Judge: Mark A. Young, Case: 23SMCV00937, Date: 2023-03-01 Tentative Ruling
Case Number: 23SMCV00937 Hearing Date: March 1, 2023 Dept: M
CASE NAME: Carbonell, et
al., v. Sproose Medical Corporation, et al.
CASE NO.: 22SMCV00937
MOTION: Petition/Motion
to Compel Arbitration
HEARING DATE: 3/1/2023
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.)
Valid Arbitration Agreement
Defendants Sproose
Medical Corporation PC dba Alchemy 43, and Sproose Holdings Inc. assert that
the instant claims must be arbitrated 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.”].)
On November 16, 2018, May 30, 2020,
and November 25, 2019, Plaintiffs Carbonell, Sung, and Frankston, respectively,
each signed an Arbitration Agreement (hereinafter collectively the “Mutual
Arbitration Agreements”) wherein they agreed to arbitrate all claims related to
their employment with Defendants. (See Levy Decl., ¶¶ 2-4, Exs. A-C.)
Plaintiffs’ claims arise from their employment with Alchemy 43. The Complaint
alleges that at all relevant times, Defendants were Plaintiffs’ employers.
(Compl., ¶¶ 8, 13-15.) Plaintiffs do not
contest that they signed the agreements. Instead, Plaintiffs argue that there
is no enforceable arbitration agreement because Defendant did not sign the
arbitration agreement.
Plaintiffs’ argue that an arbitration
agreement is invalid if it provides for two signatures and both signatures are
not signed. (See Marcus & Millichap Real Estate Inv. Brokerage
Co. v. Hock Inv. Co. (1998) 68 Cal.App.4th 83.) In Marcus, the trial
court properly denied a broker's petition to compel arbitration against sellers
on the ground that the parties did not agree to binding arbitration. (Id.
at 89-92.) The broker's petition was based on the arbitration clause in the
purchase agreement, which stated that if a controversy arose, “Buyer, Seller
and Agent agree that such controversy shall be settled by final, binding
arbitration.” Although the buyers initialed the arbitration clause as
part of their offer, the sellers never initialed this provision or
otherwise indicated they accepted it in their counteroffers. None of the
subsequent counteroffers between the buyer and seller mentioned the arbitration
provision. The Court of Appeal thus concluded that the “Buyer, Seller and
Agent” did not agree to submit controversies to binding arbitration as the
arbitration clause required.
Likewise, Romo v. Y-3 Holdings,
Inc. (2001) 87 Cal.App.4th 1153 does not aid Plaintiffs. As Plaintiffs
explain, there, the trial court denied a motion to compel arbitration where the
employee did not sign the actual arbitration agreement. (Id. at 1159
– 1160.) Plaintiffs further assert that
in Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th
74, the appellate court held the arbitration agreement was unenforceable
because by not signing, only the employees were agreeing to arbitration and not
the employer. In Carmona, the Second District held that the agreement
was substantively unconscionable due to a lack of mutuality. The enforceability
clause allowed the car wash companies to bring their claims for damages or
injunctive relief against plaintiffs in court, but plaintiffs were restricted
to arbitration. (Id., at 82, 86-88.) The Court concluded that “this type
of one-sided provision—where the employer exempts claims only it would bring
from arbitration while restricting any employee claims to arbitration—to be
substantively unconscionable.” (Id.) That
is not the situation in this case.
Thus, there is no reasonable
dispute that Plaintiffs are not bound by the arbitration provision. Plaintiffs
must now raise a defense to enforcement.
Unconscionability
As noted, Plaintiffs raise
unconscionability of the Mutual Arbitration Agreements. 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,
Plaintiffs argue that there is procedurally unconscionability because no
arbitration rules were attached to the Su Sung Agreement or Frankston’s
Agreement. Specifically, Sung and Frankston never received the JAMS rules and
AAA rules, respectively, to determine what rights they were giving up and what
arbitration and mediation scheme Plaintiffs were accepting. Plaintiffs fail
to demonstrate that the absence of attached arbitration rules, by
itself, creates significant 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 v. Forever 21, Inc. (2016) 62
Cal.4th 1237, 1246; Nguyen v. Applied Medical Resources Corp.,
(2016) 4 Cal.App.5th 232, 248-249.) Plaintiffs do not point to any such terms,
artfully hidden or otherwise. Thus, the Court would not consider this a sharp
practice which establishes a substantial degree of procedural unconscionability.
Otherwise, the record shows that
the arbitration agreements were conspicuous, not a condition of employment, and
Plaintiffs were given adequate time to review the agreements and object to any
terms.
Relevantly, Defendants provide that
the Carbonell Agreement was physically given to Carbonell, in addition to other
onboarding documents, at the start of his employment with Defendants. (Levy
Decl., ¶ 2.) Carbonell was instructed to review the Carbonell Agreement and
other onboarding documents carefully, and to inform Defendants’ Human Resources
Department if he had any questions or concerns about the Carbonell Agreement.
(Id.) Plaintiff Carbonell was informed that entering into the Arbitration
Agreement was optional. (Id.) After being told the foregoing, Carbonell entered
into the Agreement and did not raise any questions or concerns either before or
after execution of the same. (Id.)
Sung was instructed to review the
Sung Agreement and other onboarding documents carefully, and to inform
Defendants’ Human Resources Department if she had any questions or concerns
about the Sung Agreement. (Id. ¶ 3.) Sung was informed that entering into the
Arbitration Agreement was optional. (Id.) After being told the foregoing, Sung
voluntarily entered into the Sung Agreement and did not raise any questions or
concerns either before or after execution of the same. (Id.)
Frankston Agreement was given to
Frankston, in addition to other onboarding documents, at the start of her
employment with Defendants. (Levy Decl., ¶ 4.) Plaintiff Frankston was
instructed to review the Frankston Agreement and other onboarding documents
carefully, and to inform Defendants’ Human Resources Department if she had any
questions or concerns about the Sung Agreement. (Id. at ¶ 4.) Frankston was
informed that entering into the Arbitration Agreement was optional. (Id. at ¶
4.) After being told the foregoing, Frankston voluntarily entered into the
Frankston Agreement and did not raise any questions or concerns either before
or after execution of the same. (Id. at ¶ 4.) The Frankston Agreement is a
three-page document with the arbitration provisions clearly labeled with the
heading “Arbitration Procedures” which explains the effect of the
arbitration provision.
In all three agreements, the
arbitration terms were not buried or otherwise hidden. Accordingly, there is
only, at best, a low degree of procedural 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.’ ” (Id.)
Plaintiffs
reiterate their argument that the failure to sign, in and of itself, creates a
lack of mutuality. However, the agreement does not have the same limitations
present in Carmona which led that court to conclude that the
arbitration provision was substantively unconscionable due to lack of mutuality.
Plaintiffs point to no analogous provision which would enable Defendants to bring
claims they would likely bring directly to court, as opposed to arbitration. Instead,
the agreements state that all matters be submitted to arbitration for claims by
either of the parties. Thus, the provisions are mutual.
Moreover,
the arbitration agreements meet the basic requirements set forth by Armendariz.
The agreements (1) require the use of a neutral arbitrator in accordance with
the national rules for the resolution of employment disputes under AAA or JAMS
(as applicable); (2) provide for the same rights to discovery as would be
available in a proceeding in California Superior Court—more than minimal
discovery; (3) do not limit a party’s ability to recover damages; (4) require a
written award and opinion; and (5) provide that Defendants shall pay for all
unique costs to arbitration.
Therefore, the Court finds no
substantive unconscionability.
Conclusion
Defendants meet their burden to
demonstrate the existence of an arbitration agreement between the parties that
covers Plaintiffs’ claims. Plaintiffs, in turn, fail to demonstrate that the
agreement is unconscionable. Defendants’ motion is therefore GRANTED and the
Court orders Plaintiffs’ claims to arbitration, as discussed above. The entire
action is STAYED pending the completion of the arbitration. (CCP § 1281.4.)