Judge Randolph M. Hammock, Case 22STCV20273 2022-12-28 Tentative Ruling

Judge: Randolph M. Hammock, Case: 22STCV20273, Date: 2022-12-28 Tentative Ruling

This is an employment dispute. Plaintiff Shiloh Bentacourt brings this action for sexual and gender-based harassment, and for various violations of the Labor Code. Plaintiff alleges she worked for Defendants Parviz and Pari Darabi as a law clerk. During this time, she alleges she discovered that Defendants compelled clients to lie about their injuries to bolster lawsuits and increase insurance payouts. Plaintiff further alleges Defendants created a hostile work environment after Plaintiff turned down Defendant Parviz’s sexual advances. In response to Plaintiff’s complaints, Defendants retaliated against Plaintiff by making her work-conditions unreasonably difficult. Plaintiff also alleges Defendants misclassified her as an independent contractor, among other wage and hour violations.

Defendants’ Motion to Compel Arbitration is CONDITIONALLY GRANTED. The limitation of remedies and attorney’s fees discussed in Section B (2), infra., as well as the provision that the arbitration fees/costs are to be shared equally by the parties, are hereby excised from the arbitration agreement, and declared null and void. Defendants are to solely pay the reasonable arbitrator’s fees and costs, subject to possible reallocation in the future.

“[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.)

First, Plaintiff’s opposition brief is severely overlength. No “responding memorandum may exceed 15 pages.” (Cal. Rules of Court, Rule 3.1113(d).) Not including the caption page, exhibits, declarations, table of contents, table of authorities, or proof of service, Plaintiff’s memorandum spans exactly 40-pages.

To compound matters, the motion was untimely. “All papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days…before the hearing.” (CCP § 1005(b).) Thus, Plaintiff’s opposition was due on or about December 14th, 2022. However, Plaintiff filed her opposition, and then an amended opposition, on December 19th and 20th, respectively.

Defendants justifiably object to the opposition. And under these circumstances, it is well within this court’s discretion to disregard Plaintiff’s opposition in its entirety. Be that as it may, in the interests of justice, the court has read and considered the opposition.

Finally, the opposition focuses widely on collateral issues. Here, the court focuses its attention solely on the questions necessary to rule on this motion: First, does an agreement to arbitrate exist, and second, is that agreement valid and enforceable? Because both are answered in the affirmative, Defendant’s motion to compel arbitration is granted, for the reasons that follow.

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.)

Any controversy or claim arising out of this contract shall be resolved by arbitration in accordance with the existing commercial Arbitration Rules of Alternative Dispute Resolution (ADR) in San Francisco or San Jose, California, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. The parties shall split equally the costs of arbitration, except that each party shall pay its own Attorney's fees. The parties agree that the award of the arbitrator shall be final and binding.

The parties further agreed that the contract would be “governed by and construed in accordance with the laws of the State of California.” (Id., ¶ 12.) The agreement is broad, covering “[a]ny controversy or claim arising out of” the employment agreement. (Id.) Plaintiff does not contend that the agreement cannot extend to her claims here, statutory or otherwise.

Plaintiff does contend, however, that she does “not recall seeing, receiving, reviewing, accepting, or signing an Arbitration Agreement.” (Bentacourt Decl. ¶ 47.) She states that if she knew “Defendants were conditioning [her] job on [her] waiving [her] right to a jury trial or submitting to arbitration,” she would not have accepted the position. (Id.) [FN 1]

Standing alone, Plaintiff’s inability to recall signing the agreement is insufficient to void it. Further, a signor 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.) And despite Plaintiff’s after-the-fact contention she would not have waived her right to arbitration, the evidence supports that she did. Absent an unequivocal statement that Plaintiff did not sign the agreement, the court finds the existence of an agreement to arbitrate by a preponderance of the evidence.

Plaintiff then argues the agreement lacks mutual consent because it includes indefinite terms—particularly, because it is governed by the “commercial arbitration rules” of “Alternative Dispute Resolution (ADR).” Plaintiff argues this ADR “could include the Alternative Dispute Resolution program through the County of San Francisco, the local San Francisco Bar Association, the California Department of Consumer Affairs, or any number of other private companies providing ADR services in California.” (Opp. 22: 18-21.)

Based on context, the court finds it more likely than not that the parties intended “Alternative Dispute Resolution (ADR)” to refer to “ADR Services, Inc.”—a provider that both parties recognize exists. Even assuming the agreement is ambiguous in this respect, Plaintiff cites no authority suggesting this would invalidate the agreement. In that event, the parties would be expected to agree on one of the numerous other alternative dispute resolution providers. Put differently, an agreement to arbitrate can be valid even when it is silent on the service provider.

Plaintiff next argues the agreement is invalid because it fails to attach the governing ADR rules. However, the failure to attach the rules is not, by itself, enough to invalidate the agreement. (Lane v. Francis Cap. Mgmt. LLC (2014) 224 Cal. App. 4th 676, 690). “The failure to attach a copy of arbitration rules could be a factor supporting a finding of procedural unconscionability where the failure would result in surprise to the party opposing arbitration. (Id.) (Emphasis added.) In Lane, the Court found there was not a “surprise” element when the AAA rules could be accessed on the internet. (Id.) As Plaintiff was a law school graduate who had passed the bar exam at or near the time, she signed her agreement to arbitrate, there is little doubt she could have located the governing rules available on the internet.

Plaintiff argues that Defendant Pari Darabi was not a signatory to the agreement and therefore cannot invoke it. The Agreement is signed by Plaintiff, on one hand, and only Defendant Parviz Darabi, on the other. (See Darabi Decl., Exh. 1, p. 3.) Thus, Plaintiff states she “did not consent and/or assent to arbitrate any claims against Pari [Darabi],” and “did not sign an arbitration agreement with Pari [Darabi].” (Bentacourt Decl. ¶ 48.)

“Someone who is not a party to a contractual arbitration provision generally lacks standing to enforce it.” (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal. App. 5th 840, 856.) However, there is a recognized exception “for third parties who are agents of a party to a contract.” (Id.)

Plaintiff now contends “Defendant Pari was not an agent of Defendant Parviz and/or his Law Firm.” (Opp. 24: 12-13.) This is directly contradicted by her First Amended Complaint, which expressly alleges Pari Parviz was an “agent” of Defendants (Compl. ¶¶ 2, 4, 6, 7, 9, 56, 57.) The Complaint also repeatedly refers to Defendants together, and alleges that “Defendants” (plural) “controlled, and/or managed the day-to-day operations and activities at its business through its authorized agents, supervisors/managers Pari and Parviz.” (Id. ¶ 4.)

Plaintiff also alleges Pari was “the person who assigned work to Plaintiff,” “issued payments,” and “set date and time schedules.” (Id. ¶ 25, 48, 53.) Plaintiff flatly alleges that both Pari and Parviz were Plaintiff’s “’employer’ within the meaning of FEHA.” (Id. ¶ 5.) As noted earlier, the arbitration agreement broadly covers “[a]ny controversy or claim arising out of” the employment contract. (Darabi Decl., Exh. A, ¶ 10.) Plaintiff’s reason for naming Defendant Pari Darabi undoubtedly arises out of—and is inextricably intertwined with—her employment relationship with Defendants. Therefore, she can also invoke the arbitration agreement.

Plaintiff next argues that Defendants waived the right to compel arbitration, because they delayed in bringing the instant motion, and “failed to include a disclaimer in their Ex Parte Application and/or to their multiple oppositions to Plaintiff’s motions noting that they preserved their right to arbitrate.” (Opp. 18: 1-3.)

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 filed this action on June 22, 2022. Defendants filed this motion on November 2, 2022. In the context of litigation, the delay is relatively insignificant. Indeed, courts have found longer delays that 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].)

Perhaps most importantly, there is no evidence that Defendants have “invoked the litigation machinery” in this case. (Iskanian, 59 Cal. 4th at 375). To date, Defendants have done little more than file their motion to compel arbitration and move ex parte to enter a stay pursuant to that pending motion. 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.) Such is not the case here.

Moreover, “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). Again, the evidence of that here is minimal.

Finally, this court notes that Plaintiff herself attests that when her previous attorney sent Defendants a demand letter before filing this action, Defendants initiated the arbitration process voluntarily with ADR Services, Inc., in San Francisco. (Bentacourt Decl. ¶ 40.) Plaintiff informed ADR Services that she “did not and had not agreed to arbitration.” (Id. ¶ 41.) In response, she “filed this instant action seeking relief from this Court from Defendants’ unlawful conduct.” (Id.) Thus, Defendants’ position on arbitration has been consistent from the beginning.

Finally, Plaintiff argues the agreement 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).

As noted previously, at the time the parties contracted, Defendant was a practicing attorney, and Plaintiff had passed the bar and was awaiting admission—presumably, both parties had above-average knowledge of contracting and arbitration. In that sense, this contract was less a “contract of adhesion” than those usually presented in the employment context. Be that as it may, the court recognzies that an employer usually holds the upper hand in that dynamic, even in this case.

Thus, 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.)

This court is unaware of any authority suggesting, much less expressly holding, that Armendariz is invalid or otherwise in conflict with California or federal law. Defendants also contend that because Plaintiff was an independent contractor, rather than an employee, Armendariz is irrelevant. But as the Court of Appeal explained, “it is ‘both unnecessary and inappropriate’ to determine whether respondents were employees for purposes of our unconscionability determination. [Citation.] Whether or not a finder of fact ultimately agrees with respondents’ allegations that they were employees, ‘the relationship between [appellant and respondents] was characterized by a power imbalance analogous to that of an employer-employee relationship’ and was ‘sufficiently similar to that of an employee-employer relationship to conclude the parties’ arbitration agreement is subject to Armendariz requirements.” (Ali v. Daylight Transp., LLC (2020) 59 Cal. App. 5th 462, 473–74.) Given the unequal bargaining position here, the court finds Armendariz applies.

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[].” (Id.) Armendariz factor 2 and 3 requires that the arbitration agreement “provide for more than minimal discovery” and that the arbitrator issue a written opinion. (Id.) Armendariz factor 4 requires that the agreement provide for all the types of relief that would otherwise be available in court. (Id.) 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.” (Id.)

The arbitration agreement is silent on the first 3 factors—a neutral arbitrator, more than minimal discovery, and a written opinion. 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 these issues, Plaintiff has the benefit of Armendariz on her side to fill the gaps. Plaintiff also does not suggest that the governing ADR rules purport to limit these rights.

The agreement does, however, appear in conflict with factors 4 and 5. Here, the agreement attempts to limit Plaintiff’s recovery, providing that “[i]n no event shall either party be held liable for damages and penalties in excess of amounts paid to Law Clerk under this Agreement.” (Darabi Decl., Exh. 1, ¶ 13.) Similarly, the agreement purports to limit the recovery of attorney’s fees, in contravention of those that may be recoverable under FEHA or otherwise. Finally, it requires the parties “split equally the costs of arbitration.” (Darabi Decl., Exh. 1, ¶ 10.)

The Armendariz Court held that a similar “damages limitation” provision in an agreement was “contrary to public policy and unlawful.” (Id. at 104.) “[A]n arbitration agreement may not limit statutorily imposed remedies.” (Armendariz, supra, 24 Cal. 4th at 103.) Likewise, “a mandatory employment arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration.” (Id. at 113.) Were it otherwise, Plaintiff “would not be able to fully ‘vindicate [her] statutory cause[es] of action in the arbitral forum.’” (Id. at 101.)

Fortunately for Defendants, the agreement here has a severability provision. It provides: “Each paragraph of this Contract shall be and remain separate from and independent of and severable from all and any other paragraphs herein except where otherwise indicated by the context of the agreement. The decision or declaration that one or more of the paragraphs are null and void shall have no effect on the remaining paragraphs of this agreement.” (Darabi Decl., Exh. 1, ¶ 8.)

“Civil Code section 1670.5, subdivision (a) states that ‘[i]f the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.’ The Supreme Court has interpreted this provision to mean that if a trial court concludes that an arbitration agreement contains unconscionable terms, it then “must determine whether these terms should be severed, or whether instead the arbitration agreement as a whole should be invalidated.” (Lange v. Monster Energy Co. (2020) 46 Cal. App. 5th 436, 452–53.) “[T]he presence of multiple unconscionable clauses is merely one factor in the trial court's inquiry; it is not dispositive. [Citation.] That an agreement can be considered permeated by unconscionability if it contains more than one unlawful provision does not compel the conclusion that it must be so. (Lange v. Monster Energy Co. (2020) 46 Cal. App. 5th 436, 454.)

The court notes that Plaintiff has failed to address severability. The court finds the unconscionable provisions here may be severed—the agreement need not be invalidated in its entirety. Notably, the agreement was entered into by two sophisticated parties with legal acumen. And importantly, as noted above, the Agreement does not purport to limit the requirements that the arbitration “provide for more than minimal discovery,” that the arbitrator issue a written opinion, or that the arbitrator be a neutral party, which “is essential to ensuring the integrity of the arbitration process.” (Id. at 103.) It is therefore consistent with the parties’ bargained expectations—and the strong policy favoring arbitration to resolve disputes—that the agreement to arbitrate be enforced as modified.

Thus, to the extent any portion of the Agreement purports to limit Plaintiff’s statutory remedies, or to pay any costs unique to arbitration, the court orders those provisions stricken. Once accounting for the severed portions, Plaintiff has established very little substantive unconscionability here. All doubts should be resolved in favor of arbitration. (California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205).

Accordingly, Defendants’ Motion to Compel Arbitration is CONDITIONALLY GRANTED. The limitation of remedies and attorney’s fees discussed in Section B (2), infra., as well as the provision that the arbitration fees/costs are to be shared equally by the parties, are hereby excised from the arbitration agreement, and declared null and void. Defendants are to solely pay the reasonable arbitrator’s fees and costs, subject to possible reallocation in the future.

Judge of the Superior Court

FN 1 - Suffice it to state, this Court is somewhat skeptical of such a bald claim, as most applicants for employment are ready, willing, and able to (knowingly or unknowingly) waive such a “right” to a potential future jury trial, as a condition to obtain the job being sought. That is human nature. Moreover, Plaintiff is not some unskilled manual laborer – at that time she was a highly-educated law school graduate, waiting for bar admission, who undoubtedly had the ability to read and understand contracts, including the arbitration clause at issue.

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.