Judge: Michael P. Linfield, Case: 23STCV12149, Date: 2023-08-23 Tentative Ruling
Case Number: 23STCV12149 Hearing Date: August 23, 2023 Dept: 34
SUBJECT: Petition to Compel Arbitration and Stay
Proceedings
Moving Party: Defendant
SAI Long Beach B
Resp. Party: Plaintiff John Salman
The Petition is GRANTED.
This matter is STAYED pending the conclusion of
arbitration.
BACKGROUND:
On May 30, 2023,
Plaintiff John Salman filed his Complaint against Defendant SAI Long Beach B on
causes of action arising from Plaintiff’s employment with Defendant.
On July 6, 2023,
Defendant filed: (1) Notice of Hearing on Petition to Compel Arbitration and
Stay Proceedings; (2) Petition to Compel Arbitration and Stay Proceedings; (3)
Memorandum of Points and Authorities; (4) Declaration of Raquel Gonzalez; and
(5) Proposed Order.
On August 10, 2023,
Plaintiff filed his Opposition to the Petition.
On August 16, 2023,
Defendant filed its Reply regarding the Petition.
ANALYSIS:
I.
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.” (Tiri, supra,
at p. 239.)
II.
Discussion
A. The Arbitration Agreement
Defendant provides the Court with an arbitration agreement signed
by the Parties on August 27, 2021. (Decl. Gonzalez, Exh. A.)
Plaintiff does not dispute that he signed this arbitration
agreement, nor does he dispute that the terms of the arbitration agreement fall
under the Federal Arbitration Act (FAA) and the California Arbitration Act
(CAA). (Decl. Gonzalez, Exh. A, ¶ 3.)
Defendant does not dispute that the terms of the arbitration
agreement reserve decisions on the validity, scope, and enforceability (i.e.,
the arbitrability of the arbitration agreement) to the Court. (Id. at ¶
6.)
However, certain issues regarding the arbitration agreement remain.
The relevant portions of the arbitration agreement are as follows:
“1. I and the Company agree
to use individual binding arbitration to resolve all disputes of any nature
whether based on federal, state or local laws, and/or common law and/or equity,
which arise out of or are related in any way to my seeking employment with,
employment by, or any other relationship/interaction with the Company and its
Affiliates. I must submit to binding arbitration, for example, claims for discrimination,
harassment, retaliation, wrongful termination, defamation, invasion of privacy,
wage and hour violations, assault and battery, tort, etc. The Company and/or
Affiliates must submit to binding arbitration, for example, claims against me
for embezzlement, theft of trade secrets, breach of confidentiality, breach of
duty of loyalty, breach of contract, etc. Affiliates include the Company’s
owners, directors, officers, managers, employees, agents, partners, attorneys,
sister-companies, subsidiaries, parent companies, joint-venturers, alleged
joint-employers, affiliated persons/entities, affiliated dealerships,
independent contractors, and parties affiliated with its employee benefit and
health plans. I and the Company/Affiliates waive our rights to have any claims
decided in an administrative hearing, or by trial with a judge or jury in
court.
[¶]
“3. The Company’s business
and my employment affect interstate commerce. This Agreement and my employment
are governed by the Federal Arbitration Act (“FAA”) and the rules listed
herein, as supplemented by the California Arbitration Act (“CAA” as set forth
in the Code of Civil Procedure § 1280 et seq., including § 1283.05 and all of
the CAA’s other mandatory and permissive rights to discovery). The CAA shall
only control the arbitration proceedings to the extent it is consistent with
this Agreement and/or the Federal Arbitration Act.
“4. I and the Company shall
attempt to agree upon an arbitrator, who shall be a retired trial court judge
and shall be subject to disqualification on the same grounds as would apply to
a California Superior Court judge. If we cannot agree upon an arbitrator, an
arbitrator may be appointed pursuant to the CAA by the Superior Court. The
arbitrator shall have the immunity of a judicial officer from civil liability
when acting in the capacity of an arbitrator. All communications during or in
connection with the arbitration proceedings are privileged in accordance with
California Civil Code § 47(b). All California rules of pleading (including the
right of demurrer), all rules of evidence, all rights to resolution of the
dispute by means of motions for summary judgment, judgment on the pleadings,
and judgment under the Code of Civil Procedure Section 631.8, shall apply and
be observed by the arbitrator. The arbitrator shall apply only the controlling
law governing the claims and defenses pleaded, and the arbitrator may not
invoke any basis (including, but not limited to, notions of ‘just cause’) other
than such controlling law to determine the dispute. Awards shall include the
arbitrator’s written reasoned opinion.
[¶]
“6. Any challenge(s) to the validity, scope or enforceability of this
Agreement shall be determined by the court, and not the arbitrator. The
arbitration must move forward under the FAA (9 U.S.C. §§ 3–4) even though the
claims brought in court or otherwise may name, involve and/or relate to
persons/entities who are not parties to the arbitration agreement and/or claims
that are not subject to arbitration (such as PAGA). The court may not refuse to
enforce this arbitration agreement and may not stay the arbitration proceeding
despite the provisions of the Code of Civil Procedure § 1281.2(c), and shall
instead sever and stay the non-arbitrable claims pending the final adjudication
of the arbitrable claims.
“7. The Company pays all
costs and arbitrator fees unique to the arbitration forum. I have the right to
arrange for an attorney or I may represent myself during the arbitration
proceedings. I and the Company must pay our own litigation expenses and
attorney fees, unless the arbitrator awards costs and fees as required by
controlling law.
“8. To start an arbitration
claim(s), I must provide a letter outlining my claims and demand arbitration to
both the General Manager and the Controller (or Business Manager) of the
dealership where I am employed. I understand that my letter must be dated and
physically given to both the General Manager and the Controller (or Business
Manager) personally prior to the expiration of any statute of limitations that
applies to my claims. The Company may similarly commence claims against you by
giving a letter to you. The party bringing the claims will be required to file
a formal complaint pleading the claims and causes of action relied upon after
an arbitrator is selected. The arbitrator will set the timing for the
responding party to file and serve any responsive pleading.
“9. If any term or
provision of this Agreement is declared void or unenforceable, it shall be
severed and the remainder of this Agreement shall be enforceable.
Notwithstanding the same, the prohibition on the arbitrator hearing class
claims and/or collective claims shall not be severable.”
[¶]
“I UNDERSTAND THAT I AM GIVING UP THE RIGHT TO TRIAL BY JURY, BY A
SITTING TRIAL COURT JUDGE AND/OR FINAL ADJUDICATION THROUGH AN ADMINISTRATIVE
PROCESS BY AGREEING TO BINDING ARBITRATION.
“MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I HAVE BEEN GIVEN AN
OPPORTUNITY TO READ AND CONSIDER THIS AGREEMENT, AND THAT I HAVE READ,
UNDERSTAND, AND AGREE TO BE LEGALLY BOUND BY ALL OF THE ABOVE TERMS. I AGREE
THAT THE COMPANY IS BINDING ITSELF TO THIS AGREEMENT BY PRESENTING THIS
AGREEMENT TO ME FOR SIGNATURE.
“DO NOT SIGN UNTIL YOU HAVE READ THE ABOVE ACKNOWLEDGEMENT AND
AGREEMENT.”
(Decl.
Gonzalez, Exh. A.)
B. The Parties’ Arguments
Defendant petitions the Court to compel Plaintiff to arbitrate his
claims and to stay this case. Defendant argues: (1) that the Parties have a
binding and enforceable arbitration agreement; (2) that Plaintiff cannot meet
his burden of showing that the arbitration agreement in question is both
procedurally and substantively unconscionable; and (3) that the Court is
required to dismiss or stay this action pending resolution of this Petition and
the conclusion of arbitration. (Memorandum, pp. 5:14, 6:13–14, 7:22–23.)
Plaintiff opposes the Petition, arguing: (1) that this arbitration
agreement should not be enforced because it is vague, boilerplate, adhesive,
unfair, and takes away important rights; (2) that this arbitration agreement is
procedurally unconscionable; (3) that this arbitration agreement is
substantively unconscionable; and (4) that this arbitration agreement is
unenforceable because it is unconscionable. (Opposition, pp. 2:17–18, 5:11, 6:8,
7:10.)
Defendant reiterates its arguments in
its Reply.
C. Unconscionability
1.
Legal Standard
“Agreements to arbitrate may be
invalidated if they are found to be unconscionable.” (Fitz v. NCR Corp.
(2004) 118 Cal.App.4th 702, 713, citations omitted.)
“Unconscionability consists of
both procedural and substantive elements. The procedural element addresses the
circumstances of contract negotiation and formation, focusing on oppression or
surprise due to unequal bargaining power. Substantive unconscionability
pertains to the fairness of an agreement's actual terms and to assessments of
whether they are overly harsh or one-sided. (Pinnacle Museum Tower Ass’n v.
Pinnacle Mkt. Dev. (US), LLC (2012) 55 Cal.4th 223, 246, citations
omitted.)
“‘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. ‘Essentially a sliding scale is
invoked which disregards the regularity of the procedural process of the
contract formation, that creates the terms, in proportion to the greater
harshness or unreasonableness of the substantive terms themselves.’ In other words, the 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. Found. Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114, [cleaned
up], italics in original, abrogated in part on other grounds by AT&T
Mobility LLC v. Concepcion (2010) 565 U.S. 333.).)
“The party resisting arbitration bears the burden of proving
unconscionability.” (Pinnacle, supra, 55 Cal.4th at p.
247, citation omitted.)
“Moreover, courts are required to determine the unconscionability of
the contract ‘at the time it was made.’” (Sanchez v. Valencia Holding Co.,
LLC (2015) 61 Cal.4th 899, 920, quoting Civ. Code, § 1670.5.)
“Unconscionability is ultimately a question of law.” (Patterson v.
ITT Consumer Fin. Corp. (1993) 14 Cal.App.4th 1659, 1663, citation
omitted.)
2.
Procedural Unconscionability
“[P]rocedural unconscionability requires
oppression or surprise. Oppression occurs where a contract involves lack of
negotiation and meaningful choice, surprise where the allegedly unconscionable
provision is hidden within a prolix printed form.” (Pinnacle, supra,
55 Cal.4th at p. 247 [cleaned up].)
“The procedural element of an
unconscionable contract generally takes the form of a contract of adhesion . .
. .” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071.)
Plaintiff argues that the arbitration agreement is
procedurally unconscionable because: (1) the arbitration agreement is single
spaced and two pages long; (2) the text is small and dense; and (3) the
all-caps section of the text is harder to read. (Opposition, pp. 5:25–27,
6:1–6.)
Defendant concedes that “the arbitration agreement
is a contract of adhesion that bears a certain amount of procedural
unconscionability” but argues that the contract does not have a high degree of
procedural unconscionability. (Reply, p. 3:12–14.) Defendant also notes that
the vast majority of the arbitration agreement is in mixed-case text. (Id. at
p. 3:21–24.)
The Court finds that this is a contract of adhesion
with small, dense text. As Plaintiff
states in his opposition,
“Through these agreements, workers and consumers
waive their right to pursue a lawsuit in court if they are harmed by the
corporation’s misconduct. Instead, they must submit to arbitration. Many
workers and consumers do not realize they have signed an arbitration agreement
with a corporation–or what it would mean for them if they did. Few American
workers can afford to have a lawyer review their employment agreement and even
well-educated employees do not realize the impact of an arbitration agreement
on a future dispute, cost-wise.”
(Opposition, p. 2:2-9.)
The arbitration agreement is procedurally
unconscionable. However, this is not
sufficient to void the arbitration agreement.
3.
Substantive Unconscionability
“Substantive unconscionability
focuses on overly harsh or one-sided results. In assessing substantive unconscionability, the paramount
consideration is mutuality.” (Fitz, supra, 118 Cal.App.4th at p.
723 [cleaned up].)
Plaintiff argues that the arbitration
agreement is substantively unconscionable because: (1) the arbitration
agreement only takes away the right of Plaintiff to contest arbitration; (2)
the language around what discovery is allowed is too vague; (3) the language
about fees unique to arbitration forums could lead to Plaintiff paying for
discovery; and (4) an agreement that unduly burdens a party with arbitration
fees may also be substantively unconscionable. (Opposition, pp. 6:17–20, 6:26,
7:1–8.)
Defendant disagrees, arguing: (1) that
the language of the arbitration agreement does not allow Defendant to contest
arbitration; and (2) that the limits on discovery under the CAA are actually
broader than those discovery rights parties would normally have. (Reply, pp.
5–7.)
The
Court agrees with Defendant. The language of the arbitration agreement does not
indicate that there is a lack of mutuality or a high risk of one-sided results.
Rather, the language of the arbitration agreement indicates: (1) that the
Parties are mutually bound by the arbitration agreement; (2) that discovery
will be allowed pursuant to the CAA, which includes discovery rights that would
normally be allowed in a superior court case; (3) that the Company will pay
costs unique to the arbitration forum, but that each Party will be responsible
for their own litigation costs and attorney’s fees unless the arbitrator awards
costs and fees as required by controlling law — just as they would be in a
court case; and (4) that there are no costs solely borne by Plaintiff. (Decl.
Gonzalez, ¶¶ 1, 3, 6–8.)
Plaintiff
argues that paragraph 3 of the arbitration agreement states that “CAA discovery
is only available to the extent it does not contradict the Agreement or the
Federal Arbitration Act” and that this is ambiguous as to extent of discovery allowed. (See Opposition, p. 7:1-2.) The Court does not believe this to be ambiguous,
but to the extent that it is, the Court will require that discovery under the arbitration
agreement be at least co-extensive with that allowed in Court.
The
Court finds that the arbitration agreement does not contain a significant
enough degree of unconscionability for the Court to find it unenforceable.
III. Conclusion
The Petition is GRANTED.
This matter is STAYED pending the conclusion of arbitration. The Court schedules a post-arbitration status
conference for October 15, 2024. The
parties are to file a Joint Status Conference Report 5 court days prior to the
status conference hearing.