Judge: Michael Shultz, Case: 23CMCV00301, Date: 2023-08-10 Tentative Ruling
Case Number: 23CMCV00301 Hearing Date: August 10, 2023 Dept: A
23CMCV00301 Uriel Ramos v. Prime Wheel Corporation, et al.
[TENTATIVE] ORDER DENYING DEFENDANTS’ MOTION TO COMPEL ARBITRATION
I.
BACKGROUND
The complaint alleges
that Defendants discriminated against Plaintiff while he was employed by
Defendant, Prime Wheel Corporation, et al., and under the supervision of
Defendant, Jamie Flores (collectively “Defendants”). Plaintiff alleges 18
causes of action for violations of the Fair Employment and Housing Act and
related statutory and common-law claims.
II.
ARGUMENTS
Defendants argue that
Plaintiff signed a Spanish version of an agreement to submit claims arising out
of his employment to binding arbitration under the Federal Arbitration Act and
the California Arbitration Act. The agreement is not unconscionable. All claims
should be stayed. If the Court determines that only a part of Plaintiff’s
claims are subject to arbitration, the Court should stay the remaining claims until
completion of arbitration.
Plaintiff argues in
opposition that arbitration cannot be compelled under the Ending Forced
Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”). Not all of
the claims are subject to binding arbitration. The agreement is procedurally
and substantively unconscionable, and therefore, unenforceable.
In reply, Defendants
argue that Plaintiff does not dispute that he signed the arbitration agreement.
Plaintiff’s claims arose before the effective date of the EFAA. If the Court
finds that some claims arose after March 3, 2022, the Court should sever those
claims until completion of arbitration.
III.
LEGAL STANDARDS
The court can order a
matter to arbitration if it determines that an agreement exists unless the
right to compel has been waived or grounds exist for the revocation of the
agreement. (Code Civ. Proc., § 1281.2.)
The petitioning party’s burden is to establish that a valid arbitration
agreement exists by a preponderance of evidence while responding party’s burden
is to establish a defense to enforcement. (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 705.)
IV.
DISCUSSION
A.
The EFAA renders the pre-dispute arbitration
agreement unenforceable.
The arbitration
agreement states that Plaintiff’s claims “shall be submitted to and determined
exclusively by binding arbitration under the Federal Arbitration Act (“FAA” or
United States Arbitration Act (“USAA”), in conformity with the procedures of
the California Arbitration Act (Cal. Code Civ. Code, §. Pro. § 1280, et seq.,
including section 1283.05 and all of the act’s other mandatory and permissive
rights to discovery); …” (Meigs Decl., Ex. B, .pdf p. 8.) Although the agreement
states that the FAA governs arbitration, the court applies state law to
determine who is bound and who may enforce an arbitration agreement. (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614, n.7; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 410 ["Because the California procedure for deciding motions to compel
[arbitration] serves to further, rather than defeat, full and uniform
effectuation of the federal law's objectives, the California law, rather than
section 4 of the USAA, is to be followed in California courts."].)
Plaintiff does not
dispute signing the agreement which broadly requires arbitration of the
following:
“any claim dispute, or controversy
(including, but not limited to, any and all claims of discrimination and
harassment) which would otherwise require or allow resort to any court …
between myself and the Company (or its owners, … employees, agents) … arising
from, related to, or having any relationship or connection whatsoever with my
seeking employment with, employment by, or other association with the Company
whether based on tort, contract statutory, or equitable law, or otherwise… .” (Meigs Decl., Ex. B, .pdf p. 8.)
Plaintiff
argues that under federal law, his claims cannot be compelled to arbitration. A
pre-dispute arbitration agreement is not valid or enforceable where a person
alleges conduct constituting a sexual harassment or sexual assault dispute. (9 U.S.C.A. § 402 (West.) The EFAA applies to "any dispute or claim that arises on or
after the date of enactment of this Act.” (Pub. L. No. 117-90, 136 Stat. 26; Newcombe-Dierl
v. Amgen (C.D.Cal. May 26, 2022, No.
CV 22-2155-DMG (MRWx)) 2022 U.S.Dist.LEXIS 140079, at *13.)
Plaintiff
alleges he was hired in 2005 and discharged on July 29, 2022. (Complaint, ¶¶ 12,
45.) Plaintiff’s declaration states that the alleged acts of misconduct
occurred before and after the effective date of the EFAA. (Decl. of Uriel Ramos, ¶5.) Therefore,
at least some of the alleged acts of sexual harassment conceivably arose after
the EFAA’s effective date of March 3, 2022, and July 29, 2022 when Plaintiff was
terminated. (First and Fifth cause of action). (Newcombe-Dierl, supra at *13.) [“Plaintiff’s claims accrued when the adverse employment action
occurred and she was injured, which was no later than the date of her
termination.”].)
However, Plaintiff alleges 16 other
causes of action that appear independent of the allegations of sexual
harassment such as for disability discrimination; failure to accommodate
disability; interference and retaliation for requesting leave under the
California Family Rights Act; for requesting accommodation; for requesting paid
sick leave; and for requesting “kin care.” Plaintiff also alleges wage and hour
violations (10th through 13th), tort claims for wrongful
termination, negligent hiring, and intentional infliction of emotional distress
(14th through 16th) as well as statutory claims under the
whistleblower statute and the unfair competition statute (17th and
18th).
Defendants
argue that Plaintiff has not cited any California case to support the
contention that the entire case, including the non-sexual harassment claims,
cannot be arbitrated. (Reply, 2:27-3:3.) However, the EFAA expressly states
that whether it applies “shall be determined under Federal law.” (9 U.S.C. § 402 (LexisNexis, Lexis
Advance through Public Law 118-12, approved July 28, 2023).)
Ordinarily,
under the FAA, if a dispute presents multiple claims, only some of which are arbitrable,
the arbitrable claims must be sent to arbitration even if the result is
piecemeal litigation. (Johnson v. Everyrealm, Inc. (S.D.N.Y. Feb. 24, 2023) 2023 U.S.Dist.LEXIS
31242, at *39.) However, the EFAA distinguishes
a “claim” from a “case.” It provides that a pre-dispute arbitration agreement is
invalid and unenforceable “with respect to a case which is filed under Federal,
Tribal, or State law and relates to the … sexual harassment dispute. (Id.
at 41 [“This text is clear, unambiguous, and decisive as to the issue here. It
keys the scope of the invalidation of the arbitration clause to the entire
"case" relating to the sexual harassment dispute. It thus does not
limit the invalidation to the claim or claims in which that dispute plays a
part.”].)
Therefore,
the Johnson court denied the employer’s motion to compel arbitration of
the plaintiff’s entire complaint which included claims for race discrimination,
pay discrimination, whistleblower retaliation, intentional infliction of
emotional distress, and ordered that all claims would proceed in court. (Johnson
at *1). The foregoing supports
Plaintiff’s contention that under the EFAA, Plaintiff’s entire case -- not two
discrete sexual harassment claims -- cannot be ordered to arbitration.
B.
The arbitration agreement does not meet the minimum requirements that
would allow Plaintiff to vindicate statutory rights under FEHA.
As
Plaintiff alleges claims in violation of FEHA, the claims are arbitrable if the
arbitration process permits Plaintiff to vindicate his statutory rights and is
conscionable. (Fitz
v. NCR Corp. (2004) 118 Cal.App.4th 702, 713.) An arbitration properly vindicates statutory
rights if the agreement meets “minimum requirements” by providing for "(1)
neutral arbitrators, (2) more than minimal discovery, (3) a written award, (4)
all types of relief that would otherwise be available in court, and (5) no
additional costs for the employee beyond what the employee would incur if he or
she were bringing the claim in court." (Armendariz
v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th
83, 102.)
The agreement provides for a neutral
arbitrator as it requires a retired California superior court judge to serve as
arbitrator subject to the same grounds for disqualification as would otherwise apply
to a superior court judge. (Miegs Decl., Ex. B.) The agreement incorporates all
mandatory and permissive rights to discovery under Civil Procedure Section
1283.05, which gives the parties the right to take depositions and discovery
and "to use and exercise all of the same rights, remedies, and procedures,
and be subject to all of the same duties, liabilities, and obligations in the
arbitration” as provided in Civil Procedure Section 1985 (subpoenas) and commencing
with Civil Procedure section 2016.010 (the Discovery Act.) (Code
Civ. Proc., § 1283.05.) The agreement also provides for all types
of relief available in court including all rules of pleading, all rules of
evidence, summary judgment on the pleading, and judgment under Civil Procedure
section 631.8 (motion for judgment after a party’s close of evidence). (Miegs
Decl., Ex. B.)
The requirement for a written award is to
permit adequate judicial review in order that Plaintiff’s statutory rights are
property vindicated. (Armendariz at 106 [“In Moncharsh, we
acknowledged that judicial review may be appropriate when ‘granting finality to
an arbitrator's decision would be inconsistent with the protection of a party's
statutory rights.’”].) Here, Plaintiff is denied the right to
judicial review. Instead, the agreement states that the award “shall be subject
to reversal and remand, modification, or reduction following review of the
record and arguments of the parties by a second arbitrator,” who will apply the
law and procedures applicable to appellate review. (Miegs decl., Ex. B, .pdf p.
9.) Additionally, there are no conditions for the selection of the second arbitrator,
and no indication that the process will provide for a neutral arbitrator. Therefore,
the arbitration agreement does not meet the minimum requirements of Armendariz.
Finally, the arbitration agreement is
silent as to costs. As noted above, in FEHA-related claims, the agreement must
provide that the employee will not bear additional costs beyond what the
employee would incur if he or she were bringing the claim in court. Defendants
appear to concede the defect in that Prime Wheel agrees to pay for all costs
and fees “unique to arbitration.” (Meigs Decl., ¶ 9.) However, an “after-the-fact expression of
willingness by the employer to amend the arbitration agreement” is an offer to
modify the contract which was never accepted. (O'Hare
v. Municipal Resource Consultants (2003) 107 Cal.App.4th 267,
280
[“No existing rule of contract law permits a party to resuscitate a legally
defective contract merely by offering to change it."]
C. Plaintiff has
demonstrated that the agreement is unconscionable.
The court considers two elements to
establish unconscionability. The first
element, procedural unconscionability, requires evidence that the contract was
adhesive in nature, such as where the employee lacks the ability to negotiate
and lacks meaningful choice or where the unconscionable provision is hidden
within a “prolix printed form.” (Samaniego
v. Empire Today LLC (2012) 205
Cal.App.4th 1138, 1144.) The
second element, substantive unconscionability, involves a contract that is
one-sided or overly harsh. While both elements are required to be present, they
do not have to be present in the same degree. Rather, "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. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)
Procedural unconscionability
is met as Plaintiff declares that signing the arbitration agreement was a
mandatory condition of his employment, it was non-negotiable, and if he didn’t
sign it, he would be fired. (Ramos Decl., ¶¶ 13-18.) As it was a contract of
adhesion, it is procedurally unconscionable.
Substantive unconscionability exists
where the terms of arbitration are “unfairly one-sided” and lacks “mutuality of
obligations” such as where the weaker party is required to arbitrate, while the
stronger party is afforded a choice of forums. (Fitz,
supra
at 713. ) The agreement is silent as to whether Defendants are
equally bound to arbitrate claims they may have against Plaintiff. The lack of
mutuality renders the agreement substantively unconscionable. (O'Hare,
supra at 274.) Additionally,
the agreement’s silence regarding costs, which Defendants attempt to cure
post-dispute renders the agreement substantively unconscionable. (O’Hare
at 280 ["It therefore follows that [the employer’s] willingness to bear
all costs in the arbitration proceeding does not change the fact the
arbitration provision is substantively unconscionable."]
C.
The
Court cannot sever the unconscionable provisions from the rest of the
agreement.
In determining whether the unconscionable
provisions are capable of being severed, the Court considers whether voiding
the entire contract will permit one party from gaining undeserved benefit or
suffering undeserved detriment, particularly where there has been full or
partial performance. (Little
v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1074.)
Severance attempts to conserve the contractual relationship if doing so would
not be condoning an illegal scheme. (Id.) The
“over-arching inquiry” is whether the interests of justice would be furthered
by severance. The court must have the capacity to cure the offending provision,
which is not invariably the case. (Id.)
Here, as in Armendariz, the
agreement contains more than one substantively unconscionable provision: the
arbitration requirement is unilateral, the agreement does not provide that
Plaintiff will not bear additional costs beyond what the employee would incur
if he or she were bringing the claim in court, and the agreement does not
provide for judicial review. The Court would have to reform the contract by
adding additional terms or modifying the provision for review by an arbitrator
and mutuality of obligation. (Little
at
1075.) The California Arbitration Act "authorizes the court
to refuse arbitration if grounds for revocation exist, not to reform the
agreement to make it lawful. Nor do courts have any such power under their
inherent limited authority to reform contracts.” Accordingly, the agreement is
not capable of being severed from its offending provisions.
V.
CONCLUSION
Plaintiff has asserted viable defenses to
enforcement of the requirement for arbitration for all of the foregoing
reasons. Accordingly, Defendants’ Motion to Compel Arbitration is DENIED.