Judge Matthew C. Braner, Case 37-2023-00029871-CU-OE-CTL 2023-11-03 Tentative Ruling

Judge: Matthew C. Braner, Case: 37-2023-00029871-CU-OE-CTL, Date: 2023-11-03 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - November 02, 2023

11/03/2023 09:00:00 AM C-60 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Matthew C. Braner

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Civil - Unlimited Other employment Motion Hearing (Civil) 37-2023-00029871-CU-OE-CTL LAUGHY VS UBS FINANCIAL SERVICES INC [IMAGED] CAUSAL DOCUMENT/DATE FILED:

Defendant UBS Financial Services, Inc.'s motion to compel arbitration is DENIED.

As the party seeking to compel arbitration, Defendant has the burden of proving by a preponderance of the evidence the existence of an arbitration agreement. (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) As the party opposing arbitration, Plaintiff Nozomi Laughy has the burden of establishing, by a preponderance of the evidence, a defense to the agreement's enforcement. (Id.) Here, Defendant presents evidence Plaintiff agreed to binding arbitration when she signed the offer letter at the outset of her employment in 2013. Paragraph 7 of the offer letter is an arbitration provision that sets forth the parties understanding that 'any disputes between you and UBS Financial Services including claims concerning compensation, benefits or other terms or conditions of employment and termination of employment, or any claims for discrimination, retaliation or harassment, or any other claims whether they arise by statute or otherwise, . . ., including wage and hour laws, will be determined by arbitration as authorized and governed by the arbitration as authorized and governed by the arbitration law of the state of New Jersey.' (ROA #11, Jodzio Dec., Ex. A, p. 2, ¶ 7.) Defendant provided a copy of the executed offer letter, which was signed by Plaintiff on August 8, 2013. (ROA #11, Jodzio Dec., Ex. A, p. 4.) The court is not persuaded by Plaintiff's arguments that Roxanne Jodzio lacks the requisite personal knowledge to authenticate the signed offer letter, nor with Plaintiff's argument regarding the failure to specify arbitration of PAGA claims. Accordingly, Defendant's evidence is sufficient to meet its burden; an arbitration agreement exists that was agreed to by Plaintiff.

However, the court is persuaded by Plaintiff's arguments regarding unconscionability. Plaintiff argues the agreement is procedurally unconscionable because it was a contract of adhesion that was presented on a 'take it or leave it' basis, and the arbitration provision is buried in the middle of the letter and not labeled as an arbitration provision. Plaintiff argues it is substantively unconscionable because it purports to bind Plaintiff to the laws of New Jersey for purposes of arbitration. The court agrees.

First, there is no legitimate argument the agreement is not procedurally unconscionable. '[I]n the case of 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.' (Armendariz v. Foundation Health Psychcare Services, Inc. ('Armendariz') (2000) 24 Cal.4th 83, 115; see also Lona v. Citibank N.A. (2011) 202 Cal.App.4th 89, 109 ['Absent unusual circumstances, evidence that one party has overwhelming bargaining power, drafts the contract, and presents it on a take-it-or-leave-it basis is sufficient to demonstrate procedural unconscionability and Calendar No.: Event ID: TENTATIVE RULINGS

3011342 14 CASE NUMBER: CASE TITLE: LAUGHY VS UBS FINANCIAL SERVICES INC [IMAGED] 37-2023-00029871-CU-OE-CTL require the court to reach the question of substantive unconscionability, even if the other party has market alternatives.'].) Here, the degree of procedural unconscionability is even greater than that described in Armendariz, as the agreement to arbitrate was expressly a condition of employment, was buried in the middle of the letter, and was unlabeled. (See, e.g., De Leon v. Pinnacle Property Management Services, LLC (2021) 72 Cal.App.5th 476, 485-86 [lesser degree of procedural unconscionability where arbitration provision is an easily identifiable standalone provision and 'not hidden or buried in another agreement.'].) Indeed, the word 'arbitration' does not even appear in paragraph 7 (itself buried in the middle of the letter) until the middle of the paragraph, at line 13. In sum, the degree of procedural unconscionability evident from this agreement is very high.

Due to the sliding scale courts must use when assessing unconscionability in the arbitration context, and given the very high degree of procedural unconscionability described above, only a modicum of substantive unconscionability is required to find the agreement sufficiently unconscionable to foreclose enforcement. That modicum of substantive unconscionability is present due to the choice of law provision directly and inextricably tied to the arbitration clause. 'Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided.' (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125.) The logical consequence of enforcement of this choice of law provision is that Plaintiff would lose her rights under the California labor laws, which are generally not waivable. This type of one-sided consequence is substantively unconscionable, and cannot simply be severed from the remainder of the arbitration provision. (See Armendariz, supra, 25 Cal.4th at p. 124.) In sum, the arbitration provision in the offer letter is both procedurally and substantively unconscionable, and therefore cannot be enforced. Likewise, the court is not persuaded that the Form U4 signed by Plaintiff, standing alone, is sufficient to compel arbitration of her representative wage and hour claims.

(See, e.g., Zoller v. GCA Advisors, LLC (9th Cir. 2021) 993 F.3d 1198, 1203-04 [arbitration provision in U4 form merely specifies that FINRA can arbitrate disputes if the parties agree to arbitrate such disputes]; Prudential Ins. Co. of America v. Lai (9th Cir. 1994) 42 F.3d 1299, 1305.) Accordingly, Defendant's motion to compel arbitration is denied.

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