaintiff’s employment with Slate.
Slate employed Plaintiff from July 8, 2017 to July 22, 2021.
Plaintiff alleges that Andrew Doe (“Andrew”), a supervisor, harassed her and
made racially discriminatory comments toward her during her employment.
Plaintiff complained about this behavior to Andrew and to a Mrs. Furstenberg
(who appears to be the same Ms. Von Furstenberg identified by Slate) on July
20, 2021. Ms. von Furstenberg asked if Plaintiff and Andrew could figure things
out amongst themselves.
On July 22, 2021, Andrew notified Plaintiff that she was
terminated.
Plaintiff filed this action against Slate and Andrew Doe on July
20, 2023, raising claims for (1) racial discrimination; (2) harassment; and (3)
failure to prevent harassment; (4) retaliation in violation of FEHA; and (5)
wrongful termination in violation of public policy.
On December 20, 2023, Slate filed this instant motion.
Plaintiff filed an opposition and Slate filed a reply.
The
Court sustains Defendant’s evidentiary objections.
Plaintiff’s employment agreement contains a provision that
reads as follows:
4.8
Dispute Resolution. Any and all disputes, claims, or controversies arising
out of, or relating to, this Agreement or Employee's employment with Employer
shall be submitted to, and settled by, final and binding arbitration in Los
Angeles, California, under the auspices of the American Arbitration
Association ("AAA"), in accordance with the Employment Dispute
Resolution Rules of the AAA; or any other comparable arbitration company, with
like provisions; provided, however that Employer shall be entitled to
seek injunctive relief to enforce the provisions of Section 3, the breach
of which Employee acknowledges would result in irreparable harm to Employer.
Any arbitration between the parties shall be paid by the Employer at no cost to
the Employee. As referenced above, this provision does not apply to
injunctive relief by the Employer for a breach of the representation in
paragraph 3. Employer may apply for provisional relief in the Los Angeles
Superior Court and Employee agrees that a breach of the confidentiality
provisions is per se irreparable harm to the Employer due to the nature this
agreement and the services rendered and provided herein. This application of
section 3 extends beyond the termination of this agreement in perpetuity.
(Wodzislawski Decl. ¶ 8, Exh. 1 at
pp. 5-6 (the “Arbitration Provision”) [emphasis added].)
Section 3 of the parties’ agreement, which is the subject of
the carve-out described above, refers to the confidentiality portions of the
agreement. It obligates the employee,
among other things, not to disclose confidential information learned during her
employment. (Wodzislawski Decl. Exh. 1
at pp. 2-4.)
The provision, on its face, provides for the mandatory
arbitration of all disputes arising out of the employment agreement, with the
exception of the carve out for certain injunctive relief. Thus, the Arbitration
Provision appears to cover the current dispute.
“‘The prevailing view is that [procedural 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.’ [Citation] But they need not be present in the
same degree. “Essentially a sliding scale is invoked 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.” [Citation] In other words, 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.” (Armendariz
v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83,
114 (Armendariz).)
“‘Procedural unconscionability’ concerns the manner in which
the contract was negotiated and the circumstances of the parties at that time.
It focuses on factors of oppression and surprise. The oppression component
arises from an inequality of bargaining power of the parties to the contract
and an absence of real negotiation or a meaningful choice on the part of the
weaker party. The component of surprise arises when the challenged terms are
‘hidden in a prolix printed form drafted by the party seeking to enforce
them.’” (Nyulassy v. Lockheed Martin
Corp. (2004) 120 Cal.App.4th 1267, 1281.)
Where a contract of adhesion includes the unequal bargaining
power of contracting parties, with the weaker party's inability to negotiate,
this may indicate procedural unconscionability in the form of oppression. (See Thompson v. Toll Dublin, LLC (2008) 165
Cal.App.4th 1360, 1372.) “The term ‘adhesion contract' refers to standardized
contract forms offered to consumers of goods and services on essentially a
‘take it or leave it' basis without affording the consumer a realistic
opportunity to bargain and under such conditions that the consumer cannot
obtain the desired product or services except by acquiescing in the form
contract. [Citations.] The distinctive feature of a contract of adhesion is
that the weaker party has no realistic choice as to its terms. [Citations.]” (Wheeler v. St. Joseph Hospital (1976) 63
Cal.App.3d 345, 356.)
“[A] compulsory pre-dispute arbitration agreement is not
rendered unenforceable just because it is required as a condition of employment
or offered on a ‘take it or leave it’ basis.” (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.
App. 4th 1105, 1127.) However, the fact that an arbitration agreement is
mandatory for employment may be a factor in determining that it is procedurally
unconscionable. (See, e.g., Trivedi v.
Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 393; Armendariz, supra, 24 Cal.4th at pp. 114-115.) Where a
contract of adhesion includes the unequal bargaining power of contracting
parties, with the weaker party's inability to negotiate, this may indicate
procedural unconscionability in the form of oppression. (See Thompson v. Toll Dublin, LLC (2008) 165
Cal.App.4th 1360, 1372.)
“Ordinarily when a person with capacity of reading and
understanding an instrument signs it, he may not, in the absence of fraud,
imposition or excusable neglect, avoid its terms on the ground he failed to
read it before signing it.” (Ramirez v. Superior Court (1980) 103
Cal.App.3d 746, 754 [internal quotation marks omitted].)
Here, the Arbitration Provision was presented as a contract
of adhesion on which Plaintiff’s employment was conditioned. Plaintiff is a
low-wage earner who was not represented by counsel; conversely, Defendant is
wealthy and used an attorney to draft the terms of the agreement. As discussed
above, this creates a degree of procedural unconscionability.
Substantive unconscionability focuses on the actual terms of the
agreement and evaluates whether they create overly harsh or one-sided results
as to shock the conscience. (Suh v. Superior Court (2010) 181
Cal.App.4th 1504, 1515.) The paramount consideration in assessing substantive
unconscionability is mutuality. (Carmona, supra, 226 Cal.App.4th
at p. 85.)
In Armendariz, the California Supreme Court held that
a mandatory pre-dispute arbitration agreement requiring arbitration of
unwaivable statutory rights must provide for the following: (1) a neutral
arbitrator; (2) adequate discovery; (3) availability of all types of relief
that are otherwise available in court; (4) a written decision that will permit
a limited form of judicial review; and (5) a provision that the employer must
pay for the arbitrator’s fees and all costs unique to arbitration. (Armendariz,
supra, 24 Cal.4th at p. 102.)
Plaintiff argues that two aspects of the arbitration clause
are substantively unconscionable: (1)
the carve-out for the employer only for injunctive relief relating to
confidentiality issues; and (2) the AAA rules relating to discovery that are
incorporated in the agreement.
The Court agrees with Plaintiff that the provisions relating
to injunctive relief in favor of Slate only are unconscionable and
unenforceable.
The provision includes carveouts for injunctive relief
sought by Slate only. Where an arbitration agreement “exempts from the
arbitration requirement claims typically brought by employers—namely, those
seeking declaratory and preliminary injunctive relief to protect Empire's
proprietary information and non-competition/non-solicitation provisions—while
restricting to arbitration any and all claims plaintiffs might bring[,]” the
agreement “exhibits strong indicia of substantive unconscionability.” (Samaniego
v. Empire Today LLC (2012) 205 Cal.App.4th 1138, 1147.)
Slate argues that the California Supreme Court rejected this
argument in Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1247.
There, the Court found that a provision which explicitly referred to both
parties’ right to seek preliminary injunctive relief was not unconscionable
because it simply confirmed there statutory rights under Code of Civil
Procedure, section 1281.8. (Id. at pp. 1247-1248.) In Balthazar,
the Plaintiff’s argument was that such a clause unfairly favored the employer,
who was more likely to seek injunctive relief. (Id. at p. 1247.)
Here, on the other hand, the clause only contains a carveout for the
employer, and is not limited to provisional relief, but rather states that
Slate may seek injunctive relief generally.
Slate contends the carveout is nevertheless justified, arguing
that “unconscionability turns not only on a one-sided result, but also on an
absence of justification for it.” (Armendariz, supra, 24 Cal.4th at pp. 117–118.) Armendariz
left open the possibility that an arbitration agreement with nonmutual remedies
could nevertheless be justified by business realities. (Ibid.) Slate
contends that Plaintiff provided household services to Ms. Furstenberg, which
would expose her to family secrets and create a business necessity for secrecy.
However, while Armendariz did not delineate the degree of business
necessity required to justify a lopsided arbitration agreement, these facts
appear insufficient – nearly every business has some kind of trade secret which
it can plausibly claim its employees would be exposed to, and to permit
lopsided arbitration agreements in such cases would allow Amendariz’s
exception to swallow Armendariz’s much more clearly articulated rule
that “it is unfairly one-sided for an employer with superior bargaining power
to impose arbitration on the employee as plaintiff but not to accept such
limitations when it seeks to prosecute a claim against the employee[.]” (Id
at p. 117.) “Without reasonable
justification for this lack of mutuality, arbitration appears less as a forum
for neutral dispute resolution and more as a means of maximizing employer
advantage. Arbitration was not intended for this purpose.” (Id. at p.
118.)
Because carveout is limited to Slate and extends Slate’s
rights beyond the ambit of section 1281.8, it is substantively unconscionable
and not enforceable.
The Court does not agree with Plaintiff that the agreement’s
incorporation of the AAA discovery rules is substantively unconscionable.
The AAA rules provide that “[t]he arbitrator shall have the
authority to order such discovery, by way of deposition, interrogatory,
document production, or otherwise, as the arbitrator considers necessary to a
full and fair exploration of the issues in dispute, consistent with the
expedited nature of arbitration.” (Elsea Decl., Exh. 1 at § 9.)
The AAA rules provide for discovery, giving the arbitrator
authority to order the full panoply of discovery procedures. The arbitration agreement contains no
limitation on discovery and does not require any exceptional showing of need for
the litigants to be entitled to proceed with discovery.
Plaintiff cites no case that says that the incorporation of
AAA discovery rules is substantively unconscionable because it is not as
expansive as California procedures. Nor
is the Court aware of any such case. To
the extent that such case law exists, the Court asks Plaintiff to cite it at
the hearing on this motion.
Plaintiff relies on Davis v. Kozak (2020) 53 Cal.App.5th 897. This case is inapposite. In Davis, the arbitration clause that
the Court found unconscionable provided an express limitation on discovery of
no more than two depositions. (Id. at
p. 904.) And while it allowed the
parties to appeal to an arbitrator for more discovery, there was a heightened requirement
that such discovery “be awarded upon a showing of additional cause.” (Ibid.)
No such express limitations are present here. To the contrary, this is a vanilla provision
that states the AAA rules generally apply.
This case is more like Roman v. Superior Court (2009)
172 Cal.App.4th 1462, which Davis distinguished. In Roman, the Court of Appeal rejected
the very argument Plaintiff makes here, ruling that the incorporation of AAA
discovery rules does not render the agreement unconscionable. (Id. at pp. 1475-1476; see also
Armendariz, supra, 24 Cal.4th 83 at p. 106 [noting that arbitration clause provided
for “discovery sufficient to adequately arbitrate [the] statutory claim,
including access to essential documents and witnesses, as determined by the
arbitrators. . . ” (emphasis added)]; Mercuro v. Superior Court (2002)
96 Cal.App.4th 167, 184 [“‘adequate’ discovery does not mean unfettered
discovery”].)
On this record the Court does not conclude that there is
anything inadequate or unconscionable about the submission to
generally-applicable AAA rules concerning discovery.
The Court concludes that there is some degree of procedural
unconscionability and a great degree of substantive unconscionability as to one
of the agreement’s terms. Therefore, the
agreement would be void unless the court severs the unenforceable and
unconscionable provision. The Court does
sever the provision for the reasons discussed below.
“A trial court has the discretion to refuse to enforce an
agreement as a whole if it is permeated by … unconscionability.” (Carmona v. Lincoln Millennium Car Wash,
Inc. (2014) 226 Cal.App.4th 74, 90, citing Armendariz v. Foundation
Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 122.) “‘The overarching inquiry is whether “‘the
interests of justice … would be furthered’” by severance.’” (Carmona v. Lincoln Millennium Car Wash,
Inc., supra, at p. 90.) If
the central purpose of a contractual provision, such as an arbitration
agreement, is tainted with illegality, then the provision as a whole cannot be
enforced. (Ibid.) If the illegality is collateral to the main
purpose of the contractual provision, and can be severed or restricted from the
rest, then severance is appropriate. (Ibid.)
An agreement to arbitrate is considered “permeated” by
unconscionability where, for example, it contains more than one unconscionable
provision. (Magno v. The College
Network, Inc. (2016) 1 Cal.App.5th 277, 292.) Such multiple defects indicate a systematic
effort to impose arbitration on an employee not simply as an alternative to
litigation but as an inferior forum that works to the employer’s
advantage. (Carbajal v. CWPSC, Inc.
(2016) 245 Cal.App.4th 227, 254.) The
Court has discretion, but is not required, to find that the entire agreement is
permeated by unconscionability in the presence of multiple unconscionable
terms. (Lange v. Monster Energy Co.
(2020) 46 Cal.App.5th 436, 455 [“we agree with the trial court that the
parties’ arbitration agreement is permeated with too high a degree of
unconscionability for severance to rehabilitate”].)
Here, there is only a single unconscionable provision. Holding it unenforceable and severing it does
not change the nature of the arbitration, particularly in light of both
parties’ continuing ability to utilize the protections of Civil Procedure Code
section 1281.8.
The case before this Court is similar to Farrar v. Direct
Commerce, Inc. (2017) 9 Cal.App.5th 1257, which reversed a trial court that
refused to sever a similar provision. The
unconscionable term at issue in Farrar was more problematic than the one
at issue here: the clause in Farrar exempted
all litigation about the employer’s confidentiality claims from arbitration,
not just injunctive relief as is the case here. The trial court refused to sever the claim,
but the Court of Appeal ruled that this was an abuse of discretion. “Thus, in this case, the one aspect in which
the arbitration provision is substantively unconscionable is readily
remedied—by severing out the exception for claims arising from the confidentiality
agreement. This is not a case in which
the arbitration provision is ‘permeated’ by unconscionability. . . .” (Id. at p. 1275.)
So it is here. The
Court severs out the provisions allowing Slate only to broadly seek injunctive
relief. The Court enforces the rest of
the arbitration clause.