Judge Michael P. Linfield, Case Number: 23STCV20105, Date: 2023-12-22 Tentative Ruling

Judge: Michael P. Linfield, Case: 23STCV20105, Date: 2023-12-22 Tentative Ruling

Moving Party: Defendants Jason J. Emer, MD P.C., Jason Emer, and Insperity PEO Services, L.P.

On August 21, 2023, Plaintiff Ruthann Lee Brooks filed her Complaint against Defendants Jason J. Emer, MD P.C., Jason Emer, and Insperity PEO Services, L.P. on causes of action arising from Plaintiff’s employment by Defendants.

On October 24, 2023, Defendant Jason J. Emer, MD P.C. filed its Answer to the Complaint.

On October 30, 2023, Defendant Insperity PEO Services, L.P. filed its Answer to the Complaint.

On October 30, 2023, Defendant Insperity PEO Services, L.P. filed its Amended Answer to the Complaint.

On November 7, 2023, Defendants filed their Motion to Compel Arbitration. In support of their Motion, Defendants concurrently filed: (1) Declaration of Kerri Joyner; (2) Declaration of Nader Villajani; and (3) Proposed Order.

On November 29, 2023, Plaintiff filed her Opposition to the Motion. In support of her Opposition, Plaintiff concurrently filed: (1) Declaration of Ruthann Lee Brooks; (2) Declaration of Christopher J. DeClue; and (3) Evidentiary Objections.

On December 5, 2023, Defendants filed their Reply regarding the Motion. Defendants concurrently filed their Response to the Evidentiary Objections.

Plaintiff filed evidentiary objections regarding Defendants’ Declaration of Kerri Joyner. The following are the Court’s rulings on these objections.

Objection
1		OVERRULED
2		OVERRULED

“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.)

Defendants submit an eight-page document titled “Mutual Arbitration Agreement” (“Arbitration Agreement”). (Decl. Joyner, Exh. 1.) The Arbitration Agreement is purportedly electronically signed by Plaintiff on May 11, 2022. (Id. at p. 8.) In addition, the Arbitration Agreement has the names of two defendants (Defendant Jason J. Emer, MD P.C. and Insperity PEO Services, L.P.) next to the word “AGREED”. (Ibid.)

1. Mutual Arbitration Agreement. Except as this Arbitration Agreement otherwise provides, Insperity, you, and Client Company mutually agree to resolve by arbitration the following, which constitute “Covered Claims”: (a) all claims or disputes related to or arising out of my application for employment, my employment, or the termination of my employment with Insperity and/or Client Company, (b) all claims that Insperity and/or Client Company may have against me, and/or (c) all claims that I may have against Covered Persons. “Covered Persons” means: (i) Insperity and its parents, subsidiaries, affiliates, and dbas, and their respective officers, directors, employees, or agents, (ii) Insperity’s benefit plans, plan sponsors, fiduciaries, administrators, and their respective affiliates or agents, and/or (iii) Client Company and its officers, directors, employees, affiliates or agents. Any and all Covered Persons may enforce this Arbitration Agreement. All Covered Claims will be decided by a single arbitrator through final and binding arbitration and not by way of court or jury trial.

E. Mediation. Insperity, Client Company, and I understand and agree that the parties will participate in a mediation before invoking binding arbitration. Mediation is a condition precedent to arbitration. Any statute of limitation will be tolled for the period starting with the demand for mediation and ending on the date the mediation is concluded. However, any statutory or regulatory obligation to timely exhaust administrative remedies in connection with the claim or claims being asserted shall not be tolled. The parties will mutually select a mediator. If the parties cannot mutually select a mediator, except as provided in this Arbitration Agreement, the mediation will be held under the AAA (“AAA”) Employment Mediation Procedures (“AAA Mediation Procedures”). The AAA Mediation Procedures may be found at www.adr.org/employment or by searching for “AAA Employment Mediation Rules” using a service such as Google. The cost of mediation shall be borne entirely by Insperity and/or Client Company.

G. Procedures and Rules. The arbitration will be held in accordance with the then current Employment Arbitration Rules of the American Arbitration Association (“AAA Rules”).

(v) The parties have the right to conduct adequate civil discovery, and to present witnesses and evidence. Each party has the right to: (a) take the deposition of two individual fact witnesses and any expert witness designated by another party, (b) propound requests for production of documents to any party, and (c) subpoena witnesses and documents, including documents relevant to the case from third parties. Additional discovery may be had by mutual agreement of the parties, and in the absence of mutual agreement, the Arbitrator will have exclusive authority to entertain requests for additional discovery and to grant or deny such requests, based on the Arbitrator’s determination whether additional discovery is warranted by the circumstances of a particular case.

H. Arbitration Fees and Costs. Each party will pay the fees for his/her or its own attorneys, subject to any remedies to which that party may later be entitled under applicable law. Unless otherwise prohibited by applicable law, if I am the claimant, I will be responsible for paying an initial filing fee in the amount of $300 or an amount equal to the applicable filing fee had the claim been brought in a court of law, whichever is less. In all cases in which you are the claimant and where required by law, Insperity and/or Client Company will pay any portion of the initial filing fee remaining after you pay your portion of that fee. Insperity and/or Client Company will thereafter pay the Arbitrator's fees and the fees for administering the arbitration. If a jurisdiction requires a different allocation of fees and costs in order for this Arbitration Agreement to be enforceable, then such law shall be followed, and any disputes in this regard will be decided by the Arbitrator.

4. Severability. Except as stated in the section entitled “Class and Collective Action Waivers” above, if any other term or provision of this Arbitration Agreement is held to be invalid, void, or unenforceable, the remainder of the provisions of this Arbitration Agreement shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.

6. Other Arbitration Agreement. If Client Company and I have a separate agreement concerning arbitration, Client Company and I agree to resolve any disputes covered by it according to its provisions unless, after such dispute develops, Client Company and I agree to proceed under this Arbitration Agreement. I agree that all Covered Claims against Insperity will be resolved through the dispute resolution procedures described in this Arbitration Agreement.

Defendants move the Court to: (1) compel arbitration of Plaintiff’s claims against Defendants; and (2) dismiss the lawsuit or, in the alternative, stay it until the arbitration is completed. (Motion, p. 17–21.)

Defendants argue: (1) that the Arbitration Agreement is enforceable under the Federal Arbitration Act; (2) that even under California law, the Parties must be compelled to arbitration; (3) that strong public policy is in favor of contractual arbitration supports the Motion; (4) that Defendants met their burden of proving the existence of an Arbitration Agreement and that the dispute is covered by the Arbitration Agreement; (5) that the Arbitration Agreement complied with Armendariz; and (6) that the Arbitration Agreement is not unconscionable. (Motion, pp. 2:19, 3:25, 4:11–12, 5:18–19, 6:4–5, 7:3, 7:25.)

Plaintiff opposes the Motion, arguing: (1) that the Arbitration Agreement is not enforceable because employment-contingent waivers of rights violate California public policy; (2) that Defendants cannot establish that an arbitration agreement exists because there is no signature on the signature block for Defendants; (3) that even if there is an arbitration agreement, it is unconscionable and thus unenforceable; and (4) that Defendant has not shown compliance with the Uniform Electronic Transactions Act (UETA). (Opposition, pp. 5:2–3, 5:23–24, 7:25–26, 14:12–13.)

In their Reply, Defendants argue: (1) that there is an enforceable arbitration agreement; and (2) that the Arbitration Agreement is not unconscionable. (Reply, pp. 1:22, 2:26.)

“It is an unlawful employment practice for an employer, in exchange for a raise or bonus, or as a condition of employment or continued employment, to do either of the following:

“(i) For an employer to require an employee to sign a release of a claim or right under this part.

“(ii) As used in this subparagraph, “release of a claim or right” includes requiring an individual to execute a statement that the individual does not possess any claim or injury against the employer or other covered entity, and includes the release of a right to file and pursue a civil action or complaint with, or otherwise notify, a state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity.

“(i) For an employer to require an employee to sign a nondisparagement agreement or other document to the extent it has the purpose or effect of denying the employee the right to disclose information about unlawful acts in the workplace.

“(ii) A nondisparagement or other contractual provision that restricts an employee’s ability to disclose information related to conditions in the workplace shall include, in substantial form, the following language: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”

“Any agreement or document in violation of this subdivision is contrary to public policy and shall be unenforceable.” (Gov. Code, § 12964.5, subd. (a)(2).)

“This section does not prohibit an employer from protecting the employer’s trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace.” (Gov. Code, § 12964.5, subd. (f).)

Plaintiff argues that the Arbitration Agreement is not enforceable because employment-contingent waivers of rights violate California public policy. (Opposition, p. 5:2–22.) In support of her argument, Plaintiff cites Government Code section 12964.5, subdivision (a). (Ibid.)

First, none of the three employment documents submitted to the Court — (1) the letter dated May 7, 2022 (“Emer’s Offer and Acceptance of Employment”), (2) the contract dated May 11, 2022 (“Insperity’s Employment Agreement”), and (3) the Arbitration Agreement (which is also dated May 11, 2022) — indicate that Plaintiff’s has released or waived her rights or claims. (Decl. Joyner, Exh. 1; Decl. Brooks, Exhs. 1, 2; Gov. Code, § 12964.5, subd. (a)(1)(A).) Rather, they indicate she was required to sign an arbitration agreement (and other agreements) as a condition of employment. As to the arbitration agreement, it does not appear that the phrase “claim or right” includes the right to a jury trial. However, to the extent Government Code section 12964.5, subdivision (a)(1)(A) does include arbitration agreements, it would be preempted by the Federal Arbitration Act. (Accord Midwest Motor Supply Co. v. Super. Ct. (2020) 56 Cal.App.5th 702, 715; Chamber of Com. of the United States v. Bonta (2023) 62 F.4th 473, 490.)

Second, the Court has not received any evidence that Plaintiff has released or waived her rights or claims to anything other than her right to a jury trial. Insperity’s Employment Agreement does not have such a release or waiver, and at most Emer’s Offer and Acceptance of Employment only requires the protection of trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace. Such items are explicitly allowed by Government Code section 12964.5, subdivision (f).

Thus, the Court finds that the Arbitration Agreement does not violate Government Code section 12964.5.

“A party who has signed a written contract may be compelled specifically to perform it, though the other party has not signed it, if the latter has performed, or offers to perform it on his part, and the case is otherwise proper for enforcing specific performance.” (Civ. Code, § 3388.)

“Just as with any written agreement signed by one party, an arbitration agreement can be specifically enforced against the signing party regardless of whether the party seeking enforcement has also signed, provided that the party seeking enforcement has performed or offered to do so.” (Serafin v. Balco Props. Ltd., LLC (2015) 235 Cal.App.4th 165, 177.)

Plaintiff argues that the Arbitration Agreement does not exist because there is no signature on the signature block for Defendants. (Opposition, p. 5:23–24.)

First, while there is not a written signature nor a date, it does appear that Defendants Jason J. Emer, MD P.C. and Insperity PEO Services, L.P. electronically signed the Arbitration Agreement. (Decl. Joyner, Exh. 1, p. 8.) This is sufficient evidence that they signed the Arbitration Agreement.

Second, even if they had not signed the Arbitration Agreement, Plaintiff has not argued that Defendants have not performed or offered to perform under the Arbitration Agreement.

Defendants have sufficiently met their burden to show that an arbitration agreement exists.

“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.)

“[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.)

“Absent unusual circumstances, a contract offered on a take-it-or-leave-it is deemed adhesive, and a commercial transaction conditioned on a party’s acceptance of such a contract is deemed procedurally unconscionable.” (Vasquez v. Greene Motors, Inc. (2013) 214 Cal.App.4th 1172, 1184.)

It is clear to the Court that the Arbitration Agreement is procedurally unconscionable.

“[F]ew employees are in a position to refuse a job because of an arbitration agreement.” (Armendariz, supra, 24 Cal.4th at p. 115.)

The Arbitration Agreement is clearly a classic take-it-or-leave-it contract of adhesion. Defendants did not give Plaintiff a meaningful choice or opportunity to negotiate the document. “In assessing procedural unconscionability, courts ask whether circumstances of the contract’s formation created such oppression . . . that closer scrutiny of its overall fairness is required. Oppression occurs where a contract involves lack of negotiation and meaningful choice . . . .” (Haydon v. Elegance at Dublin (2023) __ Cal.App.5th __, __ [cleaned up].)

“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.

The Arbitration Agreement is substantively unconscionable because: (1) the Arbitration Agreement puts significant limits on discovery, with only two depositions each allowed by right and further depositions only allowed by agreement or by a showing of need; (2) the Arbitration Agreement requires mandatory mediation before arbitration; and (3) the Arbitration Agreement requires Plaintiff to pay an additional filing fee even though she already paid a filing fee in Court;

Here, the limitations on depositions are likely to have overly harsh or one-sided results. “While superficially neutral, the discovery restrictions favor defendants. Employment disputes are factually complex, and their outcomes are often determined by the testimony of multiple percipient witnesses, as well as written information about the disputed employment practice. Seemingly neutral limitations on discovery in employment disputes may be nonmutual in effect. This is because the employer already has in its possession many of the documents relevant to an employment case as well as having in its employ many of the relevant witnesses.” (De Leon v. Pinnacle Prop. Mgmt. Servs., LLC (2021) 72 Cal.App.5th 476, 487–488 [cleaned up].)

This Court is aware that some Courts of Appeal have upheld arbitration provisions that limit the right of discovery to one deposition, with further depositions allowable by a showing of need. (See, for example, Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 982–985.) This is because the Court must “assume that the arbitrator will operate in a reasonable manner in conformity with the law.” (Ibid.) However, this Court finds that the more recent case of De Leon is better reasoned.

Further, such a limitation on discovery can add to the substantive unconscionability of an arbitration agreement. (See, for example, Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 118–119 [“Nevertheless, considered against the backdrop of the other indisputably unconscionable provisions, the limitations on discovery do, in our view, compound the one-sidedness of the arbitration agreement.”].)

According to the Arbitration Agreement, “[m]ediation is a condition precedent to arbitration.” (Arbitration Agreement, § 1(E).) This “precondition” can produce results that are overly harsh or one-sided to employees. (See Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1282–1283.) Furthermore, without a neutral mediator present, it “suggests that defendant would receive a ‘free peek’ at plaintiff’s cause, thereby obtaining an advantage if and when plaintiff were to later demand arbitration.” (Ibid.) Mandatory mediation before an employee can invoke arbitration benefits employers over employees.

Finally, Plaintiff has already paid the costs of litigating this matter in Court. It would be substantively unconscionable to make Plaintiff pay an additional arbitration filing fee.

“Where an ‘arbitration agreement contains more than one unlawful provision,’ that factor weighs against severance.” (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205, 222, quoting Armendariz, supra, 24 Cal.4th at pp. 124–125.) “[U]pholding this type of agreement with multiple unconscionable terms would create an incentive for an employer to draft a one-sided arbitration agreement in the hope employees would not challenge the unlawful provisions, but if they do, the court would simply modify the agreement to include the bilateral terms the employer should have included in the first place.” (Mills v. Facility Sols. Grp., Inc. (2022) 84 Cal.App.5th 1035, 1045.)

The procedural and substantive unconscionability permeate the Arbitration Agreement. Further, choosing to sever multiple clauses would encourage the drafters of arbitration agreements to include as many unconscionable clauses as possible, knowing courts might catch some but not all of them.

The Court declines to sever the various unconscionable provisions of the Arbitration Agreement.

The Court finds that Plaintiff has met her burden to show that the purported arbitration agreement is unconscionable and thus unenforceable.