Judge Lon F. Hurwitz, Case 21-01191832 2023-06-16 Tentative Ruling

Judge: Lon F. Hurwitz, Case: 21-01191832, Date: 2023-06-16 Tentative Ruling

1. Motion to Compel Arbitration

2. Status Conference

Motion to Compel Arbitration

Moving Party: Defendant RHFH Services, Inc.

Responding Party: Plaintiff Daisy Ochoa

SERVICE: February 10, 2023, by U.S. Mail and email. Amended notice, February 27, 2023, by U.S. Mail and email.

RELIEF SOUGHT: Defendant RHFH, Inc. moves for an order compelling Plaintiff Daisy Ochoa to arbitrate her claims with RHFH, Inc. and its owner, Rebekah Hayes, and stay all other proceedings pending the outcome of arbitration.

UPCOMING EVENTS: None.

FACTS/OVERVIEW: This is a putative wage-and-hour class and PAGA action. On March 25, 2021, Plaintiff Jermaine Swift, an individual and on behalf of all others similarly situated and/or aggrieved, filed the original Class and Representative Action Complaint (ROA 2) against Defendants Abilities OC, Rebekah Hayes, and Jaclyn Persson alleging 14 causes of action for:

1. Failure to Pay Overtime Wages

2. Failure to Pay Minimum Wages

3. Failure to Provide Meal Periods

4. Failure to Provide Rest Periods

5. Waiting Time Penalties

6. Wage Statement Violations

7. Failure to Indemnify

8. Unfair Competition

9. Civil Penalties under Labor Code § 210

10. Civil Penalties under Labor Code § 226.3

11. Civil Penalties under Labor Code § 558

12. Civil Penalties under Labor Code § 1174.5

13. Civil Penalties under Labor Code § 1197.1

14. Civil Penalties under Labor Code § 2699 (“PAGA”)

Plaintiff alleged that he provided written notice to the Labor Workforce Development Agency (“LWDA”) on January 11, 2021. (ROA 2, ¶ 21.)

On November 8, 2022, a Stipulation and Order was signed and filed allowing Plaintiff to file a First Amended Complaint adding Daisy Ochoa, Mark Enriquez, and Miesha Elie as named plaintiffs and proposed class representatives, and adding RHFH Services, Inc. (dba “Rosie Hall”) as a defendant. (ROA 83.) In the Stipulation, it states that Plaintiffs Swift, Ochoa, and Enriquez submitted an amended notice to the LWDA on July 18, 2022. (Id.) The First Amended Complaint was filed on November 15, 2022. (ROA 88.)

On January 4, 2023, another Stipulation and Order was signed and filed allowing Plaintiffs to file a Second Amended Complaint in order to clarify Paragraph 6 of the First Amended Complaint. (ROA 102.) The operative Second Amended Complaint (“SAC”) was filed on January 10, 2023. (ROA 105.)

The SAC alleges that Plaintiffs were jointly employed by Defendants as non-exempt hourly employees who worked as home health aides. Defendants Abilities OC and RHFH are alleged to be the alter egos of Defendants Hayes and Persson. (SAC, ¶¶ 3, 15.)

On February 10, 2023, Defendant RHFH, Inc. (“RHFH”) filed the current Motion to Compel Arbitration and Stay Proceedings as to Plaintiff Daisy Ochoa (“Ochoa”) only. (ROA 117.) Ochoa opposes (ROA 134), and RHFH replies (ROA 144).

EVIDENTIARY OBJECTIONS: (ROA 138)

Ochoa has submitted evidentiary objections to the declarations of Rebekah Hayes and Stephen A. Madoni. The rulings are as follows:

1. Overruled

2. Sustained – lacks foundation, lack of personal knowledge (as to whether Ochoa is the person who signed the document)

3. Sustained – lacks foundation, lack of personal knowledge (as to whether Ochoa is the person who signed the document)

4. Sustained – improper legal conclusion

5. Sustained – improper legal conclusion

6. Sustained – lack of personal knowledge

7. Overruled

8. Overruled

9. Overruled

10. Overruled

CONTENTIONS AND ANALYSIS:

Statement of the Law

Under Code of Civil Procedure section 1281.2, a party to an arbitration agreement may move to compel arbitration if another party to the agreement refuses to arbitrate. A party moving to compel arbitration under Section 1281.2 must prove by a preponderance of the evidence that: (1) The parties entered into a written agreement to arbitrate; and (2) one or more of the claims at issue are covered by that agreement. (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 the evidence a defense to enforcement of the agreement. (Id., at p. 1230.)

California law favors the enforcement of valid arbitration agreements. (Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 320; In re Tobacco I (2004) 124 Cal.App.4th 1095, 1103.) Any doubts to arbitration will be resolved against the party asserting a defense to arbitration, whether the issue is construction of contract language, waiver, delay or any other defense to arbitrability. (Erickson, supra, 35 Cal.3d at p. 320; In re Tobacco I, supra, 124 Cal.App.4th at p. 1103.)

Merits

Is There An Enforceable Agreement?

In resolving petitions to compel arbitration, courts must first determine whether the agreement exists—i.e., whether the parties actually entered into a valid contract agreeing to arbitrate certain disputes—and whether it is enforceable. (Pinnacle Museum Tower Ass’n v. Pinnacle Market Develop. (US), LLC (2012) 55 Cal.4th 223, 236.) The moving party has the initial burden under CRC 3.1330 to prove the existence of an agreement to arbitrate.

If the moving party meets its initial burden and the opposing party disputes the existence of the agreement, then “the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement.” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.) The opposing party may do this by declaring 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. (Ibid.; see also, Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 546; Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1054.)

If the opposing party meets its burden, then the burden shifts back to the moving party to establish with admissible evidence the existence of a valid arbitration agreement. “The burden of proving the agreement by a preponderance of the evidence remains with the moving party.” (Gamboa, supra, 72 Cal.App.5th at pp. 165-166.)

Here, as a preliminary matter, it is undisputed that the claims of Plaintiffs Swift, Enriquez, and Elie should not be compelled to arbitration. Ochoa contends the other Plaintiffs never agreed to arbitrate any claims with RHFH; RHFH contends it never employed these Plaintiffs. If RHFH never employed said Plaintiffs, there cannot possibly be an employment arbitration agreement. As a result, both Ochoa and RHFH agree that the claims of Swift, Enriquez, and Elie must be litigated in this court.

RHFH contends that Ochoa was employed by both RHFH and Abilities OC. When Ochoa was first hired in July 2018 by RHFH, she signed the Employee Dispute Resolution Agreement (“2018 Agreement”). Then in late 2018, when Ochoa requested additional hours, she was hired by Defendant Abilities OC to work additional shifts. She then signed a second Employee Dispute Resolution Agreement in January 2019 (“2019 Agreement”). In support, RHFH provides the declaration of its officer, Defendant Hayes. Hayes attests she has custody of RHFH’s employment files, and that Exhibits A and B attached to her declaration are true and correct copies of the 2018 Agreement and 2019 Agreement signed by Ochoa. (ROA 114, Declaration of Rebekah Hayes (“Hayes Decl.”), ¶¶ 3-5, Exhs. A and B.)

However, although RHFH contends the 2019 Agreement is related to Ochoa’s employment with Abilities OC, the 2019 Agreement attached to Hayes’s declaration purports to be between “Rosie Hall Family Home”—RHFH’s dba—and Ochoa. (See, Hayes Decl., Exh. B.) RHFH has asserted that although Ochoa performed work for both RHFH and Abilities OC, she was paid separately by each entity and had different terms of employment related to each entity. (Motion, 4:9-11.) It is noted that RHFH has not proffered any evidence that RHFH and Abilities OC are related entities or otherwise affiliated. Therefore, while RHFH may have met its initial burden as to the 2018 Agreement, it has not met its initial burden as to the 2019 Agreement. As a result, the burden shifts to Ochoa only as to the 2018 Agreement.

In opposition, Ochoa disputes the existence and validity of the Agreements. As a preliminary matter, Ochoa contends RHFH has not adequately authenticated the documents. However, it is well settled that a defendant is “not required to authenticate [plaintiff’s] signature on [the] arbitration agreement as a preliminary matter in moving for arbitration” and has no obligation to do so unless “the authenticity of the signature” is actually challenged. (Ruiz v. Moss Bros. Auto Grp., Inc. (2014) 232 Cal.App.4th 836, 846.) Moreover, Hayes’s attestations are sufficient to establish she has personal knowledge of RHFH’s personnel files and the existence of the Agreements.

Ochoa then attests that when she was hired by RHFH, she was given “a stack of new hire paperwork” to sign, but she was not informed that she was signing an arbitration agreement. (ROA 134, Declaration of Daisy Ochoa (“Ochoa Decl.”), ¶ 6.) Ochoa then attests that she does not recall signing the 2018 Agreement and does not recall being presented with the document prior to this litigation. (Ochoa Decl., ¶ 7.) Ochoa makes similar attestations regarding the 2019 Agreement, and also states that she does not recognize the signature as hers. (Id. at ¶ 9.) Regarding the signature and initials on the 2019 Agreement, Ochoa provides a detailed discussion of the discrepancies between how she usually signs and initials documents and the signature and initials on the 2019 Agreement. (Ibid.)

As to the 2018 Agreement, there is a split in authority as to whether Ochoa has provided sufficient evidence of a factual dispute to meet her burden. Under the reasoning of the Second Appellate District, Division 7, in Gamboa, Ochoa’s attestations are sufficient to meet her burden challenging the authenticity of the 2018 Agreement. (See, Gamboa, supra, 72 Cal.App.5th at p. 167.)

However, in Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, the First Appellate District, Division Four disagreed with Gamboa. Under the reasoning in Iyere, Ochoa’s declaration does not create a factual dispute as to whether she signed the document. She acknowledges signing the “stack of new hire paperwork,” but does not deny that the stack included the 2018 Agreement. Although she states she does not recall signing the 2018 Agreement, there is no conflict between her having signed a document on which her handwritten signature appears and, four years later, being unable to recall doing so. In the absence of any evidence that the signature and initials are not her own, there is no evidence that Ochoa did not in fact sign the 2018 Agreement. (See, Iyere, supra, at p. 756.) Therefore, under Iyere, the burden does not shift back to RHFH.

To the extent the Court follows the reasoning in Gamboa, the burden shifts back to RHFH regarding the validity of the 2018 Agreement. But RHFH fails to meet its burden. In reply, RHFH proffers the supplemental declaration of Defendant Hayes as well as the declaration of Karry Vallejo, an “administrator” for RHFH. (ROA 142, Supplemental Declaration of Rebekah Hayes (“Hayes Supp. Decl.”); ROA 140, Declaration of Karry Vallejo (“Vallejo Decl.”), ¶ 1.)

Hayes’s attestations pertain to the 2019 Agreement only. (See, Hayes Supp. Decl., ¶¶ 3-5.) But Vallejo attests that in July 2018, she conducted orientation with Ochoa and spent time explaining the employment documents. (Vallejo Decl., ¶ 3.) Vallejo then attests that Ochoa signed each document in her presence, including the 2018 Agreement. (Ibid.) However, as noted above, Vallejo has only identified herself as an “administrator” for RHFH, and she has not stated that she has custody of or responsibility for the employment records. As a result, Vallejo’s declaration is not sufficient to prove the 2018 Agreement is valid.

Conversely, if the Court follows the reasoning in Iyere, the burden does not shift back to RHFH. Instead, Ochoa’s attestations as to why she did not know she had signed the 2018 Agreement—i.e., that she was pressured to sign it quickly and not given time to read it—are material only as to whether enforcement of the agreement is barred by the defense of unconscionability. (See, Iyere, supra, 87 Cal.App.5th at p. 759.)

Enforceability / Unconscionability

The 2018 Agreement states that “All arbitrations covered by this Agreement shall be adjudicated in accordance with the state or federal law that would be applied by a United States District Court sitting at [the place of hearing].” (2018 Agreement, ¶ 4.) It is undisputed that the Federal Arbitration Act (FAA) does not govern the 2018 Agreement, and that the California Arbitration Act (“CAA”) governs.

Notably, the 2018 Agreement does not include any type of class, collective, or representative action waiver. Therefore, the holding in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 is inapplicable.

The 2018 Agreement purports to cover claims for wages or other compensation due and “claims for violation of any federal, state, or other governmental constitution, statute, ordinance, regulation, or public policy ….” (2018 Agreement, ¶ 2) It also contains an arbitrator delegation clause, which provides in relevant part: “For claims covered by this agreement, arbitration is the parties’ exclusive legal remedy. The arbitrator has exclusive authority to resolve any dispute relating to the applicability or enforcement of this agreement.” (2018 Agreement, ¶ 17 [emphasis added].)

The 2018 Agreement also contains a severability clause stating:

A court construing this agreement may modify or interpret it in order to render it enforceable. If this agreement is declared enforceable and cannot be administered, interpreted, or modified to be enforceable, the parties agree to waive any right to a jury trial with respect to any dispute to which this agreement applies. If any provision of this agreement is adjudged to be void or otherwise unenforceable, in whole or in part, such adjudication shall not affect the validity of the remainder of the agreement. (2018 Agreement, ¶ 21.)

First, on the determination of enforceability and unconscionability, the 2018 Agreement reserves this determination to the arbitrator. For this reason, there is a contractual basis to grant this motion as to the 2018 Agreement and not reach the issue of enforceability/unconscionability. However, the issue of enforceability/unconscionability goes to the very existence of a valid agreement to arbitrate; and, hence, the very existence of the contract itself. If there is no contract, there is no provision giving the arbitrator the right to determine enforceability/unconscionability because the contract does not exist. As such, it is the Court which must make this determination because this goes to the first required element of a Motion to Compel Arbitration, i.e.: the existence of a valid agreement to arbitrate (the contract).

Ochoa argues that she is not required to arbitrate her claims for unpaid wages under Labor Code section 229. The statute provides in relevant part:

Actions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.

Section 229 is found in Article 1 of Division 2, Part 1, Chapter 1 of the Labor Code, encompassing sections 200 through 244. As a result, since the FAA is not applicable to this litigation, then, under California Law, if a cause of action seeks to collect unpaid wages pursuant to Labor Code sections 200 through 244, that action can be maintained in court despite an agreement to arbitrate. (Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, 684.)

Here, in reviewing Ochoa’s 14 causes of action in the SAC, it should be concluded that none of the causes of action are subject to the provisions of Section 229. The first, second, third, fourth, and seventh causes of action do not assert claims for “due and unpaid wages” under sections 200 through 244 of the Labor Code. Ochoa’s third and fourth causes of action for failure to provide meal and rest periods under section 226.7 are not actions for the “collection of due and unpaid wages”; they are actions for failure to provide mandated meal or rest breaks. (Lane, supra, 224 Cal.App.4th at p. 684, citing to Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1256-1257.) Similarly, as to the fifth and sixth causes of action, they do not seek to collect due and unpaid wages; rather, they are actions for waiting time penalties and failure to provide itemized wage statements, respectively. The ninth and tenth causes of action are for the imposition of civil penalties under sections 210 and 226.3—not for the collection of due and unpaid wages. Therefore, Ochoa’s argument on this issue fails.

Turning to the defense of unconscionability, it is first noted: “[U]nconscionability 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.” (Armendariz v. Found. Health Psychcare Servs., Inc. (2000) 24 Cal. 4th 83, 114.) “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.” (Id.) “But 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.” (Id.) “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.” (Id.) The agreement must: 1) provide for a neutral arbitrator; 2) provide for more than minimal discovery; 3) require the arbitrator to issue a written decision; 4) provide for the same remedies that would otherwise be available to the employee in court; and 5) not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum. (Id.)

“Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.” (OTO, L.L.C. v. Kho (2019) 8 Cal. 5th 111, 126.) “The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party's review of the proposed contract was aided by an attorney.” (Id. at 126-127.) “With respect to preemployment arbitration contracts, . . . ‘the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration requirement.’” (Id. at 127.) “This economic pressure can also be substantial when employees are required to accept an arbitration agreement in order to keep their job.” (Id. [significant oppression when “[t]he agreement was presented to Kho in his workspace, along with other employment-related documents,” “[n]either its contents nor its significance was explained,” and “Kho was required to sign the agreement to keep the job he had held for three years”].) Further, arbitration provisions that are lengthy and full of legal jargon contribute the surprise element. (Id. at 128 [“The single dense paragraph covering arbitration requires 51 lines,” the text is “visually impenetrable” and “challenge[s] the limits of legibility.”].)

Here, it is noted that RHFH acknowledges that the 2018 Agreement was a contract of adhesion when first presented to Ochoa. [Reply Brief, 7:25-26.] Accordingly, this is an admission that the Agreement was procedurally unconscionable when presented to her at the time that she was offered employment. But Ochoa must demonstrate some level of substantive unconscionability.

Ochoa contends that the 2018 Agreement is substantively unconscionable because it specifically carves out certain claims that are most likely to be brought by RHFH, such as claims for injunctive/equitable relief for intellectual property violations.” (Hayes Decl., Exh. A, ¶ 7.) Ochoa argues this language is not mutual, and therefore, the Agreement is substantively unconscionable. In addition, Ochoa contends Paragraph 8 endeavors to shorten the statutes of limitations applicable to her claims. Ochoa also contends the 2018 Agreement contains a fee-sharing provision that improperly requires the employee to bear certain arbitration costs. Lastly, Ochoa argues the Agreement requires her to first mediate her claims before submitting them to arbitration, and improperly limits the discovery she is allowed to conduct.

On the issue of the fee-sharing provision, RHFH stipulates to its severance from the 2018 Agreement. RHFH admits that under certain wage and hour claims, a unilateral award of fees is mandatory in favor of the employee, and the arbitrator does not have discretion to award fees to a prevailing employer.

On some of the other issues, Ochoa has not demonstrated the 2018 Agreement is substantively unconscionable. The language in the Agreement, including the mediation provision, encompasses claims brought by RHFH against Ochoa arising from her employment. The discovery provision allows the parties to conduct depositions and propound interrogatories, requests for admission, and requests for production of documents.

However, the statute of limitations provision is substantively unconscionable. It provides that “[a]ny claims governed by this agreement shall be filed no later than one year from the date of discovery, or one year from the last date of employment, whichever comes first.” (Hayes Decl., Exh. A, ¶ 8.) But the Labor Code, which provides the bases for Ochoa’s causes of action, affords her three years on her claims for missed meal and rest periods and for waiting time penalties. Courts have found that a shortened limitations period, such as the one in the 2018 Agreement, is unconscionable and insufficient to protect an employees’ right to vindicate his or her statutory rights. (See, Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 117-118.)

Since the 2018 Agreement contains elements of both procedural and substantive unconscionability, the Agreement is unenforceable.

RULING:

Defendant RHFH Services, Inc.’s Motion to Compel Arbitration is DENIED. IT IS ORDERED THAT Plaintiff Daisy Ochoa’s claims against Defendant RHFH Services, Inc. be adjudicated in this civil action.

Clerk to give notice.

The Status Conference is continued to July 26, 2023 at 1:30 p.m. in Dept. CX103.