Judge Randolph M. Hammock, Case Number: 23STCV11684, Date: 2024-04-02 Tentative Ruling

Judge: Randolph M. Hammock, Case: 23STCV11684, Date: 2024-04-02 Tentative Ruling

“[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.)

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.)

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.)

Defendants have the initial burden of producing “prima facie evidence of a written agreement to arbitrate the controversy.” (Gamboa v. Ne. Cmty. Clinic (2021) 72 Cal. App. 5th 158, 165.) “[I]t is not necessary to follow the normal procedures of document authentication.” (Condee v. Longwood Mgmt. Corp. (2001) 88 Cal. App. 4th 215, 218.)

Defendants provide a declaration from Max Mauser, Alo’s Senior Director of Global Human Resources. (Mauser Decl. ¶ 2.) Mauser attests that on or about April 28, 2022, Plaintiff and Alo, LLC entered into an “At-Will Employment, Confidential Information, Invention Assignment, Arbitration Agreement,” attached to the declaration as Exhibit A. (Id. ¶ 5.)

In relevant part, Plaintiff agreed that “ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE (INCLUDING THE COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER, OR BENEFIT PLAN OF THE COMPANY, IN THEIR CAPACITY AS SUCH OR OTHERWISE), ARISING OUT OF, RELATING TO, OR RESULTING FROM MY EMPLOYMENT WITH THE COMPANY OR THE TERMINATION OF MY EMPLOYMENT WITH THE COMPANY, INCLUDING ANY BREACH OF THIS AGREEMENT, SHALL BE SUBJECT TO BINDING ARBITRATION…” (Mauser Decl., Exh. A, ¶ 13(A).) The Agreement contains Plaintiff’s electronic signature.

This switches the burden to Plaintiff, who “bears the burden of producing evidence to challenge the authenticity of the agreement.” (Gamboa, supra, 72 Cal. App. 5th at 165.) Plaintiff can do this in “several ways,” including by “declar[ing] under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement.” (Id.)

Plaintiff has not provided evidence, by declaration or otherwise, challenging the authenticity of the agreement. Instead, Plaintiff argues only that Defendants have not met their burden to establish the existence of an agreement to arbitrate.

But her reliance on Ruiz v. Moss Bros. Auto Grp. (2014) 232 Cal. App. 4th 836, 844, is misplaced. In that case, 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).) The court noted that authenticating an electronic document or signature is “not a difficult evidentiary burden to meet,” but that it was not met in that case. (Id. at 844.)

Here, unlike in Ruiz, Plaintiff has not presented any evidence that she did not sign the agreement, and therefore cannot meet her burden to call the agreement into question. Thus, under the burden-shifting procedure for establishing the existence of a valid agreement to arbitrate, Defendants’ initial assertion that Plaintiff signed the agreement covering the dispute here is sufficient. Nothing more is required.

Next, Plaintiff argues that Defendants have not presented evidence that the FAA applies to the instant transaction. The FAA provides for enforcement of arbitration provisions in any contract “evidencing a transaction involving commerce.” (9 USC § 2.) The term “involving commerce” is functionally equivalent to “affecting commerce” and “signals an intent to exercise Congress’ commerce power to the full.” (Allied-Bruce Terminix Cos., Inc. v. Dobson (1995) 513 US 265, 277.) “The party asserting the FAA bears the burden to show it applies by presenting evidence establishing [that] the contract with the arbitration provision has a substantial relationship to interstate commerce . . . .” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238.)

In their initial moving papers, Defendants provided little, if any, evidence bearing on the applicability of the FAA. Plaintiff noted this point in her opposition. In reply, Defendants submitted a supplemental declaration from Max Mauser, who attests to the following: Alo is a “nationwide retailer of apparel and wellness products that currently operates stores in 20 states and the District of Columbia and sells its merchandise online throughout the United States and ships to all 50 states.” (Mauser Supp. Decl. ¶ 3.) In her role as “Project Manager, Real Estate,” Plaintiff’s “job responsibilities included performing tasks related to Alo’s leases for retail stores, new store openings, and retail operations at Alo’s store locations throughout the United States.” (Id. ¶ 4.)

As a general rule, courts will not consider new evidence raised with a reply. But “a trial court may properly consider new evidence submitted with a reply brief ‘so long as the party opposing…has notice and an opportunity to respond to the new material.’” (Wall St. Network, Ltd. v. New York Times Co. (2008) 164 Cal. App. 4th 1171, 1183.) Plaintiff will be given the opportunity to address the “new evidence” at the hearing, as necessary.

Next, 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.)

First, 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).

The court agrees with Plaintiff that the dynamic here represents a classic contract of adhesion. Therefore, 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.)

Plaintiff first argues the agreement is substantively unconscionable because it calls for the application of Washington State law in the arbitration process. [FN 1] While inclusion of this provision does give reason for pause, Plaintiff has cited no authority suggesting it makes the agreement unconscionable. Rather, whether the arbitrator should apply Washington law in a dispute that seemingly bears little relation to the state of Washington is a question for the arbitrator.

Plaintiff then argues the agreement is substantively unconscionable because it contains a “wholesale waiver” of PAGA claims. The Agreement provides that “neither [Plaintiff] nor the company will seek to have any dispute heard as a…private attorney general action (except as specifically authorized by law)…” (Mauser Decl., Exh. A., ¶ 13(B) [emphasis added].)

A waiver provision that forces an employee to abandon their right to bring both individual and nonindividual PAGA claims in any forum is against public policy. (See DeMarinis v. Heritage Bank of Com. (2023) 98 Cal. App. 5th 776, 789.) Therefore, any attempt to waive Plaintiff’s right to bring PAGA claims is unconscionable.

Notably, however, the agreement saves itself, as it bans all PAGA claims “except as specifically authorized by law.” Under current California law, Plaintiff has a recognized right to maintain PAGA claims. Therefore, consistent with that law, the Agreement cannot and does not waive Plaintiff’s right to bring the instant action

It is now settled in California that where a Plaintiff’s individual PAGA claims are sent to arbitration, the Plaintiff maintains standing to litigate the non-individual claims in court. (See Adolph v. Uber Techs., Inc. (2023) 14 Cal. 5th 1104, 1123.) As to how the matter should proceed procedurally, “a court ordinarily has inherent power, in its discretion, to stay proceedings when such a stay will accommodate the ends of justice.’ (People v. Bell (1984) 159 Cal.App.3d 323, 329.) As the Court in Landis v. North American Co. (1936) 299 U.S. 248, 254, explained, ‘the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 141; see also Frieberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1481, 1489 [“Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.”].)

Here, arbitration of Plaintiff’s individual claims will involve similar issues to the litigation of her non-individual claims. A stay will avoid duplicative proceedings of the same or similar issues, preserve authority of the arbitrator, and conserve the time and resources of the parties and this court. Importantly, there is no evidence Plaintiff or the alleged aggrieved employees will be unduly prejudiced by the stay.

Judge of the Superior Court

FN 1 - For whatever it is worth, it appears the portion of the arbitration agreement calling for application of Washington law was included in error, and no party contends that Washington law should apply to the instant arbitration.