Judge: Peter A. Hernandez, Case: 24STCV11720, Date: 2024-10-02 Tentative Ruling
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Case Number: 24STCV11720 Hearing Date: October 2, 2024 Dept: 34
Alana Trubitz v. Serendipity Labs, Inc. (24STCV11720)
Defendant Serendipity Labs, Inc.’s Motion to Compel
Arbitration is DENIED.
Background
Plaintiff
Alana Trubitz (“Plaintiff”) alleges as follows:
Plaintiff was an employee of Defendant Serendipity
Labs, Inc. (“Defendant”) from April 23, 2018, until January 22, 2024, when
Plaintiff was terminated.
In February 2023, Plaintiff was promoted to Regional
Director of Sales and reported to the Vice President of Sales, Jeni Smith
(“Smith”). Throughout Plaintiff’s employment, Plaintiff had excelled in her
performance and constantly received positive feedback. Nevertheless, in July
2023, Plaintiff was criticized for failing to properly process a work matter
and addressed her deficiencies with Smith.
On August 9, 2023, Plaintiff received a Performance
Improvement Plan (“PIP”) for not achieving her sales’ quota. Plaintiff
expressed her disagreement with the PIP and proposed modifications to it. However,
Smith did not follow up with Plaintiff regarding her PIP and neither person
signed it. Thereafter, Plaintiff’s progress was not reviewed in accordance with
the PIP and there were no subsequent discussions regarding it. Subsequently, in the fall and December 2023,
Plaintiff was recognized as a top seller during several team field calls.
On January 4, 2024, Plaintiff was matched for the
adoption of a newborn child from an expectant birth mother with a due date of
February 26, 2024. On January 8, 2024, Plaintiff shared this information with
Smith and informed her of Plaintiff’s plans to take leave at the end of
February 2024. In response, Smith advised Plaintiff to not inform human
resources or management of her plans until the adoption was certain.
Nevertheless, Plaintiff contacted Defendant’s human resource management company,
TriNet HR Corporation (“TriNet”), to inquire about the company’s leave policy. After
doing so, Plaintiff concluded that since her leave was foreseeable, it was best
for her to notify Defendant’s internal human resources department about her
plans.
On January 9, 2024, Plaintiff emailed Taury Phelps
(“Phelps”), Human Resource Specialists, notifying her about the adoption and
her anticipated leave. Plaintiff expressed her interest in discussing the leave
process and enclosed a letter from the adoption agency. Phelps congratulated
Plaintiff and assured her of a follow-up regarding her questions. However,
Phelps failed to provide any additional information or a response to
Plaintiff’s leave request.
On January 22, 2024, Plaintiff was abruptly
terminated for “insufficient progress in meeting the performance standards
required” for her role. Plaintiff was surprised by her termination as she had
not received any follow-up discussions regarding her PIP and had recently been
recognized as a top seller.
On
May 9, 2024, Plaintiff filed a Complaint asserting the following causes of
action against Defendant and Does 1-10:
1. Violations
of California Family Rights Act;
2. Retaliation
in Violation of the California Family Rights Act; and
3. Wrongful
Termination in Violation of Public Policy.
On
June 27, 2024, Defendant filed their Answer to Plaintiff’s Complaint.
On
September 5, 2024, Defendant filed their Motion to Compel Arbitration. On
September 18, 2024, Plaintiff filed an opposition to Defendant’s Motion. On September
24, 2024, Defendant filed a reply to Plaintiff’s opposition.
“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.) (Id.) “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).
Similarly, Plaintiff’s argument that there was no meeting of the minds due
to Plaintiff’s unawareness that the TCA contained an arbitration agreement does
not challenge the existence of the TCA and DRP. An agreement does not cease to
exist solely due to a party’s lack of awareness as to what they are agreeing
to. “Ordinarily when a person with capacity of
reading and understanding an instrument signs it, he may not, in the absence of
fraud, imposition or excusable neglect, avoid its terms on the ground he failed
to read it before signing it.” (Ramirez v. Superior Court (1980) 103
Cal.App.3d 746, 754 [citation omitted].) “No law requires that parties dealing
at arm’s length have a duty to explain to each other the terms of a written
contract . . . Reliance on an alleged misrepresentation is not reasonable when
plaintiff could have ascertained the truth through the exercise of reasonable
diligence. [Citation.] Reasonable diligence requires the reading of a contract
before signing it. A party cannot use his own lack of diligence to avoid an
arbitration agreement. [Citation.]” (Rowland v. PaineWebber Inc. (1992)
4 Cal.App.4th 279, 286.)
“Agreements to
arbitrate may be invalidated if they are found to be unconscionable.” (Fitz v.
NCR Corp. (2004) 118 Cal.App.4th 702, 713, citations omitted.)
“Unconscionability
consists of both procedural and substantive elements. The procedural element
addresses the circumstances of contract negotiation and formation, focusing on
oppression or surprise due to unequal bargaining power. Substantive unconscionability
pertains to the fairness of an agreement's actual terms and to assessments of
whether they are overly harsh or one-sided. (Pinnacle Museum Tower Ass’n v.
Pinnacle Mkt. Dev. (US), LLC (2012) 55 Cal.4th 223, 246 [citations omitted].)
“‘The prevailing
view is that [procedural 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.’ But they need not be present in the same
degree. ‘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 oppressive 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, [cleaned
up], italics in original, abrogated in part on other grounds by AT&T
Mobility LLC v. Concepcion (2010) 565 U.S. 333.).)
“The
party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle,
supra, 55 Cal.4th at p. 247, citation omitted.)
“Moreover,
courts are required to determine the unconscionability of the contract ‘at the
time it was made.’” (Sanchez v. Valencia Holding Co., LLC (2015) 61
Cal.4th 899, 920, quoting Civ. Code, § 1670.5.)
“Unconscionability
is ultimately a question of law.” (Patterson v. ITT Consumer Fin. Corp.
(1993) 14 Cal.App.4th 1659, 1663, citation omitted.)
Plaintiff argues that the DRP is both
procedurally and substantively unconscionable and, therefore, unenforceable.
(Opp., 10:24-28, 11:1-17.)
“‘Substantive unconscionability’ focuses
on the terms of the agreement and whether those terms are ‘so one-sided as to
“shock the conscience.”’ (Kinney v. United HealthCare Services, Inc.
(1999) 70 Cal.App.4th 1322, 1330 (citations omitted).) A contractual provision
that is substantively unconscionable may take various forms, but may generally
be described as unfairly one-sided. (Id.) The paramount consideration in
assessing [substantive] conscionability is mutuality. (Id.)
Additionally, Plaintiff
argues that the TCA and DRP lack mutuality in its application since TriNet and
its third-party beneficiaries make no mutual promise to arbitrate all disputes
which they may have against Plaintiff and the TCA is unsigned by either TriNet
or Defendant. (Id., 13:21-25.)
Lastly, Plaintiff argues that since the
DRP does not provide that Defendant would pay for the arbitrator and
arbitration fees where someone else other than TriNet or a TriNet customer
seeks to enforce the arbitration agreement. (Id., 13:26-28, 14:1-12.) The
DRP states that “[i]n all cases where the law requires it, TriNet
(and, if applicable, any TriNet customer or employee(s) of either TriNet or a
TriNet customer interested in enforcing this DRP for its/their own benefit),
will pay the arbitrator’s and arbitration fees.” (Weiss Decl., Exh. A pp. 7-8.)
Plaintiff contends that although Defendant has now confirmed that it will pay
the costs associated with arbitration in this case, it does not eliminate the
substantive unconscionability found in the DRP as written. (Opp., 14:8-12.)
The court finds
that the DRP is substantively unconscionable since its terms are clearly one
sided in favor of Defendant and leaves Plaintiff responsible for arbitration
costs even if she had decided to comply with the DRP in the first place.
Although there is confirmation that Defendant would cover all arbitration
expenses as noted in paragraph 3 and Exhibit 2 of Adam Grable’s declaration,
the court is “…required to determine the
unconscionability of the contract ‘at the time it was made.’” (Sanchez,
supra, 61 Cal.4th at p. 920.) As such, the fee bearing terms of the DRP are
substantively unconscionable.
Additionally, the
DRP leaves Plaintiff vulnerable to arbitration if she were to raise any claim
against Defendant, TriNet, or any of TriNet’s beneficiaries which is an
unreasonably large scope of possible defendants that Plaintiff would be
required to arbitrate with without requiring the same from them when claims
against Plaintiff arise. As such, the lack of equal benefits and burdens among
Defendant and Plaintiff found in the DRP renders it substantively
unconscionable.
Conclusion
Defendant
Serendipity Labs, Inc.’s Motion to Compel Arbitration is DENIED.