Judge: Mel Red Recana, Case: 24STCV10262, Date: 2024-08-08 Tentative Ruling
Case Number: 24STCV10262 Hearing Date: August 8, 2024 Dept: 45
Hearing Date: August
8, 2024
Moving Party:
Defendants Blanka Orloff, M.D.,
Inc.; Blanka Ann Orloff M.D.; George Orloff, M.D., Inc.; and Skin
Matrix Integrated Beauty Solutions
Responding Party: Plaintiffs
Sonya Torosyan and Mari Arutyunyan
Motion:
Defendants Motion to Compel Arbitration and Stay or Dismiss Proceedings
Tentative
Ruling: The Court considered the moving papers,
opposition, and reply. The Motion to
Compel Arbitration is GRANTED. Proceedings are stayed until the completion
of arbitration.
Background
Sonya Torosyan and Meri Arutyunyan
(Plaintiffs) filed a Complaint on April 23, 2024 against their former employers
Blanka Orloff, M.D., Inc.; Blanka Ann Orloff M.D.; George Orloff, M.D., Inc.; and
Skin Matrx Integrated Beauty Solutions (Defendants) for nine causes of action
related to labor code violations and wrongful termination. Plaintiffs were both
hired in 2019, and allege throughout their time working for Defendants,
Defendants failed to pay all the wages Plaintiffs earned, failed to pay for all
hours worked, and failed to provide rest breaks. Plaintiffs complained and alleged
they were subsequently terminated in October of 2023. Plaintiffs then filed
suit.
The motion now before the Court is
Defendants’ Motion to Compel Arbitration and Stay or Dismiss Proceedings (the
Motion). Plaintiffs oppose the Motion; Defendants file a reply.
Evidentiary Objections
Concurrently filed with their
opposition papers, Plaintiffs file objections to evidence presented by
Defendants. Plaintiffs file 20 objections in total, to both the Declaration of
Anna Fajkowski (Fajkowski Decl.), who is the Senior Product Manager for Justworks,
Inc., and to the Declaration of Vahe Tirakyan (Tirakyan Decl.) who is the
Business Manager for Defendant George Orloff, M.D. Inc. All objections are
overruled.
Likewise, Defendants submit 7
objections to the Declaration of Meri Arutyunyan (Arutyunyan Decl.) and 8
objections to the Declaration of Sonya Torosyan (Torosyan Decl.). The Court
rules as follows:
Arutyunyan
Decl.
·
Sustained: 2, 3,
4, 5, 6,
·
Overruled: 1,
7
Torosyan
Decl.
·
Sustained: 2, 3,
4, 5, 6,
·
Overruled: 1, 7, 8
Discussion
Legal
Standard
Under both the Federal Arbitration
Act and California law, arbitration agreements are valid, irrevocable, and
enforceable, except on such grounds that exist at law or equity for voiding a
contract. (Winter v. Window Fashions Professions, Inc. (2008) 166
Cal.App.4th 943, 947.) The party moving to compel arbitration must establish
the existence of a written arbitration agreement between the parties. (Code of
Civ. Proc. § 1281.2.) This is usually done by presenting a copy of the signed,
written agreement to the court. “A petition to compel arbitration or to stay
proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 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 physically or electronically attached to
the petition and incorporated by reference.” (Cal. Rules of Court, rule
3.1330.) The moving party must also establish the other party’s refusal to arbitrate
the controversy. (Code of Civ. Proc. § 1281.2.) The filing of a lawsuit against
the moving party for a controversy clearly within the scope of the arbitration
agreement affirmatively establishes the other party’s refusal to arbitrate the
controversy. (Hyundai Amco America, Inc. v. S3H, Inc. (2014) 232
Cal.App.4th 572, 577.)
Analysis
Defendants have met their initial
burden of presenting a facially valid arbitration agreement and demonstrating
that the responding party – here Plaintiffs – refused to arbitrate by filing a
Complaint with this Court. Upon opposition, Plaintiffs present several
arguments against the Motion: (1) Defendants were not party to the Arbitration
Agreements (the Agreements) signed by Plaintiffs Arutyunyan and Torosyan on
March 16 and March 24, 2021 respectively; (2) the only binding employment
agreement has no arbitration language; and (3) Defendants have failed to show
that the Federal Arbitration Act (FAA) governs the Agreements, (4) the
Agreements are invalid because the signatures are not authenticated, and (5)
the Agreements are procedurally and substantively unconscionable. As explained
below, the Court disagrees, takes each argument in turn, and grants the Motion.
(1) Defendants are party to and can enforce the Agreements
The first threshold issue is for
Defendants to present a valid arbitration agreement. Defendants do so by
presenting two exhibits attached to the Tirkyan Decl., which show a document
titled “Worksite Employee Acknowledgment”. Here, it is clear that the “Worksite
Employee Acknowledgment” is an employment contract. Section 10 of this document
is the arbitration clause. The document shows the electronic signature of
Plaintiff Arutyunyan (Exh. A) and Plaintiff Torosyan (Exh. B). However,
Plaintiffs contend that Defendants are not actually parties to the Agreements,
and therefore cannot enforce them. After review of the text of the arbitration
clause of the “Worksite Employee Acknowledgment” and the document as a whole,
the Court disagrees. The very first section titled “Introduction to Justworks” states
that the Worksite Employer is party to the contract. The Worksite Employer is
identified as George Orloff, M.D., Inc. As specific to the arbitration clause,
the clause states:
“By
clicking ‘I Accept’ below, you [the signatory], on the one hand, and Worksite
Employer [George Orloff, M.D., Inc.] and Justworks[1]
on the other hand, agree to use binding arbitration as the sole and exclusive
means to resolve all disputes that may arise between you and Worksite Employer
and/or you and Justworks…”. (Tirkyan Decl., Exhs. A and B, §10.)
The text of the arbitration clause
shows George Orloff, M.D., Inc. is clearly a party to the Agreements.[2]
(2) The July 28, 2021 Employment Agreement has no effect
on the Arbitration Agreements
Next, Plaintiffs contend that a latter
employment agreement signed only by Plaintiff Torosyan supersedes the
Agreements signed just three months earlier. Plaintiffs specifically point the
Court’s attention to section 6 of the document titled “Confidential At-Will
Employment Agreement”. (Torosyan Decl., Exh. 2, §6.) This section reads:
“This Agreement constitutes the sole and entire
agreement between the parties relating to the subject matter hereof and
specifically supersedes any prior or contemporaneous written or oral agreements
between the parties hereto. Any prior agreements promises, and negotiations not
expressly set forth in this Agreement are of no force and effect whatsoever.”
Plaintiffs claim that because the arbitration language is
missing, and that this agreement supersedes the two prior March 2021
Agreements, that there is effectively no binding arbitration agreement. The
Court disagrees. Although this is a later employment contract signed by
Plaintiff Torosyan and Business Manager Vahe Tirakyan, it does not supersede
the Agreements because as aforementioned not only was George Orloff, M.D., Inc.
party to the Agreements, so was Justworks. This is critical because both the
March 2021 Agreements state the following:
“This is the entire agreement between you, on the one
hand, and Worksite Employer and/or Justworks, on the other hand, regarding
dispute resolution, and this arbitration agreement supersedes any and all prior
agreements regarding these issues. Any agreement contrary to the foregoing must
be entered into, in writing, signed by you, the authorized representative of
Worksite Employer and the CEO of Justworks.” ((Tirkyan
Decl., Exhs. A and B, §10, emphasis added. See also §11 of the same.)
Without the signature of the CEO of Justworks, or an
authorized representative of Justworks as indicated in section 11 of the
Agreements, any change is non-binding, and this voids the July 28, 2021
employment contract signed by Plaintiff Torosyan. Accordingly, the terms of the
“Worksite Employee Acknowledgment” including its arbitration clause as valid
and enforceable.
(3) The FAA governs the Agreements
Plaintiff’s next argument is that
Defendants fail to show that the FAA governs the Agreements. The FAA applies in
both federal and state courts to contracts evidencing a transaction involving
interstate commerce. (9 U.S.C. §§ 1–2; Southland Corp. v. Keating (1984)
465 U.S. 1, 12.) The FAA preempts
conflicting state law. (Preston v. Ferrer (2008) 552 U.S. 346, 353.) The
party that contends the FAA applies bears the burden to demonstrate that the
arbitration agreement is in a “‘contract evidencing a transaction involving
commerce’[.]” (Woolls v. Superior Court (2005) 127 Cal.App.4th 197,
211.) The
Supreme Court has held that the term “involving commerce” is interpreted
broadly, so that the FAA governs any arbitration agreement that affects
commerce in any way. (Allied-Bruce Terminix Companies, Inc. v. Dobson
(1995) 513 U.S. 265, 277.) Using material created outside the state (Ibid. at
282) or even engaging in marketing or advertising activities throughout the
country has been found to be a valid use of interstate commerce. (Basura v.
U.S. Home Corp. (2002) 98 Cal.App.4th 1205, 1214.) Defendants present
evidence that in addition to accepting patients from across the country,
Defendant also purchases and utilizes supplies from outside the state of
California, thereby engaging in interstate commerce. (Tirkyan Decl., ¶14.)
Plaintiffs’ reliance on Lane v.
Francis Capital Management LLC (2014) 224 Cal.App.4th, 676, 687
is misplaced. Plaintiffs contend that because there is no information about
whether Plaintiffs themselves had any dealing with patients who travelled from
out of state, and because there is no specific information about which patient
travelled from out of state, that the FAA cannot apply. The inquiry is not
whether the Plaintiffs had engaged in interstate commerce but rather whether Defendants
can evidence a transaction involving interstate commerce. Defendants have done
so. This permits the application of the FAA.
(4) The signatures are sufficiently authenticated
Plaintiffs next argument is that the
signatures are not authenticated, and that Plaintiffs did not agree to the
Agreements simply by creating a Justworks account (Opposition Papers, pg.
7:2-21.) The Court agrees that the simple act of creating an account with a
human resources service does not equate to a signature, however, Defendants do
not make such a contention. What Defendants contend is that the electronic
signature executed by both Plaintiffs is sufficient. The Court agrees.
California Civil Code section 1633.9(a) supplies a
governing rule and articulates how a proponent of an electronic signature may
authenticate the signature and show that it is what the proponent claims it is.
“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.”
Here, Defendants provide the
Fajkowski Decl. which states that when creating an account on the Justworks
platform, employees of George Orloff, M.D., Inc. are prompted to create a
username and unique password, in addition to inputting certain personal information
like contact information, a social security number, and date of birth, among
other things. (Fajkowski Decl., ¶5.) When a worker views and signs a document,
the platform generates a record of the individual, their IP address, the version
of the document they viewed, and if they signed it, a record of the time at
which they signed. (Id.) Plaintiffs were the only individuals who could
change their passwords and access their accounts. (Id. at ¶6.)
Fajokowski explains that for each
Plaintiff, an email was sent to their personal email addresses, prompting each
Plaintiff to create an account. Once an account is created, Plaintiffs are able
to log in, view the Arbitration Agreements, and log out as they please. The IP
addresses located on the bottom left corner of the Agreements where Plaintiffs
signed is the IP address from the device used by Plaintiffs. (Fajkowski,
¶¶9-12.) It is clear that unless the password to the account is given to
another individual, only Plaintiffs can access their respective accounts and sign
their Agreements. The security process detailed in the Fajkowski Decl. is
sufficient for the purposes of California Civil Code section
1633.9(a). Therefore, the signatures are authenticated.
(5) There is no procedural nor substantive unconscionability
Plaintiffs’ final argument is that
the Agreements are unconscionable and therefore must be voided. Unconscionability
has both a procedural and a substantive element, the former focusing on
oppression or surprise due to unequal bargaining power, the latter on overly
harsh or one-sided results. (Carlson v. Home Team Pest
Defense, Inc. (2015), 239 Cal.App.4th 619,
630. “Carlson”) The prevailing
view is that procedural and substantive unconscionability must both be present
in order for a court to exercise its discretion to refuse to enforce a contract
or clause under the doctrine of unconscionability, but they need not be present
in the same degree. (Id.)
a) Procedural Unconscionability
“Procedural unconscionability exists
when the stronger party drafts the contract and presents it to the weaker party
on a take-it-or-leave-it basis.” (Carlson, supra, at 631.) Plaintiffs
argue that there is procedural unconscionability because the Agreements were
allegedly adhesion contracts. “However, the fact that the arbitration agreement
is an adhesion contract does not render it automatically unenforceable as
unconscionable.” (Carlson, supra, at 631.)
Plaintiffs argue that they were
required to create an online account with Justworks in order to access their
payroll and benefits information, if they did not they could not access said
information. (Opposition Papers, 14:17-21.) The Court is unpersuaded. This is a
separate issue from the Agreements being unconscionable. There is no assertion
that if the Agreements were not signed, payroll and benefits information could
not be accessed. With no other argument as to the presence of procedural
unconscionability, none is found.
b) Substantive Unconscionability
“Substantive unconscionability
addresses the fairness of the term in dispute; substantive unconscionability
traditionally involves contract terms that are so one-sided as to shock the
conscience, or that impose harsh or oppressive terms.” (Brown v. Wells Fargo
Bank, N.A. (2008) 168 Cal.App.4th 938, 956, internal quotations
omitted.)
Plaintiffs argue that substantive
unconscionability is present because there is no mutuality in the Agreements
because Defendants are not bound by the same terms because Defendants are not
signatories. As addressed earlier, this is incorrect, George Orloff, M.D., Inc.
is identified clearly in the Agreements and is bound by them in the same manner
Plaintiffs are bound. Moreover, Plaintiffs do not present, and the Court does
not find any terms in the Agreements that are so one-sided as to shock the
conscience nor are there any oppressive terms. Without these elements, the
Court finds no substantive unconscionability.
Conclusion
Accordingly, the Motion to
Compel Arbitration is GRANTED. Proceedings are stayed until the completion of
arbitration.
It is so ordered.
Dated: August 8, 2024
_______________________
MEL RED RECANA
Judge of the
Superior Court