Judge Randolph M. Hammock, Case Number: 22STCV34972, Date: 2023-04-26 Tentative Ruling

Judge: Randolph M. Hammock, Case: 22STCV34972, Date: 2023-04-26 Tentative Ruling

This is an employment dispute. Plaintiff Samuel Oliden worked for Defendant Ralphs Grocery Company as a Store Manager. Plaintiff alleges he complained of dangerous and unsafe business practices, including Defendant’s decision to block emergency doors in its attempts to stop thefts. In response to these continued complaints, Plaintiff alleges Defendant terminated his employment. Plaintiff also alleges that his termination was, in part, due to his age and seniority with the company.

“[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.)

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.)

It is undisputed that there is no signed agreement to arbitrate in this matter. Instead, Defendant relies on an “implied-in-fact” agreement to arbitrate that it contends Plaintiff implicitly consented to by continuing his employment with Defendant.

Courts have recognized an “implied-in-fact” agreement to arbitrate where the employee's continued employment constitutes acceptance of an agreement proposed by the employer. (See Asmus v. Pacific Bell (2000) 23 Cal.4th 1; see also Craig v. Brown & Root, Inc. (2000) 84 Cal. App. 4th 416.) “ ‘Implied-in-fact contracts are found in cases with unexecuted arbitration agreements when (1) employees have knowledge of the arbitration agreement and (2) employees continue to work after receipt of the arbitration agreement. In such cases, courts have held that the employees' continued employment constitutes their acceptance of the agreements to arbitrate.’ ” (Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th 1497, 1507.) This analysis is highly “fact specific” and depends not just on the parties’ conduct, but also on the language of the employer’s policies. (Douglass v. Serenivision, Inc. (2018) 20 Cal. App. 5th 376, 388; Mendoza v. Trans Valley Transp. (2022) 75 Cal. App. 5th 748, 791.)

Defendant submits the declaration of Annabelle Capulong, its “Division Total Rewards Manager.” (Capulong Decl. ¶ 1.) Capulong attests that on or about June 20, 2012, Ralphs sent Plaintiff a letter to his home address “advising [him] of the Dispute Resolution Program it had implemented.” (Id. ¶¶ 3, 5; Exh. A.) The letter asked Plaintiff to sign and return the included Dispute Resolution Agreement. (Id.) It further advised that “[y]ou are bound by the terms of the Dispute Resolution Agreement even if you fail to sign and return one of the attached copies. By its terms, the Dispute Resolution Agreement will bind both you and the Company 30 days after you receive it.” (Id. at 3; Exh. A.) Plaintiff did not sign and return the Agreement. (Id. ¶ 4.) However, he continued to work for Ralphs thereafter. (Id.)

The Agreement here is broad and covers “any dispute arising out of or relating to” Plaintiff’s employment with Defendant. (Capulong Decl. Exh. A.) As relevant here, it covers claims “regarding the employment relationship…[and] termination.” (Id.) The Agreement expressly states that arbitration is to be governed by the FAA, and the court will therefore apply the FAA where necessary. (See Davis v. Shiekh Shoes, LLC (2022) 84 Cal. App. 5th 956, 963 [finding the FAA applies “if it is so stated in the agreement.”].)

In opposition, Plaintiff disputes the existence of any implied-in-fact agreement to arbitrate. First, he contends that the agreement fails to “communicate to him that his employment was contingent on his agreement to arbitrate.” (Opp. 5: 10-11.) In his declaration, Plaintiff states that Defendant never “sen[t], present[ed] or discuss[ed] the arbitration agreement” with him, and never told him that an arbitration agreement was a condition of his employment. (Oliden Decl. ¶ 4.) He further contends that if he had seen the agreement, he “never would have agreed to it because [he] would not have wanted to give up [his] right to access the courts.” (Id. ¶ 6.)

“To interpret a contract, we look to its language (§ 1638) and ascertain the intent of the parties, if possible, based solely on the contract's written provisions (§ 1639). In doing so, we apply the ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage’ [citation] ....Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning.” (Hewlett-Packard Co. v. Oracle Corp. (2021) 65 Cal. App. 5th 506, 531.)

Here, it is true that the agreement does not expressly state that is it a condition of Plaintiff’s employment to arbitrate disputes—at least not in that identical language. However, the plain language of the Agreement and corresponding letter support that conclusion. First, the Agreement states that “shall be binding on the Company and Employee 30 days after Employee’s receipt.” (Capulong Decl. Exh. A.) In addition, the Agreement does not provide the employee any way to “opt out” of the arbitration program.

Second, the letter sent with the Agreement states that the Company “implemented a Dispute Resolution Program for all salaried and hourly non-union associates, requiring final and binding arbitration to resolve employment-related disputes.” (Capulong Decl. Exh. A [emphasis added].) Again, there is no mention or indication that the program was optional. Accordingly, under the plain language used, the agreement was a condition of Plaintiff’s employment. Therefore, by continuing to work for Defendant, Plaintiff agreed to be bound by the agreement to arbitrate. “California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.” (Diaz v. Sohnen Enterprises (2019) 34 Cal. App. 5th 126, 130.)

Second, Plaintiff contends there is no evidence he ever received the agreement in the mail. Under Evidence Code § 641, a letter correctly addressed and properly mailed is presumed to have been received in the ordinary course of mail. “As is true of most presumptions affecting the burden of producing evidence, this one is an expression of common experience, one in which the presumed fact (receipt of that which was mailed) is so likely to be true that the law requires it to be assumed in the absence of contrary evidence.” (Craig v. Brown & Root, Inc. (2000) 84 Cal. App. 4th 416, 421.)

Defendant includes a copy of the letter and corresponding Agreement obtained from Plaintiff’s personnel file. (Capulong Decl. Exh. A.). The letter is dated June 20, 2012, and is addressed to Plaintiff at 15620 Condesa Dr., Whittier, CA 90603. (Id.) Capulong attests that Ralph’s mailed the letter to that address. (Id.) This “create[s] a presumption that [Plaintiff] received the items that were sent, and shift[s] the burden of producing evidence to” Plaintiff. (Id.)

Plaintiff does not dispute that the address Defendant had on file was his correct address. Plaintiff provides little more than his contention that he never received or saw the documents. (Oliden Decl. ¶ 4.) But as in Craig, Plaintiff’s “equivocal denial of receipt,” standing alone, is insufficient to rebut receipt. (Craig, supra, 84 Cal. App. 4th at 421.)

This court therefore finds the existence of a valid agreement to arbitrate disputes, via an implied-in-fact agreement, by a preponderance of the evidence. (See California Corr. Peace Officers Assn. v. State of California (2006) 142 Cal. App. 4th 198, 205 [“Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration”].)

In opposition, 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 first 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]. (Armendariz, supra, 24 Cal.4th. at 113).

As discussed above, Plaintiff was presented with the arbitration agreement as a condition of his employment. Plaintiff had no ability to negotiate the terms of the agreement. Thus, Plaintiff has met his burden to demonstrate that the “take it or leave it” nature of the agreement establishes “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.)

Plaintiff also argues there exists procedural unconscionability because Defendant did not present a copy of the arbitration rules. But 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.) There is therefore little procedural unconscionability based on failure to provide a copy of the governing rules.

Plaintiff also argues the Agreement is substantively unconscionable. Plaintiff first contends the agreement imposes arbitration costs that he would not be obligated to pay in court, and leaves the decision of whether to cover the costs of arbitration purely within Defendant’s discretion.

To this point, the Agreement provides that “in all cases where required by law, the Company will pay the Arbitrator’s and arbitration fees. If under applicable law the Company is not required to pay all of the Arbitrator’s and/or arbitration fees, such fee(s) will be apportioned between the parties by the Arbitrator in accordance with said applicable law.” (Capulong Decl., Exh. A, ¶ 4.)

Armendariz provides that the agreement to arbitrate must not “require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th at p. 102.) Thus, the Agreement here complies with Armendariz, as that case itself “require[s] by law” that Plaintiff not pay arbitration fees. (Id.) Indeed, Defendant concedes that it is “required to pay the arbitration costs under California law and does not dispute that it is required to pay such costs.” (Reply 7: 21-22.)

Plaintiff next contends that the Agreement’s notice requirement amounts to a “free peek” of his case. Plaintiff takes issue with two provisions of the Agreement. The Agreement requires that a written demand be made and delivered to the other party. (Capulong Decl. Exh. A, ¶ 2.) Plaintiff cites no authority that such a requirement is at all substantively unconscionable. After all, Plaintiff put Defendant on notice of his claims by filing the complaint in this court, and even more so than he likely would in the written demand.

Plaintiff also appears to take issue where the agreement states that it is not a substitute for the “Company’s existing internal procedures for resolution of complaints.” (Capulong Decl. Exh. A.) It is difficult to conclude that this amounts to an improper notice requirement, much less that it would make the agreement substantively unconscionable. Moreover, Plaintiff is no longer an employee of Defendant, and is therefore no longer subject to the company’s “internal procedures.”

Plaintiff next contends that the Agreement lacks mutuality because it contains a signature line for him, but not for the company’s representative. This appears largely immaterial, where as here, the agreement at issue is implied-in-fact. No signature was necessary, because continued employment was Plaintiff’s assent to the agreement. Moreover, the broad terms of the agreement require that each party arbitrate disputes against the other. It is therefore mutual.

Finally, Plaintiff contends that the agreement is substantively unconscionable because it allows Defendant to unilaterally modify it. The Agreement here does not expressly mention Defendant’s right to modify it. Instead, Plaintiff focuses on the accompanying letter, which states that “[f]rom time to time, the Company updates its policies and procedures,” and in doing so, has now “implemented a Dispute Resolution Program.” (Capulong Decl, Exh. A.)

In Davis, the court found some degree of substantive unconscionability where the Company “ha[d] the unilateral right to change or modify the agreement at any time, and without notice to the” employees. (Davis v. TWC Dealer Grp. (2019) Inc., 41 Cal. App. 5th 662, 674.) But here, there is nothing in the agreement itself that gives Plaintiff the unilateral right to modify it. Moreover, there is no indication it could or would be done without notice.

Finally, even assuming it did purport to do so, this court would not find that this fact alone amounts to any significant finding of substantive unconscionability. In finding the agreement was invalid, the Davis Court noted at least four separate factors that made the agreement unconscionable. (Davis, supra, 41 Cal. App. 5th at 674.) Only one was due to the company’s unilateral right to modify the agreement. (Id.) Thus, Davis does not stand for the proposition that a unilateral right to modify an agreement makes that agreement substantively unconscionable. Nor does it amount to a high or even quantifiable degree of unconscionability. Rather, it is but one factor to consider in the analysis.

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.