Judge: Peter A. Hernandez, Case: 23STCV28977, Date: 2025-01-27 Tentative Ruling
Case Number: 23STCV28977 Hearing Date: January 27, 2025 Dept: 34
Defendant Huang Law Group’s Motion to Compel Arbitration and Stay Proceedings is GRANTED.
Background
On
November 5, 2024, Plaintiff Felicity Tingyu Newman (“Plaintiff”) filed a
complaint against Defendants Huang Law Group and Qing Yang (“Defendants”)
arising from Plaintiff’s employment with Defendants alleging causes of action
for:
1.
Gender
Identity Discrimination in Violation of the FEHA;
2.
Hostile
Work Environment – Gender Identity Harassment in Violation of the FEHA;
3.
Retaliation
in Violation of the FEHA;
4.
Failure
to Prevent Discrimination, Harassment, and/or Retaliation in Violation of the
FEHA;
5.
Wrongful
Termination in Violation of Public Policy;
6.
Failure
to Provide Meal Breaks in Violation of Labor Code § 226.7;
7.
Failure
to Provide Rest Breaks in Violation of Labor Code § 226.7;
8.
Failure
to Provide Accurate Wage Statements in Violation of Labor Code § 226;
9.
Waiting
Time Penalties Pursuant to Labor Code §§ 201 and 203; and
10.
Failure
to Permit Inspection of Personnel File and Payroll Records in Violation of
Labor Code §§ 226(c), 226(f), 432, and 1198.5.
On December 6, 2024, Defendant Huang Law
Group (“Huang”) filed this Motion to Compel Arbitration. On January 13, 2025,
Plaintiff filed an opposition. On January 21, 2025, Huang filed a reply.
Legal Standard
“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: (a) The right to compel arbitration has been waived by the petitioner; or
(b) Grounds exist for rescission of the agreement.” (Code Civ. Proc., § 1281.2,
subds. (a) and (b).)
The party seeking to compel arbitration bears the burden of proving the
existence of a valid arbitration agreement by the preponderance of the
evidence. (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144
Cal.App.4th 754, 761.) The burden then shifts to the opposing party to
prove by a preponderance of the evidence a defense to enforcement (e.g., fraud,
unconscionability, etc.) (Ibid.) “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.” (Engalla v. Permanente
Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)
“If a court of competent jurisdiction. . . has ordered arbitration of a
controversy which is an issue involved in an action or proceeding pending
before a court of this State, the court in which such action or proceeding is
pending shall, upon motion of a party to such action or proceeding, stay the
action or proceeding until an arbitration is had in accordance with the order
to arbitrate or until such earlier time as the court specifies.” (Code Civ.
Proc., § 1281.4).
Discussion
Huang moves to compel
arbitration of Plaintiff’s claims and staying all further judicial proceedings
in this action pending completion of arbitration.
Existence of an Arbitration Agreement
Huang argues that Plaintiff entered
into an arbitration agreement on December 29, 2023. (Huang Decl., Exh. A.)
Huang provides evidence of such agreement and Plaintiff’s acceptance. (Ibid.)
Huang’s arbitration agreement provides as follows:
1. Mutual Mandatory Arbitration. In exchange for the mutual
promises contained in this Agreement, the Parties agree that:
(a) Any dispute, controversy, or claim arising out of or related in any
way to Employee's employment by Employer, or termination of employment,
including but not limited to claims arising under or related to this Agreement
or any breach of this Agreement, and any alleged violation of any federal,
state, or local statute, regulation, common law, or public policy, shall be
submitted to and decided by final binding arbitration to the fullest extent
allowed and enforceable under applicable law. Any arbitration shall be governed
by the Federal Arbitration Act (FAA) to the exclusion of any state law
inconsistent with the FAA. Notwithstanding anything to the contrary, this
Agreement does not prevent Employee from filing a complaint or charge with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any similar federal or state administrative agency, including claims for
workers' compensation or unemployment insurance benefits.
(b) Any dispute, controversy or claim arising out of or relating to this
Agreement, its enforcement, arbitrability or interpretation, or because of an
alleged breach, default, or misrepresentation in connection with any of its
provisions and/ or arising out of or relating in any way to Employee's
employment, including application for employment with Employer or termination
of employment, including any alleged violation of any statute, common law or
public policy shall be submitted to and decided by final and binding
arbitration.
(Ibid.)
The court finds that
Huang has met its initial burden of proving the existence of a signed arbitration agreement between the parties wherein
the parties agreed to arbitrate claims arising out of Plaintiff’s employment by
providing Exhibit A in the declaration of Xiaosheng Huang. The burden thus
shifts to Plaintiff, who may present any challenges to the enforcement of the
agreement and evidence in support of those challenges.
Unconscionability
Plaintiff argues that
the arbitration agreement is unenforceable because it is procedurally and
substantively unconscionable. (Opp., at p. 7.)
An agreement is
unenforceable if it is both procedurally and substantively
unconscionable. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125; Sanchez
v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910.) But
procedural and substantive unconscionability need not be present in the same
degree. (OTO, supra, 8 Cal.5th at 125.) Courts
use a “sliding scale” approach—“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. (2000) 24 Cal.4th 83,
114.) Under general contract principles,¿unconscionability has both
a procedural and substantive element, with the former focusing on oppression or
surprise due to unequal bargaining power, and the latter focusing on overly
harsh or one-sided rules (Armendariz, supra, 24 Cal.4th at p.
114.)¿¿Both procedural and substantive¿unconscionability must be present¿in
order for¿a court to exercise its discretion to refuse to enforce a contract on
the basis of unconscionability.¿ (Stirlen¿v. Supercuts, Inc. (1997) 51
Cal.App.4th 1519, 1533.)
i.
Procedural Unconscionability
“Procedural unconscionability pertains to the making of the agreement; it
focuses on the oppression that arises from unequal bargaining power and the
surprise to the weaker party that results from hidden terms or the lack of
informed choice.”¿ (Ajamian¿v. CantorCO2e, L.P.¿(2012) 203 Cal.App.4th
771, 795.)¿¿Arbitration clauses are often found in adhesion contracts
(standardized contracts drafted by a party of superior bargaining power and
presented to the weaker party on a take-it-or-leave-it basis).¿ (See, e.g.,¿Armendariz,
supra, 24 Cal.4th at 113-114.)¿
Plaintiff argues that the
arbitration agreement is procedurally unconscionable because of the unequal
bargaining power between the parties as Huang is a law firm with lawyers who
know the complexities of the law and Plaintiff does not. (Opp., at p. 8.) Plaintiff
also argues that she was under influence from her supervisor, Defendant Qing
Yang, to sign the arbitration agreement and believed that she would lose her
job if Plaintiff did not sign the agreement. (Ibid.) As such, Plaintiff
argues that where an adhesive contract is oppressive, surprise does not need to
be shown. (Ibid.)
In reply, Huang argues
that there is no factual basis to support Plaintiff’s claim that she was
pressured into signing the arbitration agreement. (Reply, at p. 4.) Huang also
argues that Plaintiff is a licensed attorney in China and holds a master’s
degree in law from a U.S. law school. (Ibid.) Huang contends that
Plaintiff was given ample opportunity to review the arbitration agreement and
consult with counsel to decide whether to sign the arbitration agreement. (Ibid.)
Lastly, Huang argues that Plaintiff was not coerced or unduly influenced into
signing the agreement. (Ibid.)
There is no indication
that Plaintiff had an opportunity to opt-out of the arbitration agreement or
had a chance to review it besides the declaration of Qing Yang. Nevertheless, the
mere fact an adhesion contract is involved does not per se render the
arbitration provision unenforceable because such contracts are¿“an inevitable
fact of life for all citizens—businessman and consumer alike.”¿ (Graham v.
Scissor-Tail, Inc.¿(1981) 28 Cal.3d 807, 817.)
Plaintiff also argues that the arbitration agreement requires Plaintiff
to arbitrate her claims in Clark County, Nevada although her employment was in
Los Angeles County in California, making the agreement unconscionable. (Opp.,
at p. 6.)
Huang argues that the proper solution to Plaintiff’s argument is to
modify the location of the arbitration rather than to invalidate the entire
arbitration agreement. (Reply, at p. 5).
The arbitration agreement provides that “[t]he arbitration shall be
administered by the American Arbitration Association (AAA) and held in Clark
County, Nevada[.]” (Huang Decl., Exh. A.) Under Labor Code section 925,
employers are prohibited from requiring an employee to adjudicate their claims
arising in California outside of California. (See Lab. Code §
925(a)(1)-(2).) As such, any arbitration of this matter must be carried
out in California.
Accordingly, the court finds that there is a moderate degree of
procedural unconscionability because the arbitration agreement is an adhesion
contract, and it contains an unlawful choice of law provision.
ii.
Substantive Unconscionability
Substantive unconscionability focuses on the actual terms of the
agreement and evaluates whether¿the terms¿create overly harsh or one-sided
results as to shock the conscience.¿ (Suh v. Superior Court¿(2010) 181
Cal.App.4th 1504, 1515;¿Sanchez, supra,¿61 Cal.4th at 910-911¿[an
“old-fashioned bad bargain” or a contract term which “merely gives one side a
greater benefit” insufficient].)¿
Plaintiff argues that the arbitration agreement does not satisfy the Armendariz
requirements because the agreement does not provide all types of relief that
would be available in a non-arbitration forum, and the agreement does not
provide for adequate judicial review. (Opp., at p. 8.)
First, Plaintiff contends that since the agreement explicitly discusses
attorney’s fees as a form of remedy and leaves out other forms of remedies such
as injunctions, declaratory relief and punitive damages, the agreement does not
provide for all types of relief that would be otherwise available in a
non-arbitration forum. (Id., at p. 9.)
In reply, Huang argues that the agreement does not limit the statutory
remedies available to Plaintiff as Plaintiff is misreading the arbitration
agreement. (Reply, at p. 5.)
Second, Plaintiff argues that the arbitration agreement does not provide
for a written arbitration award that permits adequate judicial review as the
agreement only provides that “The arbitrator shall issue a written opinion
stating the essential findings and conclusions on which the arbitrator’s award
is based.” (Opp., at p. 9.)
In reply, Huang argues that the agreement provides for a written
decision, which the arbitrator is required to issue, including essential
findings and conclusions. (Reply, at p. 6.) As such, Huang contends that the arguments
made by Plaintiff that the arbitration award is not subject to judicial review
because the agreement is silent on this issue has no merit. (Ibid.)
The agreement satisfies each of the necessary safeguards for arbitration
agreements governing employment relationships set forth in Armendariz.
Here, the agreement contains no terms that contravene either the American
Arbitration Association (“AAA”) Rules or the Armendariz decision. Further,
to the extent that the Arbitration Agreement is silent on the Armendariz requirements
that the agreement requires a written reasoned opinion subject to judicial
review, it does not limit Plaintiff’s remedies, as such provisions may be
implied as a matter of law. (See Sanchez v. W. Pizza Enterprises, Inc.
(2009) 172 Cal. App. 4th 154, 177 (“the absence of express provisions requiring
a written arbitration award and allowing discovery does not render the
arbitration agreement unconscionable. Rather, those terms are implied as a
matter of law as part of the agreement”); See also Fittante v. Palm Springs
Motors, Inc. (2003) 105 Cal.App.4th 708, 717 (where an
arbitration agreement does not preclude any legal remedy, the agreement
implicitly “complies with the requirement under Armendariz that all
types of relief otherwise available in court be afforded to vindicate
plaintiff’s statutory rights”).)
As such, the court does not find the arbitration agreement to have a high
degree of substantive unconscionability to render it invalid.
Waiver
Plaintiff argues that Huang
has waived its right to compel arbitration for causing unnecessary delays by
refusing to release the arbitration agreement to Plaintiff’s counsel despite
having proper authorization citing to Civil Code section 1281.2(a). (Opp., at
p. 5.)
In reply, Huang argues
that its delay in producing the arbitration agreement arose from legitimate
concerns about the privacy of a former employee, and there was no bad faith or
intent to delay the proceedings. (Reply, at p. 3.) Additionally, Huang argues
that as Plaintiff had already been informed of the arbitration agreement, the
delay does not prejudice Plaintiff, and it does not constitute a waiver. (Ibid.)
The court does not find
that Huang waived its right to arbitrate Plaintiff’s claims as Plaintiff does
not dispute that she had knowledge of the arbitration agreement and Huang had
valid reason to request identifying information from Plaintiff before releasing
any employment records.
EFAA
Plaintiff argues that
the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act
(“EFAA”) precludes arbitration of Plaintiff claims. (9 U.S.C. § 402(a).)
Effective March 3, 2022, the EFAA amends the FAA, rendering unenforceable an
applicable predispute arbitration agreement at the election of the person
alleging a sexual harassment dispute. (Ibid.) A “sexual harassment
dispute” is defined as “a dispute relating to conduct that is alleged to
constitute sexual harassment under applicable Federal, Tribal, or State law.”
(9 U.S.C. § 401(4).)
Plaintiff contends that
her cause of action for gender identity discrimination and hostile work
environment should be viewed as a sexual harassment claim subject to the EFAA.
(Opp., at p. 10.)
In reply, Huang argues
that Plaintiff’s argument that gender identity discrimination should be treated
as sexual harassment under EFAA is not only legally unsupported but also an
attempt to circumvent the contractual agreement to arbitrate. (Reply, at p. 7.)
Having reviewed the
complaint, the court does not find that Plaintiff’s causes of action for gender
identity discrimination relates to a sexual harassment dispute under California
law. As such, the EFAA does not apply to preclude arbitration of Plaintiff’s
action.
Attorney’s Fees
Plaintiff requests
attorney fees pursuant to Labor Code section 925. That statute prohibits an
employer from requiring an employee who primarily resides and words in
California to agree to a provision, as a condition of employment, that would
(1) require the employee to adjudicate outside of California a claim arising in
California or (2) deprive the employee of the substantive protection of
California law with respect to a controversy arising in California. (Lab. Code
§ 925(a).) A court has discretion to award an employee attorney fees for
enforcing his rights under this statute. (Lab. Code § 925(c).)
Plaintiff’s request for attorney fees is denied. The court finds this
request premature.
Stay Request
If a party applies to a court “for
an order to arbitrate a controversy which is an issue involved in an action or
proceeding pending before a court of this State and such application is
undetermined, the court in which such action or proceeding is pending shall,
upon motion of a party to such action or proceeding, stay the action or
proceeding until the application for an order to arbitrate is determined and,
if arbitration of such controversy is ordered, until an arbitration is had in
accordance with the order to arbitrate or until such earlier time as the court
specifies.” (Code of Civ. Proc., § 1281.4.)
Because the court has found that
arbitration is warranted in this matter, the court also stays the proceedings
during the pendency of the arbitration process.
Conclusion
Defendant Huang Law Group’s Motion to
Compel Arbitration and Stay Proceedings is GRANTED.