Judge: Monica Bachner, Case: 22STCV00818, Date: 2022-11-07 Tentative Ruling

Case Number: 22STCV00818    Hearing Date: November 7, 2022    Dept: 71

Superior Court of California

County of Los Angeles

 

DEPARTMENT 71

 

TENTATIVE RULING

 

BERTRAND ESCANO,

 

         vs.

 

LOS ANGELES FEDERAL CREDIT UNION and DINA FRANKS.

 Case No.:  22STCV00818

 

 

 

Hearing Date:  November 7, 2022

 

Defendants Los Angeles Federal Credit Union’s and Dina Franks’s motion to compel arbitration of Plaintiff Bertrand Escano’s claims in this action is granted. Plaintiff’s request for a 402 Evidentiary Hearing is denied. The case is stayed pending arbitration.

 

The Court sets a non-appearance case review for May 3, 2023 at 8:30 a.m.  The parties are directed to submit a joint statement five calendar days in advance, apprising the Court of the status of the arbitration.

 

Defendants Los Angeles Federal Credit Union (“Credit Union”) and Dina Franks (“Franks”) (collectively, “Defendants”) move for an order compelling arbitration of all claims asserted by Plaintiff Bertrand Escano (“Escano”) (“Plaintiff”) and dismissing Plaintiff’s claims or alternatively staying the action pending completion of arbitration.  (Notice of Motion, pgs. 1-2.) 

 

Evidentiary Objections

 

Plaintiff’s 10/25/22 evidentiary objections to the Declaration of Michelle Spence (“Spence”) are overruled as to Nos. 1, 2, 3, 4, and 5.

 

Background

 

On January 7, 2022, Plaintiff filed the instant action for employment disability discrimination claims under the California Fair Employment and Housing Act (“FEHA”), Labor Code §1102.5, and the California Family Rights Act (“CFRA”) against Defendants in connection with Defendant’s September 17, 2021, alleged constructive/actual termination of Plaintiff’s employment in discrimination of Plaintiff’s disabilities, including Plaintiff’s possible exposure to COVID-19, time Plaintiff took off related to his health and/or the health of his child, illness or the employer’s perception of his illness related to COVID-19, and his medical condition.  (Complaint ¶¶30-31.)  Defendants filed the instant motion on April 7, 2022.  Plaintiff filed his opposition on October 25, 2022.  Defendants filed their reply on October 31, 2022.

 

Motion to Compel Arbitration

 

A.  Arbitration Agreement

 

  1. The Arbitration Agreement is enforceable

 

Federal law provides for enforcement of this Arbitration Agreement. The Federal Arbitration Act, 9 U.S.C. §1, et seq. (“FAA”), establishes a strong federal policy in favor of arbitration of disputes where a written arbitration agreement exists. Section 2 of the FAA provides, in pertinent part that “[a] written provision . . . to settle by arbitration a controversy thereafter arising out of such contract . . .  shall be valid, irrevocable, and enforceable.” (9 U.S.C. §2.)  The purpose of the FAA is to “reverse the longstanding judicial hostility to arbitration agreements.” (Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 24.)  The FAA places arbitration agreements “on an equal footing with other contracts and [requires courts] to enforce them according to their terms.”  (AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. 333, 339; see also Rent-A-Center West, Inc. v. Jackson (2010) 561 U.S. 63, 67 [“The FAA reflects the fundamental principle that arbitration is a matter of contract.”].)  The FAA will preempt not only a state law that “discriminat[es] on its face against arbitration,” but also a state law that “covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements.” (Kindred Nursing Centers Limited Partnership v. Clark (2017) 137 S.Ct. 1421, 1426.)

 

The United States Supreme Court has specifically held that the FAA applies to employment contracts: “[A]s a matter of law the answer is clear.  In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms.”  (Epic Systems Corp. v. Lewis (2018) 138 S.Ct. 1612, 1619, [holding that employees must submit to arbitration agreements including those with collective action waivers].)  Here, the FAA is applicable to the Arbitration Agreement executed by Plaintiff because the Arbitration Agreement confirms it is governed by the FAA. (Motion, Exh. C ¶8; Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1074, 1075.)

 

The FAA restricts a court’s inquiry related to compelling arbitration to two threshold questions: (1) whether there was an agreement to arbitrate between the parties; and (2) whether the agreement covers the dispute.  (Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 84.)  Here, both criteria are satisfied. First, Plaintiff agreed to arbitration when signed the Arbitration Agreements.  (Decl. of Spence ¶¶ 5-6; Exhs. B, C.)  Second, the Arbitration Agreement expressly covers employment claims between Plaintiff and Chartwell. (Decl. of Spence, Exhs. B ¶1, C ¶2.) 

 

California law also favors arbitration for dispute resolution. The California Arbitration Act (“CAA”), codified at C.C.P. §1281 et seq., provides, “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.” (C.C.P. §1281; see also Grafton Partners L.P. v. Superior Court (2005) 36 Cal.4th 944, 955 [“[U]nlike predispute jury waivers, predispute arbitration agreements are specifically authorized by statute.”].)  

 

“California law, like federal law, favors enforcement of valid arbitration agreements.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97, 99 [“Armendariz”].) The public policy in favor of arbitration is so strong that California courts have held that an employee is “bound by the provisions of the [arbitration] agreement regardless of whether [he] read it or [was] aware of the arbitration clause when [he] signed the document.”  (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, citing Macaulay v. Norlander (1992) 12 Cal.App.4th 1.)  The only prerequisite for a court to order arbitration is a determination that the parties have entered into an agreement to arbitrate the dispute.  (United Transportation Union v. Southern California Rapid Transit District (1992) 7 Cal.App.4th 804, 808.) Thus, arbitration must be ordered “unless the agreement clearly does not apply to the dispute in question.” (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189.)

 

Defendants proved the existence of an arbitration agreement with Plaintiff.  Defendant submitted evidence that on February 12, 2007, Plaintiff signed the Los Angeles Federal Credit Union Mutual Agreement to Arbitrate Claims (“Arbitration Agreement”).  (Decl. of Spence ¶5, Exh. B.)  Credit Union modified its arbitration agreement in 2019 and Plaintiff signed the new Arbitration Agreement on March 29, 2019.  (Decl. of Spence ¶6, Exh. C.)  Pursuant to C.C.P. §1281.2, Defendants demonstrate they made a formal demand for arbitration, which Plaintiff refused.  (Decl. of Schimley ¶3.)  Although Plaintiff appears to deny signing the 2007 agreement to arbitrate (stating “I have never seen these two documents and I do not recall ever seeing these documents”), he does not deny signing the 2019 agreement.  (Decl. of Escano, ¶¶2, 4-6.)  Based on the foregoing, Defendants proved the existence of a valid Arbitration Agreement that is enforceable by Defendants.

 

B. Unconscionability

 

Plaintiff argues the arbitration agreement is procedurally and substantively unconscionable. (Opposition, pg. 10.)  “[P]rocedural 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.”  (Armendariz, supra, 24 Cal.4th at pg. 102.)  Courts invoke a sliding scale 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, i.e., the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa.  (Id., at pg. 114.)  Plaintiff bears the burden of proving that the provision at issue is both procedurally and substantively unconscionable. 

 

  1. Procedural Unconscionability

     

    “Procedural unconscionability focuses on the elements of oppression and surprise. [Citations] ‘Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice . . . Surprise involves the extent to which the terms of the bargain are hidden in a ‘prolix printed form’ drafted by a party in a superior bargaining position.’ [Citations]” (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469.)

     

    Plaintiff argues that the arbitration agreement is procedurally unconscionable because: (1) Plaintiff signed the Arbitration Agreement to secure an offer of employment, which deprived Plaintiff of meaningful choice and an opportunity to negotiate; (2) Plaintiff was presented with a “take it or leave it” situation and nothing was explained to Plaintiff; and (3) it is unclear why Credit Union decided to impose a new arbitration agreement twelve years after Plaintiff was first hired.  (Opposition, pgs. 15-16.)

     

    Procedural unconscionability “focuses on the unequal bargaining positions and hidden terms common in the context of adhesion contracts.”  (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1212-1213.)  Although standard employment agreements offered on a “take it or leave it” basis are generally considered contracts of adhesion, this alone is not enough to equate to unconscionability.  (See Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 817-819 [“To describe a contract as adhesive in character is not to indicate its legal effect. It is, rather, ‘the beginning and not the end of the analysis insofar as enforceability of its terms are concerned.’”].)  Adhesion contracts are “fully enforceable . . . unless certain other factors are present which under established legal rules—legislative or judicial—operate to render it otherwise.” (Id. at 819-820; Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1409 [adhesion alone does not render arbitration agreements unconscionable]; see also Armendariz, supra, 24 Cal.4th at 114; Lagatree v. Luce, Forward, Hamilton & Scripps, LLP (1999) 74 Cal.App.4th 1105 [discussing many authorities upholding arbitration agreements contained in adhesion contracts].)

     

    Plaintiff declares that he was “told by an HR employee that if [he] did not sign [the Arbitration Agreement] then [he] would be fired on the spot.”  (Decl. of Escano ¶5.)  Plaintiff also declares he was first emailed the Arbitration Agreement in or about February 2019; Plaintiff’s signature on the Arbitration Agreement is dated March 29, 2019, which suggests Plaintiff had almost a month to consider the Agreement and was therefore not presented with an immediate “take it or leave it” scenario.  (See Decl. of Escano ¶4.)  The terms of the Arbitration Agreement do not appear hidden or obscure, and the Arbitration Agreement was presented as a separate document to review. (Decl. of Spence, Exh. C.)  Accordingly, the Arbitration Agreement’s duty to arbitrate was not hidden from Plaintiff in a manner as to make him unaware of the agreement to arbitrate.

     

    Based on the foregoing, the Court finds the Arbitration Agreement is minimally procedurally unconscionable.  However, as discussed below, the Court finds the arbitration agreement is not substantively unconscionable. 

     

  2. Substantive Unconscionability

     

    “Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create ‘overly harsh’ or ‘‘one-sided’ results’ [Citations] that is, whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner.  [Citation] Substantive unconscionability ‘may take various forms,’ but typically is found in the employment context when the arbitration agreement is ‘one-sided’ in favor of the employer without sufficient justification, for example, when ‘the employee’s claims against the employer, but not the employer’s claims against the employee, are subject to arbitration.’ [Citations].”  (Roman, supra, 172 Cal.App.4th at pgs. 1469-1470.) In determining whether an arbitration agreement is unconscionable, the Court considers whether the agreement: (1) provides for a neutral arbitrator; (2) provides for reasonable discovery; (3) requires a written award; (4) provides for the same remedies that otherwise would be available in court; and (5) does not require employees to bear costs unique to arbitration.  (See Armendariz, supra, 24 Cal.4th at pgs. 102-103.)

     

    Plaintiff argues the operative 2019 Agreement is substantively unconscionable because (1) the employer representative and Plaintiff did not sign the Agreement the same day, and there is no explanation of how the Agreement was presented to Plaintiff; (2) paragraph 4 gives the arbitrator the power to compel arbitration; (3) paragraph 6 denies Plaintiff the right to recover attorney’s fees allowed in FEHA claims; (4) paragraph 7 gives Credit Union the right to assert additional defenses but no similar right is afforded to Plaintiff; and (5) the Agreement does not provide a process for arbitrator selection.  (Opposition, pg. 17.)  Plaintiff further requests a 402 hearing to present evidence to assist this Court in its determination of substantive unconscionability.  (Opposition, pg. 17.)

     

              Plaintiff’s five arguments do not demonstrate the Arbitration Agreement is substantively unconscionable.  First, there is no legal authority requiring an employer to sign an arbitration agreement to make it binding.  (See, e.g., Boucher v. Alliance Title Company, Inc. (2005) 127 Cal.App.4th 262, 271 [identifying cases where non-signatory defendants could compel signatory plaintiffs to arbitrate claims in complaint].)  Second, an arbitrator is empowered to determine the gateway issues of arbitrability so long as the parties agree to that process, which the parties here have done.  (Malone v. Superior Court (2014) 226 Cal.App.4th 1551; Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 68-69; Decl. of Spence, Exh. C ¶4.)  Third, the Arbitration Agreement states, “The parties may be represented by their own attorneys in the arbitration proceeding and, except as may be otherwise required by law (emphasis added), shall be responsible for their own attorneys’ fees and costs incurred in presenting their case to the arbitrator,” and therefore preserves Plaintiff’s right under FEHA to recover attorneys’ fees.  (Decl. of Spence, Exh. C ¶6.)  Fourth, the Arbitration Agreement allows both parties to “retain all defenses that they would have in a judicial proceeding.”  (Decl. of Spence, Exh. C ¶7.)  Finally, the Arbitration Agreement follows the JAMS Employment Arbitration Rules & Procedures, which provides a process for selection of an arbitrator.  (Decl. of Spence, Exh. C ¶1; see JAMS Employment Arbitration Rules & Procedures, Rule 15.)

     

    The Arbitration Agreement satisfies the requisite elements set forth in Armendariz to determine the Agreement is not substantively unconscionable.  First, as stated above, the Arbitration Agreement provides for a neutral arbitrator; the Agreement states, all claims or controversies . . . shall be resolved through final and binding arbitration using the JAMS Employment Arbitration Rules & Procedures Rules.”  (Decl. of Spence, Exh. C ¶1.)  Second, the court in Armendariz explicitly acknowledged an arbitrator’s authority to determine what constitutes sufficient discovery adequate to arbitrate an employee’s claims. (Armendariz, supra, 24 Cal.4th at pg. 106 [employees are “entitled to discovery sufficient to adequately arbitrate their statutory claim, including access to essential documents and witnesses, as determined by the arbitrator.”)  Here, the Arbitration Agreement states “[t]he arbitrator shall authorize discovery sufficient to adequately arbitrate Parties’ claims as determined by the arbitrator, including access to essential documents and witnesses.” (Decl. of Spence, Exh. C ¶7.)  Therefore, the parties remain entitled to conduct all relevant discovery.  Third, Under Armendariz, an employee cannot be required to pay any type of expense that the employee would not be required to bear if he or she were free to bring the action in court. (Armendariz, supra, 24 Cal.4th at pgs. 110-111.)  Here, the Arbitration Agreement provides that “The Company shall bear those costs specific to the arbitration process, including the compensation of the Arbitrator and all administrative expenses.” (Decl. of Spence, Exh. C ¶6.)  Accordingly, Plaintiff would not be required to bear expenses he would not be required to bear if he were to bring the action in court.

     

    Based on the evidence before the Court, the terms of the Arbitration Agreement do not create overly harsh or one-sided results, satisfying the requirements for a substantively conscionable agreement.

     

    Based on the foregoing, the Court finds the Arbitration Agreement is not substantively unconscionable.  Plaintiff’s request for a 402 Evidentiary Hearing is denied.  Trinity v. Life Ins. Co. of America (2022) 78 Cal. App. 5th 1111, 1122, cited by Plaintiff is inapposite as Plaintiff acknowledged that he signed the 2019 Agreement.. 

     

  1. Stay of Current Action

 

Pursuant to Code of Civil Procedure section 1281.4, if an application has been made to a court involving order to arbitrate a controversy and such application is undetermined, the court where the application is pending shall, upon motion of a party to the action, stay the action until the application for an order to arbitrate is determined. (C.C.P. §1281.4.)

 

Accordingly, this case is stayed pending arbitration.

 

  1. Conclusion

 

Defendants’ motion to compel arbitration is granted.  The case is stayed pending arbitration. The Court sets a non-appearance case review for May 3, 2023 at 8:30 a.m.  The parties are directed to submit a joint statement five calendar days in advance, apprising the Court of the status of the arbitration.

 

Dated:  November _____, 2022

                                                                                                                       

Hon. Monica Bachner

Judge of the Superior Court