Judge Randolph M. Hammock, Case 21STCV34427 2022-08-19 Tentative Ruling

MOVING PARTY: Defendants Simms Restaurants, LLC; MBPO, LLC; DMCT, LLC; and Jeremy Loya

This is an employment dispute. Plaintiff Tatiana Bernardi alleges she worked as a server for Defendants and experienced sexual harassment from a supervisor, Defendant Jeremy Loya. Plaintiff brings six causes of action for (1) FEHA Sexual Harassment, (2) Sexual Discrimination, (3) FEHA Retaliation, (4) Labor Code Retaliation, (5) Failure to Prevent Harassment, Discrimination, and Retaliation, and (6) Negligent Supervision and Retention.

Defendants now move for an order compelling Plaintiff to arbitrate the dispute pursuant to CCP § 1281 et seq. This matter came for hearing on July 16, 2022, and the matter was continued to this date. Both parties were permitted to file supplemental declarations addressing the delay in filing the motion. The court has read and considered Defendant’s Supplemental Declaration filed 07/27/2022, and Plaintiff’s Supplemental Response filed 08/03/2022, and now rules as follows.

Defendants’ Motion to Compel Arbitration is GRANTED. The action is stayed pending the results of the arbitration. This would include any pending discovery motions in this case.

“[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 first argues that Defendants waived their 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, v. CLS Transportation Los Angeles, LLC (2014) 59 Cal. 4th 348, 375 [abrogated on other grounds by Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (2022)].)

Here, Plaintiff filed her Complaint on September 17, 2021. Defendants filed an Answer on December 1, 2021. The answer makes no mention of arbitration. Defendants’ Case Management Statement also failed to mention arbitration or indicate they were willing to participate in the same. On April 11, 2022, the parties appeared at a Case Management Conference before this court where arbitration was again not mentioned, and a December 2023 trial date was set. Plaintiff has served initial discovery on each Defendant and the Defendants have served responses. (Foley Decl. 9.) Defendants have not propounded any of their own discovery to Plaintiff. Defendants filed this motion to compel arbitration on June 8, 2022.

Defendants’ participation in this litigation—at least for purposes of a waiver analysis—has been mostly passive. Defendants’ motion to compel arbitration was the first substantive motion filed. The approximately 7 or 8-month delay from the filing of the complaint to the time that Defendants compelled arbitration is certainly delayed, but is not, by itself, enough to constitute waiver. 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].) Similarly, Defendants’ 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,” but is not dispositive. (Guess?, Inc. v. Superior Ct. (2000) 79 Cal. App. 4th 553, 558.)

Perhaps most important here, there is no evidence that Defendant has “invoked the litigation machinery,” or in any way benefitted from their delay. (Iskanian, 59 Cal. 4th at 375). This is distinguishable from the situation in Guess?, Inc. v. Superior Ct. (2000) 79 Cal. App. 4th 553, 558. There, 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.” They also “t[ook] full advantage of the opportunity to test the validity of Guess's claims, both legally and factually, primarily at Guess's expense.” (Id.) Such is not the case here. Only Plaintiff has propounded discovery in this matter. And because the arbitration agreements at issue permit the same discovery as that of a judicial forum, there is no evidence that Plaintiff has been or will be limited in the discovery mechanisms available to her.

In her Supplemental Declaration, Defendant’s Counsel Uliana Kozeychuk states that the arbitration issue came up in a phone-call between herself and Plaintiff’s counsel, Shannon Foley, on December 23, 2020—before Plaintiff filed this action. (Kozeychuk Supp. Decl. 4.) Then, in an email sent from Kozeychuk to Foley on April 5, 2021, Kozeychuck advised “I think it would be wise to settle this case now instead of waiting for a very embarrassing deposition of your client and just as embarrassing trial/arbitration testimony by her and by our witnesses.” (Id., Exh. B [emphasis added].) The two had another conversation where arbitration came up on April 29, 2021. (Id. 7.) Plaintiff filed the action a few months later, on September 17, 2021. Defendant answered on December 1, 2021.

Kozeychuk states she “inadvertently (and not for any improper purpose of surprising Plaintiff later with this motion given that Plaintiff’s counsel was already on notice of Defendants’ intent to compel arbitration) did not include the affirmative defense of arbitration in the answer or the case management statement.”[1] (Id. 9.) She then was “sidetracked” preparing for trial in another matter and but got sidetracked with first preparing for a trial in another matter and preparing response to Plaintiff’s “voluminous discovery sets.” (Id. 10.) Since the discovery in the arbitration would have been the same as that in litigation, Counsel’s “intention was to file the motion after that discovery project was completed.” (Id.)

As noted in her previous Declarations, Kozeychuk states “as soon as Russia invaded Ukraine on February 24, 2022, I began to experience an unprecedented workload (heavier than any of the trials I have done) in the Russian employment law part of my practice. Most of the work was handling mass layoffs of over 2,000 Russian employees that I provided ongoing legal support and drafted all necessary documents for. My schedule was further negatively impacted by the fact that I had to assist my Ukrainian and Russian relatives with relocations and researching paths to immigration.” (Id. 11.) This “workload started to subside [by] mid-May,” and counsel was “finally able to provide supplemental discovery responses and production to Plaintiff on June 6, 2022.” (Id. 16.) She then “revisited the subject of stipulating to arbitration” with opposing counsel, and once those attempts were unsuccessful, filed the motion to compel arbitration on June 8, 2022. (Id.) Thus, Counsel concludes, “there has not been any improper purpose or gamesmanship on my part or Defendants’ part behind the 6-months delay in moving to compel arbitration.” (Id. 18.)

As discussed in their opposition, and also raised at the first hearing on this motion, Plaintiff contends it will suffer undue prejudice from the delay. Counsel for Plaintiff disputes that the arbitration agreement ever materially came up in conversation but does not directly refute defense counsel’s declaration in that regard. With all due respects to the Ukrainian people, this court certainly agrees with Plaintiff that defense counsel’s offered reasons do not justify the delay here, although they do appear sincere. There is simply no excuse for the repeated failure to compel arbitration, or at the very least, the failure to take a firm position that it would seek to compel arbitration at some time. The effort required to even mention arbitration in the Answer, or more importantly, to raise the issue at the Case Management Conference, or to find another attorney at the firm with time to bring the motion, would have been negligible and completed in seconds. This court emphasizes that it in no way intends to diminish the ongoing crisis in Ukraine, nor downplay the repercussions felt by all of those impacted—including Ms. Kozeychuck.

Be that is it may, and having considered Plaintiff’s Supplemental Declaration, this court concludes there is still no evidence of undue or substantial prejudice to Plaintiff – which is her burden to demonstrate - not the Defendant. Though this court recognizes that Plaintiff has served discovery and has pending motions to compel, “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). There is no evidence of that here. Apart from being somewhat dragged along, Plaintiff has not articulated any actual advantage Defendant has gained from this delay and/or any real undue prejudice to her for the delay.

To be sure, there are factors that point to waiver in this case, however, “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.

Plaintiff signed two arbitration agreements: one with Defendant MBPO[2], and one with Defendant Simms. Defendants represent that “MBPO is an affiliated entity of Simms and DMCT,” that “Simms is an affiliated entity of MBPO and DMCT,” and thus that “Simms, MBPO, and DMCT are affiliated entities.” (Rucinski Suppl. Decl. 2, 3.)

The Simms Agreement reflects that Plaintiff signed it on January 20, 2018. It covers “all claims or causes of action that the Company may have against me or that I may have against the Company” and “claims for breach of any contract or covenant; tort claims; claims for discrimination or harassment (including, but not limited to, race, sex, religion, national origin, age, medical condition, disability or sexual orientation); claims for retaliation; claims for wrongful termination or violation of public policy; and claims for violation of any federal, state, local or other law, statute, regulation or ordinance…” (Rucinski Decl. Exh. A, ¶ 1.) The Simms Agreement applies to Simms “and/or any related or affiliated entity.” (Id.) Coverage also extends to the company’s employees—in this case, Defendant Loya. (Id.)

The MBPO agreement reflects that Plaintiff signed it on November 1, 2019. It appears to cover claims identical to the Simms Agreement. (Rucinski Decl. Exh. B, ¶ 1.)

Accordingly, Defendants have shown the existence of agreements to arbitrate that undoubtedly extend to cover Plaintiff’s claims here.

Plaintiff disputes that she ever signed the Arbitration Agreements. She contends: “I do not recall reading or reviewing the documents attached as Exhibit A and B. I did not sign or accept an agreement to arbitrate employment claims against my employer and I would have never intended to do so.” (Bernardi Decl. 3.) But later in her declaration, Plaintiff seems to contradict this, stating that Defendants “told [her] in the middle of a busy shift that [she] had to use the MB Post computer in the restaurant and click to sign some documents.” (Id. 4.)

Plaintiff’s inability to recall signing the documents is insufficient to void the agreements to arbitrate. Further, an employee will be “bound by the provisions of the arbitration agreement regardless of whether she read it or was aware of the arbitration clause when she signed the document.” (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1673.) Here, although the Declaration may contain some artful language, Plaintiff apparently concedes that she “sign[ed] some documents.” (Bernardi Decl. 4.)

Likewise, Plaintiff’s argument that Defendants’ signatures do not appear on the agreements is of no moment. Courts do not require the signature of the employer when “the Agreement is written in terms of both parties' obligations and evidences [the employer's] intent to be bound.” (Cruise v. Kroger Co. (2015) 233 Cal. App. 4th 390, 398.) Both agreements here reflect that the agreements apply with full force to both Plaintiff and Defendants.

Finally, there is no evidence here that the arbitration agreements are procedurally or substantively unconscionable. 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.)

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.)

There is no evidence that the agreements are substantively unconscionable. 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.) All are met here. The agreements provide for a neutral arbitrator, the same discovery that would be available in a court of law (i.e. “more than minimal discovery”), a written opinion by the arbitrator, all types of relief that would be available in a court of law, and that the Company will cover the costs of the arbitration. (See Rucinski Decl. Exhs. A & B, ¶¶ 5-6.)

For the foregoing reasons, Plaintiff has not established there is any substantive unconscionability here.

Accordingly, Defendants’ Motion to Compel Arbitration is GRANTED. The action is stayed pending the results of the arbitration.

[1] This is certainly a fact that the arbitration agreement was never mentioned in the Answer. But is it relevant? Is a prior binding arbitration agreement an actual “affirmative defense” which must be included in an Answer? Is there a waiver of binding arbitration if not done so? The Plaintiff seems to think so. What is the supporting legal authority for that position?

[2] “Manhattan Beach Post” is a dba of Defendant MBPO. (See Rucinski Suppl. Decl. 2, 3.)