Judge Linda S. Marks, Case 01237185 2022-07-25 Tentative Ruling

Judge: Linda S. Marks, Case: 01237185, Date: 2022-07-25 Tentative Ruling

Motion to Compel Arbitration

Initially, there is no dispute that Plaintiff executed an Associate Acknowledgment of ADR Policy on January 8, 2018. (¶6 and ¶9 of Barnes Declaration, as well as Exhibit D thereto; See also ¶3 of Cruz Declaration and Exhibit B thereto). Additionally, there is no dispute that the signed agreement applies to “all claims arising from or related to his/her employment…” (¶4 of Cruz Declaration and Exhibit C thereto; See also ¶7 of Barnes Declaration and Exhibit B thereto).

Moreover, there appears to be no dispute that all moving Defendants are entitled to enforce the Agreement. Per the Acknowledgement, the term “Company” is defined as “Lennar Corporation and all of its subsidiaries affiliate companies.” (¶6 and ¶9 of Barnes Declaration, as well as Exhibit D thereto; See also ¶3 of Cruz Declaration and Exhibit B thereto). Additionally, per the Acknowledgement, the ADR Policy includes claims against “directors, officers, managers, employees and agents.” (Id.).

Plaintiff does not dispute that Defendants are the “subsidiaries,” “affiliates” or agents of Lennar Corporation. Further, the Complaint alleges that all Defendants are agents of each other. (¶11 of Complaint). “[A] plaintiff’s allegation of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement.” (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614-615).

Instead, in response to this motion, Plaintiff asserts the agreement is unenforceable, pursuant to Labor Code §432.6; however, “[n]othing in [Labor Code §432.6] is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act…” (C.C.P. §432.6(f)).

The instant motion asserts the Agreement is governed by the Federal Arbitration Act and Plaintiff does not dispute the same. (Motion: 3:14-11). Additionally, the Agreement expressly indicates disputes will be resolved “exclusively by binding arbitration under the Federal Arbitration Act” and that arbitration “will be governed by the Federal Arbitration Act.” (See ¶8 of Barnes Declaration and Exhibit B thereto and ¶4 of Cruz Declaration and Exhibit C thereto; See also Victrola 89, LLC v. Jaman Properties 8, LLC (2020) 46 Cal.App.5th 337, 355). Further, the agreement involves interstate commerce as Lennar sells products and services in multiple sates, including California, Nevada, Colorado and Texas, and Plaintiff was employed out of state. (¶3 and ¶10 of Barnes Declaration; See also Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1286-1287).

Based on the above, the FAA applies and the agreement is not invalidated by Labor Code §432.6. (See also Chamber of Commerce Of United States v. Bonta (9th Cir. 2021) 13 F.4th 766, 775-776).

Thereafter, Plaintiff asserts the Agreement is unconscionable. In order to invalidate an Arbitration Agreement, both procedural and substantive unconscionability must be present. (Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1570).

Here, it is undisputed that the January 8th, 2018 agreement was imposed as a condition of Plaintiff’s employment and, consequently, is an agreement of adhesion. (¶5 of Barnes Declaration); however, the adhesive nature of the agreement alone, establishes only a “modest” or “low” degree of procedural unconscionability. (See Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248 and Davis v. Kozak (2020) 53 Cal.App.5th 897, 910).

Next, Plaintiff asserts procedural unconscionability, on the basis Defendants maintain a unilateral right to modify the agreement, citing Dumais v. American Golf Corp. (10th Cir. 2002) 299 F.3d 1216, wherein the court held “that an arbitration agreement allowing one party the unfettered right to alter the arbitration agreement’s existence or its scope is illusory.” (Id. at 1219); however, Plaintiff identifies no language in the agreement which provides a unilateral right to modify.

Similarly, while Plaintiff declares he understood such a unilateral right existed, he does not identify any communications from Defendants or any language in the acknowledgment itself, which indicate the agreement was being extended or modified. (¶2 of Cruz Declaration). Moreover, as noted by Defendants, “[u]nder California law…even a modification clause not providing for advance notice does not render an agreement illusory, because the agreement also contains an implied covenant of good faith and fair dealing.” (Casas v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 1233, 1237).

Next, Defendant asserts procedural unconscionability, on the basis Plaintiff was not provided consideration for the agreement. (Opposition: 5:5-10); however, as noted by Defendants, courts have found that “the availability of continuing employment” serves as “adequate consideration from the employer.” (Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 15). Additionally, as noted by Defendants, the agreement to arbitrate is mutual. (See ¶8 of Barnes Declaration and Exhibit B thereto and ¶4 of Cruz Declaration and Exhibit C thereto).

Lastly, Plaintiff asserts the Agreement is substantively unconscionable, as it requires Plaintiff to pay half the costs of pre-arbitration mediation. The Court finds this argument persuasive and severs the relevant provision.

“A provision is substantively unconscionable if it involves contract terms that are so one-sided as to ‘shock the conscience,' or that impose harsh or oppressive terms.” (Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1573).

Per Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” (Id. at 110-111).

Here, the Agreement provides that, prior to arbitration, “the parties shall first submit the dispute or controversy to non-binding mediation” and “[t]he parties shall equally share the costs of mediation, unless the parties agree otherwise…” (¶4 of Cruz Declaration and Exhibit C thereto).

Requiring an employee to pay half of pre-arbitration mediation expenses, goes beyond the “usual costs” of litigation and, pursuant to Civil Code §1670.5, the court severs this provision.

Tentative Ruling: Following severance, this Motion is GRANTED and Plaintiff is ordered to arbitrate his claims against Defendants. This action wil be stayed, pending completion of arbitration. (C.C.P. §1281.4 and 9 U.S.C. §3).