Judge: Mark A. Young, Case: 22SMCV00322, Date: 2022-09-29 Tentative Ruling
Case Number: 22SMCV00322 Hearing Date: September 29, 2022 Dept: M
CASE NAME: Fryer v. The
Sunset Restaurant and Beach Bar LP, et al.
CASE NO.: 22SMCV00322
MOTION: Petition/Motion
to Compel Arbitration
HEARING DATE: 9/29/2022
TENTATIVE RULING
Legal
Standard
Under California and federal law,
public policy favors arbitration as an efficient and less expensive means of
resolving private disputes. (Moncharsh
v. Heily & Blase (1992)
3 Cal.4th 1, 8-9; AT&T Mobility
LLC v. Concepcion (2011) 563 U.S. 333, 339.) Accordingly, whether an
agreement is governed by the California Arbitration Act (“CAA”) or the Federal
Arbitration Act (“FAA”), courts resolve doubts about an arbitration agreement’s
scope in favor of arbitration. (Moncharsh, supra, 3 Cal.4th at 9;
Comedy Club, Inc. v. Improv West
Assocs. (9th Cir. 2009) 553 F.3d 1277, 1284; see also Engalla v. Permanente Med. Grp., Inc.
(1997) 15 Cal.4th 951, 971-972 [“California law incorporates many of the basic
policy objectives contained in the Federal Arbitration Act, including a
presumption in favor of arbitrability [citation] and a requirement that an
arbitration agreement must be enforced on the basis of state law standards that
apply to contracts in general”].) “[U]nder both the FAA and California law,
‘arbitration agreements are valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.’ ” (Higgins v. Superior Crout (2006) 140 Cal.App.4th 1238, 1247.)
“Code of
Civil Procedure section 1281.2 requires a trial court to grant a petition to
compel arbitration if the court determines that an agreement to arbitrate the
controversy exists.” (Avery v.
Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59,
quotations omitted.) Accordingly, “when presented with a petition to compel
arbitration, the court’s first task is to determine whether the parties have in
fact agreed to arbitrate the dispute.” (Ibid.) A petition to compel arbitration is in essence a suit in equity
to compel specific performance of a contract. (Id. at 71.) As with any other specific performance claim, “a
party seeking to enforce an arbitration agreement must show the agreement’s
terms are sufficiently definite to enable the court to know what it is to
enforce.” (Ibid. [internal citations omitted].) “Only
the valid and binding agreement of the parties, including all material terms
well-defined and clearly expressed, may be ordered specifically performed.” (Ibid.) An arbitration agreement “must be so interpreted as to give
effect to the mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful.” (Civ. Code, §
1636.) The language of the contract governs its interpretation if it is clear
and explicit. (Civ. Code, § 1368.) If uncertainty exists, “the language of a
contract should be interpreted most strongly against the party who caused the
uncertainty to exist.” (Civ. Code, § 1654.)
The party
seeking to compel arbitration bears the burden of proving the existence of a
valid arbitration agreement by the preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc.
(1997) 15 Cal.4th 951, 972.) It would then be plaintiff’s burden, in opposing
the motion, to prove by a preponderance of the evidence any fact necessary to her
opposition. (See Ibid.) “In these
summary proceedings, the trial court sits as a trier of fact, weighing all the
affidavits, declarations, and other documentary evidence, as well as oral
testimony received at the court’s discretion, to reach a final determination.” (Ibid.)
Analysis
Valid Arbitration Agreement
Defendants
assert that the instant claims are required to go to arbitration because
Plaintiff signed an arbitration agreement covering their claims.
As with any contract, mutual assent
or consent is necessary for the formation of a valid arbitration agreement.
(Civ. Code, §§ 1550, 1565.) “Consent is not mutual, unless the parties all
agree upon the same thing in the same sense.” (Civ. Code, § 1580.) The moving
party bears the initial burden of showing the existence of an agreement to
arbitrate by a preponderance of the evidence. (Mitri v. Arnel Mgmt. Co. (2007) 157 Cal.App.4th 1164, 1169
[“Because the existence of the agreement is a statutory prerequisite to
granting the petition, the petitioner bears the burden of proving its existence
by a preponderance of the evidence.”].)
Defendants cite two arbitration agreements
signed by Plaintiffs. On or about May 7, 2019, upon beginning her employment, Plaintiff
signed a “Mutual Dispute Resolution Agreement.” (Simplicio Decl., Ex. A.)
Plaintiff subsequently signed an “Agreement to Arbitrate Disputes” on February
26, 2020. (Ex. B.)
There is no
reasonable dispute that the claims here fall under the scope of the broad
arbitration provisions. The agreement specifically outlines that the following
claims are subject to arbitration: “any controversy between you and the Company
arising out of your employment or the termination of your employment shall be
settled by binding arbitration pursuant to the Federal Arbitration Act… This
agreement to arbitrate is intended to be broad and to cover… all such disputes,
including but not limited to those arising out of federal and state statutes
and local ordinances [such as FMLA, ADA, or other similar laws].” (Simplicio
Decl., Ex. B.)
This broad clause would apply to
the claims at hand. The Complaint’s causes specifically regard violations of Labor
Code sections, FEHA discrimination, FEHA retaliation, wrongful termination,
among other covered claims. These are claims that arise out of Plaintiff’s
employment with Defendants. Accordingly, the Court finds that there is an
arbitration agreement between the parties that cover the claims here.
Plaintiff does not dispute that she
signed both agreements. Plaintiff claims that she was “coerced” into signing
the arbitration agreement. Specifically, she declares that agents Simplicio,
Martinez and McCurdy told her that she needed to sign the agreement on February
26, 2020, or she would be terminated. (Fryer Decl., ¶ 5.) She felt threatened
by this and was not given any opportunity to negotiate or discuss the terms of
the agreement. (Id.) This is insufficient to show that there was no mutual
consent between the parties regarding the arbitration agreement. At best, this
would be a factor to consider for procedural unconscionability, which will be
discussed further below. Further, this does not address her assent to the
original “Mutual Dispute Resolution Agreement.” Even if she did not willingly
assent to the second agreement, then the merger clause in the second agreement
would be negated and the first agreement would still be operative.
FAA Applies to the Agreement
Plaintiff argues that her wage and
hour claims are not arbitrable because her employment relationship did not
involve interstate commerce.
Arbitration agreements included in
contracts evidencing a transaction involving interstate commerce “shall be
valid, irrevocable, and enforceable, save upon grounds as exist at law or in
equity for the revocation of any contract.” (9 U.S.C. § 2.) Interstate commerce is defined as
“commerce among several states” and required for the application of the FAA. (9
USC § 1.)
The question of whether federal law
governs an arbitration agreement is a question of law involving the
interpretation of statutes and the contract with no extrinsic evidence. (Rodriguez v. Am. Techs., Inc. (2006)
136 Cal.App.4th 110, 117.) “In
accordance with choice-of-law principles, the parties may limit the trial
court’s authority to stay or deny arbitration under the CAA by adopting the
more restrictive procedural provisions of the FAA.” (Valencia v. Smyth (2010) 185
Cal.App.4th 153, 157.)
To
give effect to the intent of Congress in enacting the FAA, courts broadly
construe the term “involving commerce.” (Allied-Bruce Terminix Cos. v.
Dobson (1995) 513 U.S. 265, 268.) The FAA applies to arbitration agreements
if the economic activity at issue, when considered in the aggregate, bears on
interstate commerce in a substantial way, even if the particular conduct of the
parties does not itself affect interstate commerce. (Citizens Bank v.
Alafabco, Inc. (2003) 539 U.S In deciding FAA coverage, “[the court] must
broadly construe the phrase ‘evidencing a transaction involving commerce,’
because the FAA ‘embodies Congress’ intent to provide for the enforcement of
arbitration agreements within the full reach of the Commerce Clause…’ In
determining whether the employment agreement involved interstate commerce, the
parties’ subjective intent is not the determining factor.” (Giuliano v.
Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1286
[referencing 9 U.S.C. § 2].)
For
example, in Khalatian v. Prime Time Shuttle, Inc. (2015) 327 Cal.App.4th
651, the court held that the arbitration agreement regarding plaintiff’s
employment, driving shuttles only in California, involved interstate commerce
because “the passengers using the employer’s service often traveled from other
states[ ] [and] passengers purchased package deals on the Internet which
included hotel accommodations, airfare, and vouchers for free airport
transportation which the customers used to board the employer’s airport
shuttles.” (Id. at pp. 657-658.)
First, the agreement provides that the
interpretation and enforceability of this Agreement will be governed by the FAA,
consistent with the CAA.
Second, Defendants demonstrate
that the contract affects interstate commerce under the broad definition
provided by caselaw. Because Sunset utilizes goods and supplies from across the
country, serves resident and nonresident customers in California, and
advertises to out-of-state patrons, Plaintiff’s employment “involves” interstate
commerce. (Simplico Decl., ¶ 4.) Therefore, it is properly governed by the FAA.
Accordingly, the FAA applies and preempts substantive California law that would
limit arbitration agreements, such as Lab. Code section 229.
Procedural Unconscionability
Plaintiff argues that the agreement
is unconscionable. The doctrine of unconscionability refers to “an absence of
meaningful choice on the part of one of the parties together with contract
terms which are unreasonably favorable to the other party.” (Sonic-Calabasas
A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of
procedural and substantive components, “the former focusing on oppression or
surprise due to unequal bargaining power, the latter on overly harsh or
one-sided results.” (Ibid.) Although both components of
unconscionability must be present to invalidate an arbitration agreement, they
need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24
Cal.4th 83, 114.) “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.
[Citations.] In other words, the more substantively unconscionable the
contract term, the less evidence of procedural unconscionability is required to
come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.) “The party resisting arbitration bears the burden of proving
unconscionability.” (Pinnacle
Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55
Cal.4th 223, 247.)
As to procedural unconscionability, Plaintiff
argues that there was a degree of coercion because the arbitration agreement
was a condition of employment. (Fryer Decl., ¶ 5.) The Court
finds little surprise or oppression beyond that which is typically present in
the employment context. (See Baltazar v. Forever 21 Inc. (2016) 62 Cal.4th
1237, 1246; [Courts do not recognize that “adhesive” arbitration agreements in
the employment context establish a high degree of procedural unconscionability
absent “surprise or other sharp practices”]; see also Nguyen v. Applied
Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248; [the
fact that an arbitration agreement is presented as a “take-it-or-leave-it”
contract of adhesion in the employment context, alone only establishes a modest
degree of procedural unconscionability].) Thus, Plaintiff’s evidence
establishes a modest degree of procedural unconscionability.
Plaintiff also asserts that
Defendants failed to attach or otherwise provide the procedural rules governing
the arbitration. Plaintiff fails to demonstrate that a failure to
attach arbitration rules, by itself, creates procedural
unconscionability. An employer’s failure to attach the arbitration rules to an
arbitration agreement requires courts to scrutinize the substantive
unconscionability of terms that were “artfully hidden” but does not otherwise
add to the procedural unconscionability of the agreement. (E.g., Baltazar,
supra, 62 Cal.4th at 1246; Nguyen, supra,
4 Cal.App.5th at 248-249.) Plaintiff does not point to any such terms, artfully
hidden or otherwise.
Accordingly, the Court finds a modest
degree of procedural unconscionability. To deny enforcement, the Court will
need to find a high degree of substantive unconscionability.
Substantive Unconscionability
As to substantive
unconscionability, an agreement is substantively unconscionable if it
imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably
favorable,” or “so one-sided as to ‘shock the conscience.’ ” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910-911.) “All
of these formulations point to the central idea that unconscionability doctrine
is concerned not with ‘a simple old-fashioned bad bargain’ [citation], but with
terms that are ‘unreasonably favorable to the more powerful party.’
[Citation.]” (Id. at 911.) “These include ‘terms that
impair the integrity of the bargaining process or otherwise contravene the public
interest or public policy; terms (usually of an adhesion or boilerplate nature)
that attempt to alter in an impermissible manner fundamental duties otherwise
imposed by the law, fine-print terms, or provisions that seek to negate the
reasonable expectations of the nondrafting party, or unreasonably and
unexpectedly harsh terms having to do with price or other central aspects of
the transaction.’ ” (Ibid.)
Plaintiff argues that the agreement
is unconscionable because it contains a jury trial waiver, there are
limitations to discovery, does not provide for a final award and improperly
waives class/representative actions. The Court does not find that any of these
issues provide sufficient substantive unconscionability to justify denial of
the motion.
First, Plaintiff posits no
authority that a jury trial waiver would create substantive unconscionability
here. Plaintiff cites to inapplicable authorities regarding CCP § 631 waiver of
jury trials, rather than contractual waiver of jury through arbitration. Simply
put: if this weighed towards unconscionability, then no arbitration agreement
could pass muster.
Second, the purported limitation on
discovery is within the boundaries provided by Armendariz. The agreement
provides that both parties are entitled to “reasonable discovery” without
further limitation. (Exs. A, B; see also JAMS Rule 7.) This provides for “more
than minimal discovery” required by Armendariz. (Armendariz, supra,
24 Cal.4th at 102.)
Third, the agreement squarely provides for a final award
and appeal process. Again, Plaintiff cites to inapplicable rules regarding the
filing of an appeal from the superior court. (CRC Rule 8.104.) The agreement
specifically provides that arbitration awards shall be binding and include the
arbitrator’s written reasoned opinion. (Exh B, ¶ 6.) In addition, the JAMS
Employment Arbitration Rules & Procedures also provide that the arbitrator
shall issue a written award. Moreover, the term is consistent with the process
to confirm, modify or reverse an arbitration award. (See CCP §§ 1288, 1288.4 [The
petition must be served no earlier than 10 days, but no later than 4 years,
after service of the award on the petitioner].) The terms easily meet the
judicial review requirements required by Armendariz of FEHA cases.
Finally, Plaintiff argues that there is an improper class
action waiver. Plaintiff relies on outdated law. (See Iskanian v. CLS
Transp. Los Angeles, LLC (2014) 59 Cal.4th 348.) In its opinion in Viking
River Cruises, Inc. v. Moriana (2022) 142 U. S. 1906, (“Viking River”), the
Supreme Court discussed the scope of the FAA and enforceability of individual
arbitration under Iskanian:
We hold that the FAA preempts the rule of
Iskanian insofar as it precludes division of PAGA actions into individual and
non-individual claims through an agreement to arbitrate. This holding compels
reversal in this case. The agreement between Viking and Moriana purported to
waive “representative” PAGA claims. Under Iskanian, this provision was invalid
if construed as a wholesale waiver of PAGA claims. And under our holding, that
aspect of Iskanian is not preempted by the FAA, so the agreement remains
invalid insofar as it is interpreted in that manner. But the severability
clause in the agreement provides that if the waiver provision is invalid in
some respect, any “portion” of the waiver that remains valid must still be
“enforced in arbitration.” Based on this clause, Viking was entitled to enforce
the agreement insofar as it mandated arbitration of Moriana's individual PAGA
claim. The lower courts refused to do so based on the rule that PAGA actions
cannot be divided into individual and non-individual claims. Under our holding,
that rule is preempted, so Viking is entitled to compel arbitration of
Moriana's individual claim.
(Id. at 1924–1925.)
Under the Viking
River rule, employers may properly compel an employee’s individual claims
to arbitration despite any class action waiver. Similarly, here, the class
action waiver is severable under the terms of the agreement. The agreement
provides that it would only not be severable if the dispute is “brought as a
class, collective or representative action.” This action was not brought in
that capacity.
Thus, the
Court does not observe any substantive unconscionability.
Conclusion
Defendants meet their burden to
demonstrate the existence of an arbitration agreement between the parties that
covers Plaintiff’s claims. Plaintiff, in turn, fails to demonstrate that the
agreement is unconscionable. Defendants’ motion is therefore GRANTED and the
Court orders Plaintiff’s claims to arbitration, as discussed above. The entire
action is STAYED pending the completion of the arbitration. (CCP § 1281.4.)