Judge Randolph M. Hammock, Case Number: 23STCV24061, Date: 2024-02-01 Tentative Ruling

Judge: Randolph M. Hammock, Case: 23STCV24061, Date: 2024-02-01 Tentative Ruling

Plaintiff Robert Cardamone alleges he worked for Defendants Source Atlantique, Inc., and Rema Foods, Inc., as a West Coast Regional Sales Director. Plaintiff alleges he suffered from an eye disability that left him unable to travel on airplanes. Plaintiff further alleges that Defendants terminated his employment based on his disability and without offering reasonable accommodations.

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.)

“[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.)

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.)

Arguing the transaction here involved commerce, Defendants present evidence that Source Atlantique is an independent importer and distributor of specialty foods. (Rockwood Decl. ¶ 9). Source Atlantique engages in multi-state marketing and imports and distributes products that travel in interstate commerce. (Id.) Source Atlantique distributes these products by warehousing and marketing them in various states. (Id.)

Moreover, as West Coast Regional Manager, Plaintiff was assigned to California, Arizona, Oregon, Colorado, Washington, among other states. (Id. ¶ 10.) This required that he meet with independent brokers and customers located in various states on the West Coast. (Id. ¶ 11.) Defendants have therefore evidenced a transaction involving commerce.

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 present evidence that Plaintiff signed an Arbitration Agreement as part of his new hire onboarding on December 13, 2019. (Rockwood Decl. ¶ 5., Exh. A.) Under that Agreement, “[Plaintiff] and the Company agree that, in the event that either party seeks relief in a court for a dispute covered by this Agreement, all disputes will be arbitrated by a single arbitrator…” (Id.) The Agreement applies to “all matters directly or indirectly related to [Plaintiff’s] recruitment, hire, employment or separation from the Company, including, but not limited to, claims of alleged discrimination, harassment or retaliation under federal, state or local law…” (Id.)

In opposition, Plaintiff does not dispute that he signed the Agreement to arbitrate, nor does he dispute that the Agreement is broad enough to cover the claims here. (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”].)

Therefore, this court finds that Defendants have established prima facie evidence of an agreement to arbitrate. Because Plaintiff does not challenge the existence of the agreement, nothing more is required.

The Court of Appeal has held 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.]” (Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 786.)

In addition, although “[s]omeone who is not a party to a contractual arbitration provision generally lacks standing to enforce it,” there is a recognized exception “for third parties who are agents of a party to a contract.” (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal. App. 5th 840, 856; Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406, 418 [“If, as the complaint alleges, the individual defendants, though not signatories, were acting as agents for the [Defendant], then they are entitled to the benefit of the arbitration provisions.”]).

Here, the causes of action against each Defendant are “intimately founded in and intertwined” with the underlying contract obligations. Plaintiff alleges the Defendants were his joint employers, that the Defendants “share management,” “constitute an integrated enterprise,” and are agents and alter egos of one another. (Compl. ¶¶ 6, 7, 8.) Therefore, Defendant Rema may invoke the Arbitration Agreement under either an agency or equitable estoppel theory. [FN 1] Plaintiff does not contend otherwise.

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).

Plaintiff states in his declaration as follows: “When I was offered employment at Source, David Rockwood told me I had to sign all of the new hire documents, including the Arbitration Agreement, in order to be hired.” (Cardamone Decl. ¶ 3.) Plaintiff continues that he “did not have any ability to make any changes to the Arbitration Agreement and could not negotiate any of its provisions.” (Id. ¶ 5.)

The court therefore agrees with Plaintiff that the dynamic represents a classic contract of adhesion. 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.) [FN 2]

Plaintiff also argues the agreement is substantively unconscionable because (i) it lacks mutuality, (ii) it imposes an inequitable statute of limitations, (iii) contains a fee shifting clause, (iv) requires that the arbitration proceedings remain confidential, and (v) requires the arbitrator decide issues of enforceability. Each of these arguments is addressed below.

The Agreement applies “in the event that either party seeks relief in a court…” (Rockwood Decl., Exh. A [emphasis added].) It covers “all matters directly or indirectly related to [Plaintiff’s] recruitment, hire, employment or separation from the Company, including, but not limited to, claims of alleged discrimination, harassment or retaliation under federal, state or local law.” (Id.) The Agreement excludes “claims for Worker's Compensation (other than Worker’s Compensation retaliation), Unemployment benefits, criminal matters or claims of unfair competition or disclosure of trade secrets.” (Id.)

Here, the broad terms of the agreement require that each party arbitrate disputes against the other. While the agreement does exclude certain claims from its reach, the excluded areas are also mainly claims that Plaintiff would have against the employer, with the exception of a matter involving “disclosure of trade secrets.” (Id.) While the employer has excluded from the agreement the disclosure of trade secrets—an action which would likely be brought by the employer against the employee—this by itself does not make the agreement lack mutuality. It is therefore mutual.

To ensure the speedy resolution of any dispute, both parties agree to submit their claim(s) to AAA (or other arbitrator or arbitration forum) within forty-five (45) days of the other party’s demand for arbitration under this Agreement, and that a parties’ failure to do so will forever bar any claim covered by this Agreement that was or could have been asserted by that party at that time.

Plaintiff argues this provision is unconscionable because it shortens the statute of limitations period. However, this provision does not shorten the time for Plaintiff to bring her claims. It demands only that once a party files an arbitration demand, the claims must be submitted to AAA within 45-days. This is distinguishable from the cases cited by Plaintiff, in which courts found it unconscionable where an agreement to arbitrate restricted the time to bring claims at all. Therefore, Plaintiff has not demonstrated that this provision is unconscionable.

The Arbitration Agreement states that “if either party refuses to arbitrate after a demand has been made to do so, and if a court orders arbitration, the non-agreeing party consents to pay the other party’s legal costs, including attorney's fees, incurred in enforcing this Agreement to arbitrate.” (Rockwood Decl., Exh. A.)

Under Armendariz, an 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.” (Armendariz, supra, 24 Cal.4th 83, 114.) Defendant counters that Armendariz is preempted by the FAA. 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. The court therefore applies Armendariz.

In Patterson v. Superior Ct. (2021) 70 Cal. App. 5th 473, 489, the Court of Appeal held that a similar fee shifting provision was unconscionable. The Court explained that “[p]ermitting [the defendant] to recover its attorney fees for a successful motion to compel arbitration in a pending FEHA lawsuit without a showing the plaintiff's insistence on a judicial forum to determine his or her claims was objectively groundless similarly denies the plaintiff the rights guaranteed” under FEHA. (Id.)

The Agreement states that it will be governed by AAA Rules. Under the AAA Rules, “The arbitrator shall maintain the confidentiality of the arbitration and shall have the authority to make appropriate rulings to safeguard that confidentiality, unless the parties agree otherwise or the law provides to the contrary.” (Caludac Decl., Exh. G, p. 19.)

However, this court is unaware of any court holding that any such confidentiality provision in the AAA Rules is unconscionable, or that reference to such rule in an agreement to arbitrate makes the agreement unconscionable. Therefore, Plaintiff has not demonstrated that the inclusion of the AAA Rules supports a finding of unconscionability.

v. Provision Requiring Arbitrator Decide Enforceability

The Agreement states that the “Arbitrator shall resolve questions regarding the scope of this Agreement or Arbitrability.” (Rockwood Decl. Exh. A.) Plaintiff contends this provision unconscionably gives the Arbitrator “exclusive authority” to decide questions of enforceability or unconscionability.

However, the Agreement refers to the scenario where a “court orders arbitration,” and allows the court to sever an unconscionable provision. (Id.) By inclusion of these terms, the Agreement necessarily—even if implicitly—recognizes that a court may decide gateway issues of arbitrability. (See Nelson v. Dual Diagnosis Treatment Center (2022) 77 Cal.App.5th 643, 654 [“Under California law, it is presumed the judge will decide arbitrability, unless there is clear and unmistakable evidence the parties intended the arbitrator to decide arbitrability.”].) Therefore, the Agreement does not attempt to limit a court’s role in the process.

3. Severability of Unconscionable Provisions

However, the Agreement contains a severability provision which states: “If any court or arbitrator may find or hold that any provision of this Agreement or portion thereof is invalid or unenforceable, that provision or portion thereof will be deleted or modified so that all other provisions will remain in effect and be interpreted and construed so as to be fully enforceable.” (Rockwood Decl., Exh. A.)

“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.)

While the attempt to shift the costs of Defendant’s motion on Plaintiff is unconscionable, the Agreement is not “permeated” with unconscionability. (Lange, supra, 46 Cal. App. 5th at 454.) Severance of the unconscionable provision has a minimal impact on the parties’ rights or the Agreement as a whole. It is therefore consistent with the parties’ expectations—and the strong policy favoring arbitration to resolve disputes—that the agreement to arbitrate be enforced as modified.

The court therefore finds it appropriate under these circumstances to sever that specific unconscionable provision and enforce the agreement as modified. Once accounting for the severed portion, Plaintiff has established little substantive unconscionability. Under the sliding scale approach, Plaintiff has not established the Agreement is unconscionable.

[2] Be that as it may, this does not mean that the arbitration agreement is void, per se, since the law is clear that an employer may require the signing of an arbitration agreement as a condition of employment.

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.