Judge: Peter Wilson, Case: 2020-01123754, Date: 2022-10-06 Tentative Ruling
Defendant Adecco USA, Inc. (Adecco) seeks to compel Plaintiff Gilberto Gutierrez to binding arbitration of his individual PAGA claim and to dismiss this action, including the representative PAGA claim, without prejudice pursuant to Viking River Cruises, Inc. v. Moriana (2022) 142 S. Ct. 1906 (Viking River Cruises). Defendants Blue Diamond Growers, Blue Diamond Growers Service, and Blue Diamond Almond Growers (collectively, Blue Diamond Defendants) join Adecco’s Motion on the ground they are a third-party beneficiary of the arbitration agreement between Adecco and Plaintiff.
For the reasons set forth below, the Motion to Compel Arbitration is GRANTED. The motion to dismiss is DENIED.
The Court DENIES Plaintiff’s request for judicial notice (ROA 157) as Plaintiff failed to attach any of the orders for which he sought judicial notice.
There Is a Valid Arbitration Agreement. To compel arbitration under either the CAA or FAA, there must be a valid arbitration agreement between the parties. (Code Civ. Proc., § 1281.2; Chiron Corp. v. Ortho Diagnostic Sys., Inc. (9th Cir. 2000) 207 F.3d 1126, 1130.) Moving party bears the burden of proving the existence of an arbitration agreement by a preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)
It is undisputed that Plaintiff electronically signed and entered into the “Voluntary Dispute Resolution and Arbitration Agreement for Consultants/Associates” (Arbitration Agreement) between him and Adecco. See ROA 131, Prentiss Decl., ¶¶4-18 and Exs. A and B. It is also undisputed that the Blue Diamond Defendants are third-party beneficiaries of the Arbitration Agreement. See ROA 131, Prentiss Decl., Ex. B, ¶10; ROA 142, Watkins Decl., ¶¶1-2, 4; ROA 2, Complaint, ¶¶2, 6.
Further, it is undisputed that the FAA applies to the Arbitration Agreement. See ROA 131, Prentis Decl., ¶1 and Ex. B, §1; ROA 142, Watkins Decl., ¶¶3-4.
Plaintiff Has Not Met His Burden of Establishing Any Defense to Arbitration. The party opposing arbitration bears the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 903, 971.) Plaintiff argues the Arbitration Agreement is procedurally and substantively unconscionable.
California law applies to the unconscionability analysis. (Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1107 [“[U]nder the FAA’s savings clause, an arbitration agreement is not enforceable if a party establishes a state law contract defense, such as fraud, duress, unconscionability, or illegality.”]; see also AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 [The FAA’s “saving clause permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability ….’”].)
Unconscionability has a procedural and a substantive component, requiring both to be present though not in the same degree. (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 177.) “A sliding scale is applied so that ‘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.’ ” (Id. at 178.)
Plaintiff Has Not Demonstrated Any Procedural Unconscionability. In OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, the California Supreme Court explained that the procedural unconscionability analysis begins with an inquiry into whether the contract is one of adhesion. (Id. at 126.) “An adhesive contract is standardized, generally on a preprinted form, and offered by the party with superior bargaining power on a take-it-or-leave-it basis. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245.) Arbitration contracts imposed as a condition of employment are typically adhesive (Armendariz v. Foundational Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114-115; Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.) But the fact that an agreement is adhesive is not, alone, sufficient to render it unconscionable. (Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1561.)
The court also considers whether circumstances of the contract’s formation created such oppression or surprise that closer scrutiny of its overall fairness is required. (OTO, L.L.C., supra, 8 Cal.5th at 126-127.) “The circumstances relevant to establishing oppression 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.” (Id.)
Plaintiff argues there is procedural unconscionability because he was required to fill out 44 onboarding documents without supervision or assistance, without sufficient time or consideration, and was forced to accept the Arbitration Agreement on a take-it-or-leave-it basis in order to complete his onboarding paperwork and begin working. ROA 161, Omnibus Opp., pp. 10-11.
Contrary to Plaintiff’s characterization, the Arbitration Agreement was not presented on a take-it-or-leave-it-basis. The Arbitration Agreement contains an opt out clause that permitted Plaintiff 30 days to opt out. ROA 131, Prentiss Decl., Ex. B, ¶9. Additionally, the Arbitration Agreement states that Plaintiff has the right to consult with an attorney and has read the Arbitration Agreement “carefully” and “fully understands the meaning of its terms and is signing it knowingly and voluntarily.” ROA 161, Prentiss Decl., Ex. B, ¶11. Importantly, Plaintiff has not submitted any evidence, including his own declaration, attesting to any surprise, that he was not given sufficient instructions or time to review the materials, that he was misled, or that he was pressured in any way to sign the Arbitration Agreement and not opt out. The Arbitration Agreement is not hidden in some other document, but is a separate, stand-alone document that clearly states at the top of the first page in bold letters it is a “Voluntary Dispute Resolution and Arbitration Agreement”. ROA 161, Prentiss Decl., Ex. B, p. 1.
Plaintiff Has Not Demonstrated Substantive Unconscionability. Substantive unconscionability occurs when a contract, particularly, contracts of adhesion, impose terms “that have been variously described as overly harsh, unduly oppressive, so one-sided as to shock the conscience, or unfairly one-sided. All of these formulations point to the central idea that the unconscionability doctrine is concerned not with a simple old-fashioned bad bargain, but with terms that are unreasonably favorable to the more powerful party. Unconscionable terms impair the integrity of the bargaining process or otherwise contravene the public interest or public policy or attempt to impermissibly alter fundamental legal duties.” (OTO, L.L.C. v. Kho, supra, 8 Cal. 5th at 129–30, internal 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. (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 692, citing inter alia, 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1213.) Such unconscionability turns not only on a one-sided result, but also on an absence of justification for it. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 117-118.)
Plaintiff argues the Arbitration Agreement is substantively unconscionable because it fails to comply with any of the requirements set forth in Armendariz v. Foundation Health Psychcare Services, Inc. Those elements of essential fairness are (1) a neutral arbitrator; (2) adequate discovery; (3) all types of relief otherwise available in court; (4) a written arbitration award that permits limited judicial review; and (5) limits on arbitration costs and fees (in arbitration of FEHA claims, employer must pay all costs unique to arbitration). (24 Cal. 4th at 102, 118; Pearson Dental Supplies, Inc. v. Sup.Ct. (Turcios) (2010) 48 Cal. 4th 665, 677; see also Craig v. Brown & Root, Inc. (2000) 84 Cal. App. 4th 416, 422 [$50 arbitration cost to employee acceptable].)
Plaintiff contends that because the Arbitration Agreement incorporates by reference the AAA Employment Rules to govern arbitration but does not attach them, and does not otherwise discuss the Armendariz requirements, it is substantively unconscionable. ROA 161, Omnibus Opp., pp. 11-12. Plaintiff’s argument is not persuasive.
The Arbitration Agreement expressly provides that the AAA Employment Rules will govern and provides link to obtain those rules as well as instructions that the AAA Employment Rules may be obtained from HR. ROA 131, Prentiss Decl., Ex. B, ¶1. Referencing the AAA rules without attaching them is acceptable and does not render the agreement procedurally unconscionable since the AAA Rules are available on the internet. (See Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 691-692 [failure to attach a copy of the AAA rules “did not render the agreement procedurally unconscionable” because they “were available on the Internet”].) Further, the California Supreme Court explained in Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237 that the failure to provide the AAA rules generally raises procedural unconscionability concerns only if there is substantively unconscionable provision in the AAA rules. (Id. at 1236; Cisneros Alvarez v. Altamed Health Services Corporation (2021) 60 Cal.App.5th 572, 590.)
Plaintiff does not argue that any specific AAA Employment Rule is unconscionable. It appears that Plaintiff does not dispute that the AAA Employment Rules satisfy the Armendariz requirements since he notes that the AAA Employment Rules “outline the Armendariz minimum requirements” and does not identify any specific provisions that violate the Armendariz requirements or otherwise take issue with any specific provision. ROA 161, Omnibus Opp., p. 12:17-18.
Plaintiff Must Arbitrate His Individual PAGA Claim. Pursuant Viking River, “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (142 S.Ct. at 1925.) Thus, a plaintiff may be compelled to arbitrate his or her individual PAGA claim even if the arbitration agreement has a wholesale PAGA waiver as long as there is a severability clause. (Id.) This is the situation here. See ROA 131, Prentiss Decl., Ex. B, ¶8 [“BY SIGNING THIS AGREEMENT, THE PARTIES AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN THEIR INDIVIDUAL CAPACITIES AND NOT IN ANY REPRESENTATIVE PROCEEDING UNDER ANY PRIVATE ATTORNEY GENERAL STATUTE (“PAGA CLAIM”), UNLESS APPLICABLE LAW REQUIRES OTHERWISE. (Bold and capitalization in original.)”] and ¶13 [severability clause].
Based on the foregoing reasons, the Motion and Joinder are GRANTED. Plaintiff is ordered to binding arbitration of his individual PAGA claim with Defendants.
The Representative PAGA Claim Should Be Stayed.
In Viking River, the majority of the U.S. Supreme Court explained that under its view of California law, plaintiffs who are ordered to arbitrate their individual PAGA claims lose standing to prosecute representative PAGA claims: “But as we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual
claim has been committed to a separate proceeding. Under PAGA’s standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action.” (142 S. Ct. at 1925.)
But, as Plaintiff correctly points out, “construction of a state statute by a federal court does not preclude a state court from later rejecting the federal court’s conclusion.” (16 Cal.Jur.3d (2022) Courts, § 324. See also, East Quincy Services Dist. v. General Accident Ins. Co. of America (2001) 88 Cal.App.4th 239, 246 (“As we repeatedly remind litigants, on questions of state law even U.S. Supreme Court decisions are not controlling.”).) As two concurrences in Viking River pointed out, the majority may well be incorrect about PAGA standing. Justice Sotomayor wrote, “Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.” (Viking River, supra, 142 S.Ct. at 1926 [conc. opn. of Sotomayor, J.].) And three justices noted the majority’s conclusion “addresses disputed state-law questions” and “is unnecessary to the result.” (Ibid. [conc. opn. of Barrett, J.].)
The California Supreme Court recently granted review in Adolph v. Uber Technologies, S274671, to answer this exact question. Per an order dated August 1, 2022, “The issue to be briefed and argued is limited to the following: Whether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee [citation] maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ [citation] in court or in any other forum the parties agree is suitable.”
Were the Court to dismiss the representative PAGA claims only for Adolph to reach a different conclusion than Viking River, both judicial economy and the parties’ resources would be taxed by attempts to unwind the dismissal. The Court accordingly DENIES the request to dismiss the representative claims without prejudice to Defendants raising the issue again when the arbitration on Plaintiff’s individual claims concludes.
The Court orders that this matter is STAYED pending completion of the arbitration. (Code Civ. Proc. § 1281.4.)
A status conference is scheduled for April 7, 2023 at 9:00 a.m., and the parties are ordered to file a joint status report not later than March 30, 2023.
Defendant Adecco is ordered to give notice.