Judge: Olivia Rosales, Case: 21NWCV00009, Date: 2022-10-04 Tentative Ruling

Case Number: 21NWCV00009    Hearing Date: October 4, 2022    Dept: SEC

HERNANDEZ  v.  SOUTHLAND BOX COMPANY

CASE NO.:  21NWCV00009

HEARING:  10/04/22 @ 9:30 AM

#2

TENTATIVE RULING

Defendant Southland Box Company’s motion to compel arbitration is GRANTED as to the individual claims.  The representative claims are STAYED.

Moving party to give NOTICE.

Defendant Southland Box Company moves to compel arbitration pursuant to CCP § 1281.2.

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.  (CCP § 1281.) The court must grant the petition to compel arbitration unless it finds either: no written agreement to arbitrate exists; the right to compel arbitration has been waived; grounds exist for revocation of the agreement; or litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues.  (CCP § 1281.2.)

Plaintiff’s Complaint, filed on January 8, 2021, asserts six causes of action for PAGA violations.

Unconscionability

Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement. (Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219.)  An adhesion contract in of itself is insufficient to render the arbitration clause unenforceable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.) Instead, the opposing party must demonstrate that the agreement is unconscionable. (Id.) To find an agreement to be unconscionable, there must be a finding of both procedural unconscionability and substantive unconscionability. (Id. at 114.)

Procedural unconscionability concerns the manner in which the contract was negotiated and the parties' circumstances at that time, and focuses on the factors of oppression or surprise. (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 173.) “Procedural unconscionability focuses on the manner in which the disputed clause is presented to the party in the weaker bargaining position. When the weaker party is presented the clause and told to ‘take it or leave it’ without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present.” (Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1100.) “Substantive unconscionability addresses the fairness of the term in dispute. Substantive unconscionability ‘traditionally involves contract terms that are so one-sided as to ‘shock the conscience,’ or that impose harsh or oppressive terms.’”) (Szetela, supra, 97 Cal.App.4th at 1110.)

Plaintiff contends that the arbitration agreement is unconscionable because the employment contract was an adhesion contract.  Plaintiff declares that the agreement was imposed on Plaintiff with no opportunity to negotiate any of its terms.  (Hernandez Decl., ¶ 4.)  The agreement did not contain an opt-out provision, nor was Plaintiff told that he could opt-out if he so chose.  (Yang Decl., Ex. A; Hernandez Decl., ¶ 5.)  Therefore, the contract does have a degree of procedural unconscionability.

However, an adhesion contract in of itself is insufficient to render the arbitration clause unenforceable.  (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.) A finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided. There are degrees of procedural unconscionability. At one end of the spectrum are contracts that have been freely negotiated by roughly equal parties, in which there is no procedural unconscionability.  Contracts of adhesion that involve surprise or other sharp practices lie on the other end of the spectrum. Ordinary contracts of adhesion, although they are indispensable facts of modern life that are generally enforced, contain a degree of procedural unconscionability even without any notable surprises.  (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4^th 1237, 1244.)

Plaintiff points to no element of the contract that is substantively unconscionable.  The court finds that Plaintiff failed to establish substantive unconscionability.  There are no contract terms that are so one-sided that it shocks the conscience of impose harsh or oppressive terms. 

Accordingly, the court does not find that the contract is unconscionable.

PAGA Claims

Based on the recent United States Supreme Court opinion in Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022), all of Plaintiff’s individual claims are subject to binding arbitration.

The U.S. Supreme Court in Viking River held that a plaintiff loses standing to assert a representative PAGA claim once her own individual claims are compelled to arbitration.  (Viking River, supra, 142 S.Ct. at p. 1925.)  However, the California Supreme Court has held that a plaintiff retains standing even after their individual claims are settled. (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 80.) 

Because PAGA standing may be a state law issue, and the California Supreme Court is poised to hear this issue in Adolph v. Uber Technologies, Inc., No. S274671 (rev. granted July 20, 2022), this court will sever the representative claims from the individual claims, and stay the representative claims pending the arbitration of the individual claims and/or further instruction from the California Supreme Court.

Accordingly, the motion is GRANTED as to the individual claims.  The representative claims are STAYED.