Judge: Michael C. Kelley, Case: 22AVCV00387, Date: 2022-09-29 Tentative Ruling

Case Number: 22AVCV00387    Hearing Date: September 29, 2022    Dept: A15

Background

This wrongful termination lawsuit was filed on April 15, 2022, by Plaintiff Jennifer Vasquez (“Plaintiff”) against her former employer, Defendant Tarzana Treatment Centers, Inc. (“Defendant”). Plaintiff alleges she worked for Defendant from 2018 until January 2021 and that, during this period, Plaintiff’s supervisors, Yolanda Cellbalos and Nathalie Contro, created a hostile work environment by discriminating against Plaintiff based on her gender, sex, race, and national origin, and denying accommodations needed for Plaintiff’s medical condition. (Compl. ¶¶ 1, 4, 28.) Plaintiff alleges that, as a result of her supervisors’ conduct, she was forced to resign. (Id., ¶¶ 35-36.)

Plaintiff filed the operative Complaint on June 3, 2022. She alleges 11 causes of action for (1) violation of public policy, (2) harassment in violation of the Fair Employment and Housing Act (FEHA), (3) failure to prevent discrimination and harassment, (4) disability discrimination, (5) failure to provide reasonable accommodation in violation of FEHA, (6) intentional infliction of emotional distress, (7) violation of the California Family Rights Act, (8) retaliation, (9) gender discrimination, (10) race discrimination, and (11) constructive discharge.

Defendant filed the instant Motion to Compel Arbitration on August 1, 2022. Plaintiff filed a timely Opposition and Defendant filed a timely Reply.

Analysis

Motion to Compel Arbitration--Under Code of Civil Procedure section 1281.2, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a 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 the court finds that the right to compel arbitration has been “waived by the petitioner,” or that “grounds exist for recission” of the arbitration agreement. (Code Civ. Proc., § 1281.2, subds. (a) & (b).)

A written arbitration agreement is “valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.)

“The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)

“[P]ublic policy favors the resolution of disputes through arbitration.” (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1128.) Thus, both Congress and the California Legislature have enacted statutes that express a strong policy favoring arbitration: the Federal Arbitration Act (FAA) and the California Arbitration Act (CAA). The FAA is a federal statute, and therefore preempts state laws that limit the enforceability of arbitration agreements, including contradictory portions of the CAA, if any. But generally, “[t]he inquiry under the FAA is the same as under California law.” (Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846, 856.)

Under both federal and state law, arbitration agreements are valid and enforceable, unless they are revocable for reasons under state law that would render any contract revocable. [Citation.] Reasons that would render any contract revocable under state law include fraud, duress, and unconscionability.

(Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.)

For a contract to be unenforceable due to unconscionability:

Both procedural and substantive unconscionability must be shown for the defense to be established, but “they need not be present in the same degree.” [Citation.] Instead, they are evaluated on “‘a sliding scale.’” [Citation.] “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to” conclude that the term is unenforceable. [Citation.] Conversely, the more deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required.

(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125–126, quoting Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.) Since unconscionability is measured on a sliding scale, an arbitration agreement might not be unconscionable, even if it contains one procedurally unconscionable provision, if it completely “fails the substantive unconscionability test.” (Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1159.) It follows that, despite the case law holding that certain factors may indicate procedural or substantive unconscionability, the court must evaluate the agreement as a whole, rather than each factor in isolation.

Here, Defendant argues there exists an applicable, enforceable arbitration agreement, which Defendant alleges Plaintiff voluntarily signed when she was hired: she initially signed a Voluntary Mutual Agreement to Arbitrate Claims with her hiring paperwork, and later signed the operative second Voluntary Mutual Agreement to Arbitrate Claims (the “Agreement”).

Plaintiff does not dispute there is an applicable arbitration agreement covering her claims, but instead argues the Agreement cannot be enforced because it is both procedurally and substantively unconscionable.

Procedural Unconscionability

A contractual provision is procedurally unconscionable if it is either oppressive or surprising due to unequal bargaining power:

Oppression arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice. Surprise involves the extent to which the supposedly agreed-upon terms are hidden in a prolix printed form drafted by the party seeking to enforce them.

(Flores v. Transamerica HomeFirst, Inc., supra, 93 Cal.App.4th at 853.) A contract may be “oppressive” if it was a contract of adhesion, i.e., “a standardized contract, imposed upon the subscribing party without an opportunity to negotiate the terms.” (Ibid.)

If the agreement is an adhesion contract, it is not per se “unconscionable”: “if an employer does have reasonable justification for the arrangement—i.e., a justification grounded in something other than the employer's desire to maximize its advantage based on the perceived superiority of the judicial forum—such an agreement would not be unconscionable.” (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at 120.) For example, our Supreme Court held that a contract was not procedurally unconscionable, despite being drafted without any input from the other party, because its purpose was to enact the “legislative policy choices” of an applicable state law. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 248 [“Thus, while a condominium declaration may perhaps be viewed as adhesive, a developer's procedural compliance with the Davis-Stirling Act provides a sufficient basis for rejecting an association's claim of procedural unconscionability.”].)

Even if a contract is not adhesive, it can still be oppressive:

The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party's review of the proposed contract was aided by an attorney.

(Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348.) However, that a party to the contract did not read or understand the contract does not constitute oppression or surprise in itself:

When a person with the capacity of reading and understanding an instrument signs it, he may not, in the absence of fraud, coercion or excusable neglect, avoid its terms on the ground he failed to read it before signing it.

(Bolanos v. Khalatian (1991) 231 Cal.App.3d 1586, 1590.)

Furthermore, in Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, the Court of Appeal held that a failure to attach a copy of the applicable arbitration rules did not, in itself, render an arbitration agreement procedurally unconscionable. This was because the rules were easily accessible to the parties on the Internet, and therefore there was no surprise. (Id. at 691.) Also, there was no evidence that the party challenging the arbitration agreement lacked the “means or capacity to locate and retrieve a copy of the referenced rules.” (Id. at 692.)

Here, Plaintiff makes arguments for both oppression and surprise. She attests that she was required to sign the Agreement in order to work for Defendant; and that she did not have an opportunity to review it, either alone or with an attorney. (Pl.’s Decl. Vasquez Opp’n Mot. Compel Arb. ¶¶ 6, 11.) She attests that she never received copies of the Agreement “to review outside the Company or with my Attorneys,” and that she was “never aware of” what she had signed. (Id., ¶¶ 7, 14.) She attests that no one explained the Agreement to her, such that she was at no point aware that she had signed an arbitration agreement. (Id., ¶¶ 7-10.) She attests that she was only given a few minutes to sign the Agreement, which was part of a “stack” of employment documents. (Id, ¶ 9.) Lastly, she attests that she did not have an opportunity to negotiate or reject any of the terms of the Agreement, and that the Agreement was part of a standardized form. (Id., ¶ 13.)

The Court agrees that the Agreement was an adhesion contract, because it was standardized and Plaintiff had no opportunity to negotiate or reject it without forgoing her employment offer. An adhesive contract may indicate procedural unconscionability, but not necessarily unenforceability; the analysis requires a more nuanced inquiry. After all, “a compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis.” (Lagatree v. Luce, Forward, Hamilton & Scripps, supra, 74 Cal.App.4th at 1127.) There are actually reasonable justifications for requiring employees to sign identical adhesive contracts, the most obvious being that it subjects all employees to the same, and therefore “equal” terms of employment. Thus, while the fact that the Agreement was adhesive is a sign of procedural unconscionability, as is the fact that Plaintiff was required to sign it to keep her job offer, this does not necessarily require a finding that the Agreement is unenforceable.

In fact, the remaining circumstances of Plaintiff’s introduction to the Agreement weigh in favor of finding the process was not procedurally unconscionable. For example, while Plaintiff attests that she did not have the opportunity to review the Agreement, and that no one had explained what the Agreement was, she does not suggest that she lacked the capacity to read or understand the Agreement, nor that she was coerced or tricked into signing without reading it.

Furthermore, the language is not unfairly complex and is limited to three pages of reasonably-sized font; nothing suggests it would have been impossible to understand had Plaintiff attempted it. The operative Agreement states, above Plaintiff’s signature, “I acknowledge that I have carefully read this Arbitration Agreement, that I understand its terms . . . and I have both waived our right to a jury trial with respect to all claims covered by this Agreement.” (Def.’s Decl. Avakian Supp. Mot. Compel Arb. at Ex. A.) This language makes very clear, in simple wording set apart in its own paragraph, that Plaintiff was signing away her right to a jury trial by entering into this agreement; the straightforward language of the Agreement weighs in favor of finding it was not procedurally unconscionable. Contrary to Plaintiff’s suggestion, this language need not be in bold print to be clear and conspicuous.

Additionally, while Plaintiff attests that she never received a copy of the Agreement, Defendant’s Human Resources Coordinator attests that Plaintiff, like all employees, was “provided with hard copies” of Defendant’s policies, including the Agreement. (Def.’s Decl. Avakian Supp. Mot. Compel Arb. ¶ 5.) Plaintiff also appears to have signed an acknowledgment, stating that she received a copy of Defendant’s Employee Handbook--though it is unclear whether the Agreement was contained in the Handbook she acknowledges receiving. Nevertheless, there is a conflict in the evidence as to whether Plaintiff truly did not receive a copy of the Agreement to keep for her own records. Even if she did not, the operative Agreement states, on the page with Plaintiff’s signature, “Questions regarding this Arbitration Agreement should be directed to the Human Resources Department.” (Id. at Ex. A [PDF p. 7].) This indicates that Plaintiff had the ability to obtain a copy of the Agreement, or ask questions about it, had she wished.

In summary, the fact that the Agreement was a contract of adhesion weighs slightly in favor of finding the Agreement was procedurally unconscionable; but all the other circumstances of Plaintiff’s consent to the Agreement suggest that the process was fair: under the case law, the fact that she did not review or understand the agreement she signed does not render the Agreement procedurally unconscionable absent coercion or fraud; and while there is conflicting evidence as to whether she received a copy of the Agreement, even if she did not, the language of the Agreement suggests she could have obtained additional copies. Overall, there is very little procedural unconscionability here.

Substantive Unconscionability

“[P]rocedural unconscionability alone does not invalidate a contract.” (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at 130.) “[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.” (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at 114.)

“[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.]” (Flores v. Transamerica HomeFirst, Inc., supra, 93 Cal.App.4th at 854, quoting Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at 117.) Indicators of substantive unconscionability include clauses which “relegated all employee claims to arbitration while allowing the employer to enforce its rights in court [Citation]; restricted the discovery available to employees, but not employer [Citation]; and unilaterally deprived employees, but not employer, of significant statutory and common law remedies . . . .” (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1213.)

Here, the Agreement is described as “mutual,” and its first paragraph indicates that its terms apply to both Plaintiff and Defendant. (Def.’s Decl. Avakian Supp. Mot. Compel Arb. at Ex. 1 [PDF p. 5].) Furthermore, it does not require “the surrender by either party of any substantive statutory or common law benefit, protection, or defense,” nor does it prohibit an employee from filing administrative complaints with a state or federal agency. (Ibid.)

The arbitration procedures itself are evenly applied to both employer and employee. First, the Agreement contains a plain language explanation for how to initiate arbitration, and it is exactly where one would expect to find it: in the section entitled “Arbitration Procedure.” (Def.’s Decl. Avakian Supp. Mot. Compel Arb. at Ex. 1 [PDF p. 6].) It states that Defendant “shall pay all costs and fees not ordinarily incurred in litigation in court, such as the arbitrator’s fees and administrative costs for the arbitration[,]” which means the arbitration will not necessarily be more expensive to the employee than litigation. (Ibid.) Plaintiff is not deprived of any remedies because “[t]he arbitrator shall have the authority to award all remedies and relief that would otherwise have been available if the claim had been brought by way of a civil complaint in court.” (Ibid.) The language does not contain any restrictions on discovery, other than stating that the arbitration shall be in accordance with the FAA and CAA. (Ibid.)

In summary, the arbitration procedures are actually quite fair, in that they are evenly applied to both parties; they do not deprive employees of any particular remedies that would be available to them in a judicial setting; and employees are not forced to bear the costs of Defendant’s chosen forum. Therefore, the Court finds no substantive unconscionability.

Conclusion