Judge: Monica Bachner, Case: 22STCV06564, Date: 2023-04-11 Tentative Ruling

Department 71: Attorneys who elect to submit on these published tentative rulings, without making an appearance at the hearing, may so notify the Court by communicating this to the Department's staff at (213) 830-0771 before the set hearing time.  See, e.g., CRC Rule 324(b).   All parties are otherwise encouraged to appear by Court Call for all matters.

Case Number: 22STCV06564    Hearing Date: April 11, 2023    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendant Maxim Healthcare Staffing, Inc.’s motion to compel arbitration of Plaintiff Moyses Mancilla’s claims in this action is granted. This case is stayed pending arbitration.

The Court sets a non-appearance case review for April 11, 2024, 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.

Defendant Maxim Healthcare Staffing, Inc. (“Maxim Healthcare”) (“Defendant”) moves for an order compelling arbitration of all claims asserted by Plaintiff Moyses Mancilla (“Mancilla”) (“Plaintiff”) and dismissing Plaintiff’s complaint.  (Notice of Motion, pg. 2; 9 U.S.C. §§1 et seq.) 

Background

On February 23, 2022, Plaintiff filed the instant action for employment discrimination claims under the California Fair Employment and Housing Act (“FEHA”) against Defendant Maxim Healthcare and non-moving defendant Cherokee Nation Businesses, LLC (“Cherokee Nation”) (“Non-moving defendant”) in connection with Defendant’s June 9, 2021, alleged termination of Plaintiff’s employment based on in discrimination of Plaintiff’s disability, sex, and race.  (Complaint ¶18.)  Defendant filed the instant motion on November 8, 2022.  On March 28, 2023, Plaintiff filed his opposition.  On April 4, 2023, Defendant filed its reply.

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.  (Decl. of Williams ¶10, Exh. D §XI; Aviation Data, Inc. v. American Express Travel Related Service Co. (2007) 152 Cal.App.4th 1522, 1534-1535.)

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 he signed the Arbitration Agreement.  (Decl. of Williams ¶¶6, 10; Exhs. B, D.)  Second, the Arbitration Agreement expressly covers employment claims between Plaintiff and Defendant or the terms and conditions of employment.  (Decl. of Williams ¶10, Exh. D §§I, II.) 

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 April 21, 2021, at 11:54 a.m., Plaintiff signed the Mutual Agreement to Arbitrate Employment-Related Disputes (“Arbitration Agreement”).  (Decl. of Williams ¶10, Exh. D.)  Pursuant to C.C.P. §1281.2, Defendant demonstrates it made a formal demand for arbitration, which Plaintiff refused.  (Decl. of Kapoor ¶3, Exh. 2.)  Based on the foregoing, Defendant proved the existence of a valid Arbitration Agreement that is enforceable by Defendant. Further, Plaintiff does not dispute that he signed the Arbitration Agreement or that the Agreement covers all claims alleged in the Complaint.

B. Unconscionability

“[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, 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

Plaintiff argues the Arbitration Agreement is procedurally unconscionable because the Agreement states that it is deemed accepted by continuing employment with Defendant.  (Opposition, pg. 7; Decl. of Williams, Exh. D at pg. 7.)

“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.)

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’s argument in opposition that his requirement to sign the Arbitration Agreement as a condition of his employment is unavailing and is unsupported by case law. The adhesive nature of arbitration agreements in the employment context does not render an agreement unenforceable.  (Lagatree, 74 Cal.App.4th at pg. 1127 [“[C]ases uniformly agree that a compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis.”]; Armendariz, 24 Cal. 4th at pg. 113 [holding that the requirement that the employee sign an arbitration agreement may contain some elements of procedural unconscionability, but that, in itself, does not invalidate the arbitration agreement]; Ajamian v. CantorCO2e, LP (2012) 203 Cal.App.4th 771, 796 [“Where there is no other indication of oppression or surprise, the degree of procedural unconscionability of an adhesion agreement is low[.]”].)  Further, Plaintiff fails to submit evidence in support of his argument that Defendants presented the Arbitration Agreement on a “take it or leave it basis.”  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 Williams, Exh. D.)  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

Plaintiff argues the Arbitration Agreement is substantively unconscionable because it exempts from arbitration claims that the “Defendant employer would typically bring like those for declaratory and preliminary injunctive relief to protect proprietary information and noncompetition/non-solicitation clauses, while requiring arbitration for all claims that employees would typically bring such as discrimination and wrongful termination.”  (Opposition, pg. 7.)  Plaintiff argues the clause offering both parties the ability to apply to a court for injunctive relief is not mutual because the need for injunctive relief will only be for the employer’s claims for alleged stolen proprietary information or violation of a non-compete clause or non-solicitation clause.  (Opposition, pgs. 7-8.)  Plaintiff argues allegedly unconscionable provisions in the Arbitration Agreement cannot be severed.  (Opposition, pg. 9.)  Plaintiff argues he cannot be compelled to arbitrate claims against Defendant while also proceeding in court against non-moving Defendant Cherokee Nation pursuant to C.C.P. §1281(c).  (Opposition, pg. 9.)

“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, 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, 24 Cal.4th at pgs. 102-103.)

          Plaintiff’s arguments in opposition are unavailing and unsupported.  The Arbitration Agreement states that claims for breach of non-solicitation, non-disclosure, and non-competition agreements between Plaintiff and Defendant are covered claims and would be arbitrated regardless of which party alleges a breach.  (Decl. of Williams, Exh. D at pg. 2 §II.)  The Arbitration Agreement also provides the remedy of injunctive relief for both parties, despite Plaintiff’s argument that an employer is more likely to avail itself of the remedy.  (Decl. of Williams, Exh. D at pg. 3.)  Plaintiff’s argument that alleged unconscionable provisions of the Arbitration Agreement cannot be severed is contradicted by the existence of a severability clause in the Agreement, and Plaintiff has failed to demonstrate that any allegedly unconscionable provision is not collateral to the Agreement or could not be excised from the Agreement without the Court having to rewrite the Agreement.  Plaintiff’s argument that C.C.P §1281.2(c) precludes this Court from enforcing arbitration is inapposite because the Arbitration Agreement is governed by the FAA, not California law, and is therefore not a proper basis to deny the instant motion.  (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 393 [“[S]ection 1281.2(c) is not a special rule limiting the authority of arbitrators. It is an evenhanded law that allows the trial court to stay arbitration proceedings while the concurrent lawsuit proceeds or stay the lawsuit while arbitration proceeds to avoid conflicting rulings on common issues of fact and law amongst interrelated parties. Moreover, “[s]ection 1281.2(c) is not a provision designed to limit the rights of parties who choose to arbitrate or otherwise to discourage the use of arbitration. Rather, it is part of California’s statutory scheme designed to enforce the parties’ arbitration agreements, as the FAA requires.”]; Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122 [“In accordance with the agreement of the parties, section 3 of the FAA required the court to compel arbitration between [parties] and to stay the court proceeding with respect to their disputes with each other. . . . The court will not rewrite their contract.”].)

The Arbitration Agreement satisfies the requisite elements set forth in Armendariz to determine the Agreement is not substantively unconscionable.  First, the Arbitration Agreement provides for a “a single, neutral arbitrator of the American Arbitration Association (‘AAA’)” unless the parties agree to another mutually acceptable arbitrator.  (Decl. of Williams ¶10, Exh. D §VI.)  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, 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 AAA Employment Arbitration Rules specifically allow for discovery including “deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary for a full and fair exploration of the issues in dispute.”  (Decl. of Kapoor ¶2, Exh. 1 at pg. 19.)  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, 24 Cal.4th at pgs. 110-111.)  Here, the Arbitration Agreement provides for the types of individual relief that would be otherwise available in court, as it confirms a party’s “affirmative rights to individual damages and other relief, as would have applied if the claim was made, and proceeded, in a judicial forum” and expressly provides “The parties understand and agree that MAXIM will bear the arbitrator’s fee and any other type of expense or cost that the EMPLOYEE would not be required to bear if the dispute or claim was brought in court, as well as any other expense or cost that is unique to arbitration.”  (Decl. of Williams ¶10, Exh. D §§VII, XIV.)

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. 

C.    Stay of Current Action

Pursuant to C.C.P. §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.

D.   Conclusion

Defendants’ motion to compel arbitration is granted.  The case is stayed pending arbitration. The Court sets a non-appearance case review for April 11, 2024, 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:  April  7, 2023

Hon. Daniel P. Ramirez

Judge of the Superior Court