Judge: Michael P. Linfield, Case: 22STCV25672, Date: 2023-03-29 Tentative Ruling
Case Number: 22STCV25672 Hearing Date: March 29, 2023 Dept: 34
SUBJECT: Motion to Compel Arbitration
Moving Party: Defendant
Sunrun, Inc.
Resp. Party: Plaintiff Angel Mondragon
RULING:
Defendant’s
Motion to Compel Arbitration is DENIED.
BACKGROUND:
On August 9, 2022, Plaintiff
Angel Mondragon, individually and behalf of all aggrieved employees, filed his
Complaint against Defendant Sunrun, Inc. for alleged violations of the
California Labor Code pursuant to the Private Attorneys General Act (PAGA).
On October 21, 2022,
Defendant filed its Answer.
On March 8, 2023,
Defendant filed its Motion to Compel Arbitration. Defendant concurrently filed:
(1) Memorandum of Points and Authorities; (2) Declaration of Jason D.
Goldwater; (3) Declaration of Megan Lessard; (4) Index of Exhibits; (5) Request
for Judicial Notice; (6) Proposed Order; and (7) Proof of Service.
On March 16, 2023,
Plaintiff filed his Opposition. Plaintiff concurrently filed: (1) Declaration
of Jonathan M. Lebe; (2) Declaration of Angel Mondragon; and (3) Proof of
Service.
On March 23, 2023 at 11:50 p.m.,
Defendant filed its Reply. On March 24, 2023 at 8:48 a.m., Defendant filed its
Amended Reply. Both the Reply and Amended Reply were filed late. Nonetheless, the
Court will consider the Amended Reply in its discussion below.
ANALYSIS:
I.
Judicial
Notice
A.
Defendant’s
Request for Judicial Notice
Defendant requests that the Court take judicial notice of the American
Arbitration Association (AAA) Employment Arbitration Rules and Mediation
Procedures, citing Evidence Code section 452, subdivision (h) and Zakarian
v. Bekov (2002) 98 Cal.App.4th 316, 323, fn. 8.
The Court GRANTS judicial notice of this item.
II.
Legal
Standard
“A written agreement to submit to
arbitration an existing controversy or a controversy thereafter arising is
valid, enforceable and irrevocable, save upon such grounds as exist for the
revocation of any contract.” (Code Civ. Proc., § 1281.)
“On petition of a party to an arbitration
agreement alleging the existence of a written agreement to arbitrate a
controversy and that a party to the agreement refuses to arbitrate that
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 makes certain determinations].” (Code Civ. Proc.,
§ 1281.2.)
“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.
. . . 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, citations omitted.)
“The party seeking to compel arbitration bears
the burden of proving by a preponderance of the evidence the existence of an
arbitration agreement. The party opposing the petition bears the burden of
establishing a defense to the agreement's enforcement by a preponderance of the
evidence. In determining whether there is a duty to arbitrate, the trial
court must, at least to some extent, examine and construe the agreement.” (Id.)
III.
Discussion
A.
The
Arbitration Clause
The arbitration agreement at issue is titled “Mutual Arbitration
Agreement”, three pages long, and signed by Plaintiff and Defendant’s Chief
People Officer. (Decl. Lessard, Ex. A.) The agreement states in relevant parts:
“Parties understand and agree that the
following disputes are not covered by this Agreement:
. . .
“claims brought by Employee in state or
federal court as a representative of the state of California as a private
attorney general under the PAGA (to the extent applicable)[.]”
. . .
“The Parties will use the America Arbitration
Association (“AAA”) for Arbitration, subject to its Employment Arbitration
Rules and mediation Procedures (“Arbitration Rules”), available at www.adr.org.
The Company will provide a copy of the rules upon a request by Direct Seller.
The Rules explain how to file a Demand for Arbitration. If the Arbitration
Rules conflict with this Agreement in any way, this Agreement prevails and
controls. The demand for arbitration must be filed within the statute of
limitations applicable to the claim on which arbitration is sought.”
(Decl. Lessard, Ex.
A, pp. 1–2.)
B.
The
Parties’ Arguments
Defendant moves the Court to compel arbitration, arguing: (1) that the
arbitration agreement is an enforceable contract that has been authenticated;
(2) federal law and the Federal Arbitration Act (FAA) compel liberal
enforcement of arbitration agreements; (3) the FAA applies in this case; (4)
California law also favors liberal enforcement of arbitration agreements; (5)
when California law differs from federal law regarding the enforcement of
arbitration agreements, federal law controls; (6) the United States Supreme
Court decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.
Ct. 1906 requires Plaintiff’s individual PAGA claims to be severed from his
non-individual PAGA claims and compelled to arbitration; (7) any doubt
concerning the arbitrability of Plaintiff’s individual PAGA claims must be
resolved by an arbitrator; and (8) once Plaintiff’s individual PAGA claims are
referred to arbitration, Plaintiff lacks standing to pursue representative
claims. (Motion, pp. 7:14–15, 8:1–2, 8:18, 9:5–6, 9:19–20, 10:1–2, 11:4–5,
12:25–26, 14:1–2.
Plaintiff opposes the Motion, arguing:
(1) the Motion should be denied because the arbitration agreement unambiguously
excludes PAGA claims; (2) this Court has authority to determine the
arbitrability of Plaintiff’s PAGA claims as the arbitration agreement does not
clearly and unmistakably delegate issues of arbitrability; and (3) Plaintiff’s
representative claims should not be dismissed. (Opposition, pp. 4:11–12,
7:16–18, 12:17.)
In its Amended Reply, Defendant
reiterates its arguments. Notably, Defendant also discusses new authorities for
these arguments, including: (1) Dream Theater, Inc. v. Dream Theater (2004)
124 Cal.App.4th 547; (2) Rodriguez v. American Technologies, Inc. (2006)
136 Cal.App.4th 1110; and (3) Ajamian v. CantorCO2e, L.P. (2012) 203
Cal.App.4th 771.
The Court first considers the Parties’
arguments about arbitrability, as that is a threshold issue.
C.
Arbitrability
1.
Legal
Standard
“In general, it is left
to an arbitrator to construe the meaning and extent of the arbitration
agreement between the parties. However, it is for the courts to decide
questions of arbitrability, which include whether the parties are bound by a
given arbitration clause, or whether it is unenforceable as unconscionable. (Indep. Ass’n of Mailbox Ctr. Owners, Inc. v.
Super. Ct. (2005) 133 Cal.App.4th 396, 406, citations omitted.)
“Although
threshold questions of arbitrability are ordinarily for courts to decide in the
first instance under the FAA, the ‘[p]arties to an arbitration agreement may
agree to delegate to the arbitrator, instead of a court, questions regarding
the enforceability of the agreement.’” (Pinela v. Neiman Marcus Group, Inc. (2015)
238 Cal.App.4th 227, 239, quoting Tiri, supra,
at 241.)
“For
a delegation clause to be effective, two prerequisites must be satisfied. First,
the language of the clause must be clear and unmistakable. (Rent-A-Center,
West, Inc. v. Jackson (2010)
561 U.S. 63, 69, fn. 1.)
“The
required clear and unmistakable expression is a ‘heightened standard’ . . . . Thus,
‘[u]nless the parties clearly and unmistakably provide otherwise, the question
of whether the parties agreed to arbitrate is to be decided by the court, not
the arbitrator.’” (Pinela, supra, at 239–40, quoting Rent-A-Center,
supra, at 69, fn. 1, and quoting AT&T
Techs. v. Commc’ns Workers (1986)
475 U.S. 643, 649, other citations omitted.)
“Second,
the delegation must not be revocable under state contract defenses to
enforcement. Among these defenses is
unconscionability.” (Pinela, supra,
at 240, citation omitted.)
“When
deciding whether the parties agreed to arbitrate a certain matter (including
arbitrability), courts generally . . . should apply ordinary state-law
principles that govern the formation of contracts.” (Aanderud v. Super. Ct. (2017)
13 Cal.App.5th 880, 890, quoting First Options of Chicago, Inc. v. Kaplan (1995)
514 U.S. 938, 944, internal quotation marks omitted.)
2.
Analysis
a. Explicit
Delegation
The arbitration agreement does not have an explicit delegation of
arbitrability to the arbitrator. Rather, the only plausibly explicit discussion
of arbitrability is in the section of the agreement regarding waivers from
class and collection actions, which does not allow an arbitrator to decide such
questions and instead requires “[a]ny issues concerning the validity,
enforceability, or scope of this class and collective action waiver [to] be
decided by a state or federal court.” If this section were relevant, it would
be evidence against Defendant’s argument.
The Court finds that the arbitration agreement does not explicitly
delegate arbitrability to the arbitrator.
b. Implicit Delegation
Defendant argues that the reference in the arbitration agreement to the
AAA’s Arbitration Rules is sufficient to invoke arbitrability by the
arbitrator, citing Lewis v. Simplified Labor Staffing Solutions, Inc. (2022)
85 Cal.App.5th 983, 1000–01. (Motion, pp. 12:27–28, 13:1–28.)
The Court disagrees.
To start, Defendant filed its Motion on March 8, 2023, citing the
opinion in Lewis, which was published on December 5, 2022. But on March
15, 2023, the Court of Appeal directed depublication of this opinion. (Lewis
v. Simplified Labor Staffing Solutions, Inc. (2023) 2023 Cal. LEXIS 1409*.)
As this opinion has been depublished, it is no longer binding, citable
authority before the Court.
Further, the analysis of arbitrability in Lewis appears to
contain a significant citation flaw. Specifically, the Court of Appeal cited Nguyen
v. Applied Medical Resources Corporation (2016) 4 Cal.App.5th 232, 245 for
the proposition that an incorporation of the AAA Arbitration Rules’
jurisdiction section “clearly leaves to the arbitrator to determine whether the
agreement to arbitrate extends to [the plaintiff’s] nonindividual PAGA claims.”
(Lewis, supra, at 1001.) Yet not only does Nguyen fail to
provide support for this holding, but the cited portion of Nguyen actually
provides support for allowing the Court to decide issues of arbitrability. (Nguyen,
supra, at 245 (“To dismiss the appeal and allow the parties to arbitrate
only plaintiff’s individual claims merely to have the resulting order vacated .
. . would waste time and resources.”).)
The Court determines that there has not been an implicit delegation of
the question of arbitrability. The section titled “Arbitration Procedures,”
which is where the reference to the AAA’s Arbitration Rules is located, merely
states that the Parties will use those rules. But it does not state when those
rules will be used. Specifically, the agreement is not clear on whether those
rules would be used before or after the initial arbitrability determination.
Moreover, the Arbitration Rules themselves do not make it clear that
arbitrability should be determined by the arbitrator. The relevant portions of
the Arbitration Rules state:
a.
“The
arbitrator shall have the power to rule on his or her own jurisdiction,
including any objections with respect to the existence, scope or validity of
the arbitration agreement.
.
. .
c.
“A party
must object to the jurisdiction of the arbitrator or to the arbitrability of a
claim or counterclaim no later than the filing of the answer statement to the
claim or counterclaim that gives rise to the objection. The arbitrator may rule
on such objections as a preliminary matter or as part of the final award.”
(AAA Arbitration
Rules, § 6., subds. a., c.)
These sections are equally unclear as to
whether these rules apply before or after an initial arbitrability
determination. Just because an arbitrator would have jurisdiction over issues
once it has received the case does not necessarily mean it would have such
jurisdiction prior to an initial arbitrability determination.
The most that could be clearly said
about arbitrability in this agreement is that the section on waivers of class
and collective actions explicitly gives arbitrability of such issues to the
Court. The existence of this clause provides support for the proposition that
there is no implicit delegation of a more general arbitrability determination
to the arbitrator; Defendant, as drafter of the arbitration agreement, would
certainly have known how to include an explicit clause on this issue if it had
desired to.
The Court finds that there is no
delegation clause that meets the heightened standard of clearly and
unmistakably delegating the question of arbitrability to an arbitrator rather
than to the Court. (Pinela, supra, at pp. 239–40.)
The decisions cited by Defendant in its [late]
reply to not change the Court’s analysis.
In this case, the language of the agreement does not make it clear and
unmistakable that the AAA Arbitration rules are incorporated for the purpose of
arbitrability. That distinguishes this case from Dream Theater, Inc. and
Rodriguez.
Moreover, the most recent of these three opinions — Ajamian —
provides a very clear, helpful, and relevant analysis.
“[The issue of who would decide the enforceability of the arbitration
clause itself] is a distinct issue that could and would be easily addressed — if
the parties actually contemplated it at the time of contracting — by stating
expressly that the arbitrator shall decide questions of the enforceability of
the arbitration provision. Because such issues are normally decided by the
court, parties who consider the matter and want the issues to be decided
instead by the arbitrator would most likely spell out their unusual intention
in the arbitration provision. The absence of such express language (or
extrinsic evidence to the same effect) therefore gives rise to the inference
that the parties did not consider the matter. Indeed, because the issue is arcane and not likely
contemplated by the parties, silence or ambiguity as to who would decide
the enforceability of the arbitration provision suggests it was not a matter on
which the parties mutually agreed and, therefore, the enforceability
issue cannot be arbitrated—no matter how much public policy
favors the notion of arbitration generally.” (Ajamian, supra, at
787, italics in original.)
The Court of Appeal in Ajamian went
on to discuss how various federal cases cited in the appeal predate the United
States Supreme Court’s 2010 opinion in Rent-a-Center, “and thus did not
have the advantage of the Supreme Court’s confirmation that the clear and
unmistakable test necessitates a heightened standard of proof.” (Rodriguez,
supra, at 787, italics in original.) The same could be said of Dream
Theater, Inc. and Rodriguez, which were published in 2004 and 2006,
respectively.
The Court therefore considers the
arbitrability of this matter.
D.
PAGA
Claims under the Arbitration Clause
There is only one cause of action in the complaint; it is a PAGA cause
of action.
The arbitration agreement clearly and unmistakably states that PAGA
claims are not covered by the arbitration agreement. (Decl. Lessard, Ex. A., p.
1.) There is no distinction in the agreement between an employee’s individual
claims as opposed to that employee’s representative claims on behalf of other
employees.
Defendant admits that it
drafted the arbitration agreement and simply presented it to Plaintiff for his
signature when Plaintiff was hired. (Lessard Declaration, ¶ 12.) If
there were any ambiguity in the arbitration agreement, it would have to be
construed against Defendant. (See, e.g., Victoria v. Superior Court (1985) 40 Cal.3d 734, 747; CACI 320.)
Further, if the Court were to
find the arbitration terms ambiguous, it could rely on extrinsic evidence to
resolve the ambiguities. On January 12, 2022, Defendant sent Plaintiff a letter
offering him employment and detailing the terms of the employment offer.
Under the section entitled “Arbitration,” the letter stated the arbitration
provision had “specific language
excluding Private Attorney General Act (PAGA) claims” from arbitration.
(See Lebe Declaration, Exh. B.)
The Court finds the arbitration
agreement to unambiguously exclude a PAGA cause of action. Even if the Court
were to find the arbitration agreement to be ambiguous, it would hold that the
agreement excluded PAGA causes of action.
Defendant has not met its burden of proof to show that there is a valid
arbitration agreement regarding the PAGA cause of action.
Having found that the arbitration agreement does not apply here, the
Court need not and does not reach any further issues.
The Court DENIES Defendant’s Motion to Compel Arbitration.
IV.
Conclusion
Defendant’s
Motion to Compel Arbitration is DENIED.