Judge Randolph M. Hammock, Case 21STCV32527 2022-08-17 Tentative Ruling

This is an employment dispute. Plaintiff Juventina Martinez alleges she suffered an adverse employment action based on her protected disability.

Defendant now moves for an order compelling Plaintiff to arbitrate the dispute pursuant to CCP § 1281 et seq. Plaintiff opposed.

“[T]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence . . . .” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284). “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.” (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353). “Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.” (California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205).

“[A] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] 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.” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284).

“If a court of competent jurisdiction, whether in this State or not, 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. . . .” (CCP § 1281.4.)

Plaintiff objects to the Declarations of Yossi Zaga and Paul Tokar. Defendant objects to the Declaration of Plaintiff Juventina Martinez.

This court is unaware of any legal authority which requires a court to rule on evidentiary objections on a motion, except as to a motion for summary motion/adjudication (CCP § 437c (q)] or a special motion to strike (CCP § 425.16 (b)(2)); see also, Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 947-949.)

As such, this court respectfully declines to rule on these objections. This court is well aware of the rules of evidence, and to how much weight, if any, should be given to any of the proposed evidence.

California has a strong public policy in favor of arbitration as an expeditious and cost-effective way of resolving disputes. “Even so, parties can only be compelled to arbitrate when they have agreed to do so.” (Avila v. S. California Specialty Care, Inc. (2018) 20 Cal. App. 5th 835, 843.) “The party seeking to compel arbitration bears the burden of proving the existence of a valid arbitration agreement.” (Id.)

An arbitration agreement is a contractual agreement. “General contract law principles include that ‘[t]he basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting. [Citations.] ... The words of a contract are to be understood in their ordinary and popular sense.” [Citations.] (Garcia v. Expert Staffing W., 73 Cal. App. 5th 408, 412–13.)

In or around 2013, Defendant employed Plaintiff via a staffing company called “Harbor America California.” (Zaga Decl. ¶ 3.) The arbitration provision in this case is contained in a document on Harbor America’s letterhead. The provision provides, in full:

Arbitration. HACAL promotes a voluntary alternative dispute resolution system that uses binding arbitration to resolve all disputes that may arise in the employment context.

This court agrees with Defendant that the arbitration provision is broad, as it covers “all disputes that may arise in the employment context.” This would cover the claims in this case. But it is also the broad and general nature of the provision that causes pause.[1]

This court cannot find that the language in the provision mandates binding arbitration. First, use of the word “promotes”[2] suggests that arbitration is not mandatory, but merely favored. Under the ordinary meaning of this word, this court does not believe that a reasonable employee who reads this language would conclude that they had unambiguously waived their right to a jury trial.

Second, there is no language in the arbitration agreement providing that Plaintiff herself agreed to binding arbitration. By its express language, Plaintiff at most agreed that “HACAL promotes a voluntary alternative dispute resolution system that uses binding arbitration to resolve all disputes that may arise in the employment context.” That’s it. But nowhere does it state that Plaintiff too “promotes” arbitration, and certainly not that she agrees to be bound by arbitration. “Without a clear agreement to arbitrate a controversy, courts will not infer that the right to a jury trial has been waived.” (Garcia v. Expert Staffing W. (2021) 73 Cal. App. 5th 408, 413 [italics added].) Thus, there is no mutual assent to be bound to arbitrate in this case.

However, assuming that there actually is, in fact, a binding arbitration clause in the agreement at issue (which this Court has found that there is NOT, this Court addresses the other factors which would be at issue, as follows:

Finding that Defendant has not met the threshold element (existence of an agreement to arbitrate), this court continues for discussion purposes only. Plaintiff argues that Defendant waived its right to compel arbitration. When considering if waiver occurred in the context of arbitration, courts consider “(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected, misled, or prejudiced’ the opposing party.” [Citations]. (Iskanian, 59 Cal. 4th at 375).

Plaintiff first notes that Defendant waited five months from the filing of the Complaint to seek arbitration. Plaintiff filed this action on September 2, 2021, and Defendant sought to compel arbitration on February 07, 2022. Although this court agrees Defendant was less than expedient, the delay is not substantial. This is not the situation where a Defendant seeks to compel arbitration on the eve of trial. Indeed, courts have found that significantly longer delays than this did not amount to waiver. (See Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal. App. 4th 651, 663 [a 14-month period from the filing of the original complaint to the filing of the motion to compel was insufficient to support the waiver].)

Next, Defendant’s failure to plead arbitration in their answer as an affirmative defense is certainly “an act inconsistent with the later assertion of a right to arbitrate,” and a factor to consider. (Guess?, Inc. v. Superior Ct. (2000) 79 Cal. App. 4th 553, 558.) Defendant contends, however, that it only learned of the agreement to arbitrate after filing its answer. (Tokar Decl. ¶ 2.)

Plaintiff also contends that Defendant has “invoked the litigation machinery,” by propounding discovery on Plaintiff. (Iskanian, 59 Cal. 4th at 375). Plaintiff’s counsel states that “[o]n or about October 22, 2021, Defendant propounded on Plaintiff its first set of discovery requests: Form Interrogatory – Employment Law, Form Interrogatory – General, and Request for Production of Documents.” (Declue Decl. 7.) This means Defendant served discovery before it moved to compel arbitration. Again, Defendant contends it only learned of the agreement to arbitrate after propounding this discovery. (Tokar Decl. ¶ 2.) The discovery here is notable, but certainly not extensive.

As a reference, Courts have found a waiver when the party seeking to compel arbitration did so only after “sen[ding] two sets of lawyers to the third-party depositions and t[aking] full advantage of every opportunity to cross-examine the deponents.” (Guess?, Inc. v. Superior Ct. (2000) 79 Cal. App. 4th 553, 558. They also “t[ook] full advantage of the opportunity to test the validity of Guess's claims, both legally and factually, primarily at [the plaintiff’s] expense.” (Id.) Although the “litigation machinery” has not been invoked to this level, this factor goes against Defendant.

Plaintiff finally argues it will suffer prejudice by the delay. But aside from giving up some discovery—which Plaintiff would likely have been forced to produce anyway—there is no evidence of undue or substantial prejudice to Plaintiff. Though this court recognizes that Plaintiff has served discovery, “courts will not find prejudice where the party opposing arbitration shows only that it incurred court costs and legal expenses.’[Citation.] ‘Prejudice typically is found only where the petitioning party's conduct has substantially undermined this important public policy or substantially impaired the other side's ability to take advantage of the benefits and efficiencies of arbitration.’” (Iskanian, 59 Cal. 4th at 377). The evidence of that here is minimal.

Considering the above, this court finds no waiver of the right to arbitrate. To be sure, there are factors that point to waiver in this case, namely, Defendant’s delay and its propounding of discovery. But this court has its doubt that these factors have truly prejudiced Plaintiff. Moreover, “any doubts regarding a waiver allegation should be resolved in favor of arbitration. (St. Agnes Med. Ctr., 31 Cal. 4th at 1195.) Based on the record before it, this court cannot find a waiver in light of the strong public policy in favor of arbitration.

Defendant was not, per se, a party to the agreement. The agreement is on Harbor America letterhead—Harbor America was the staffing company who apparently assigned Plaintiff to work with Defendant. Plaintiff argues that because Defendant is a nonsignatory, it cannot rely on the arbitration agreement. “As a general rule, only a party to an arbitration agreement may enforce the agreement. [Citation.] However, there are several exceptions that allow a nonsignatory to invoke an agreement to arbitrate. [Citation.] The doctrine of equitable estoppel is one of the exceptions. (Ibid.)” (Felisilda v. FCA US LLC, (2020) 53 Cal. App. 5th 486, 495. Under equitable estoppel, “as applied in ‘both federal and California decisional authority, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are “intimately founded in and intertwined” with the underlying contract obligations.’ [Citations.] ‘By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.’ [Citation.] (Id.)

Although neither party addresses it, the case of Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, appears particularly on point. There, an employee was hired by a temporary staffing company (Real Time) and was assigned to work at Pexco. (Id. at 784.) The employee signed an arbitration agreement with Real Time, but the agreement did not mention Pexco. (Id.) The employee sued Real Time and Pexco for wage and hour violations which occurred during the employee's assignment with Pexco. (Id. at 785.)

Real Time and Pexco moved to compel arbitration. (Id.) The Court of Appeal determined that under the principle of equitable estoppel, “ ‘a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are “intimately founded in and intertwined” with the underlying contract obligations.’ [Citation.]” (Id. at 786.) Because the claims against Real Time and Pexco were based on the same facts and were inseparable from the arbitrable claims against Real Time, the employee was “equitably estopped from refusing to arbitrate his claims with Pexco.” (Id. at 788.)

Here, Plaintiff has not addressed why Defendant cannot also invoke the Harbor America arbitration agreement. Defendant’s failure to itself sign the agreement is not dispositive. Rather, it appears the causes of action against Defendant are “intimately founded in and intertwined” with the underlying contract obligations. Thus, Defendant can invoke the arbitration provision—assuming it is valid in the first place.

Plaintiff argues that Defendant has failed to authenticate Plaintiff’s signature on the document. But Plaintiff’s reliance on Ruiz is misplaced. In Ruiz v. Moss Bros. Auto Grp. (2014) 232 Cal. App. 4th 836, 844, the issue was whether an electronic signature was the “act of” the employee. The employee did not recall signing the agreement. And the employer provided only a Declaration from the employer’s business manager “offer[ing] her unsupported assertion that [the employee] was the person who electronically signed the 2011 agreement.” (Id.) The court held that “[i]n the face of [the employee’s] failure to recall electronically signing the 2011 agreement”, and the employer’s failure to adequately authenticate the agreement, the electronic signature “was insufficient to support a finding that the electronic signature was, in fact, ‘the act of’ [the employee].” (Civ. Code, § 1633.9, subd. (a).)

Here, an electronic signature is not at issue—Plaintiff physically signed the document. And the assertion that Plaintiff does not recall signing the document is given little weight. Defendant submits the Declaration of Defendant’s principal, Yossi Zaga. He states that “at the time of her hiring,” Harbor America gave Plaintiff “a two page agreement for her review and execution in Spanish which contained an agreement to arbitration [sic] any employment claims.” (Zaga Decl. ¶ 3.) Zaga says he is confident that it is Plaintiff's signature on the Arbitration Agreement based on Plaintiff's signature on other employment documents.” (Id. ¶ 5.) It appears, then, that Zaga has no direct knowledge of the circumstances when Plaintiff signed the agreement. But Plaintiff has not cited a case showing this fact is dispositive.

Plaintiff next argues that even if a valid agreement does exist, it should be disregarded based on principles of unconscionability. Unconscionability has “both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results. (Sanchez v. Valencia Holding Company, LLC (2015) 61 Cal.4th 899, 910.) Under California law, an arbitration agreement must be in some measure both procedurally and substantively unconscionable in order for the agreement to be unenforceable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114; De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966, 982.) “But they need not be present in the same degree. . . . [T]he 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, supra, 24 Cal.4th at p. 114.)

Plaintiff argues the agreement is procedurally unconscionable because it was a contract of adhesion. “The term [contract of adhesion] signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” [Citation]. (Id. at 113).

Here, the “take it or leave it” nature of the agreement is sufficient to establish “some degree of procedural unconscionability.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915). This means the substantive terms of the agreement must be scrutinized to ensure they are not manifestly unfair or one-sided. (Id.)

In Armendariz, the California Supreme Court outlined five elements that must be present in an arbitration agreement in order to avoid substantive unconscionability. (24 Cal.4th at p. 102.)

Armendariz factor 1 requires that the agreement provide for a “neutral arbitrator[].” (Ibid.) Armendariz factor 2 and 3 requires that the arbitration agreement “provide for more than minimal discovery” and that the arbitrator issue a written opinion. (24 Cal.4th at p. 102.) Armendariz factor 4 requires that the agreement provide for all the types of relief that would otherwise be available in court. (24 Cal.4th at p. 102.) Finally, Armendariz factor 5 provides that the agreement must not “require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum.” (24 Cal.4th at p. 102.)

The arbitration agreement is silent on these issues. However, the Court in Armendariz expressly held that its elements are interpreted into an arbitration agreement covering FEHA claims. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 106-07.) Because the agreement is silent on the issues, Plaintiff has the benefit of Amendariz on her side to fill the gaps. For the foregoing reasons, Plaintiff has established very little, if any, substantive unconscionability here.

The bottom line is that this Court finds that there is not, in fact, and actual mandatory arbitration clause contained in the agreement at issue. That ends the analysis. Motion DENIED.

However, if there is such a binding arbitration agreement, this Court would reject all other arguments proffered by Plaintiff in its opposition, and it would uphold this arbitration clause as valid and binding as between the Plaintiff and the Defendant.

Since the Moving Party/Defendant has failed to meet its burden to establish the existence of an actual “binding arbitration” clause or agreement, its motion is DENIED.

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.

[1] It must be noted that the English translation has, in fact, been proffered by the Moving Party Defendant. It has not been challenged in any aspect as to the accuracy of that translation.

[2] Merriam-Webster defines “promote” as “to help the growth or development of.” Similarly, dictionary.com defines “promote” as “to help or encourage to exist or flourish; further.”