Judge: Mel Red Recana, Case: 23STCV21795, Date: 2024-05-09 Tentative Ruling

Case Number: 23STCV21795    Hearing Date: May 9, 2024    Dept: 45

Superior Court of California

County of Los Angeles

Hearing date:              May 9, 2024

Moving Party:             Defendants Broadway Typewriter Company, Inc. and Arey Jones Company

Responding Party:      Plaintiff Juan Antonio Espitia  

Motion to Compel Arbitration

The Court has considered the moving, opposition, and reply papers.

The motion is GRANTED.

Background

            This is an action arising from an alleged wrongful termination and other wrongful actions taken against Plaintiff Juan Antonio Espitia (“Plaintiff”). On September 11, 2023, Plaintiff filed a Complaint against Defendants Broadway Typewriter Company, Inc. dba Arey Jones Educational Solutions (“Broadway”), Arey Jones Company (“AJC”) (collectively “Defendants”), and DOES 1 through 20, inclusive, alleging causes of action for: (1) discrimination in violation of Gov. Code § 12940 et seq.; (2) retaliation in violation of Gov. Code § 12940 et seq.; (3) failure to prevent discrimination and retaliation in violation of Gov. Code § 12940(k); (4) failure to provide reasonable accommodations in violation of Gov. Code § 12940 et seq.; (5) failure to engage in a good faith interactive process in violation of Gov. Code § 12940 et seq.; (6) declaratory judgment; (7) wrongful termination in violation of the public policy of the State of California; (8) failure to provide rest breaks in violation of Lab. Code § 226.7; (9) failure to provide itemized wage and hour statements in violation of Lab. Code § 226 et seq.; (10) waiting time penalties pursuant to Lab. Code §§ 201-203; and (11) unfair competition pursuant to Bus. & Prof. Code § 17200 et seq.

            On February 13, 2024, Defendants filed and served the instant Motion to Compel Arbitration. Plaintiff filed an opposition to the motion on April 26, 2024, to which Defendants replied on May 2, 2024.  

Legal Standard

            Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿ (Code Civ. Proc., § 1281.2.) California law favors enforcement of valid arbitration agreements. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97.) A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-357.)

            The Federal Arbitration Act (“FAA”) applies to any contract evidencing a transaction involving interstate commerce which contains an arbitration clause. (Wolls v. Superior Court (2005) 127 Cal.App.4th 197, 211.) Section 2 of the FAA provides that arbitration provisions shall be enforced, save upon grounds as exist at law or in equity for the revocation of any contract. (Ibid.) A state court may refuse to enforce an arbitration clause on the basis of generally applicable contract defenses, such as fraud, duress, or unconscionability. (Ibid.) A state court, however, may not defeat an arbitration clause by applying state laws applicable only to arbitration provisions. (Ibid.)

For the FAA to apply, a contract must involve interstate commerce. (Ibid.) When it applies, the FAA preempts any state law rule that stands as an obstacle to the accomplishment of the FAA’s objectives. (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238.) A party asserting FAA preemption bears the burden to present evidence establishing a contract with the arbitration provision affects interstate commerce, and the failure to do so renders the FAA inapplicable. (Ibid.) Evidence must be presented, in the form of declarations or other evidence, that establishes that the contract affects interstate commerce.  (Ibid.) “[S]ince arbitration is a matter of contract, the FAA also applies if it is so stated in the agreement.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 963.)

“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.”  (Code Civ. Proc. § 1281.2, subds. (a), (b).) Thus, in assessing a motion to compel arbitration, the moving party “bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, and a party opposing the [motion] bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284, citation omitted.)

“If a court of competent jurisdiction . . . has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.) 

Evidentiary Objections

            The Court OVERRULES Plaintiff’s evidentiary objections numbers 1, 2, and 3 to the declaration of Rudy Perez submitted in support of the motion.

Discussion  

            The Existence of an Agreement to Arbitrate

            The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking performance of that contract. (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653.) There is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate. (Ibid.) The FAA does not force parties to arbitrate when they have not agreed to do so. (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 385.)

a.       Evidence in Support of the Motion

In support of the motion, Michael Scarpella (“Scarpella”), declares the following: for the last 30 years, he has served as the President and Chief Executive Officer of Defendant Broadway and Defendant Broadway provides technology to school districts and that Defendant Broadway was Plaintiff’s employer from approximately May 18, 2021 through December 17, 2021. (Scarpella Decl., ¶ 3.) AJC is a non-public facing affiliate of Defendant Broadway. (Scarpella Decl., ¶ 4.) Defendants are at the same business address, are solely owned by Scarpella and his siblings as shareholders, have the same officers and directors comprised of Scarpella and his siblings, and both entities are under control with one another and have been operated in such way for at least 30 years. (Scarpella Decl., ¶ 5.) Scarpella states that the definition of “the Company” in the arbitration agreement includes Defendant Broadway and its affiliates and affiliated entities, agents, successors, and assigns. (Scarpella Decl., ¶ 8.)

Rudy Perez (“Perez”) also provides a declaration in support of the motion. Mr. Perez sets forth his position at Defendant Broadway. (Perez Decl., ¶ 3.) Mr. Perez states that he is personally familiar with Plaintiff because he onboarded and supervised Plaintiff during his employment. (Perez Decl., ¶ 5.) Plaintiff worked for Defendant Broadway for a very short time. (Perez Decl., ¶ 5.) After hiring and consistent with Defendant Broadway’s onboarding practices, he presented Plaintiff with a series of documents to complete the employment onboarding process in person, including a copy of the “Agreement to Submit Disputes to Binding Individual Arbitration” (the “Arbitration Agreement”). (Perez Decl., ¶ 6; Exh. A.) Plaintiff signed the Arbitration Agreement in the presence of Mr. Perez and he countersigned the Arbitration Agreement on behalf of Defendant Broadway on May 18, 2021. (Perez Decl., ¶ 6; Exh. A.) At no point during the onboarding did Plaintiff raise any disagreement to the Arbitration Agreement or claim a lack of understanding of its contents. (Perez Decl., ¶ 8.)

b.      Evidence in Opposition to the Motion

In opposition to the motion, Plaintiff states the following: he performed his job duties

entirely within the State of California. (Espitia Decl., ¶ 3.) None of his work required him to do anything outside the State of California. (Espitia Decl., ¶ 3.) As part of the hiring process, Plaintiff was given around 15 pages of employment documents and he was rushed to sign such documents without receiving any explanation and was told just “sign here” in order to start working. (Espitia Decl., ¶ 4.) Plaintiff was never told by anyone that signing the “Agreement to Submit Disputes to Individual Binding Arbitration” attached as Exhibit A to Rudy Perez’s declaration was voluntary, that its terms were negotiable, or that he could refuse to agree to the arbitration agreement to which it referred. (Espitia Decl., ¶ 5.) Plaintiff was never told by anyone that there was an opt-out procedure to the arbitration provision. (Espitia Decl., ¶ 5.) Plaintiff was never told by anyone that he could refuse to sign any of the documents that were given to him. (Espitia Decl., ¶ 5.) Plaintiff states that he was not given a copy of the Arbitration Agreement after he was forced to sign it to retain for his records and he does not have a signed copy of Defendants’ arbitration agreement. (Espitia Decl., ¶ 7.) Plaintiff states that he did not understand the legal significance of the document he was being forced to sign. (Espitia Decl., ¶ 6.)

c.       Analysis

The Court finds that Defendants have met their burden in showing the existence of a

valid agreement to arbitrate. Defendants have presented admissible evidence that Plaintiff signed the Arbitration Agreement.  Defendants have presented such an agreement to the Court through the declaration of Mr. Perez.

            Thus, under the FAA and California law, Defendants have met their burden in showing the existence of a valid agreement to arbitrate. Defendants have shown by a preponderance of the evidence that an agreement to arbitrate exists.  

            Coverage of Claims Alleged

            The Court finds that the Arbitration Agreement covers the claims alleged in the Complaint. The Arbitration Agreement provides that it covers any and all disputes and claims arising out of Plaintiff’s employment with Defendant Broadway and its affiliates and affiliated entities. (Perez Decl., ¶ 6; Exh. A.) The Complaint arises from Plaintiff’s employment with Defendant Broadway. Defendant AJC is also entitled to compel arbitration under an equitable estoppel theory because—although not being a signatory to the Arbitration Agreement— the claims against Defendant AJC are intertwined with Plaintiff’s claims asserted against Defendant Broadway. (Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271.)

            Applicability of the FAA

            The Court also finds that the FAA applies to the Arbitration Agreement as the Arbitration Agreement specifically provides that the FAA shall govern its interpretation and enforcement. (Perez Decl., ¶ 6; Exh. A.)

            Fraud in the Execution and Lack of Mutual Assent

            Plaintiff argues that the Arbitration Agreement is unenforceable because there was no mutual assent, and the Arbitration Agreement is void due to fraud in the execution.

            To establish a valid contract there must be: (1) parties capable of contracting; (2) their consent; (3) a lawful object; and (4) sufficient cause or consideration. (Civ. Code § 1550.) “California law distinguishes between fraud in the execution or inception of a contract and fraud in the inducement of a contract.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415.)  Fraud in the execution “goes to the inception or execution of the agreement, so that the promisor is deceived as to the nature of his act, and actually does not know what he is signing, or does not intend to enter into a contract at all, mutual assent is lacking, and [the contract] is void.” (Ibid., citation omitted.) “A misrepresentation as to the character or essential terms of a proposed contract can render the promisor’s assent ineffective.”  (Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler & Mitchell, LLP (2013) 219 Cal.App.4th 1299, 1308.)  The question of fraud in the execution is for the trial court to decide.  (Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th 394, 416.) “[M]isrepresentation does not render the contract void unless the misled party, before making the agreement, lacked a reasonable opportunity to learn its terms.” (Id. at p. 421.)

“If a party, with such reasonable opportunity, fails to learn the nature of the document he or she signs, such negligence precludes a finding the contract is void for fraud in the execution.” (Id. at p. 423, citation omitted.) “[O]ne party’s unreasonable reliance on the other’s misrepresentations, resulting in a failure to read a written agreement before signing it, is an insufficient basis, under the doctrine of fraud in the execution, for permitting that party to avoid an arbitration agreement contained in the contract.” (Ibid.) “[I]t is generally unreasonable, in reliance . . . on assurances, to neglect to read a written agreement before signing it.” (Id. at p. 424.) “California law . . . requires that the plaintiff, in failing to acquaint himself or herself with the contents of a written agreement before signing it, not have acted in an objectively unreasonable manner.” (Id. at p. 423.) “One party’s misrepresentations as to the nature or character of the writing do not negate the other party’s apparent manifestation of assent, if the second party had a reasonable opportunity to know the character or essential terms of the proposed contract.” (Ibid, citation omitted.)

Plaintiff has not met his burden in showing lack of consent and fraud in the execution. The Court notes that Plaintiff did not set forth any efforts to ascertain the nature or significance of the Arbitration Agreement. Plaintiff’s declaration is void of any indication that he lacked the opportunity to acquaint himself with the terms of the Arbitration Agreement. Also, Defendants had no duty to explain the terms of the Arbitration Agreement because “the [Arbitration Agreement] expressly and plainly provides for arbitration of disputes arising out of the contractual relationship.” (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1674.) Plaintiff could have “ascertained the truth through the exercise of reasonable diligence.” (Ibid.)

In sum, the Court finds that Plaintiff’s lack of understanding as to the Arbitration Agreement was due to Plaintiff’s negligence and lack of diligence. Plaintiff could have, and in fact should have, requested that the Arbitration Agreement be read or explained to him, or otherwise acquainted himself with the Arbitration Agreement.

Unconscionability

The inquiry into unconscionability consists of two prongs: A contract will be revoked if it is both procedurally unconscionable and substantively unconscionable. (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th 83, 114.) Procedural and substantive unconscionability need not be present to the same degree, with the test operating on a “sliding scale”: “[T]he 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.” (Ibid.)

“‘Procedural unconscionability’ concerns the manner in which the contract was negotiated and the circumstances of the parties at that time.  It focuses on the factors of oppression and surprise. The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party. The component of surprise arises when the challenged terms are ‘hidden in a prolix printed form drafted by the party seeking to enforce them.’” (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1281, citations omitted.)       

Substantive unconscionability focuses on the terms of the agreement and whether those terms are “so one sided as to “’shock the conscience.’” (Kinney v. United Healthcare Services, Inc., supra, 70 Cal. App.4th 1329, 1330.)  The California Supreme Court in Armendariz set forth five minimum requirements in requiring that arbitration agreements in the employer-employee context must provide for: (1) neutral arbitrators; (2) more than minimal discovery; (3) a written award; (4) all types of relief that would otherwise be available in court; and (5) no additional costs for the employee beyond what the employee would incur if he or she were bringing the claim in court.  (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 712-713.)

The Court finds that the Arbitration Agreement contains some degree of procedural unconscionability. Plaintiff has stated that he was forced to sign the Arbitration Agreement without any opportunity for negotiation. (Espitia Decl., ¶¶ 6-7.) The Court acknowledges that the Arbitration Agreement states that the arbitration will be governed by the then-current Employment Arbitration Rules of JAMS. (Perez Decl. at Exh. A.) The Court, however, does not find that the Arbitration Agreement is substantively unconscionable because it is not so one-sided as to shock the conscience.

Thus, the Court therefore GRANTS Defendants’ motion to compel arbitration. The Court STAYS this action pending the completion of arbitration pursuant to the Arbitration Agreement. (CCP § 1281.4.)

It is so ordered.

Dated: May 9, 2024

_______________________

MEL RED RECANA

Judge of the Superior Court