Judge: Randall J. Sherman, Case: 2022-01243365, Date: 2022-07-22 Tentative Ruling

Defendant Behavioral Systems Southwest, Inc.’s Motion to Compel Arbitration on an Individual Basis, to Dismiss Class Claims and to Stay this Action is denied.  The arbitration agreement is unenforceable because it is both procedurally and substantively unconscionable.


Defendant has shown the existence of an arbitration agreement signed by plaintiff, but not by defendant.  On June 26, 2017, plaintiff signed a statement affirming that she had “read the rules and regulations set forth in the BSS Employee Handbook” and agreed to “abide by these rules during my employment”.  (However, defendant did not provide the court with the actual handbook that allegedly contains the arbitration agreement to show that plaintiff in fact received the arbitration agreement on June 26, 2017.)  On July 3, 2017, after plaintiff’s week of training, plaintiff signed the arbitration agreement in the employee handbook.  Around July 26, 2017, plaintiff signed another statement, again affirming that she had read the rules in the employee handbook and that she agreed to abide by them.  (However, this statement did not reference any arbitration agreement, but only the employee handbook which was not provided as evidence.)


Plaintiff has established a valid defense to enforcement.  The defense of unconscionability requires that the arbitration agreement be both procedurally and substantively unconscionable.  De La Torre v. CashCall, Inc. (2018) 5 Cal. 5th 966, 982; Baltazar v. Forever 21, Inc. (2016) 62 Cal. 4th 1237, 1243; Baxter v. Genworth North America Corp. (2017) 16 Cal. App. 5th 713, 723.  Procedural unconscionability is present here based on the arbitration agreement being a contract of adhesion.  The arbitration agreement provided that “signed acknowledgment of the following conditions is required for employment with BSS”, and arbitration was one of the required conditions.  The court in the seminal case of Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 114-15, held that there is little dispute that an arbitration agreement is adhesive if it was imposed on employees as a condition of employment and there was no opportunity to negotiate.  Appellate courts have continued to agree.  Zullo v. Superior Court (2011) 197 Cal. App. 4th 477, 485; Martinez v. Master Protection Corp. (2004) 118 Cal. App. 4th 107, 114.  Plaintiff asserts she had no opportunity to negotiate the arbitration agreement, also satisfying this element.


Substantive unconscionability is present here as well.  The court in Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal. App. 4th 74, 85-86, held, “The paramount consideration in assessing substantive conscionability is mutuality.  Given the disadvantages that may exist for plaintiffs arbitrating disputes, it is unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee, without at least some reasonable justification for such one-sidedness based on business realities.”  The California Supreme Court in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 119, also required mutuality.  Defendant has not shown that it agreed to arbitrate any or all disputes with plaintiff, but only that plaintiff so agreed.  Thus, defendant has failed to establish mutuality, resulting in substantive unconscionability.  With both procedural and substantive unconscionability present, the arbitration agreement is unenforceable.


The case of Roman v. Superior Court (2009) 172 Cal. App. 4th 1462, does not change the result.  There, only plaintiff signed the arbitration agreement, which provided, “I hereby agree to submit to binding arbitration all disputes and claims arising out of the submission of this application.  I further agree, in the event that I am hired by the company, that all disputes that cannot be resolved by informal internal resolution which might arise out of my employment with the company, whether during or after that employment, will be submitted to binding arbitration.”  The second next sentence stated, “This application contains the entire agreement between the parties with regard to dispute resolution.”  172 Cal. App. 4th at 1467.  Thus, the employer included language acknowledging that the arbitration agreement was “between the parties”.  Here, by contrast, there was no such language indicating that the arbitration agreement was bilateral.  Rather, only plaintiff stated, “I agree to Binding Arbitration.”  Further, the Roman court noted, in distinguishing Higgins v. Superior Court (2006) 140 Cal. App. 4th 1238, that Roman’s arbitration provision was “contained in a relatively short agreement rather than buried in a 24-page agreement with multiple attachments”.  172 Cal. App. 4th at 1473.  Here, however, plaintiff’s arbitration provision was on page 87 of a document package.  Thus, this case is far closer to Higgins than to Roman.  Since the arbitration agreement here contained no bilateral language, while the Roman arbitration agreement did, the court concludes that the Roman case does not apply, and that the agreement here suffers from substantive unconscionability, and that as a result, defendant may not enforce its arbitration clause.


The Minute Order for this motion will serve as the Statement of Decision that defendant has requested, consistent with CRC Rule 3.1590(a).  The court does not reach the issue of whether the arbitration should be conducted on an individual or a class basis.


The court sets a Case Management Conference for September 8, 2022 at 9:00 a.m.  The parties must file a Joint Case Management Statement at least a week before the CMC.  Counsel must use pleading paper rather than Judicial Council Form CM-110, and should include in the Statement a discussion of the applicable subjects set forth in CRC Rule 3.727.


Plaintiff is ordered to give notice of the ruling unless notice is waived.