Judge: Michelle Williams Court, Case: 21STCV47258, Date: 2022-08-16 Tentative Ruling
Case Number: 21STCV47258 Hearing Date: August 16, 2022 Dept: 74
21STCV47258 SARAH
COSTELLO vs LOWE'S COMPANIES, INC.
Defendants Lowe’s Home Centers, LLC; Lowe’s Companies,
Inc.; Lowe’s Home Improvement, LLC.; and Fabiola Garcia’s Motion to Compel
Arbitration
TENTATIVE RULING:
Defendants’ Motion to
Compel Arbitration and Order to Stay Proceedings is GRANTED. This action is STAYED pending the outcome of
arbitration. A Status Conference re Initiation of Arbitration is scheduled on
September 15, 2022 at 8:30 a.m.
Background
On December
28, 2021, Plaintiff Sarah Costello filed this employment action against
Defendants Lowe’s Home Centers, LLC,
Lowe’s Companies, Inc., Lowe’s Home Improvement, LLC., and Fabiola Garcia. The
complaint asserts thirteen causes of action, including claims for discrimination,
harassment, retaliation, failure to accommodate, failure to engage in the
interactive process, failure to prevent discrimination, harassment, and
discrimination, negligent hiring, supervision and retention, breach of
contract, violation of Business and Professions Code § 17200, intentional
infliction of emotional distress, and wrongful termination. Plaintiff, a
fifty-year old woman, alleges she began to work for Defendants on November 18,
2017 as an Assistant Store Manager of Specialty and was subjected to unlawful
treatment based upon her age, disability, and protected activity.
Motion
On April 25,
2022, Defendants Lowe’s Home Centers, LLC,
Lowe’s Companies, Inc., Lowe’s Home Improvement, LLC., and Fabiola Garcia filed
their motion to compel arbitration and stay proceedings.
Opposition
In
opposition, Plaintiff contends there is insufficient evidence that she signed
an arbitration agreement and the agreement is unconscionable.
Reply
In reply,
Defendant argues Plaintiff’s evidence is insufficient to avoid enforcement of
the agreement and the agreement is not unconscionable.
Evidentiary
Objections
Defendants’
objections to paragraphs 6 and 7 of the Costello declaration are SUSTAINED. The
remaining objections are OVERRULED.
Judicial
Notice
Defendants request the Court take judicial notice of
rulings in other Superior Court cases in which they were defendants seeking to compel
arbitration. The request for judicial notice is DENIED. (See City of Bakersfield v. West Park Home Owners Assn. & Friends (2016)
4 Cal.App.5th 1199, 1210 (“the City relies on similar financing plans having
been validated by at least eight California trial courts. The City requests
this court to take judicial notice of these trial court orders. However, trial
court orders hold no precedential value. Accordingly, we will neither rely
upon, nor take judicial notice of, these orders.”) (internal citation
omitted).)
Motion to Compel
Arbitration
Standard
“California
law reflects a strong public policy in favor of arbitration as a relatively
quick and inexpensive method for resolving disputes. To further that policy,
section 1281.2 requires a trial court to enforce a written arbitration
agreement unless one of three limited exceptions applies. Those statutory
exceptions arise where (1) a party
waives the right to arbitration; (2) grounds exist for revoking the arbitration
agreement; and (3) pending litigation with a third party creates the
possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group
(2013) 213 Cal.App.4th 959, 967; Code Civ. Proc. § 1281.2.) Similarly, “under
the FAA, the strong federal policy favoring arbitration agreements requires
courts to resolve any doubts concerning arbitrability in favor of arbitration.”
(Valencia v. Smyth (2010) 185 Cal.App.4th 153, 176 (internal quotations
omitted).)
In deciding a petition to compel
arbitration, trial courts must decide first whether an enforceable arbitration
agreement exists between the parties, and then determine the second gateway
issue whether the claims are covered within the scope of the agreement. (Omar
v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The opposing party
has the burden to establish any defense to enforcement. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 579 (“The
petitioner, T–Mobile here, bears the burden of proving the existence of a valid
arbitration agreement and the opposing party, plaintiffs here, bears the burden
of proving any fact necessary to its defense.”).)
If a party asserts the applicability of
the Federal Arbitration Act (“FAA”), that party “bears the burden to show it
applies by presenting evidence establishing [that] the contract with the
arbitration provision has a substantial relationship to interstate commerce . .
. .” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238.) Alternatively, the parties may agree to
the application of the FAA. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355 (“But the
presence of interstate commerce is not the only manner under which the FAA may
apply. As discussed above, the parties may also voluntarily elect to have the
FAA govern enforcement of the Agreement, as they did here.”).)
Procedurally, a petition to compel
arbitration or stay proceedings must state verbatim the provisions providing
for arbitration, or must have a copy of them attached. (Cal. R. Ct., rule 3.1330.)
Arbitration Agreement at
Issue
“With
respect to the moving party’s burden to provide evidence of the existence of an
agreement to arbitrate, it is generally sufficient for that party to present a
copy of the contract to the court.” (Baker
v. Italian Maple Holdings, LLC
(2017) 13 Cal.App.5th 1152, 1160.)
Defendants
provide a copy of Plaintiff’s offer letter dated October 26, 2017, which
includes an arbitration agreement. (Spears Decl. ¶ , Ex. B at 4.) The agreement
provides, in relevant part:
In exchange for the mutual
promises in this Agreement in addition to [Plaintiff’s] continued employment by
Lowe’s Home Centers, LLC and its successors or assigns (hereinafter “Lowe’s”),
which you hereby accept, you and Lowe’s agree that any controversy between you
and Lowe’s (including agents of Lowe’s and Lowe’s predecessor, Lowe’s HIW,
Inc.) arising out of Plaintiff’s employment or the termination of your
employment shall be settled by binding arbitration (at the insistence of either
you or Lowe’s) in accordance with the arbitration procedures set forth by the American
Arbitration Association (“AAA”), under its then in-effect AAA Employment
Arbitration Rules, the most current version of which are currently available
at: http://www.adr.org (the “AAA Rules”).
(Ibid.)
The agreement “is intended to be broad and to cover, to the extent otherwise
permitted by law, all such disputers between you and Lowe’s including but not
limited to those arising out of federal and state statutes and local
ordinances, such as . . . the California Fair Employment and Housing Act (‘FEHA’)
. . . the California Government Code . . . the California Business and
Professions Code § 17200 . . . and any similar federal, state, and local laws.”
(Ibid.) The arbitration provision encompasses all of Plaintiff’s claims
asserted in the complaint.
Defendant
adequately demonstrates Plaintiff accepted the terms of the offer through
Defendant’s candidate portal. (Spears Decl. ¶¶ 2-16. See Espejo v. Southern
California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1062.)
In
opposition, Plaintiff contends she never agreed to arbitration and never
knowingly entered into an arbitration agreement. (Opp. at 5:1-8:9.) Plaintiff’s
declaration acknowledges she was told she “will receive an offer letter that [she]’ll
need to sign to accept the job.” (Costello Decl. ¶ 2.) Plaintiff does not deny
receiving the offer letter or accessing the online portal. Plaintiff
acknowledges she signed an initial offer letter. (Id. ¶ 6.) Plaintiff states
she “never saw” the “alleged Arbitration Agreement,” which is merely a portion
of the offer letter, does “not remember having to separately sign an agreement
to arbitrate,” and would have read the arbitration agreement had she seen it. (Id.
¶¶ 5, 7, 8.)
As
argued by Defendants in reply, Plaintiff’s evidence is insufficient to support
a conclusion that she was not presented with the offer letter containing the
arbitration agreement and signed it through the electronic portal. Plaintiff’s
evidence suggests she does not remember the arbitration agreement within the
offer letter and may not have read it, which does not bar enforcement. (Harris
v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 383 (“The fact that
defendant either chose not to read or take the time to understand these
provisions is legally irrelevant.”).) Defendant does not have a duty to explain
the document and therefore Plaintiff’s summary claim of fraud is unsupported. (Sanchez v. Valencia Holding Co., LLC,
(2015 61 Cal.4th 899, 914.)
The
Court finds Defendants met their burden to demonstrate all Defendants can
enforce the agreement as alleged agents of Lowe’s Home Centers, LLC and all of
Plaintiff’s claims arise out of her employment. (Compl. ¶ 4; Thomas v. Westlake (2012) 204
Cal.App.4th 605, 615 (“it would be unfair to defendants to allow [plaintiff] to
invoke agency principles when it is to his advantage to do so, but to disavow
those same principles when it is not.”); Fuentes v. TMCSF, Inc., 26 Cal.
App. 5th 541, 549 (2018). (“The arbitration clause itself specified the
entities to which it applied.”); Michaelis v. Schori (1993) 20
Cal.App.4th 133, 139 (“This clause sufficiently encompasses Bader as an
employee or associate.”).) Plaintiff does not contest all Defendants’ ability
to enforce the agreement.
The Arbitration Agreement
Does Not Violate Armendariz
To
be enforceable, an arbitration agreement in an employment contract must comply
with the requirements of Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. The Armendariz requirements are that: “(1)
the arbitration agreement may not limit the damages normally available under
the statute; (2) there must be discovery sufficient to adequately arbitrate
their statutory claim; (3) there must be a written arbitration decision and
judicial review sufficient to ensure the arbitrators comply with the
requirements of the statute; and (4) the employer must pay all types of costs
that are unique to arbitration.” (Little
v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076.)
The
arbitration agreement does not limit the damages available, requires Defendants
to pay the costs associated with arbitration, and the relevant rules of the
arbitral forums require neutral arbitrators, written awards, and permit
sufficient discovery. (Moore Decl. Ex. C-D. See also Roman v. Superior Court
(2009) 172 Cal.App.4th 1462, 1476 (“There appears to be no meaningful
difference between the scope of discovery approved in Armendariz and
that authorized by the AAA employment dispute rules.”).) The arbitration
provisions comply with the requirements of Armendariz.
Unconscionability
Plaintiff
also argues the agreement is unenforceable as unconscionable. (Opp. at 8:10-13:8.)
Regardless
of the claim asserted, arbitration agreements are only enforceable if they are
not unconscionable. (Armendariz, supra, 24 Cal.4th at 113; Baxter v.
Genworth N. Am. Corp., (2017) 16 Cal.App.5th 713, 721.).) “Both procedural
and substantive unconscionability must be present for a court to refuse to
enforce a contract, although they need not be present in the same degree.” (Baxter, supra, 16 Cal.App.5th at 721 (citing Baltazar
v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243.) Procedural
unconscionability focuses on (1) “oppression” resulting from unequal bargaining
power that adheres the weaker party to nonnegotiable terms and (2) “surprise”
involving “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., (2001) 93 Cal.App.4th 846, 853.)
Substantive unconscionability “focuses on overly harsh or one-sided results
[that lack substantial justification].” (Baxter, supra, 16 Cal.App.5th at 724; see Armendariz, supra, 24 Cal.4th at 117-18.).)
Procedural
Unconscionability
Plaintiff’s sole argument regarding
procedural unconscionability is that the arbitration agreement is a contract of
adhesion as a mandatory condition of employment. (Opp. at 9:6-10:22.) A
mandatory arbitration agreement in the employment context establishes a small
degree of procedural unconscionability. (Armendariz, supra, 24 Cal.4th at 113 (“The term [contract of adhesion] signifies a
standardized contract, which, imposed and drafted by the party of superior
bargaining strength, relegates to the subscribing party only the opportunity to
adhere to the contract or reject it.”); Serpa v. California Surety
Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 (“It is well settled
that adhesion contracts in the employment context, that is, those contracts
offered to employees on a take-it-or-leave-it basis, typically contain some
aspects of procedural unconscionability.”).)
Plaintiff’s opposition does not establish any other basis for finding the
agreement procedurally unconscionable.
Accordingly, Plaintiff has demonstrated minimal
procedural unconscionability and must “make a strong showing of substantive
unconscionability to render the arbitration provision unenforceable.” (Gatton,
supra, 152 Cal.App.4th at 586.)
Substantive
Unconscionability
Plaintiff contends the arbitration
provisions’ class action and representative
action waivers as well as a lack of mutuality contribute to substantive
unconscionability. (Opp. at 11:23-12:22.)
Plaintiff argues the agreement lacks
mutuality because it applies to claims arising out of Plaintiff’s employment,
citing O’Hare v. Municipal Resource Consultants (2003) 107 Cal.App.4th
267. However, the agreement at issue in O’Hare
does not mirror the arbitration agreement in this case. (Id. at 274
(“O’Hare contends the arbitration provision lacks the required ‘modicum of
mutuality’ because it requires him to arbitrate all of his claims, expressly
permits MRC to file a lawsuit seeking injunctive and equitable relief against
him, and is silent about requiring MRC to arbitrate any other claim it may have
against him. The contention is well taken.”).) The arbitration agreement between
Plaintiff and Defendants is mutual as it binds both parties to arbitrate any
controversy arising out of Plaintiff’s employment. (Spears Decl. Ex. B; Roman, supra, 172 Cal. App. 4th at 1473;
Baltazar, supra, 62 Cal.4th at 1248 (“Baltazar argues that the
arbitration agreement at issue is unfairly one-sided because it lists only
employee claims as examples of the types of claims that are subject to
arbitration. . . . We disagree. The arbitration agreement at issue here makes
clear that the parties mutually agree to arbitrate all employment-related
claims: that is, ‘any claim or action arising out of or in any way related to
the hire, employment, remuneration, separation or termination of Employee.’”).)
The agreement is mutual and Plaintiff’s argument does not establish substantive
unconscionability.
The arbitration agreement also includes
a “CLASS ACTION WAIVER” and a “REPRESENTATIVE ACTION WAIVER,” which both
indicate they apply “[t]o the extent permissible by law.” (Spears Decl. Ex. B.)
Plaintiff does not bring either a class action or PAGA claim in this action.
Defendant notes “[s]ince applicable California law does not permit enforcement
of such a provision [PAGA waiver], it is not part of the Agreement by the
Agreement’s own terms.” (Reply at 8:26-9:1.) The Court agrees that these
provisions do not add to substantive unconscionability here. (See Torrecillas
v. Fitness International, LLC (2020) 52 Cal.App.5th 485, 500 (“As for the
claim about the Private Attorneys General Act, Torrecillas's argument is odd
because he did not sue under that law. Nonetheless, as to claims under both
laws, the 2013 agreement resolves any conflict between the laws and arbitration
by excluding arbitration ‘where the law specifically forbids [it].’ So the
agreement steers clear of what, in this case, is not an issue. This does not
demonstrate unconscionability.”).)
Moreover, Defendant has demonstrated
the Federal Arbitration Act applies. (See Spears Decl. ¶ 17; Carbajal, supra, 245 Cal.App.4th at 238.)
Class action waivers are enforceable under the FAA and therefore do not add to
substantive unconscionability. (Iskanian v. CLS Transportation Los Angeles,
LLC (2014) 59 Cal.4th 348, 364 (“the FAA preempts Gentry's rule
against employment class waivers.”).) Accordingly, Plaintiff has failed to
demonstrate any substantive unconscionability.
Even if the waivers were not avoidable
by the express terms of the agreement, the arbitration requirement would remain
enforceable. (See Correia v. NB Baker Electric, Inc. (2019) 32
Cal.App.5th 602, 621 (“we are satisfied that the parties agreed (through the
agreement’s severance clause) that if any provision (such as the representative
claim waiver in all forums) is found to be invalid, the finding does not
preclude the enforcement of any remaining portion of the agreement.”); Iskanian,
supra, 59 Cal.4th at 391 (sending individual claims to arbitration despite
PAGA waiver).)
The Court finds Plaintiff failed to
meet her burden to establish the arbitration provisions are unenforceable as
unconscionable.
There is No Basis for an
Evidentiary Hearing
Finally, Plaintiff requests an
evidentiary hearing. (Opp. at 13:9-26.) Plaintiff cites Rosenthal v. Great
Western Fin. Securities Corp. (1996) 14 Cal.4th 394, which involved
directly conflicting testimony regarding fraud during the execution of the
agreement. The Court found “where—as is common with allegations of fraud such
as are made here—the enforceability of an arbitration clause may depend upon
which of two sharply conflicting factual accounts is to be believed, the better
course would normally be for the trial court to hear oral testimony and allow
the parties the opportunity for cross-examination.” (Id. at 414.) Plaintiff also cites Hotels Nevada v. L.A. Pacific
Center, Inc. (2006) 144 Cal.App.4th 754, 764, which similarly involved fraud
in the execution.
Here, there are no sharply conflicting
factual accounts. As noted above, Plaintiff has only demonstrated she does not
remember seeing or reading the arbitration provisions contained in her offer
letter, which is immaterial to the Court’s resolution of the issues. Plaintiff’s
request for an evidentiary hearing is DENIED.