Judge Kerry Bensinger, Case Number: 23STCV17011, Date: 2024-02-06 Tentative Ruling

This is a discrimination and wrongful termination action. On July 20, 2023, Plaintiff, Elizabeth Martinez, filed a Complaint against her former employer, Defendant, MorBro Logistics, for: (1) Disability Discrimination in Violation of Cal. Gov. Code § 12940 (a); (2) Disability Discrimination in Violation of Cal. Gov. Code § 12940 (m) – Failure to Provide Reasonable Accommodation; (3) Disability Discrimination in Violation of Cal. Gov. Code § 12940 (n) – Failure to Engage in the Interactive Process; (4) Retaliation in Violation of Cal. Gov. Code § 12940 (h); (5) Failure to Prevent Harassment, Discrimination and Retaliation in Violation of Cal. Gov. Code § 12940 (k); and (6) Wrongful Termination in Violation of Public Policy.

On October 4, 2023, Defendant filed its Answer to the Complaint. Defendant pleaded an affirmative defense based on the existence of a valid arbitration agreement.

On January 4, 2024, Defendant filed this motion for an order compelling arbitration and to dismiss or stay proceedings.

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act (FAA), including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) Under both the FAA and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The petitioner bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, the party opposing the petition then bears the burden of proving by a preponderance of the evidence any fact necessary to demonstrate that there should be no enforcement of the agreement, and the trial court sits as a trier of fact to reach a final determination on the issue. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) Pursuant to Code of Civil Procedure section 1281.2, the court can compel parties to an arbitration agreement to arbitrate their dispute.

Defendant moves to compel arbitration and stay the proceedings in this matter. In opposition, Plaintiff argues the arbitration agreement is unconscionable and therefore, unenforceable. Defendant responds that the agreement is not unconscionable, and even if the court were to find some of the terms to be unconscionable, those terms must be severed from the agreement.

Plaintiff was employed by Defendant as a Delivery Driver and then as a Dispatcher from on or about July 13, 2021 until February 9, 2023. (Morgan Decl., ¶ 3.) On July 19, 2021, Plaintiff signed an Arbitration Agreement wherein she agreed to arbitrate any claims that arose out of her employment with Defendant. (Morgan Decl., ¶ 6, Exh. 1.) The Agreement is between Plaintiff and MorBro Logistics. (Id.) Pursuant to the Arbitration Agreement, Plaintiff and Defendant agreed to binding individual arbitration. (Id.) Specifically, Plaintiff and Defendant agreed that:

Except as explained in the section "Claims Not Covered" below, this Mutual Agreement to Individually Arbitrate Disputes (this "Agreement") covers all past, current, and future grievances, disputes, claims, issues, or causes of action (collectively, "claims") under applicable federal, state or local laws, arising out of or relating to (a) Employee's application, hiring, hours worked, services provided, and/or employment with the Company or the termination thereof, and/or (b) a Company policy or practice, or the Company's relationship with or to a customer, vendor, or third party, including without limitation claims Employee may have against the Company and/or any Covered Parties (defined below), or that the Company may have against Employee.

The claims covered by this Agreement include, but are not limited to claims asserted under or relating to: (i) Title VII of the Civil Rights Act of 1964 and similar state statutes; (ii) Age Discrimination in Employment Act and similar state statutes; (iii) Fair Labor Standards Act or similar state statutes; (iv) Family and Medical Leave Act or similar state statutes; (v) Americans with Disabilities Act or similar state statutes; (vi) injuries you believe are attributable to the Company under theories of product liability, strict liability, intentional wrongdoing, gross negligence, negligence, or respondent superior, (vii) actions or omissions of third parties you attribute to the Company; (viii) claims brought pursuant to actual or alleged exceptions to the exclusive remedy provisions of state workers compensation laws; (ix) Consolidated Omnibus Budget Reconciliation Act of 1985; (v) federal and state antitrust law; (xi) issues regarding benefits, bonuses, wages, co-employment, or joint employment; (xii) contracts between you and the Company; (xiii) personal or emotional injury to you or your family; (xiv) federal, state, local, or municipal regulations, ordinances, or orders; (xv) any common law, or statutory law issues relating to discrimination by sex, race, age, national origin, sexual orientation, family or marital status, disability, medical condition, weight, dress, or religion or other characteristic protected by applicable law; (xvi) wrongful retaliation of any type, including retaliation related to workers' compensation laws or employee injury benefit plan actionable at law or equity; and (xvii) misappropriation of confidential information or other acts or omissions by you.

Waiver of Trial by Jury. Each of the Employee and the Company understands and fully agrees that by entering into this Agreement to arbitrate, each agrees to resolve all claims through arbitration and is giving up the right to have a trial by jury and the right of appeal following the rendering of a decision except on the grounds for reviewing an arbitration award under the Federal Arbitration Act ("FAA") or applicable state law.

As such, Defendant has shown that an arbitration agreement exists. Plaintiff does not present any arguments to the contrary.

The¿FAA¿applies to contracts that involve interstate commerce. (9 U.S.C. §§ 1,¿2.) Because arbitration is a matter of contract, the¿FAA¿also applies if it is so stated in the agreement.¿ (See¿Victrola 89, LLC v. Jaman Properties 8 LLC¿(2020) 46 Cal.App.5th 337, 355 (“[T]he presence of interstate commerce is not the only manner under which the¿FAA¿may apply. … [T]he parties may also voluntarily elect to have the¿FAA¿govern enforcement of the Agreement”].)

The FAA governs written arbitration agreements in the employment context.¿ (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 109, 113.)¿ The FAA provides, “A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”¿ (9 U.S.C. § 2.)

Here, the Arbitration Agreement states that “The Federal Arbitration Act ("FAA") and federal common law applicable to arbitration shall govern the interpretation and enforcement of this Agreement. If, for any reason, the FAA or federal common law is found not to apply to this Agreement (or its agreement to arbitrate), then applicable state law shall govern.” (Morgan Decl., ¶ 6, Exh. 1.)

As the High Court noted in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 (Concepcion), “the final phrase of § 2 [of the FAA], however, permits arbitration agreements to be declared unenforceable ‘upon such grounds as exist at law or in equity for the revocation of any contract.’ This saving clause permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” Thus, under the FAA, state courts may “decline to enforce arbitration clauses on the basis of generally applicable contract defenses, such as fraud, duress or unconscionability.” (Erickson v. Aetna Health Plans of California, Inc. (1999) 71 Cal.App.4th 646, 650-651 [cleaned up].)

Plaintiff raises the contractual defense of unconscionability. “The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 247 (Pinnacle Museum).) In general, the doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic, supra, 57 Cal.4th at p. 1133 [cleaned up].) In other words, the doctrine consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Ibid.)¿

If unconscionable, the arbitration agreement is not a valid contract and therefore is unenforceable.¿ (Armendariz, supra, 24 Cal.4th at p. 114.)¿ Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree.¿ (Id.) “ ‘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. In other words, the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’ ” (Ibid.)¿

Procedural unconscionability focuses on the elements of oppression and surprise. (Pinnacle Museum, supra, 55 Cal.4th at p. 247.) “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.” (Davis v. TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662, 671.)

A “contract of adhesion” creates some amount of procedural unconscionability – the term signifies a standardized contract, 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. (Neal v. State Farm Ins. Cos. (1961) 188 Cal.App.2d 690, 694.) In addition, a lack of effort to highlight the presence of an arbitration provision, such as through bold lettering, larger font, or capitalization, has been found to indicate procedural unconscionability. (See Higgins v. Superior Court (2006) 140 Cal.App.4th 1238.)¿¿However, when there is no other indication of oppression other than the adhesive aspect of an agreement, the degree of procedural unconscionability is low. (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)¿¿¿

“[T]he fact that the arbitration agreement is an adhesion contract does not render it automatically unenforceable as unconscionable. Courts have consistently held that the requirement to enter into an arbitration agreement is not a bar to its enforcement.” (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 179.)

Here, Plaintiff argues that the agreement is procedurally unconscionable because Plaintiff did not have an opportunity to negotiate the agreement, was presented the agreement under pressure (take it or leave it), and did not have an attorney to review the contract prior to signing. Plaintiff further represents that her first language is Spanish, her highest level of education is high school, and the agreement was difficult to read because it “had a lot of fine print,” suggesting obliquely that she may not have understood the agreement.

Plaintiff presents evidence of an adhesion contract. However, as explained above, an adhesion contract does not render an agreement automatically unconscionable. Moreover, the requirement to enter into an arbitration agreement is not a bar to the agreement’s enforcement.¿ (Serafin, supra, 235 Cal.App.4th at p. 179.)

Plaintiff argues the arbitration agreement is procedurally unconscionable because it does not include the location of the arbitration proceedings. Failing to include the location of the arbitration proceeding, according to Plaintiff, made “the agreement more confusing.” (Opp., p. 4.) Plaintiff does not explain how the lack of location of the arbitration proceedings made the agreement more confusing. Nonetheless, Plaintiff cites Murrey v. Superior Court (2023) 87 Cal.App.5th 1223. In Murrey, the Court of Appeal found a high degree of procedural unconscionability as well as substantively unconscionable provisions. One of the procedurally unconscionable provisions involved the failure of the arbitration agreement to identify the dispute resolution organization (“DRO”), other than a nationally recognized DRO, or where the place of the arbitration might be held. The Murrey court found the provision in the agreement discussing the location of the arbitration agreement to be “a complicated way of saying the location of your arbitration will be a surprise.” (Id. at p. 1248.)

Here, the arbitration agreement in this matter clearly states, “The arbitration will be administered by an independent and neutral arbitrator from the American Arbitration Association ("AAA") in accordance with the AAA Employment Arbitration Rules and Mediation procedures ("AAA Rules") available online at www.adr.org/employment (or to be provided upon request).” (Morgan Decl., Exh. 1.) The arbitration agreement further states, “If for any reason the AAA will not administer the arbitration, the party seeking arbitration may initiate the arbitration with JAMS (www.jams.adr) or other recognized arbitration services provider.” (Id.) Plaintiff does not explain how this provision makes the agreement “more confusing.” And while the agreement does not specifically identify the location where the arbitration will be held and therefore may raise a somewhat similar concern to that raised by the court in Murrey, the agreement here specifically identifies the “DRO” and how to locate the arbitration associations rules. Moreover, the provisions herein do not raise the multiple concerns over procedural unconscionability identified in Murrey.[1]

With respect to the two components that comprise procedural unconscionability – oppression and surprise – the court finds in Plaintiff’s favor on the existence of an adhesion contract, but against Plaintiff on the issue of surprise. The court finds the degree of procedural unconscionability to be low. (Serpa, supra, 215 Cal.App.4th at p. 704 [“When there is no other indication of oppression other than the adhesive aspect of an agreement, the degree of procedural unconscionability is low.”].) ¿¿¿

Assessing substantive unconscionability, courts generally focus on the terms of the agreement and look for terms that are overly harsh or one-sided such that they shock the conscience. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1281; see also Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910-911 (clarifying various definitions—e.g., “shocks the conscience,” “unduly oppressive,” “unreasonable favorable” mean same thing).) The “paramount consideration” is mutuality of the obligation to arbitrate. (Nyulassy, 120 Cal.App.4th at pp. 1281, 1287.)

“Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided. One such form, as in Armendariz, is the arbitration agreement’s lack of a modicum of bilaterality, wherein the employee’s claims against the employer, but not the employer’s claims against the employee, are subject to arbitration. [Citation.] Another kind of substantively unconscionable provision occurs when the party imposing arbitration mandates a post-arbitration proceeding, either judicial or arbitral, wholly or largely to its benefit at the expense of the party on which the arbitration is imposed. [Citation.] In determining unconscionability, our inquiry is into whether a contract provision was unconscionable at the time it was made. [Citation.]” (Sonic, supra, 57 Cal.4th at pp. 1133-34 [cleaned up].) “To state it simply: it is substantively unconscionable to require a consumer to give up the right to utilize the judicial system, while imposing arbitral forum fees that are prohibitively high.” (Id. at pp. 1144-45.)

Here, Plaintiff points to three terms in the agreement which Plaintiff argues renders the agreement substantively unconscionable. First, the arbitration agreement requires the employee to follow a certain procedure to demand arbitration yet does not provide the name or address of the person to whom the claim should be sent. The agreement states, ““A demand for arbitration must be in writing and delivered by certified or registered mail, return receipt requested, to the Company's [NAME OF PERSON OR POSITION] at [ADDRESS] ("Notice Address").” (Morgan Decl., Ex. 1.)

Second, the arbitration agreement requires that written notice of a claim “shall identify and describe the nature of all claims asserted and the facts upon which such claims are based.” Plaintiff argues this is “a further limitation of Plaintiff’s rights to immediately bring this matter to court and provides no basis for whom decides what is sufficient factual or legal showing, or who is to decide the sufficiency.” (Opp. at p. 4.)

Third, the agreement grants the employer alone the right to seek equitable relief based on misappropriation of confidential information.

The court is not persuaded. First, the omission of the name and address of the person to whom an arbitration claim should be directed ignores that the agreement was countersigned by MorBro’s CEO and Human Resources Manager, Jennifer Morgan.

Second, Plaintiff’s argument is undeveloped. Plaintiff fails to explain how requiring Plaintiff to describe the nature of all claims asserted and the facts thereon renders the agreement unconscionable.

Last, the arbitration agreement does not limit equitable relief to Defendant for claims involving misappropriation of confidential information. Rather, the agreement states:

MANDATORY ARBBITRATION. THE EMPLOYEE AND THE COMPANY AGREE THAT ANY COVERED CLAIM (DEFINED BELOW), WHETHER BASED IN CONTRACT, TORT, STATUTE, FRAUD, MISREPRESENTATION OR ANY OTHER LEGAL OR EQUITABLE THEORY, SHALL BE SUBMITTED TO BINDING ARBITRATION.

In sum, Plaintiff does not point to any terms of the agreement that are “overly harsh”, “one-sided”, or that “shocks the conscience.” Plaintiff does not demonstrate a lack of mutuality as in Armendariz “wherein the employee’s claims against the employer, but not the employer’s claims against the employee, are subject to arbitration.” (Armendariz, supra, 24 Cal.4th at p. 119.) Nor is this a case where Defendant, as the party imposing arbitration, is requiring a post-arbitration proceeding, wholly or largely to Defendant’s benefit at Plaintiff’s expense. (Little v. Auto Steigler, Inc. 29 Cal.4th 1064, 1071-72 (Little).)

Because both substantive and procedural components must be present, Plaintiff fails to demonstrate the agreement is unconscionable.[2]

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.¿

¿ Here, the court will order this action to arbitration. Thus, Defendant’s motion to stay the action pending arbitration is granted.¿¿

Accordingly, the motion to compel arbitration is GRANTED. The action is stayed as to all parties pending the conclusion of the arbitration. The court sets a post-arbitration status conference for November 8, 2024 at 9:00 a.m.

Kerry Bensinger

Judge of the Superior Court

[1] To the extent Plaintiff argues the agreement is procedurally unconscionable because it contains fine print, Plaintiff failed to identify the fine print. The font throughout the agreement is the same.

[2] Having so found, the court need not address severability.