Judge: Lon F. Hurwitz, Case: 2021-01221100, Date: 2023-04-14 Tentative Ruling
1. Motion to Compel Arbitration
2. Status Conference
Authority
A party moving to compel arbitration under Code Civil Procedure Section 1281.2 must prove by a preponderance of the evidence that: (1) The parties entered into a written agreement to arbitrate; (2) One or more of the claims at issue are covered by that agreement; and (3) The responding party refused a prior demand for arbitration under the agreement of the claims at issue. (Code Civ. Proc., § 1281.2; Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230.) If the moving party meets this burden, the burden shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud or unconscionability). (Villacreses, 132 Cal.App.4th at 1230.)
Application of the FAA
The party asserting the FAA applies to an agreement has “the burden to demonstrate FAA coverage by declarations and other evidence.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1208.) Here, both Agreements contain a contractual provision for application of the FAA. “[S]ince arbitration is a matter of contract, the FAA also applies if it is so stated in the agreement.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 963.)
Merits
Defendant has its initial burden under CRC 3.1330 to prove the existence of an agreement to arbitrate. Defendant presents evidence that Plaintiffs signed separate versions of a Mutual Agreement to Arbitrate Claims (“Agreement”) as part of their new hire paperwork. (ROA 37, Lozcano Decl. Exs. A, B.)
Hernandez’s Agreement states that he agreed to “arbitrate and resolve any dispute, claim, or controversy (“Claims”) between Mission Inn and myself. . . . Claims include all disputes, including statutory and common law claims and penalties, whether under state, federal, or local law . . . .” (Emphasis in original.)
Merrero’s Agreement states that he agreed to arbitrate “all disputes, controversies claims, and causes of action (collectively, “Covered Disputes”) in any federal, state or local court, or before any governmental agency, under applicable federal, state or local laws, arising out of or relating to Employee’s employment with the Mission Inn and the termination of that employment . . . .”
Plaintiffs do not dispute the authenticity of the Agreements provided by Defendant, nor do they contend they did not sign the Agreements. Plaintiffs do not contend that they were denied access to the Agreement.
Further, the Hernandez’s Arbitration Agreement includes the following term above the signature line:
“I have read the agreement above and have been given the opportunity to consider the terms & effects on The Mission Inn and myself. I knowingly and voluntarily agree to be bonded by the terms and conditions of this agreement.” (ROA 37, Lozcano Decl. Ex. A [emphasis in original].)
Similarly, Merrero’s Agreement contains the following language directly above the signature line:
“EMPLOYEE HAS READ THE AGREEMENT ABOVE CAREFULLY AND HAS BEEN GIVEN THE OPPORTUNITY TO CONSIDER THE TERMS AND EFFECT ON EMPLOYEE. BY EMPLOYEE’S SIGNATURE BELOW, EMPLOYEE KNOWINGLY AND VOLUNTARILY AGREES TO BE BOUND BY THE TERMS AND CONDITIONS OF THIS AGREEMENT.” (ROA 37, Lozcano Decl. Ex. B [emphasis in original].)
Therefore, Defendant has proved the existence of a valid arbitration agreement with Plaintiff.
PAGA Waiver/Severability
In Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, the United States Supreme Court overruled Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 to the extent its holding was preempted by the FAA and concluded that (1) a PAGA claim could be split into “individual” and “representative” portions, and (2) the individual portion could be compelled to arbitration. However, Viking River Cruises did not overrule Iskanian to the extent it precludes “a wholesale waiver of PAGA claims.” (Id. at 1924-25.)
Therefore, pursuant to Viking River, Plaintiff’s “individual” claim may be compelled to arbitration.
Plaintiff argues Viking River only preempts Iskanian if both parties contractually agree to divide the PAGA action. The arbitration agreements signed by Hernandez and Marrero are different than the arbitration agreement in Viking River, in that neither agreement has a representative action waiver like the agreement in Viking River. The argument is unpersuasive and requires a razor-thin, literal reading of both Viking River and the Arbitration Agreements.
Defendant argues the provisions are severable under Civ. Code § 1670.5, which states, “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” As severance of the PAGA waiver clause is allowed under Civil Code § 1670.5, the Court should sever the implicit PAGA waivers, enforce the remainder of the contract, and order Plaintiffs’ individual PAGA claims to arbitration.
Stay/Dismissal
Defendant urges dismissal of the non-individual PAGA claim in its moving papers, but then argues in its replies that it only seeks a stay.
RULING:
Defendant’s Motion to Compel Arbitration and Stay the Action is GRANTED. Plaintiffs’ individual PAGA claims are compelled to arbitration. The remaining representative PAGA claim is stayed pending the outcome of arbitration.
The court concludes that there exists a valid agreement to arbitrate the individual claims asserted by Plaintiff and that no grounds exist to bar enforcement of the agreement. (CCP § 1281.2.) Defendant has provided a Mutual Agreement to Arbitrate Disputes (“Agreement”), both of which include an arbitration provision governing all disputes arising out of the employee’s employment with the Mission Inn. (Lozcano Decl., Exs. A and B.) Plaintiffs do not dispute they signed the agreements.
With respect to the implicit PAGA waivers, the Court severs it from the agreements pursuant to the severance clauses in the Agreements and Civ. Code § 1670.5.
Defendant has provided a Mutual Agreement to Arbitrate Disputes (“Agreement”), which includes an arbitration provision governing “all disputes, controversies claims, and causes of action (collectively, "Covered Disputes"} in any federal, state or local court, or before any
governmental agency, under applicable federal, state or local laws, arising out of or relating to
Employee's employment with the Mission Inn and the termination of that employment.” (Lozcano Decl., Ex. A.) Plaintiff does not dispute she signed the agreement.
The court concludes that there exists a valid agreement to arbitrate the individual claims asserted by Plaintiff and that no grounds exist to bar enforcement of the agreement. (CCP § 1281.2.)
Further, the defense of unconscionability requires that the arbitration agreement be both procedurally and substantively unconscionable. (De La Torre v. CashCall, Inc. (2018) 5 Cal. 5th 966, 982.) Plaintiff fails to show any procedural unconscionability as the arbitration provision is clearly provided.
With respect to both the discretionary fees provision and implicit PAGA waiver (those portions of Paragraphs 5 and 15 as set forth in the tentative rulings as to #’s 5 and 15 hereinabove) the Court finds that these provision are substantively unconscionable and unenforceable; therefore, the Court severs such portions of Paragraphs 5 and 15 from the agreement as set forth in the Court’s tentative rulings as to #’s 4 & 5 set forth hereinabove pursuant to the severance clause in the Agreement and Civ. Code § 1670.5. The remaining Agreement is not substantively unconscionable nor is the Agreement “permeated” with unconscionability under Armendariz; therefore, it is enforceable.
The remaining representative claim is stayed pending the outcome of arbitration of Plaintiffs’ individual PAGA claims.
Defendant to give notice.