Judge Lynne M. Hobbs, Case Number: 24STCV19263, Date: 2024-11-04 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 24STCV19263, Date: 2024-11-04 Tentative Ruling

Case Number: 24STCV19263 Hearing Date: November 4, 2024 Dept: 61

DANIEL VERMETTE vs GT'S LIVING FOODS, LLC

TENTATIVE

Defendant GT’s Living Foods, LLC’s Motion to Compel Arbitration is DENIED.

Plaintiff to provide notice.

DISCUSSION

I. OBJECTIONS

Plaintiff Daniell Vermette (Plaintiff) objects to the declaration of Jefferson Rogers, submitted by Defendant GT’s Living Foods, LLC (Defendant) in support of their motion to compel arbitration. These objections are OVERRULED. Rogers possesses sufficient personal knowledge to authenticate the arbitration agreement and other documents in Plaintiff’s personnel file as business records under Evidence Code § 1271. Plaintiff argues that Rogers’ declaration is insufficient to establish that the electronic signature on the agreement “could only have been placed” on the agreement by Plaintiff (See Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836), specifically offering his own declaration stating that his supervisor, Gennedy Polyak, could access his email account to view messages and click the links therein, through which he could access the arbitration agreement allegedly signed by Plaintiff. (Vermette Decl. ¶¶ 9–13.) But Polyak testifies that he has neither done so nor directed others to do so. (Polyak Decl. ¶¶ 6–7.) Plaintiff’s objections are therefore OVERRULED.

II. MOTION TO COMPEL ARBITRATION

On petition of a party to an arbitration agreement to arbitrate a controversy, a court must order the petitioner and respondent to arbitrate the controversy if it determines the arbitration agreement exists, unless (1) the petitioner has waived its right to arbitrate; (2) grounds exist for the revocation of the agreement; or (3) “[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2.)

“[T]he party moving to compel arbitration bears the burden of establishing the existence of a valid agreement to arbitrate, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. The role of the trial court is to sit as a trier of fact, weighing any affidavits, declarations, and other documentary evidence, together with oral testimony received at the court's discretion, to reach a determination on the issue of arbitrability.” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Defendant GT’s Living Foods, LLC (Defendant) moves to compel arbitration of Plaintiff Daniel Vermette’s employment discrimination and retaliation claims based on an arbitration purportedly executed by Plaintiff on June 5, 2023, which applies to any claims “in any way arising out of, relating to, or associated with Employee’s employment with Employer.” (Rogers Decl. Exh. A.)

Plaintiff challenges the authenticity of his electronic signature on the agreement. He states that not only did he not sign the arbitration agreement, but that he kept native electronic copies of all documents he e-signed for his employment, and the arbitration agreement is not among them. (Vermette Decl. ¶ 3, Exh. 1.) When Plaintiff’s counsel requested his personnel files from Defendant in December 2023, Defendant’s responsive production in January 2024 contained 98 pages of scanned employment records, including electronically signed documents, but which also did not include the arbitration agreement. (Hui Decl. ¶¶ 3–4, Exh. 6.) Plaintiff also argues that the arbitration agreement later sent by Defendant to Plaintiff’s counsel did not have the same “visibility restricted” document setting that other documents in Plaintiff’s personnel file had, and further that the file metadata on that agreement indicated it was created and edited in 2024 in a program called Power PDF, created by an employee of Defendant’s counsel named Shana McGraw. (Opposition at p. 2; Hui Decl. ¶¶ 5–6, Exh. 8.)

Defendant in reply presents the declaration of Shana McGraw, stating that she used Kofax Power PDF software to extract the pages corresponding to the arbitration agreement from a larger PDF document of Plaintiff’s personnel files. (McGraw Decl. ¶¶ 3–6.) Defendant also notes that Plaintiff acknowledges using the same electronic signature software to sign the employee handbook on June 5, 2023 (Vermette Decl. ¶ 5, Exh. 2), and further notes that the Adobe DocuSign audit tracker for the arbitration agreement indicates it was signed merely three minutes after Plaintiff signed the other employment documents. (Rogers Decl. Exhs. A, B.) Defendant also notes that Plaintiff acknowledged the existence of the arbitration agreement in signing his offer letter and acknowledgment of employee handbook, which included references to the arbitration agreement. (Rogers Decl. Exh. B.)

The circumstances of the execution of the arbitration agreement are questionable. On one hand, the audit reports generated by the Adobe DocuSign program indicate that the arbitration agreement was signed on June 5, 2023, only three minutes after Plaintiff signed other employment materials, the authenticity of which he acknowledges. This evidence suggests that Plaintiff in fact signed the agreement, just as he signed the other documents in the employment packet.

However, Plaintiff’s showing as to the non-existence of the arbitration agreement is more persuasive. Plaintiff outright denies signing the agreement. He declares a practice of saving documents signed in the manner that Defendant alleges the agreement was signed, and testifies that he has no such document in his records — a point bolstered by Defendant’s own failure to turn over the arbitration agreement in January 2024, when Plaintiff sought all personnel records pertaining to him. Defendant does not address this discrepancy in its reply.

But even if the arbitration agreement does exist, it is unenforceable because it is permeated by unconscionable provisions. “Unconscionability requires a showing of both procedural unconscionability and substantive unconscionability.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) Arbitration contracts presented to employees on a take-it-or-leave-it basis are at least minimally procedurally unconscionable. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.) Assuming the authenticity of the agreement at issue here, it is one of adhesion presented to Plaintiff by as a mandatory condition of employment, and as such the agreement possesses a level of procedural unconscionability.

The agreement is also substantively unconscionable in a number of respects. As Plaintiff notes, the agreement permits Plaintiff to “file an administrative charge” with various state and federal civil enforcement agencies, but also states: “You may present such claims to the appropriate court or governmental agency, but you and the Company agree to arbitrate under this Arbitration agreement all rights to any form of recovery or relief, including monetary or other damages.” (Rogers Decl. Exh. A.) This provision operates essentially as a waiver on the part of Plaintiff against obtaining any remedy through a civil enforcement agency, and similar provisions have been held substantively unconscionable. “A provision waiving the “right to any remedy or relief” as a result of a complaint brought by the Labor Commissioner, hidden in an arbitration agreement, insulates the [employer] from such awards and precludes the employee from obtaining redress for labor violations that a government agency has determined exist and are well-founded.” (Hasty v. American Automobile Assn. etc. (2023) 98 Cal.App.5th 1041, 1060.) Defendant argues that the clause at issue in the above case was different from the present case, because that clause waived any remedy available to the employee. (Reply at p. 7.) But this is inaccurate; it waived only those remedies offered through a government administrative proceeding. The clause here, stating that Plaintiff may file a charge, but must have “any form of recovery or relief” determined in arbitration, is invalid for precisely those reasons articulated in Hasty.

The agreement also contains an unconscionable waiver of Plaintiff’s representative PAGA claims. The agreement exempts from arbitration “those claims prohibited by law from being resolved in Arbitration,” but also states that Plaintiff waives all right to jury trial, and that all claims “must be arbitrated in an individual capacity, and not as a Plaintiff or class member in any purported class, collective, or representative action or proceeding.” (Rogers Decl. Exh. A.) The agreement thus purports to waive Plaintiff’s ability to bring any representative action or proceeding, and deprives the arbitrator of authority to “provide relief to any party on a class, collective, or representative basis.” (Ibid.) This provision effects a “wholesale waiver of PAGA claims” prohibited by California law (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1114), and moreover deprives the arbitrator of awarding any relief on even those “individual” PAGA claims held arbitrable by the United States Supreme Court in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639. This too is unconscionable.

The arbitration agreement also contains a broad and unconscionable confidentiality clause. The agreement states: The existence, subject, evidence, proceedings, and ruling resulting from the arbitration proceedings, as well as documents, records, information, and other materials submitted in the arbitration shall be deemed Confidential Information. (Rogers Decl. Exh. A.) There are exceptions for judicial proceedings related to the arbitration, and for where consent is provided by the other party to disclosure. (Ibid.)

Confidentiality clauses may be valid when “based on a legitimate commercial need.” (Hasty, supra, 98 Cal.App.5th at p. 1061–1062.) But Defendant articulates no commercial need for the provision in question. Absent such a showing, such clauses are unconscionable when applied against FEHA discrimination claims, as they serve only to benefit the employer by preventing employees from learning of the claims of others, and potentially discouraging valid claims. (See id. at p. 1062.)

The agreement also unconscionably requires Plaintiff to arbitrate his claims against Defendant’s affiliates, who are third-party beneficiaries of the agreement, but not vice-versa. The agreement defines its scope by reference to employment-related claims against Defendant, as well as its “affiliate entities, predecessors, successors, owners, shareholders, directors, members, officers, employees, and agents,” who are expressly named as third-party beneficiaries capable of enforcing the agreement. (Rogers Decl. Exh. A.) Such language has been held to provide “a significant benefit” to the employer “without any reciprocal benefit” to the employee, rendering such provisions unconscionable. (Cook v. University of Southern California (2024) 102 Cal.App.5th 312, 328.) Although Defendant argues that the holding of Cook may be distinguished because the arbitration clause in that case was not limited to employment-related claims, the court in that case separately found the scope of the arbitration agreement to be unconscionable, and its reasoning as to the third-party beneficiaries was not dependent upon the scope of the agreement. (Cook, supra, 102 Cal.app.5th at p. 328.)

The number of unconscionable provisions at issue here supports a conclusion that the agreement is permeated by unconscionability, and that the provisions are not severable from the agreement.

A trial court has the discretion to refuse to enforce an agreement as a whole if it is permeated by the unconscionability. The overarching inquiry is whether the interests of justice would be furthered by severance. If the central purpose of a contractual provision, such as an arbitration agreement, is tainted with illegality, then the provision as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contractual provision, and can be severed or restricted from the rest, then severance is appropriate. (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 90, internal quotation marks, citations, and alterations omitted.) “When an arbitration agreement contains multiple unconscionable provisions, such multiple defects indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage.” (Ibid, internal quotation marks and alterations omitted.)

Here, the agreement contains unconscionable provisions relating to confidentiality, administrative charges, representative actions, and third-party beneficiaries. The volume of such provisions renders the agreement permeated by unconscionability, which cannot be rectified by severance.

For the foregoing reasons, the motion is DENIED.