Judge: Nathan Vu, Case: 30-2022-01262997, Date: 2022-10-31 Tentative Ruling
Please Note: The hearing on this matter has been changed to 8:30 A.M.
Motion to Compel Arbitration
Defendant Southern California Pizza Company, LLC, d/b/a Pizza Hut’s and Itzel Luna’s motion to compel arbitration is GRANTED.
This action is STAYED pending completion of arbitration.
The Case Management Conference set for 11/10/2022 is taken OFF CALENDAR.
An Alternative Dispute Resolution (ADR) Review Hearing shall be scheduled for 02/16/2023 at 8:30 am in Department N15.
Plaintiff Carlos Villegas’ evidentiary objection numbers 11, 14, and 15 are SUSTAINED and evidentiary objection numbers 1-10, 12-13, and 16 are OVERRULED.
Defendant Southern California Pizza Company, LLC, d/b/a Pizza Hut’s and Itzel Luna’s evidentiary objection numbers 1-8 are OVERRULED.
Compelling Arbitration
When a party to an arbitration agreement refuses to submit to arbitration, the other party may petition the court to compel arbitration and stay any pending lawsuit. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218).
Specifically, Civil Procedure Code section 1281.2 states:
On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that [an exception applies].
(Civil Proc. Code., § 1281.2.)
Standard for Compelling Arbitration
The right to arbitration depends upon contract, and thus, a motion to compel arbitration is akin to a suit in equity seeking specific performance of that contract. (See Little v. Pullman (2013) 219 Cal.App.4th 558, 565.)
Pursuant to Section 1281.2, the court must grant the petition unless it finds that one of the exceptions applies: (1) that no written agreement to arbitrate exists; (2) that the right to compel arbitration has been waived; (3) that grounds exist for revocation of the agreement; or (4) that litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Civil Proc. Code, § 1281.2; Condee v. Longwood Management Corp., supra, 88 Cal.App.4th at pp. 218-219.)
The moving party bears the burden of alleging and proving the existence of a valid arbitration agreement by the preponderance of the evidence. (Little v. Pullman, supra, 219 Cal.App.4th at p. 565.) Rules of Court Rule 3.1330 states:
A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.
(Cal. Rules of Court, rule 1.1330; see also Condee v. Longwood Management Corp. , supra, 88 Cal.App.4th at p. 218 [party seeking arbitration is required to allege existence of agreement to arbitrate].)
A party opposing the motion bears the burden of alleging and proving by a preponderance of the evidence any fact necessary to its defense. (Little v. Pullman, supra, 219 Cal.App.4th at p. 565.) In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination. (Ibid.)
“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Id., quotations omitted.)
Existence of Arbitration Agreement
The Supreme Court in Condee v. Longwood Management Corp. held that the party seeking arbitration was only required to state or provide the provisions of the agreement requiring arbitration. (Condee v. Longwood Management Corp., supra, 88 Cal.App.4th at pp. 218-219.) The party requesting arbitration was not required to follow the normal procedures to authenticate documents and Section 1281.2 “does not require the petitioner to introduce the agreement into evidence.” (Ibid.)
If the party opposing arbitration challenges the authenticity of an electronic signature to the agreement, the burden shifts back to the moving party to offer evidence that the electronic signature could only have been placed on the agreement by a person using the employee's unique identification number and password. (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 844.)
The moving party may meet the burden of showing that the electronic signature was the act of the employee “in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” (Civil Code, § 1633.9). The moving party may submit a supplemental evidence in reply to meet its burden. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.)
Here, Defendants have met their initial burden by attaching a copy of the arbitration agreement and submitting the declaration of Joelena McCoy, Senior Director of Human Resources at Defendant Southern California Pizza Company, LLC, d/b/a Pizza Hut (SPC). McCoy’s declaration states that all new employees must create a unique username and password in order to access their onboarding paperwork, that the password cannot be accessed by anyone other than the user, and that Plaintiff’s arbitration agreement was electronically signed using Plaintiff’s password. (McCoy Decl., ¶ 3-9 & Exh. A.)
Challenge to the Existence of the Arbitration Agreement
Plaintiff challenges the authenticity of the arbitration agreement by testifying that he “did not consent to entering into any arbitration agreement by electronic means at any point of [his] employment with Defendant.” (Villegas Decl., ¶ 4.)
Plaintiff further testifies that no agent or representative of Defendant reviewed or discussed that there was an arbitration agreement, the advantages and disadvantages of the arbitration agreement, or the legal effect of the arbitration agreement. (Id., ¶ 5-7.)
Defendant does admit that, “I applied to work for Defendant using their online portal system. Shortly after hiring, Defendant also had me sign several onboarding documents in person, in paper form.” (Id., ¶ 3.) That is the extent of his testimony about the onboarding process.
Reply to the Challenge to the Arbitration Agreement
The burden then shifts to the Defendants to prove that the electronic signature was the act of the Plaintiff. Defendants offer a supplemental declaration by McCoy, which states:
(McCoy Reply Decl., ¶ 5-9 & Exhs. C-D.)
Considering all the evidence, including Plaintiff’s declaration, McCoy’s two declarations, and all admissible evidence attached to them, that Defendants have established by a preponderance of evidence that the arbitration agreement is valid and was electronically signed by Plaintiff. McCoy’s declarations credibly explain the procedures of the onboarding process and that Plaintiff’s username and password was unique and that no person other than Plaintiff had access to that information such that there is a sufficient “security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” Furthermore, other onboarding documents that were completed on the same day as the arbitration agreement contained Plaintiff’s private information that only Plaintiff would know.
Plaintiff’s only evidence is his bare assertion that he did not consent to an electronic arbitration agreement and that Defendants did not discuss the arbitration agreement with him. Plaintiff provides no facts or evidence to provide context to his claims.
For example, while Plaintiff admits that he did use the onboarding portal, he does not state whether he created a unique username and password, and what documents he reviewed and signed electronically. Plaintiff offers no evidence that any other person had access to his username or password. While he testifies that he also signed some onboarding materials in person, there are no facts to establish what those documents are or what the relevance of that fact might be.
Where the employee’s declarations contain conclusory allegations with little detail and the employer provides evidence that explains in detail the onboarding process and authenticates the employee’s signature on the arbitration agreement, the courts have found that it was more likely than not that the employee signed the arbitration agreement. (See Ruiz v. Moss Bros. Auto Group, Inc., supra, 232 Cal.App.4th 836, 838-840 & 844; Fabian v. Renovate Am., Inc., (2019) 42 Cal.App.5th 1062, 1069-1070.) Considering the totality of the evidence, this court finds that Defendants have met their burden of showing the existence of an arbitration agreement.
Unconscionability
Plaintiff next asserts that the arbitration agreement is not valid because it is unconscionable.
The doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of both procedural and substantive components – “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Ibid.)
Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114; Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1570.)
“Essentially a sliding scale is invoked 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. In other words, the more substantively unconscionable 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. Found Health Psychcare Servs., Inc., supra, 2000) 24 Cal.4th 83 at p. 114.)
“The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Ass’n. v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 247.)
Procedural Unconscionability
Procedural unconscionability concerns the manner in which the contract was negotiated and the parties' circumstances at that time. It focuses on the factors of surprise and oppression. (Kinney v. United Healthcare Servs. (1999) 70 Cal.App.4th 1322, 1329.)
These factors “include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126-127.)
As noted by the Supreme Court in OTO, “the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration requirement.” (Id. at p. 127).
Thus, the Supreme Court has instructed courts to first determine whether an arbitration agreement is adhesive. (See Armendariz v. Found. Health Psychcare Servs., Inc., supra, 24 Cal. 4th 83, 114–15.) “Oppression generally takes the form of a contract of adhesion, 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.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84, quotations and citations omitted.)
In this case, the employment agreement contained an adhesive arbitration provision. Agreeing to arbitration was a condition of Plaintiff’s employment and Plaintiff had no ability to negotiate it.
Plaintiff provided evidence that he had limited education and experience and he was not aided by an attorney. Defendants have provided evidence that Plaintiff was given an unlimited amount of time to consider the arbitration agreement, there was little pressure exerted on Plaintiff since the arbitration agreement was presented to Plaintiff online, and the arbitration agreement was two pages and 9 paragraphs long.
The court therefore finds a low degree of procedural unconscionability.
Substantive Unconscionability
Even if an arbitration agreement is adhesive and procedurally unconscionable, that “does not as a matter of law render [it] unenforceable.” (McManus v. CIBC World Markets Corp. (2003) 109 Cal. App. 4th 76, 91.) “[The] adhesive aspect of an agreement is not dispositive.” (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704; see also Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal. App. 4th 1105, 1127 [“As we have seen, the cases uniformly agree that a compulsory pre-dispute 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. An employee who signs such an agreement is obligated to submit employment-related disputes to arbitration; if he refuses to do so, the courts stand ready to compel arbitration.”].)
In order to be invalid, the arbitration agreement must also be substantively unconscionable. “Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh.” (Carmona v. Lincoln Millennium Car Wash, Inc., supra, 226 Cal.App.4th at p. 85, quotations and citations omitted.) A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be so one-sided as to ‘shock the conscience.’” (Id.)
The “paramount consideration” is the mutuality of the obligation to arbitrate. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1287.) “Substantive unconscionability focuses on the one-sidedness or overly harsh effect of the contract term or clause.” (Harper vs. Ultimo (2003) 113 Cal.App.4th 1402, 1406-1407.) An arbitration agreement “lacks basic fairness and mutuality if it requires one contracting party, but not the other, to arbitrate all claims arising out of the same transaction or occurrence or series of transactions or occurrences.” (Armendariz v. Found Health Psychcare Servs., Inc., supra, 24 Cal.4th at p. 120.)
In addition, an arbitration provision must provide an adequate forum to adjudicate the parties’ claims. (Id. at p. 101.) An arbitration provision is adequate if it provides for the following:
1. Neutral arbitrator;
2. Adequate discovery;
3. A written award;
4. No limitation on remedies; and
5. No unreasonable costs and arbitration fees to be paid by the employee.
(Id. at 102.)
In terms of discovery limits that usually come with arbitration, the Supreme Court has ruled that arbitration procedures in the employment context must provide for adequate discovery, which is “more than minimal discovery.” (Armendariz v. Found Health Psychcare Servs., Inc., supra, 24 Cal.4th at pp. 105-106.) Where there is at least “adequate discovery” allowed, the “lack of discovery is not grounds for holding a [] claim inarbitrable.” (Id. at 106.)
The Court of Appeal recently explained, however “that ‘adequate’ does not mean ‘unfettered.’ In striking the appropriate balance between the desired simplicity of limited discovery and an employee's statutory rights, courts assess the amount of default discovery permitted under the arbitration agreement, the standard for obtaining additional discovery, and whether the plaintiffs have demonstrated that the discovery limitations will prevent them from adequately arbitrating their statutory claims.” (Davis v. Kozak (2020) 53 Cal.App.5th 897, 910–911.)
Here, Plaintiff argues that the arbitration agreement is substantively unconscionable only on the basis that discovery is limited by the rules of the arbitration provider, JAMS. Plaintiff, however, has not explained (1) what discovery he needs to prove his case, (2) what provisions of JAMs limit those needs, and (3) whether or not other alternative provisions exist under JAMS to request leave for additional discover.
As such, Plaintiff has not met his burden of “demonstrat[ing] that the discovery limitations will prevent them from adequately arbitrating their statutory claims.” The discovery limits in the JAMS rules are mutual and bilateral and as Defendants point out, the arbitration agreement allows the parties to arbitrate its claims in accordance with Civil Procedure Code section 1280 et seq. “including section 1283.50 and all of the Act’s other mandatory and permissive rights to discovery . . . .”
The arbitration agreement is not permeated with unconscionability. When viewed as a whole and balancing all the circumstances, the arbitration agreement is not unconscionable.
Defendants shall give notice of this ruling.