Judge Randolph M. Hammock, Case Number: 24STCV02758, Date: 2024-05-22 Tentative Ruling

Plaintiff Omar Gamez Alvarez worked for Defendants Priorityworkforce, Inc., Hultafors Group North America, Inc., and Hultafors Group US Holdco LLC as a warehouse worker. Plaintiff alleges he suffered a foot contusion at work when a stack of pallets fell on his foot. When Plaintiff returned the next day under medical restrictions, Defendants allegedly fired him. Plaintiff asserts causes of action for (1) disability discrimination, (2) failure to provide reasonable accommodations, (3) failure to engage in good faith interactive process, (4) retaliation, and (5) wrongful termination.

Each party has submitted evidentiary objections. 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.)

Here, the Arbitration Agreement states that the any employment disputes “shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act.” (Rosa Decl., Exh. B.); 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.”].)

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.)

Defendant has 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.)

Defendant presents a declaration from Jennifer Pena, who works as Defendant’s Human Resources Generalist/Safety Compliance Manager. (Pena Decl. ¶ 4.) Pena attests that Plaintiff received and signed a Spanish version of Defendant’s Arbitration Agreement. (Pena Decl. ¶ 6; Exh. A; Rosa Decl. Exh. B.)

By signing the Agreement, Plaintiff agreed that “any claim, dispute and/or controversy that I may have against the Company (or its owners, directors, officers, managers, employees, agents and parties affiliated with its employees, agents and affiliated parties with their benefit and health plans) or that the Company may have against me, arising out of, relating to, or having any relation or connection with my pursuit of employment with, employment by, or other association with the Company, shall be submitted to and determined exclusively by binding arbitration…” (Rosa Decl., Exh. B, ¶ A.)

Therefore, this court finds that Defendants have established prima facie evidence of an agreement to arbitrate that covers the claims here.

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 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 adhesive and lacks an “opt-out” clause. He also argues he was not given the opportunity to review the agreement, that the agreement is “lengthy and complex,” and that he informed Defendant that he did not understand the agreement, among other things.

“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 that a “lady, whose name [he] cannot recall,” presented him with the arbitration agreement on the first day of his employment. (Alvarez Decl. ¶ 6.) Plaintiff initially returned the arbitration agreement unsigned, because he “did not understand it” and was “suspicious of it.” (Id.) When he told the “lady” that he “did not wish to sign” the Agreement, she told him “that it was company policy that [he] had to sign” the Agreement, and that he “should sign the AA because it is just a form and it does not matter anyway.” (Id.) Plaintiff continues that no one explained to him “the meaning of arbitration, the arbitration process, or how agreeing to arbitrate claims would affect [his] rights.” (Id. ¶ 7.) In addition, no one explained to Plaintiff that he could opt out of an arbitration, that he could consult an attorney, or “what the American Arbitration Association was or that they apparently maintain a website that contains rules governing arbitrations.” (Id. ¶¶ 8, 9.) Had Defendant explained these things to him, Plaintiff maintains, he “would have never executed an arbitration agreement.” (Id. ¶ 11.)

Ultimately, the court agrees with Plaintiff that the dynamic demonstrates 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.)

The employer’s failure to attach the arbitration rules to the agreement, however, is of little consequence. (See Peng v. First Republic Bank (2013) 219 Cal. App. 4th 1462, 1472 [“failure to attach the AAA rules, standing alone, is insufficient grounds to support a finding of procedural unconscionability”].) “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. (Lane v. Francis Cap. Mgmt. LLC (2014) 224 Cal. App. 4th 676, 690.) In Lane, the Court found there was not a “surprise” element where, as here, the arbitration provider’s rules could be accessed on the internet. (Id.) At most, the failure to attach the governing rules adds slight procedural unconscionability to that already existing based on the adhesive nature.

The Agreement is mutual in the sense that it requires “[b]oth the Company and [Plaintiff]” to arbitrate “any claim, dispute and/or controversy that [Plaintiff] may have against the Company…or that the Company may have against [Plaintiff].” (Rosa Decl., Exh. B, ¶ A.)

Plaintiff argues, however, the agreement exempts certain claims from arbitration that the employer would be more likely to bring against an employee. The agreement does not apply to “claims arising under the National Labor Relations Act that are filed with the National Labor Relations Board, claims for medical and disability benefits under the California Workers' Compensation Act, claims for unemployment insurance benefits that are filed with the Employment Development Department, claims filed under the Private Attorneys General Act of the Labor Code 2004 (Cal. Lab. Code§§ 2698, et seq.), claims for public injunctive relief, or as required by state law that is not preempted by the Federal Arbitration Act or other federal law.” (Id.)

The court does not agree that the agreement lacks mutuality in that sense. The excluded claims are not of the type that would generally be brought only by the employer. The arbitration agreement (and claims excluded) are distinguishable from those that other courts have found substantively unconscionable. (See Martinez v. Master Prot. Corp. (2004) 118 Cal. App. 4th 107, 115 [provision of arbitration agreement was substantively unconscionable where it excluded “claims involving trade secrets, misuse or disclosure of confidential information, and unfair competition,” which “typically are asserted only by employers”].)

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 not necessarily exclusive to the employee or employer. The agreement is therefore mutual.

Plaintiff next argues the agreement is substantively unconscionable because it contains a waiver of PAGA claims. The agreement applies to “all disputes…with the exception of…claims filed under the Private Attorneys General Act.” (Rosa Decl., Exh. B, ¶ A.)

An arbitration agreement may not require that a plaintiff only bring claims in an individual capacity as opposed to a private attorney general capacity. (See Hasty v. Am. Auto. Assn. etc. (2023) 98 Cal. App. 5th 1041, 1063.) And in this case, it is “irrelevant that [the plaintiff] has not brought a private attorney general action.” (Id.)

The Agreement contains a severability provision which states: “If any term or provision, or part of this Agreement is declared void or unenforceable, it shall be severed and the remainder of this Agreement shall be enforceable.” (Rosa Decl., Exh. B, ¶ 4.) [FN 1]

“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.)

Here, while the attempt to waive PAGA claims may be 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. Indeed, Plaintiff does not assert any PAGA claims here. 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 the unconscionable provision and enforce the agreement as modified. Once accounting for the severed portion, Plaintiff has established little, if any, substantive unconscionability. Under the sliding scale approach, Plaintiff has not established the Agreement is unconscionable.

FN 1- Interestingly, the severability provision is labeled “Indemnification.” (Rosa Decl., Exh. B, ¶ 4.) The text following makes clear that the paragraph is addressing severability, not indemnification. The parties do not address this point in the briefing. Because courts must “consider the contract as a whole and interpret the language in context,” this court construes the paragraph as a standard and enforceable severance provision notwithstanding the mislabeling. (Am. Alternative Ins. Corp. v. Superior Ct. (2006) 135 Cal. App. 4th 1239, 1245.)