Judge: Martha K. Gooding, Case: 2022-01256937, Date: 2022-10-03 Tentative Ruling
1) Motion to Compel Arbitration
2) Case Management Conference
The Motion by Defendants Universal Services of America, LP, Universal Protection Service, LP dba Allied Universal Security Services (together, “Allied”) and Brian K. Cescolini to compel Plaintiff Crystal Morena to arbitrate her claims against them is GRANTED. Defendants are initially to pay the costs of arbitration.
This action is stayed pending completion of the arbitration proceedings
The Court sets an ADR Review Hearing is set for April 24, 2023 at 9:00 a.m., at which the parties or their counsel shall appear and advise the Court of the status of the arbitration proceedings.
The CMC is vacated.
Defendants seek judicial notice of 11 declarations and orders filed in other actions in which arbitration was sought and assert these other documents demonstrate their good faith. Plaintiff objects to the request for judicial notice. The Court agrees the documents are not relevant. The Request for Judicial Notice is denied.
Plaintiff’s evidentiary objection no. 5 to the Grinde Declaration is sustained. Her remaining evidentiary objections are overruled.
The Court did not consider Plaintiff’s further objection (ROA #58), which she filed in response to Defendant’s response to the evidentiary objections Plaintiffs filed with her opposition papers. Plaintiff’s further objection is untimely and was neither requested nor authorized by the Court.
Arbitration
Code Civ. Proc. § 1281.2 provides, inter alia:
“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:
(a) The right to compel arbitration has been waived by the petitioner; or
(b) Grounds exist for the revocation of the agreement.
(c) 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. …”
(Emphasis supplied.)
CRC 3.1330 requires that a petition to compel arbitration or to stay proceedings pursuant to Code Civ. Proc. §1281.2 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be attached to the petition and incorporated by reference
“‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. 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. If the party opposing the petition raises a defense to enforcement--either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see § 1281.2, subds. (a), (b))--that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’” Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal. App. 4th 754, 761, quoting Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal. 4th 394, 413.
While there is a policy in favor of arbitration and doubts are to be resolved in favor of arbitration, there is no public policy in favor of compelling persons to accept arbitration of controversies they have not agreed to arbitrate. Id. at 739; Mitri v. Arnel Management Co. (2007) 157 Cal. App. 4th at 1170; Greenspan v. LADT, LLC. (2010) 185 Cal. App. 4th 1413, 1437. As a general rule, a party cannot be compelled to arbitrate a dispute that he or she has not agreed to resolve by arbitration. Buckner v. Tamarin (2002) 98 Cal. App. 4th 140, 142; Benasra v. Marciano (2001) 92 Cal. App. 4th 987, 990 (“The strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement, and a party cannot be compelled to arbitrate a dispute that he has not agreed to resolve by arbitration”).
As a result, the first step in determining whether to grant a motion to compel contractual arbitration is to determine whether there was, in fact, an agreement to arbitrate the pending dispute.
Defendant Has Shown the Existence of an Agreement
As noted above, the moving party bears the burden of proving the existence of an agreement to arbitrate by a preponderance of the evidence. Villacreses v. Molinari (2004) 132 Cal.App.4th 1223, 1230. If met, the burden then shifts to the resisting party “to demonstrate that an arbitration clause cannot be interpreted to require arbitration of the dispute.” Buckhorn v. St. Judge Heritage Medical Group (2004) 121 Cal.App.4th 1401, 1406. “Any doubt on the issue must be resolved in favor of arbitration.” Id.
Similarly, under 9 USCA § 2 of the FAA, the proponent of the arbitration agreement needs to show that there is an agreement in writing to submit to arbitration an “existing controversy arising out of such contract.” The agreement to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist law or equity for the revocation of any contract.” 121 Cal.App.4th at 1406.
Ruiz v. Moss Bros. Auto Grp. (2014) 232 Cal. App. 4th 836, 842 requires evidence by the employer to show the authenticity of the electronic signature. When an employer contends that an employee e-signed an arbitration agreement, the employer's failure to authenticate the employee's purported e-signature is ground to deny the employer's motion to compel arbitration. 232 Cal. App. 4th at 843-44.
“Civil Code section 1633.9 addresses how a proponent of an electronic signature may authenticate the signature—that is, show the signature is, in fact, the signature of the person the proponent claims it is. The statute states: ‘(a) An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.’ (Civ.Code, § 1633.9, subd. (a), italics added.)” (Ruiz, supra, at p. 843, 181 Cal.Rptr.3d 781.)
Espejo v. S. California Permanente Med. Grp. (2016) 246 Cal. App. 4th 1047, 1061.
The Grinde Declaration satisfies these requirements.
This is in contrast the declaration found insufficient in Ruiz v. Moss Bros. Auto Grp, supra. Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1061–1062.
Plaintiff declares she does not recall signing or seeing the arbitration agreement; nor does she recall having a username or log in for an online portal for Allied. [Moreno Decl., ¶¶ 3, 6, 7.] But Plaintiff’s declaration is equivocal and without any specifics. Plaintiff does not explain how, if she did not have a username or log in, she completed the other documents required for employment.
The Court thus finds Defendants have shown the existence of the arbitration agreement.
Plaintiff contends that, in that case, the agreement is unconscionable. This is discussed below.
Plaintiff also contends that Defendants waived their right to arbitration by failing to respond to her pre-litigation settlement demand – which demanded money only and did not mention arbitration. [Fine Decl. (ROA #42), Ex. A.] A refusal to settle before litigation commences does not waive the right to demand arbitration when litigation does commence.
Is the Arbitration Agreement Unenforceable for Unconscionability?
Plaintiff has not shown the arbitration agreement is unenforceable for unconscionability.
Unconscionability is one ground on which a court may refuse to enforce a contract, including an arbitration agreement. Civ. Code §1670.5. Whether a provision is unconscionable is a question of law. Civ. Code §1670.5(a); Flores v. Transamerica (2001) 93 Cal. App. 4th 846, 851.
The core concern of unconscionability doctrine is the absence of meaningful choice on the part of one of the parties, together with contract terms that are unreasonably favorable to the other party. Sonic Calabasas A, Inc. v. Moreno, (2013) 57 Cal.4th 1109, 1145.
“If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” Civ. Code §1670.5(a); Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 122. The absence of a severability clause is irrelevant to the determination whether the offensive provisions are “severable” for purposes of unconscionability analysis. Severability is decided as a matter of state law. Terminix Int’l Co., LP v. Palmer Ranch Ltd. Partnership (11th Cir. 2005) 532 F.3d 1327, 1331.
Unconscionability has both a procedural and a substantive element: the procedural element focuses on the existence of oppression or surprise and the substantive element focuses on overly harsh or one-sided results. Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 114.
To be unenforceable, a contract must be both procedurally and substantively unconscionable, but the elements need not be present in the same degree. The analysis employs a sliding scale: “…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.” Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 114; Mercuro v. Superior Court (2002) 96 Cal. App. 4th 167, 174-75.
Procedural Unconscionability
Procedural unconscionability concerns the manner in which the contract was negotiated and the parties’ circumstances at that time. It focuses on the factors of oppression or surprise. Kinney v. United HealthCare Services, Inc. (1999) 70 Cal. App. 4th 1322, 1329.
Procedural unconscionability is often found in contracts of adhesion – i.e. standardized contracts which, imposed and drafted by the party of superior bargaining strength, relegate to the subscribing party only the opportunity to adhere to the contract or to reject it. Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 113. “When the weaker party is presented the clause and told to take it or leave it without the opportunity for meaningful negotiation, oppress, and therefore procedural unconscionability, are present.” Szetela v. Discover Bank (2002) 97 Cal. App. 4th 107, 114. See also Lhotka v. Geographic Expeditions, Inc. (2010) 181 Cal. App. 4th 816, 821-24 (finding take it or leave it contract for recreational activity procedurally unconscionable even though activity not a “necessity”). A “meaningful opportunity to negotiate or reject the terms of a contract requires, at a minimum, that a party have reasonable notice of the opportunity to negotiate or reject the terms of the contract and an actual, meaningful, and reasonable choice to exercise that discretion. Circuit City Stores, Inc. v. Mantor (9th Cir. 2003) 335 F. 3d 1101, 1106.
“Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice.” Crippen v. Central Valley RV Outlet (2004) 124 Cal. App. 4th 1159, 1165 (citation omitted). “When the weaker party is presented the clause and told to ‘take it or leave it’ without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present.” Szetela v. Discover Bank (2002) 97 Cal. App. 4th 1094, 1100 (citation omitted).
Contracts of adhesion in the employment context that are offered on a take-it-or-leave-it basis typically contains some aspect of procedural unconscionability. See Tiri v. Lucky Chances, Inc. (2014) 226 Cal. App. 4th 231, 245 (“In the employment context, ‘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.’”).
Here, Plaintiff contends the arbitration agreement was adhesive. Usually there is some degree of procedural unconscionability simply on the basis that the arbitration agreement is, in the employment context, an adhesion agreement. The presumption was explained by the Court in Ajamian v. CantorCO2e, LP (2012) 203 Cal. App. 771, 796:
“The finding that the arbitration provision was part of a nonnegotiated employment agreement establishes, by itself, some degree of procedural unconscionability. It was an adhesion contract, because it was based on a standardized form, drafted and imposed by a party of superior bargaining strength … [however] where there is no other indication of oppression or surprise, the degree of procedural unconscionability of an adhesion agreement is low.”
Id. In accord, Wisdom v. AccentCare, Inc. (2012) 202 Cal.App.4th 591, 597; Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 980-981; Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1471; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 175.
But, here, the agreement provided a choice: the employee could agree or choose to opt out. It was not a requirement of employment that the employee agree to the arbitration agreement. As a result, the agreement was not adhesive.
Plaintiff also argues that there was procedural unconscionability due to the unequal bargaining power between her and Allied and the fact that she did not have time to consult a lawyer and did not understand what arbitration is. The issue of bargaining power is not relevant where, as here, Plaintiff had the option to opt out of the agreement. And as to what Plaintiff understood and whether she had time to ask questions or consult a lawyer, none of this is in her declaration.
The Court finds that Plaintiff has not shown procedural unconscionability.
Substantive Unconscionability
[S]ubstantive unconscionability focuses on the one-sidedness of the contract terms. In the context of an arbitration agreement, the agreement is unconscionable unless there is a “ ‘modicum of bilaterality’ ” in the arbitration remedy. [Citation.] “Although parties are free to contract for asymmetrical remedies and arbitration clauses of varying scope, ... the doctrine of unconscionability limits the extent to which a stronger party may, through a contract of adhesion, impose the arbitration forum on the weaker party without accepting that forum for itself.” [Citation.]
Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal. App. 4th 846, 854.
To be substantively unconscionable, contract terms must be “unduly harsh, oppressive, or one-sided.” Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal. App. 4th 398, 403.
Plaintiff contends the arbitration agreement lacks mutuality or consideration.
As for consideration, this is provided by the fact that both Employer and Employee agree to arbitration. In connection with this, Plaintiff objects that the arbitration agreement states that it is not an employment agreement. But that is irrelevant to the consideration created by both sides agreeing to arbitrate.
And the terms of the arbitration agreement apply equally to both of them – so there is mutuality. Plaintiff objects that Employer has the power unilaterally to modify or terminate the agreement upon 30 days’ notice, and prospectively only. But such provisions have been found not to create an illusory contract because of the employer’s duty to act in good faith.
24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1214.
Plaintiff also objects that Allied did not sign the arbitration agreement. But case law is clear that a signature is not required, just the fact of an agreement to arbitrate. Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 176 (emphasis added).
Arbitration Clauses in the Employment Context
Mandatory arbitration clauses in employment contracts are enforceable if they provide essential fairness to the employee. Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 90-911. Where the employee claims discrimination in violation of the Fair Employment and Housing Act (FEHA, Gov. C. § 12940 et seq.), those elements of essential fairness include:
· a neutral arbitrator;
· adequate discovery;
· all types of relief otherwise available in court;
· a written arbitration award that permits limited judicial review; and
· limits on arbitration costs and fees (in arbitration of FEHA claims, employer must pay all costs unique to arbitration).
Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal. 4th at 102, 118; Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal. 4th 665, 677; see also Craig v. Brown & Root, Inc. (2000) 84 Cal. App. 4th 416, 422 (finding $50 arbitration cost to employee acceptable).
An arbitration agreement that fails to provide for all types of relief that would be available in court is substantively unconscionable. See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 116. FEHA provides for attorney’s fees to the prevailing plaintiff.
A provision requiring each party to bear its own attorney fees, thereby impliedly waiving the employee's right to statutory fees, is substantively unconscionable and may be severed to allow enforcement of the remainder of the agreement—unless the agreement has more than one unlawful provision. See Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal. App. 4th 165, 184-185 (finding court should sever unconscionable provision unless agreement so permeated by unconscionability it cannot be cured by severance); Carbajal v. CWPSC, Inc. (2016) 245 Cal. App. 4th 227, 253-54 (finding severance not required if unconscionability permeates agreement).
Further, cost-splitting provisions for arbitration of FEHA claims are substantively unconscionable under California law. “When an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 110-11; Ontiveros v. DHL Express (USA), Inc. (2008) 164 Cal. App. 4th 494, 510-11.
The arbitration provision at issue here expressly provides that the employer, Defendant, will pay the costs of arbitration beyond what Plaintiff would pay for a lawsuit. This Plaintiff must pay to initiate arbitration. Under Armendariz, Defendant must initially bear the costs of arbitration. To the extent this is not what the fee provision in the agreement provide for, the court severs the fee provision and orders Defendants to pay the arbitration fees. Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 124; Lennar Homes of California, Inc. v. Stephens (2014) 232 Cal.App.4th 673, 688.
The agreement contains a severance provision. [Grime Decl., Ex. A at ¶ 9.]
Beyond this, the arbitration agreement provides that the arbitrator can award fees and costs as provided by law.
Further, the arbitration provision does limit PAGA representative actions and requires an employee to arbitrate individual PAGA rights. This is not really relevant here since Plaintiff does not assert a PAGA claim. Moreover, the United States Supreme Court has recently found such arbitration provisions enforceable under the FAA. The arbitration agreement here provides it is governed by the FAA and Plaintiff has not disputed this. Viking River Cruises, Inc. v. Moriana (2022) 213 L.Ed.2d 179 [142 S.Ct. 1906, 1924–1925], reh'g denied.
The agreement also provides for discovery pursuant to the CAA, Code Civ. Proc. § 1283.05.
In short, the Court finds that the arbitration agreement is not substantively unconscionable.
Conclusion
Based on these findings, the Court GRANTS Defendants’ Motion to compel arbitration, and orders Defendants to initially pay the costs of arbitration.
Defendant is ordered to give notice.