Judge: Joseph Lipner, Case: 23STCV29123, Date: 2024-04-11 Tentative Ruling

Case Number: 23STCV29123    Hearing Date: April 11, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendants In-N-Out Burgers, Steve Hernandez and Darrell Wilson (“Defendants”) move to compel arbitration of the claims of Plaintiff Matthew Chidez (“Plaintiff”).  Defendants also move to stay these proceedings.  Plaintiff moves to amend the complaint.

Defendants’ motion to compel arbitration is GRANTED.

Defendants’ motion to stay proceedings is GRANTED.

Plaintiff’s motion to amend the complaint is DENIED as moot.

This action is hereby STAYED pending resolution of the arbitration. The Court sets a Status Conference Re: Arbitration for January 29, 2025 at 8:30 AM.  Defendants to give notice.

Background

            Plaintiff Matthew Chidez (“Plaintiff”) filed this action on November 28, 2023 against Defendants In-N-Out Burgers (“INO”), Steve Hernandez and Darrell Wilson (“Defendants”). Plaintiff filed a first amended complaint (“FAC”) on December 6, 2023. Plaintiff’s FAC alleges fourteen causes of action against Defendants for violations of the Fair Employment and Housing Act (FEHA), employment interference and retaliation, negligent hiring and retention, intentional infliction of emotional distress, unfair competition, and wrongful termination.

Defendants’ Evidentiary Objections to Declaration of Matthew Chidez

The Court denies Defendants’ objections.

Discussion

Governing Law

Plaintiff does not dispute that the Federal Arbitration Act (“FAA”) applies. The FAA deems a written arbitration agreement valid except where contract principles invalidate the agreement. (9 U.S.C. § 2.)

Existence of an Arbitration Agreement 

A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate, and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 356-57.)  

Courts have articulated a three-step burden shifting process:  

First, the moving party bears the burden of producing prima facie evidence of a written agreement to arbitrate the controversy. The moving party can meet its initial burden by attaching to the [motion] a copy of the arbitration agreement purporting to bear the [opposing party’s] signature. Alternatively, the moving party can meet its burden by setting forth the agreement’s provisions in the motion. For this step, it is not necessary to follow the normal procedures of document authentication. . . .

If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement. The opposing party can do this in several ways. For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement.

If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party.

(Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165-66 [citations omitted].) An electronic record or signature is attributable to a person if it was the act of the person. (Civ. Code § 1633.9(a).) The act of the person may be shown in any manner. (Id.) As described by the Court of Appeal, “the burden of authenticating an electronic signature is not great.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 844.) 

Defendants have provided a copy of a Dispute Resolution Agreement (“DRA”) dated August 4, 2019 bearing Plaintiff’s electronic signature and his associate number. (Declaration of Rebecca Douglass ISO Mot. Exh. A.) Section 1 of this agreement states: 

This Agreement is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce. Except as it otherwise provides, this Agreement applies to any legal dispute, past, present or future, arising out of or related to Associate's (sometimes “you” or “your”) application for employment, employment with IN-N-OUT Burgers (“Company”) or relationship with any of its agents, employees, affiliates, successors, assigns, subsidiaries or parent companies (each of which are third party beneficiaries of this Agreement) or termination of employment regardless of its date of accrual and survives

after the employment relationship terminates. . . .

Except as it otherwise provides, this Agreement is intended to apply to the resolution of disputes that otherwise would be resolved in a court of law, and therefore this Agreement requires all such disputes to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial. Except as this Agreement otherwise provides, such disputes include without limitation disputes arising out of or relating to interpretation or application of this Agreement, including the scope, formation, enforceability, revocability or validity of the Agreement or any portion of the Agreement.

(Douglass Decl. Ex. A. ¶ 1.) Above Plaintiff’s signature block stated in capital letters is the following:

AGREED: IN-N-OUT Burgers

AGREED and RECEIVED [followed by Plaintiff’s signature block]

(Id., Ex. A at p. 4.) Defendants have also provided evidence of INO’s onboarding process, (Id. ¶¶ 7-9) Defendants have thus met their burden of production to establish the existence of an arbitration agreement. 

1.      Authentication of an electronic signature

Plaintiff first argues in opposition that Defendants failed to show that the signature on the DRA is “attributable” to Plaintiff under the meaning of Civil Code § 1633.9 because Defendants did not authenticate the signature. Specifically, Plaintiff argues that although “Defendants describe a login process,” they “make no allegation that that is what specifically happened to Plaintiff.” (Opp’n, 10:26-27.) Plaintiff relies on Ruiz v. Moss Bros. Auto Grp., Inc. (1994) 232 Cal.App.4th 836 as the “roadmap to authenticate an electronic signature.” (Opp’n, 10:13.) In Ruiz, the court described the kind of circumstantial evidence that is sufficient to authenticate an e-signature:

Indeed, [the business manager] did not explain that an electronic signature in the name of [the plaintiff] “Ernesto Zamora Ruiz” could only have been placed on the 2011 agreement (i.e., on the employee acknowledgement form) by a person using Ruiz’s “unique login ID and password”; that the date and time printed next to the electronic signature indicated the date and time the electronic signature was made; that all [the defendant] Moss Bros. employees were required to use their unique login ID and password when they logged into the HR system and signed electronic forms and agreements; and the electronic signature on the 2011 agreement was, therefore, apparently made by Ruiz on September 21, 2011, at 11:47 a.m. Rather than offer this or any other explanation of how she inferred the electronic signature on the 2011 agreement was the act of [the plaintiff] Ruiz, [the business manager] only offered her unsupported assertion that Ruiz was the person who electronically signed the 2011 agreement. 

(Ruiz, supra, 232 Cal.App.4th at p.844.) Here, Defendants stated that a new associate must create an account in a secure onboarding portal by accessing a link sent to the associate’s personal email address. (Douglass Decl., ¶ 7.) The associate is then directed to input the last four digits of their social security number, last name and zip code to verify their identity. (Ibid.) Only then will the system provide the associate with their employee identification number. (Ibid.) The associate must then create a unique and complex password. Both the number and password are required to access the associate’s online portal account through which onboarding documents are signed. (Ibid.) This information creates the inference that only Plaintiff could have known his login credentials. Therefore, Defendants have met the Ruiz standard for authentication.

2.      Plaintiff’s claim that his supervisor e-signed for him

            Plaintiff also submits his declaration that he did not personally e-sign the DRA. (See Chidez Decl.) Plaintiff alleges that a supervisor, Chris Hand (“Hand”), knew his login credentials and logged into Plaintiff’s account for him during orientation at INO’s Baldwin Park warehouse location. (Ibid.) Plaintiff declares that he did not sign the DRA and that, if anybody signed the DRA, it was Hand. (Opp’n, 9:6-12.)

Defendants rebutted this statement by a preponderance of the evidence. In reply, Defendants submit the declaration of Philip Van Luke, Software Development Supervisor for INO (“Luke Decl.”). INO’s records show that the IP information associated with Plaintiff’s completion of his onboarding documents, including signature of the DRA, is not associated with any INO device or location. (Luke Decl., ¶ 16, 9, 11, 13.)

3.      The hand signed agreement

            Defendants also submitted evidence that Plaintiff signed a physical document stating that he acknowledges receipt of the DRA. (Douglass Decl., Ex. B.) Plaintiff objects to this because it is incomplete, does not identify the name of the parties, or the other terms of the arbitration agreement. (See Opp’n, 13:5-14.) Plaintiff’s argument in this regard has merit, but nevertheless is immaterial to the disposition of the motion because Defendants were able to show the existence of a valid electronically signed arbitration agreement.

For the foregoing reasons, the Court finds that Defendants have demonstrated the existence of an agreement to arbitrate with Plaintiff.  

Unconscionability 

1.      Procedural Unconscionability

“To briefly recapitulate the principles of unconscionability, the doctrine has both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh . . . or one-sided results. The procedural element of an unconscionable contract generally takes the form of a contract of adhesion, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. . . . Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided.”¿ 
¿ 
“Under this approach, both the procedural and substantive elements must be met before a contract or term will be deemed unconscionable. Both, however, need not be present to the same degree. A sliding scale is applied so that ‘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.”
¿ 

(Walnut Producers of California v. Diamond Foods, Inc. (2010) 187 Cal.App.4th 634, 645 [citations omitted].)¿  

Plaintiff first argues that the DRA is procedurally unconscionable because it is a contract of adhesion presented to Plaintiff as a take-it-or-leave-it condition of his employment, which also makes the DRA oppressively one-sided. However, the DRA clearly and conspicuously states an employee’s right to opt out of the DRA within 39 days of receipt of the DRA. (Douglass Decl., Ex. A, ¶ 10.) Since the implementation of the DRA in February 2012, more than 277 associates have opted out of the DRA by timely submitting completed opt-out forms. (Id., ¶ 12.) Thus, the opt-out provision is meaningful because INO has honored those associates that timely opted-out of the DRA.

As Plaintiff has not shown procedural unconscionability, which is a required element of the unconscionability defense, Plaintiff’s unconscionability argument fails.

2.      Substantive Unconscionability

Plaintiff also argues that the DRA is substantively unconscionable for several reasons. First, Plaintiff argues that the DRA is substantively unconscionable because it lacks mutuality. Specifically, Plaintiff points to a provision in the DRA requiring Plaintiff to arbitrate claims not only against INO but also against INO’s “agents, employees, affiliates, successors, assigns, subsidiaries, or parent companies.” (Id., Ex. A, ¶ 1.) Unlike Plaintiff, these third-parties are not required to arbitrate their claims against Plaintiff. Defendants argue in reply that Plaintiff did not cite any case law in support of this argument, presumably because such case law does not exist. Parties may contract to benefit unnamed beneficiaries. The DRA provides that INO’s “agents, employees, affiliates, successors, assigns, subsidiaries or parent companies,” are “third party beneficiaries of this Agreement.” (Ibid.)

Second, Plaintiff argues that the DRA is substantively unconscionable because it contains a class action and PAGA waiver. However, the same argument was already considered by the California Court of Appeal in Piplack v. In-N-Out Burgers (2023) 88 Cal.App.5th 1281. There, the court found that INO’s DRA properly compelled an employee’s PAGA claims to arbitration, and that class action waivers are specifically allowed under the U.S. Supreme Court’s ruling in A&T Mobility LLC v. Concepcion (2011) 563 U.S. 333. 

Moreover, the PAGA waiver is severable by its terms.  Assuming that the term is unconscionable and unenforceable, it is a single term and is severable from the rest of the agreement.  Moreover, the term is of limited relevance here as this is not a PAGA claim.

Thus, Plaintiff has failed to demonstrate substantive unconscionability.  

As Plaintiff has not demonstrated procedural or substantive unconscionability, the Court finds that the DRA is not unconscionable and should be enforced.  

Motion to Stay Proceedings

Defendants concurrently filed a motion to stay proceedings pending arbitration. The FAA requires this action be stayed because issues presented for resolution by the Court are “referable to arbitration.” (9 U.S.C. § 3; Rodriguez v. Am. Techs., Inc. (2006) 136 Cal.App.4th 1110, 1122; Code Civ. Proc. § 1281.4.)

The motion to stay is granted.

Motion to Amend

            Plaintiff has made a motion to amend the complaint.  Given the Court’s ruling above, the motion is DENIED as moot.

Moving parties to give notice.