Judge: Lon F. Hurwitz, Case: 23-01309015, Date: 2023-08-04 Tentative Ruling

Motion to Compel Arbitration

Motion to Compel Arbitration and To Stay Proceeding

Moving Party: Defendant E Mortgage Capital, Inc.

Responding Party: Plaintiff Yvonne Ramos, an individual, on behalf of herself and on behalf of all persons similarly situated

SERVICE: May 11, 2023, by electronic service

RELIEF SOUGHT: Defendant moves for an order compelling arbitration of this action, and staying all proceedings in this action pending resolution of the arbitration.

UPCOMING EVENTS: Case Management Conference, October 25, 2023

FACTS/OVERVIEW: This is a putative wage-and-hour class action. On February 21, 2023, Plaintiff Yvonne Ramos, an individual, on behalf of herself and on behalf of all persons similarly situated (“Plaintiff”) filed a Complaint against Defendant E Mortgage Capital, Inc. (“Defendant”). (ROA 2). The Complaint alleges nine causes of action for:

1. Unfair Competition;

2. Failure to Pay Minimum Wages;

3. Failure to Pay Overtime Wages;

4. Failure to Provide Required Meal Periods;

5. Failure to Provide Required Rest Periods;

6. Failure to Provide Accurate Itemized Statements;

7. Failure to Reimburse for Required Expenses;

8. Failure to Provide Wages When Due; and

9. Failure to Pay Sick Pay Wages.

The Class is defined as “all individuals who are or previously were employed by Defendant in California, including any employees staffed with Defendant by a third party, and classified as non-exempt employees at any time during the period beginning four (4) years prior to the filing of this Complaint and ending on the date as determined by the Court” (“California Class”). [Compl., ¶ 27.] Plaintiff brings the first cause of action on behalf of this Class.

Plaintiff alleges that she brings the remaining causes of action on behalf of a sub-class defined as “all members of the California Class who are or previously were employed by Defendant in California, including any employees staffed with Defendant by a third party, and classified as non-exempt employees at any time during the period three (3) years prior to the filing of the Complaint and ending on the date as determined by the Court” (“California Labor Sub-Class”). [Compl., ¶ 37.]

Plaintiff alleges that Defendant administered a uniform practice of “rounding” the actual time worked by its employees, and required employees to perform off-the-clock work. In addition, Plaintiff alleges the second component of the compensation paid to class members is Defendant’s non-discretionary incentive program that paid employees incentive wages based on their performance. This incentive program provided all hourly employees with incentive compensation when they met various performance goals. Plaintiff alleges that in calculating the regular rate of pay in order to pay overtime and meal and rest period premiums, Defendant failed to include the incentive compensation as part of the employees’ “regular rate of pay.” [Compl., ¶¶ 8, 10.]

On May 11, 2023, Defendant filed the current Motion to Compel Arbitration and Stay Action Pending Arbitration. (ROA 18). Plaintiff opposes (ROA 27), and Defendant replies.

REQUEST FOR JUDICIAL NOTICE:

In opposition, Plaintiff asks this Court to take judicial notice of the following documents (ROA 29):

Exhibit A – Minute Order, dated February 19, 2016, regarding Amended Order granting defendant’s Motion to Compel Arbitration, in LASC Case No. BC572848, Andres Medina v. Universal Protection Services, L.P. related to LASC Case No. BC525543, Cole v. UPS; LASC Cas No. BC544565, Arroyo v. UPS; and LASC Case No. BC554387, Goodrum v. UPS.

Although this document is an order of the court, it was entered in a case or cases unrelated to this litigation.

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 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 Agreement to Arbitrate?

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 to prove the existence of an agreement to arbitrate by either reciting verbatim or providing a copy of the alleged agreement. (CRC, rule 3.1330; Condee v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 219.)

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, Defendant provides a copy of the purported “Loan Originator Independent Contractor Agreement” with Plaintiff. The document is attached as “Exhibit 1” to the Declaration of Joseph N. Shalaby, Defendant’s found and Chief Executive Officer. [See, Declaration of Joseph N. Shalaby (“Shalaby Decl.”), ¶¶ 1, 2, and Exh. 1.] The Agreement bears Plaintiff’s electronic signature as well as the electronic signature of Shalaby [id. at p. 11]; Plaintiff does not dispute the authenticity of the signature. [Declaration of Yvonne Ramos (“Ramos Decl.”) (ROA 31), ¶ 3.] 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.)

However, there are some discrepancies that the parties fail to address—namely, the date on the Agreement does not correspond to the date Plaintiff allegedly commenced her employment with Defendant. The Complaint alleges Plaintiff worked for Defendant “from December of 2020 to August 2022.” [Compl., ¶ 3.] In the motion, Defendant similarly contends that Plaintiff began her employment in December 2020. Notably, Defendant goes on to state that Plaintiff entered into the Agreement “at the inception of [the parties’] relationship.” [Motion, 3:12-14.]

However, on the face of the Agreement, it states the “effective date” is December 8, 2021. [See, Shalaby Decl., Exh. A., p. 1.] Although the line above the signature block states that “the parties have executed this Agreement on the Effective Date,” neither of the parties separately placed a date next to their signatures to indicate when the Agreement was executed. [Id., p. 11.] Therefore, it is not clear if the Agreement was executed at the time Plaintiff was hired or subsequently during her employment.

To complicate matters further, Plaintiff’s declaration, filed in support of the opposition to this motion, states that Plaintiff was employed by Defendant “from June 2021 through June 2022.” [Declaration of Yvonne Ramos (“Ramos Decl.”) (ROA 31), ¶ 2.]

Although some or all of Plaintiff’s term of employment is covered by the Agreement based on the “effective date” shown on its face, the conflicting information about the dates of Plaintiff’s employment is problematic, especially as it pertains to Plaintiff’s unconscionability argument discussed below. The analysis as to the alleged procedural unconscionability of the Agreement may depend on whether Plaintiff executed the Agreement during her onboarding process or several months into her employment. Plaintiff may need to address this discrepancy by amending her Complaint or her declaration in opposition to the instant motion.

Arbitrability

Defendant contends that the arbitration provision in Paragraph 24 of the Agreement requires this dispute, including the alleged failure to pay all compensation due, to be sent to arbitration. Other than referring to the arbitration provision, Defendant does not provide any argument—only conclusory assertions.

In opposition, Plaintiff contends that the arbitration provisions are contained not just in Paragraph 24 of the Agreement, but also in Paragraphs 13, 21, and 25. According to Plaintiff, these provisions require the Court to invalidate the entire Agreement.

Plaintiff then argues that she is an employee, not an independent contractor, and therefore, this litigation does not arise out of the Agreement. In citing to Dynamex Operations W, Inc. v. Superior Court (2018) 4 Cal.5th 903, Plaintiff argues that since Defendant cannot establish that she is not an employee, then this dispute cannot be within the scope of the arbitration provision in the Agreement. Plaintiff also argues that this litigation does not seek to enforce the Agreement. Instead, Plaintiff contends this is a suit for failure to pay wages and for damages and penalties arising out of various alleged Labor Code violations.

In reply, Defendant refutes Plaintiff’s argument that her claims are not within the scope of the Agreement. As argued by Defendant, Plaintiff’s claims pertain to the alleged failure to pay wages—i.e., overtime pay, minimum wages, and reimbursement for missed meal and rest periods. Defendant again points to Paragraph 24 of the Agreement, and contends it expressly states that controversies regarding the payment of compensation must be sent to arbitration. In citing to The United States Chamber of Commerce v. Bonta (2023) 62 F.4th 473, Defendant contends there is a national policy favoring arbitrations, and the U.S. Supreme Court and Ninth Circuit have held the scope of the Federal Arbitration Act is quite broad.

As a preliminary matter, Plaintiff’s contention regarding misclassification of employees by Defendant must be rejected. The Agreement repeatedly states that the signatory will be considered an independent contractor. [See generally, Shalaby Decl., Exh. 1.] Moreover, the operative Complaint does not contain any allegations that Plaintiff or other employees were misclassified as independent contractors instead of employees. If Plaintiff wishes to make such a claim, she will have to amend the Complaint.

As for Plaintiff’s contention that this action falls outside the scope of the arbitration provision, it hinges on the interpretation of the specific words in the Agreement. In determining what disputes are subject to arbitration, the court must first read the contract as a whole. “However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.” (Civ. Code, § 1648.) “ ‘ “[T]he decision as to whether a contractual arbitration clause covers a particular dispute rest substantially on whether the clause in question is ‘broad’ or ‘narrow.’”’ [Citation.]” (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1051-1052.)

Here, the arbitration provision in the Agreement is found in Paragraph 24, which provides:

The parties hereby agree that any controversy between Company and Contractor arising from this Agreement, including the payment of Compensation, shall, at the election of either party, be submitted to arbitration in the Orange County, California offices of Judicial Arbitration & Mediation Services, Inc. (JAMS). The parties may agree on a retired judge from the JAMS panel. If they are unable to agree, JAMS will provide a list of three available judges and each party shall strike one. The remaining judge shall serve as the arbitrator for purposes of resolving such dispute. The arbitrator shall follow any applicable federal law and California state law in rendering an award. Judgment on the award may be entered in any court having jurisdiction. This clause shall not preclude Company from seeking injunctive relief from a court of appropriate jurisdiction. The parties further understand and agree that the arbitrator’s decision shall be final and binding to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof.

In a related provision, Paragraph 23, the agreement states:

Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, CONTRACTOR AND COMPANY EACH WAIVE THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

Plaintiff seems to interpret the phrase “arising from this Agreement” in Paragraph 24 to mean “enforcement” of the Agreement. [Opp. Brief, 3:18-24.] However, in making this assertion, Plaintiff also seems to ignore the broad language in Paragraph 23—“…arising out of or in connection with this Agreement.” However, these two paragraphs must be construed together.

Paragraph 23 contains the most common “broad form” language covering “…all claims or disputes arising out of or relating to this agreement ….” (Larkin v. Williams, Woolley, Cogswell, Nakazawa & Russell (1999) 76 Cal.App.4th 227, 230.) The phrase “arising under or related to” has been construed broadly by the courts. (See, Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.pp.4th 651, 659-660; ibid., also citing to Baudoin v. Mid-Louisiana Anesthesia Consultants, Inc. (5th Cir. 2009) 306 Fed.Appx. 188, 192 [“broad arbitration clauses are those where the language of the clause requires arbitration of any dispute that arises out of or relates to” the agreement, or disputes that are “ ‘ “in connection with” the agreement’”].) These types of broad form clauses “are consistently interpreted as applying to extracontractual disputes between the contracting parties.” (Khalatian, supra, at p. 660, citing to Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 681, fn. 2.) As the Ninth Circuit stated in Simula, Inc. v. Autoliv, Inc. (9th Cir. 1999) 175 F.3d 716, 720-721): “Every court that has construed the phrase ‘arising in connection with’ in an arbitration clause has interpreted that language broadly. We likewise conclude that the language ‘arising in connection with’ reaches every dispute between the parties having a significant relationship to the contract and all disputes having their origin or genesis in the contract.”

On the other hand, there is a split in authority on whether the phrase “arising out of” or “arising from,” as found in Paragraph 24 of the Agreement, is broad enough to compel arbitration of anything other than contract claims. (Ramos, supra, 28 Cal.App.5th at pp. 1051-1052.) Some courts have found that the phrase “arising from” or “arising out of” an agreement is more limited in scope. (Rice v. Downs (2016) 248 Cal.App.4th 175, 186.) Several Ninth Circuit cases have held that agreements requiring arbitration of disputes, controversies, or claims “arising under” or “arising out of” the agreement are intended to encompass only disputes regarding the interpretation and performance of the agreement. (Cape Flattery Ltd. V. Titan Mar., LLC (9th Cir. 2011) 647 F.3d 914, 921; Tracer Research Corp. v. Nat. Environ. Services Co. (9th Cir. 1994).) However, other courts have found that the phrase “arising out of” was broad enough to encompass extracontractual disputes such as tort claims. (EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1314; Bosinger v. Phillips Plastics Corp. (S.D. Cal. 1999) 57 F.Supp.2d 986, 993-994.)

In the current litigation, Paragraph 23 states that the parties waive the right to a jury trial to any litigation “arising out of or in connection with” the Agreement. This broad form phrase covers all claims or disputes between the parties, including those not related to the interpretation or performance of the Agreement. However, this clause does not preclude a court trial and it does not require that disputes be submitted to arbitration. It only states that no dispute between the parties can be adjudicated by a jury.

The arbitration clause in Paragraph 24, however, states that the parties agreed that “any controversy … arising from” the Agreement would be sent to arbitration. This phrase is narrower in scope, and as noted above, has been found by some courts to only encompass disputes regarding the interpretation and performance of a contract. If this interpretation is followed, then when the adjacent provisions of Paragraph 23 and Paragraph 24 are viewed together, it seems clear that the parties intended to arbitrate only a limited range of claims—i.e., those “arising out of” the Agreement, while litigating a much broader range of claims, i.e., any claim “arising out of or in connection with” the Agreement. The broader language in Paragraph 23 could have easily been used in Paragraph 24, but it was not. This omission is significant, especially in light of court precedent in interpreting the scope of these two phrases. (See, Rice, supra, 248 Cal.App.4th at p. 190.) Under the general rules of contract construction, it is presumed that the parties know all applicable laws extant when an agreement is made. (Ibid.) Under the general rules of contract interpretation, the intent of the parties is to be inferred, if possible, solely from the written provisions of the contract, and the “clear and explicit” meaning of the provisions are to be interpreted in their “ordinary and popular sense….” (TRB Investments, Inc. v. Fireman’s Fund Ins. Co. (2006) 40 Cal.4th 19, 27.)

Accordingly, when the Agreement is read as a whole, the specific arbitration clause in Paragraph 24 is limited to interpretation and performance of the Agreement.

In that regard, it is clear that the scope of the arbitration provision includes only one of Plaintiff’s claims. As noted above, Paragraph 24 expressly states that any controversy “arising from this Agreement, including the payment of Compensation,” must be submitted to arbitration. [Shalaby Decl., Exh. 1, ¶ 24.] Only Plaintiff’s ninth cause of action falls into the category of “compensation.”

Labor Code section 229 provides in relevant part: “Actions to enforce the provisions of this arbitration 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.” (Lab. Code, § 229.) 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 Federal Arbitration Act 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 Plaintiff’s nine causes of action in the Complaint, it should be concluded that with the exception of the ninth cause of action, none of Plaintiff’s claims are subject to the provisions of Section 229. The first, second, and third causes of action do not assert claims for “due and unpaid wages” under sections 200 through 244 of the Labor Code. Plaintiff’s fourth and fifth 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 sixth and eighth causes of action, they do not seek to collect due and unpaid wages; rather, they are actions for failure to provide itemized wage statements and waiting time penalties, respectively. The seventh cause of action is for reimbursement of expenses—not for the collection of due and unpaid wages.

The first through eighth causes of action also do not otherwise “arise from” the Agreement; they do not pertain to the interpretation or enforcement of the Agreement. Instead, they are alleged Labor Code violations. Since these claims fall outside the scope of the arbitration provision, they must be litigated in court.

As for Paragraphs 13 and 21, they do not pertain to the arbitration or litigation of disputes and claims. Paragraph 13 is an indemnity provision stating that the signatory will indemnify Defendant against any claims “arising out of or related to” Defendant’s breach of the Agreement and the signatory’s acts or omissions. [Shalaby Decl., Exh. 1, ¶ 13.] Paragraph 21 is the severance provision. Paragraph 25 pertains to the arbitration or litigation of disputes, but only as to the right to an award of attorneys’ fees by the prevailing party. [Id. at ¶ 25.] None of these provisions control whether disputes or claims must be sent to arbitration.

Unconscionability

Turning to the defense of unconscionability, it is first noted that unconscionability has both a “procedural” and a “substantive” element. (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. at pp. 113-114) “But they need not be present in the same degree.” (Ibid.) “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.” (Ibid.)

Procedural unconscionability focuses on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.” An analysis of procedural unconscionability “begins with an inquiry into whether the contract is one of adhesion.” (Armendariz, supra, 24 Cal.4th at p. 113.) An agreement imposed on an employee as a condition of employment, with no opportunity to negotiate, is typically an “adhesive” contract which may be procedurally unconscionable. (Navas v. Fresh Venture Foods, LLC (2022) 85 Cal.App.5th 626, 633, citing to Armendariz, supra, 24 Cal.4th at p. 115.) “The pertinent question … is whether circumstances of the contract’s formation create such oppression or surprise that closer scrutiny of its overall fairness is required.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126.)

“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.’” (OTO, supra, 8 Cal.5th 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, Plaintiff contends the Agreement is procedurally unconscionable because it is a contract of adhesion. As argued by Plaintiff, she was presented with the Agreement during the employment application process and was required to sign it as a prerequisite for employment. In addition, Plaintiff contends she was not given any information about the arbitration provision and was rushed through the onboarding process by Defendant. [Ramos Decl., ¶¶ 3-8.] Plaintiff also contends the Agreement containing the arbitration provision was one of several documents she was required to sign before being hired, and it is “legally complex.” Lastly, Plaintiff argues the Agreement is substantively unconscionable because Paragraph 25 removes the protections of the fee-shifting provisions codified in Labor Code section 1194.

The format of the arbitration provision is problematic and creates an element of surprise. It is on Page 9 of the 11-page document, and is presented in the 24th paragraph of the 32-paragraph Agreement. It is not labeled as an arbitration provision, and unlike Paragraph 23, it is not presented in a manner that would draw attention to it (i.e., bold font, capitalized lettering, etc.) Also, no separate acknowledgement or signature is required for the arbitration provision. Although the format is not “visually impenetrable” and does not “challenge the limits of legibility” (OTO, supra, 8 Cal.5th at p. 128), the fact that it is visually indistinguishable from the other paragraphs and is not labeled as an arbitration provision is problematic. In addition, the fact that it is a preemployment contract implies a certain level of oppression. Therefore, there is an element of procedural unconscionability in the Agreement.

As for the substantive unconscionability prong, it examines the fairness of a contract’s terms and determines whether they are “overly harsh.” (OTO, supra, 8 Cal.5th at p. 129.) “Unconscionable terms ‘ “impair the integrity of the bargaining process or otherwise contravene the public interest or public policy”’ or attempt to impermissibly alter fundamental legal duties. [Citation.]” (Ibid.) Under Armendariz, arbitration agreements must provide for: (1) a neutral arbitrator; (2) more than minimal discovery; (3) a written award; (4) all the types of relief that would otherwise be available in court; and (5) the requirement that the employer pays the arbitrator’s fees or expenses. (Armendariz, supra, 24 Cal.4th at p. 102.)

Here, the Agreement has an element of substantive unconscionability. Although the arbitration provision provides for a neutral arbitrator, it does not expressly provide for any type of discovery or a written award by the arbitrator. It also does not include the requirement that Defendant must pay the arbitrator’s fees and expenses.

As for Paragraph 25, the attorney’s fees provision, it is also substantively unconscionable. Paragraph 25 provides:

In the even that any suit, arbitration or action is instituted by either of the parties hereto against the other to enforce compliance with any of the terms, covenants or conditions of this Agreement or for damages for breach of this Agreement, in addition to costs and disbursements provided by statute, the prevailing party shall be entitled to an award of reasonable attorneys’ fees in such suit, arbitration or action, including appeal from any judgment rendered therein.

Courts have found that such a fee-shifting provision is contrary to California and Federal law in wage disputes because it could be disproportionately burdensome to the plaintiff employee and create an advantage for defendant employers. (Armendariz, supra, 24 Cal.4th at pp. 110-111.)

Based on the above, the arbitration provision in the Agreement has elements of both procedural and substantive unconscionability such that it is rendered unenforceable. Although Defendant contends any provisions deemed unconscionable can be severed under the severability provision of the Agreement, the broad nature of the procedural and substantive unconscionability here precludes such a remedy. Indeed, the Agreement is so “permeated” with procedural and substantive unconscionability that it cannot be saved. (Armendariz, supra, 24 Cal.4th at pp. 122-125.) As a result, Defendant’s motion must be denied.

RULING:

Defendant E Mortgage Capital, Inc.’s Motion to Compel Arbitration and To Stay Action Pending Arbitration is DENIED on the grounds: (a) the first through eighth causes of action do not “arise from” the Agreement, and thus fall outside the scope of the arbitration provision; and (b) the arbitration agreement is unconscionable.

IT IS ORDERED THAT Plaintiff Yvonne Ramos’s individual and class claims against Defendant E Mortgage Capital, Inc. be adjudicated in this civil action.

The Clerk shall give notice of this Court’s ruling.