Judge: Michelle Williams Court, Case: 22STCV19395, Date: 2022-09-29 Tentative Ruling
Case Number: 22STCV19395 Hearing Date: September 29, 2022 Dept: 74
22STCV19395 HILARY
POLAK vs BARRETT BUSINESS SERVICES, INC.
Defendants’ Motion to Compel Arbitration and Stay
Proceeding
TENTATIVE RULING: Defendants’ Motion to Compel Arbitration and
Stay Proceeding is GRANTED. All Plaintiff’s claims in this action against all
Defendants are ordered to arbitration. This
action is STAYED pending the outcome of arbitration. A Status Conference re Initiation of
Arbitration is scheduled for October 26, 2022, at 8:30 a.m.
Background
On June 14,
2022, Plaintiff Hilary Polak filed this action against Defendants Barrett
Business Services, Inc., Dan Ventura, and Danielle Benoit arising out of Plaintiff’s
employment with Defendants and subsequent termination. The complaint asserts FEHA
causes of action for disability harassment, discrimination, and retaliation,
failure to engage in an interactive process, failure to accommodate, violations
of CFRA, intentional infliction of emotional distress, and wrongful termination
in violation of public policy.
Motion
On July 29,
2022, Defendants Barrett Business Services, Inc., Dan Ventura, and Danielle
Benoit filed the instant motion to compel Plaintiff to submit her claims to
arbitration.
Opposition
In
opposition, Plaintiff contends the arbitration agreement violates Armendariz,
is unenforceable as unconscionable, contains an unenforceable class action
waiver, and the non-signatory Defendants cannot enforce its terms.
Reply
In reply, Defendants
contend the agreement is enforceable by all parties, satisfies all Armendariz
requirements, and is not unconscionable.
Plaintiff’s
Evidentiary Objections
Each of
Plaintiff’s objections are OVERRULED.
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 a separate Arbitration Agreement with Barrett Business
Services, Inc. signed by Plaintiff Hilary Polak on March 25, 2019. (Ventura
Decl. ¶ 5, Ex. 1; Polak Decl. ¶ 3 (“When I was first hired, I was required to
attend an employment orientation, during which I signed all the new employment
documents, which included [the] purported arbitration agreement.”).) Pursuant
to the Arbitration Agreement “the Company and Employee (hereinafter ‘the
parties’) hereby agree to submit to mandatory binding arbitration any dispute,
claim or controversy arising out of or relating to Employee's employment with
the Company.” (Ventura Decl. Ex. 1.) The Arbitration Agreement provides:
The parties understand and
agree that this Agreement applies to all claims (the ‘Arbitrable Claims’)
arising out of, related to or connected with the Employee’s employment with the
Company, Including, but by no means limited to, claims of discrimination,
harassment, unpaid wages, breach of contract (express or implied), wrongful
termination, torts, claims for stock or stock options, as well as claims based
upon any federal, state or local ordinance, statute, regulation or
constitutional provision, including, but not limited to, . . . any and all
state or local laws prohibiting discrimination or regulating any terms or
conditions of employment. . . . The parties agree that arbitration shall be the
exclusive method by which to resolve any Arbitrable Claims, and specifically
agree that they win not file a court lawsuit to pursue any Arbitrable Claims.
Arbitration shall be final and binding upon the parties.
(Ventura
Decl. Ex. 1 § 1.) The Arbitration Agreement therefore encompasses all the
substantive claims alleged in Plaintiff’s complaint.
Ventura and Benoit Can Enforce the Arbitration
Agreement
In
opposition, Plaintiff contends Ventura and Benoit are not parties to the
Arbitration Agreement and therefore cannot compel Plaintiff to arbitration her
claims against them. (Opp. at 12:23-13:16.) Plaintiff further argues because
they are non-parties, the Court should deny arbitration all together pursuant
to Code of Civil Procedure section 1281.2(c). (Ibid.) Plaintiff cites Matthau v. Superior Court (2007) 151
Cal.App.4th 593 in which the court found there was no basis to compel an
actor’s son, and the “loan out” company through which the actor provided his services,
to arbitrate pursuant to agreements only the actor signed. The court in Matthau
noted there are several grounds upon which a nonsignatory may be compelled
to arbitrate, but none applied in that case. (Id. at 599 (“Indeed, one
court, reviewing the cases, observed that, “in varying circumstances,
California courts have repeatedly enforced arbitration agreements against and
in favor of persons who never agreed to arbitrate the dispute.”).)
“[W]hether
a contract may be enforced by or against a nonsignatory to the contract is
determined by principles of state law. [Citations] To that, there are six
theories by which a nonsignatory may be bound to arbitrate: ‘(a) incorporation
by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e)
estoppel; and (f) third-party beneficiary.” Philadelphia Indemnity Ins. Co.
v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 840-841.)
Defendants
note Ventura and Benoit have been sued in their capacity as “a Manager,
Officer, Shareholder, Director, Supervisor, Manager, Managing Agent, Owner,
Principal, and/or Employee” of Defendant BBSI. (Compl. ¶¶ 3-4.) Defendants also
note all Ventura and Benoit’s alleged conduct “aris[es] out of, relat[es] or
[is] connected with the Employee’s employment with the Company.” (Ventura Decl.
Ex. A.) Defendants contend Ventura and Benoit are third-party beneficiaries capable
of enforcing the agreement. (Mot. at 6:11-27; Reply at 9:19-10:13 citing Murphy v. DirecTV, Inc. (9th Cir. 2013)
724 F.3d 1218, 1229-31 and Metalclad
Corp. v. Ventana Environmental Organizational Partnership (2003) 109
Cal.App.4th 1705, 1713.)
The
portion of Murphy cited, pages 1229 through 1231, discussed equitable
estoppel, not enforcement by third-party beneficiaries. (Murphy, supra,
724 F.3d at 1229. (“We therefore examine the contract law of California to
determine whether Best Buy, as a nonsignatory, may seek arbitration under the
theory of equitable estoppel.”).) The court in Murphy discussed
third-party beneficiary status beginning on page 1233 of the opinion, and
concluded it did not apply in that case. (Id. at 1233 (“Finally, Best
Buy argues that it is a third-party beneficiary of the Customer Agreements, and
is therefore entitled to arbitration. . . . Best Buy's argument that it meets
this exception is unpersuasive.”).)
Similarly,
the court in Metalclad, addressed equitable estoppel and made no
reference to enforcement by a third-party beneficiary. (Metalclad, supra,
109 Cal.App.4th at 1715 (“Before turning to equitable estoppel's application
here, we first address the standard of review.”).) However, Defendants quote
language from Murphy and Metalclad that nonsignatories may arbitrate
“claims that are based on the same facts and are inherently inseparable from
arbitrable claims against signatory defendants.” (Mot. at 6:23-26.) This is an
equitable estoppel standard. The court in Metalclad noted “[t]he
doctrine thus prevents a party from playing fast and loose with its commitment
to arbitrate, honoring it when advantageous and circumventing it to gain undue
advantage” and cited the following “(Cf. IDS Life Ins. Co. v. SunAmerica,
Inc. (7th Cir.1996) 103 F.3d 524, 530 [where a party to an arbitration
agreement attempts to avoid that agreement by suing a “related party with which
it has no arbitration agreement, in the hope that the claim against the other
party will be adjudicated first and have preclusive effect in the arbitration.
Such a maneuver should not be allowed to succeed ...”].)” (Metalclad, supra,
109 Cal.App.4th at 1714.) Plaintiff is attempting such a maneuver here. Plaintiff
admits to signing the arbitration agreement as part of her employment
documents. (Polak Decl. ¶ 3.) As noted above all of Plaintiff’s claims arise
out of her employment and she agreed to arbitrate all such claims. Accordingly,
she cannot avoid arbitration of her claims against Ventura and Benoit that arise
out of the employment relationship. (Garcia
v. Pexco, LLC (2017) 11 Cal.App.5th 782, 787.)
Defendants Failed to Demonstrate the Applicability
of the Federal Arbitration Act
While ultimately immaterial to the
Court’s disposition of the motion herein, Defendants argue the Arbitration
Agreement is governed by the Federal Arbitration Act (“FAA”). (Mot. at 3:26-4:19;
Reply at 7:13-8:6.)
The party
asserting the applicability of the FAA “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.) Whenever the FAA applies,
“state law is preempted to the extent it ‘stands as an obstacle to the
accomplishment and execution of the full purposes and objectives’ of the
FAA[.]” Lamps Plus, Inc. v. Varela (2019) 139 S.Ct. 1407, 1415 quoting AT&T
Mobility LLC v. Concepcion (2011) 563 U.S. 333, 352.)
Defendants
provide the declaration of Dan Ventura who states BBSI “is a temporary staffing services and
professional employer organization (PEO) company doing business in California
and other states. BBSI has numerous office locations in Southern California and
in other states across the United States. BBSI provides PEO services to
customers in California, as well as customers based outside of California. In
conducting its business operations, BBSI purchases equipment, goods, and
services that originate from outside of California.” (Ventura Decl. ¶ 2.)
Defendants’ evidence does not address Plaintiff’s specific employment. “[T]here
[is] no evidence in the record establishing that the relationship between [Plaintiff]
and [Defendant] had a specific effect or ‘bear[ing] on interstate commerce in a
substantial way.’” (Hoover v. American Income Life Ins. Co. (2012) 206
Cal.App.4th 1193, 1207.) By solely citing Defendant’s general business,
Defendants failed to meet their burden that “the contract with the arbitration provision has a
substantial relationship to interstate commerce . . . .” (Carbajal, supra, 245
Cal.App.4th at 238.)
However, under either the FAA or
California law, all Plaintiff’s claims are subject to arbitration as discussed
below.
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.)
In
opposition, Plaintiff contends the agreement violates Armendariz. (Opp.
at 3:4-7:9.) First, Plaintiff contends “the presence of Repeat Player indicates the
agreement fails for lack of neutral arbitrator” because the Arbitration
Agreement requires the parties arbitrate before JAMS. (Opp. at 3:11-26.)
Plaintiff cites Mercuro v. Superior Court (2002) 96 Cal.App.4th 167,
which has no application here. In Mercuro, the court addressed a
requirement to arbitrate before the National Arbitration Forum and the “relatively
few available NAF arbitrators.” The court noted the arbitration provision
expressly removed the plaintiff’s ability to participate in the selection of
the arbitrator. (Mercuro, supra, 96 Cal.App.4th at 179 (“The Countrywide
agreement provides the arbitrator will be selected by NAF. Therefore the weaker
party's participation in the selection of the arbitrator, which is sometimes
available under the statute, does not arise under the Countrywide
agreement.”).) No such limitation exists in the parties’ agreement and the
Arbitration Agreement expressly requires a neutral arbitrator. (Ventura Decl.
Ex. 1 § 2.) Plaintiff’s “repeat player” argument is unpersuasive.
Plaintiff
also argues the Arbitration Agreement fails to provide adequate discovery.
(Opp. at 3:28-6:10.) Plaintiff relies upon case authority involving express
limitations on discovery and high standards for additional discovery. (See De
Leon v. Pinnacle Property Management Services, LLC (2021) 72 Cal.App.5th
476, 487 (“the IRA limits each party to 20 interrogatories and three
depositions per side . . . the arbitrator could order more discovery ‘upon ...
a showing of substantial need’ ‘but only if the Arbitrator finds that such
additional discovery is not overly burdensome, and will not unduly delay
conclusion of the arbitration.’”); Davis v. Kozak (2020) 53 Cal.App.5th
897, 911–912 (“Red Bull's arbitration agreement provides instead for default
discovery that makes no mention of written discovery or document production,
that limits depositions to two per party, and that uses a less-defined
‘sufficient cause’ standard for obtaining additional discovery.”).)
The
Arbitration Agreement here contains no express limitations on discovery. The
JAMS rules provided by Plaintiff require the parties to exchange “all
non-privileged documents and other information . . . relevant to the dispute or
claim” provide that “[e]ach Party may take at least one deposition of an opposing
Party or an individual under the control of the opposing Party,” allow the
parties to agree to more depositions, and if they are unable to agree, “the Arbitrator
shall determine these issues, including whether to grant a request for
additional depositions, based upon the reasonable need for the requested
information, the availability of other discovery and the burdensomeness of the
request on the opposing Parties and the witness.” (Beck Decl. Ex. 1, Rule 17.) The
Arbitration Agreement provides adequate discovery and does not violate Armendariz’s
discovery requirements. (Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th
975, 984 (“We assume that the arbitrator will operate in a reasonable manner in
conformity with the law.”).)
Plaintiff
contends “the arbitration agreement does not provide for judicial review of the
written arbitration award and contains no language providing for limited
judicial review.” (Opp. at 6:13-15.) However, Armendariz only requires a
written award. (Armendariz, supra, 24 Cal.4th at 107 (“All we hold today
is that in order for such judicial review to be successfully accomplished, an
arbitrator in an FEHA case must issue a written arbitration decision that will
reveal, however briefly, the essential findings and conclusions on which the
award is based.”).) The Arbitration Agreement expressly contains this
requirement and therefore does not violate Armendariz. (Ventura Decl.
Ex. 1 § 2 (“The arbitrator shall issue a written decision with the essential
findings and conclusions on which the decision is based.”).)
Finally,
Plaintiff contends the Arbitration Agreement violates Armendariz’s
limitation on imposing arbitration costs upon employees. (Opp. at 6:26-7:9.)
However, nothing in the Arbitration Agreement requires Plaintiff to pay costs
unique to arbitration and “[t]he absence of specific provisions on arbitration
costs would therefore not be grounds for denying the enforcement of an
arbitration agreement.” (Armendariz, supra, 24 Cal.4th at 113.) Moreover,
the JAMS rules provided by Plaintiff incorporate the Armendariz
standard. (Beck Decl. Ex. 1 Rule 31.) Plaintiff’s argument is unpersuasive.
The
Court finds the agreement complies with the requirements of Armendariz.
Unconscionability
Plaintiff
also argues the agreement is unenforceable as unconscionable. (Opp. at 7:10-12:23.)
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.).)
Plaintiff Has Demonstrated
Minimal 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 7:18-9:15.) The
Arbitration Agreement expressly states it is a condition of employment.
(Ventura Decl. Ex. 1 (“As a condition of the Employee’s employment with Barrett
Business Services, Inc. . . .”).)
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.”).)
However, the Arbitration Agreement here
is a separate document signed by Plaintiff, which reduces any claimed
procedural unconscionability. (See e.g. Serafin v. Balco Properties Ltd.,
LLC (2015) 235 Cal.App.4th 165, 179 (“where the arbitration provisions
presented in a contract of adhesion are highlighted for the employee, any
procedural unconscionability is ‘limited.’”).)
Plaintiff’s opposition does not
establish any other basis for finding the agreement procedurally
unconscionable. Plaintiff cites Labor
Code section 432.6, which became effective after Plaintiff signed the agreement
and is therefore immaterial. Plaintiff also cites Chamber of Com. of United States v.
Bonta (9th Cir. 2021) 13 F.4th
766, (Opp. at 9:1-2.) However, that ruling has been withdrawn and resubmitted.
(Chamber of Commerce of United States v. Bonta (9th Cir. 2022) 45 F.4th
1113.) 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.)
Plaintiff Has Not
Demonstrated Substantive Unconscionability
Plaintiff argues that the Arbitration
Agreement failed to attach the JAMS rules. (Opp. at 10:19-12:4.) The cases cited
by Plaintiff addressed the failure to attach the rules of the arbitral forum as
an element of procedural, not substantive, unconscionability. (See e.g. Harper
v. Ultimo (2003) 113 Cal.App.4th 1402, 1406 (discussing the failure to
attach arbitration rules as evidence of oppression under procedural
unconscionability); Zullo v. Superior Court (2011) 197 Cal.App.4th 477,
485 (“The absence of the AAA (American Arbitration Association) arbitration
rules adds a bit to the procedural unconscionability.”).) However, California
law no longer supports this argument. (Baltazar, supra, 62 Cal.4th at
1246; Da Loc Nguyen v. Applied Medical Resources Corporation (2016) 4
Cal.App.5th 232, 249 (“As to these cases, Baltazar removed the
nonprovision or nonattachment of the AAA rules as a basis for increasing the
procedural unconscionability level.”); Cisneros Alvarez v. Altamed Health
Services Corporation (2021) 60 Cal.App.5th 572, 590 (“the failure to
provide a copy of the arbitration rules generally raises procedural unconscionability
concerns only if there is a substantively unconscionable provision in the
omitted rules.”).) The Court finds the failure to provide a copy of the JAMS
rules here does not add to substantive or procedural unconscionability.
Finally, Plaintiff contends the class
action waiver renders the agreement unenforceable. (Opp. at 12:5-23.) Plaintiff
does not cite any authority for this contention. The Arbitration Agreement
provides “[t]o the fullest extent permitted by law: (a) Employee and the
Company expressly agree that class action, collective action, and
representative action procedures shall not be asserted, nor will they apply, in
any arbitration pursuant to this Agreement; (b) Employee and the Company agree
that each will not assert class action, collective action, or representative
claims against the other in arbitration or otherwise; and (c) each of Employee
and the Company shall submit their individual claims to arbitration and will
not seek to represent the interests of any other person. This Section 3 does not
apply to any rights to bring class action, collective action, or representative
claims that may not be waived as a matter of law.]” (Ventura Decl. Ex. 1 § 3.)
Plaintiff has not brought a class or
representative action and the agree carves out any waiver to the extent it is
unlawful. (See e.g. 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.”); 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.”).)
The Court finds Plaintiff failed to
meet her burden to establish the arbitration provisions are unenforceable as
unconscionable.