Judge Randolph M. Hammock, Case Number: 24STCV05640, Date: 2024-07-16 Tentative Ruling

Judge: Randolph M. Hammock, Case: 24STCV05640, Date: 2024-07-16 Tentative Ruling

While employed by Defendants, Plaintiff Hailey Lujan alleges she injured her foot at work. The injury resulted in working restrictions and the need for accommodations. Plaintiff alleges Defendants violated her restrictions and failed to promote her to the assistant manager position promised her. After raising complaints, Plaintiff was terminated.

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.)

“Under the FAA, there is a strong policy favoring arbitration. [Citations.] ‘The overarching purpose of the FAA is to ensure the enforcement of arbitration agreements according to their terms ....’ [Citation.] Therefore, ‘[a]rbitration is a matter of consent ....’ [Citations.] [¶] ‘ “Although the FAA preempts any state law that stands as an obstacle to its objective of enforcing arbitration agreements according to their terms, ... we apply general California contract law to determine whether the parties formed a valid agreement to arbitrate their dispute.” ’ [Citations.]” (Barrera v. Apple Am. Grp. LLC (2023) 95 Cal. App. 5th 63, 76.) It is settled that “[u]nder both California and federal law, arbitration is strongly favored and any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” (Balandran v. Labor Ready, Inc. (2004) 124 Cal.App.4th 1522, 1527.)

California also 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.)

“[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.)

Plaintiff executed two separate arbitration agreements during her employment. The most recent, 2023 Arbitration Agreement states that “[a]ny arbitration proceeding under this Agreement shall proceed under and be governed by the Federal Arbitration Act ("FAA") because Employee, the Company, and MODERN HR are engaged in interstate commerce.” (Holmes Decl. ¶ 13; Exh. B, p. 2.)

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 submit a declaration from Michael Holmes, the Vice President of Human Resources & Business Development for Modern H.R., Inc. (Holmes Decl. ¶ 1.) Modern H.R. “has provided outsourced human resources services to Nowhere Palisades, LLC DBA Erewhon – Palisades since 2019 and to Nowhere Beverly Hills, LLC DBA Erewhon – Beverly Hills and since 2022.” (Id. ¶ 2.) These services “include, among others, human resources information management, human resources policy consultation, investigative support, [and] payroll processing.” (Id. ¶ 3.)

Holmes has held his “current position with Modern HR throughout this period.” (Id. ¶ 2.) As Vice President of Human Resources & Business Development, Holmes attests that he is “responsible for overseeing the Modern HR’s human resources department personnel” and is “also responsible for ensuring compliance with Modern HR’s electronic employee human resources management and information systems.” (Id. ¶ 4.)

Holmes represents that Erewhon-Beverly Hills and Erewhon-Palisades’ electronic employee human resources management and information system is used in the ordinary course of business and “are made, kept, and securely maintained on a computer platform that is SOC1, Type 2, compliant.” (Id. ¶ 5.)

Holmes details the onboarding process for all new employees. (Id. ¶ 6.) New employees receive an email with “a unique secure link specific to that employee that the new employee uses to register onto the secure employee web portal to complete a new hire packet.” (Id. ¶ 6(b).) Employees must then create an account by creating a password and answering security questions. (Id. ¶ 6(c).) Employees then receive an autogenerated email containing a confirmation link. (Id. ¶ 6(d).) Upon clicking the link, employees are directed to the login page where they must enter their username and password. (Id. ¶ 6(e).) They then receive “a dual authentication email or text with a unique code to confirm their identity.” (Id.) Once the employee enters that unique code, they can complete the onboarding new hire documents. (Id.)

After reviewing a document, employees “click a button to consent and acknowledge their review and understanding of, and agreement to the terms of, the particular document.” (Id. ¶ 6(f).) The system then generates “an electronic signature stamp for the employee to memorialize that agreement that includes the employee’s name and date and time of acknowledgment.” (Id. ¶ 6(g).)

Holmes has reviewed Defendants’ records maintained for Plaintiff. (Id. ¶ 8.) Based on those records, “Ms. Lujan accessed the electronic onboarding system on November 21, 2020, using an email address that she had provided to Erewhon – Palisades and to which presumably only she had access.” (Id.) Thereafter, Plaintiff “completed her registration using a unique user ID and password to access the system, [and] she reviewed and signed a number of documents,” including an “ALTERNATIVE DISPUTE RESOLUTION POLICY AND ACKNOWLEDGEMENT.” (Id. ¶ 8, 9; Exh. A.) Plaintiff then electronically signed the 2020 Arbitration Agreement. (Id. ¶ 11.)

Then, in April of 2023, Plaintiff signed a 2023 Arbitration Agreement using “substantially the same procedure.” (Id. ¶ 13; Exh. B.) Holmes attests, based on his “knowledge of Modern HR’s secure human resources management information system web portal and [his] review of the records created and maintained therewith, that “Ms. Lujan’s electronic signature on the 2020 Arbitration Agreement and the 2023 Arbitration Agreement could only be attributed to her.” (Id. ¶ 14.)

The 2020 agreement requires arbitration of “any dispute arising out of or related to your employment, the terms and conditions of your employment and/or the termination of your employment, including, but not limited to… Claims of unlawful harassment, discrimination, retaliation or wrongful termination that cannot be resolved by the parties.” (Id., Exh. A, p. 2.)

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.)

In opposition, Plaintiff disputes the validity of the Arbitration Agreements. Plaintiff attests that she “does not recall signing forms regarding arbitration.” (Lujan Decl. ¶ 5.) She further states that she had no “understanding that [she] was signing something agreeing to arbitrate [her] claims.” (Id. ¶ 6.) Instead, Plaintiff was told to “electronically sign some documents, that these documents were just onboarding, and to sign it now.” (Id.) Plaintiff maintains that she “was never told that [she] had the right to consult with legal counsel,” was not “provided an opportunity to negotiate the terms of the arbitration agreement,” and “was not provided with a copy of the” JAMS rules. (Id. ¶¶ 7, 8.)

This places the final burden on Defendants to “establish with admissible evidence a valid arbitration agreement between the parties.” (Gamboa, supra, 72 Cal. App. 5th at 165.) In determining whether Plaintiff signed the agreement by a preponderance of the evidence, this court must necessarily sit as the trier of fact and resolve evidentiary conflicts. (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284).

First, the instant case distinguishable from Ruiz, a case relied on by Plaintiff. In Ruiz v. Moss Bros. Auto Grp. (2014) 232 Cal. App. 4th 836, 844, 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.)

The facts here, however, are more in line with Espejo v. S. California Permanente Med. Grp. (2016) 246 Cal. App. 4th 1047, 1053. There, the court came to the opposite conclusion of Ruiz, finding the employer had met its burden “by attaching to their petition a copy of the purported arbitration agreement bearing Espejo's electronic signature.” (Id. at 1060 [emphasis added].) Unlike in Ruiz, the Espejo defendant “had sufficiently security precautions regarding transmission and use of an applicant's unique username and password, as well as the steps an applicant would have to take to place his or her name on the signature line of the employment agreement.” (Id. at 1062.)

Likewise, here Defendants have sufficiently described the electronic onboarding process. Defendants have also explained the security measures in place that suggests with reasonable certainty that only Plaintiff could have signed the agreement. Authenticating an electronic signature, after all, is “not a difficult evidentiary burden to meet.” (Ruiz, supra, 232 Cal. App. 4th at 844.)

Plaintiff’s failure to recall signing the agreement must be given little weight. Lacking is any firm denial that Plaintiff did not sign the Arbitration Agreement. Based on a preponderance of the evidence and the totality of the circumstances, this court finds that Defendants have met their burden to “establish with admissible evidence a valid arbitration agreement between the parties.” (Gamboa, supra, 72 Cal. App. 5th at 165.)

“Employee’s agreement to arbitrate claims against the Company or MODERN HR includes claims that Employee may bring against the Company’s or MODERN HR’s respective parent, subsidiary, affiliated or client entities as well as against owners, directors, officers, managers, employees, agents, brokers, contractors, attorneys, including in their capacity as benefit plan administrators or fiduciaries to any employee benefit plan of which Employee is a participant or beneficiary and insurers of the Company or MODERN HR (hereinafter “Company Entities”).” (Holmes Decl., Exh. B, p. 1.)

Generally, a party must be a signatory to the contract to enforce the arbitration clause. (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236 (JSM).) However, 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; Rowe v. Exline (2007) 153 Cal. App. 4th 1276, 1287 citing Turtle Ridge, 140 Cal.App.4th at 833 [“a signatory plaintiff who sues on a written contract containing an arbitration clause may be estopped from denying arbitration if he sues nonsignatories as related or affiliated persons with the signatory entity”].) 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, Plaintiff alleges that Defendant Beta Doe and Defendant Josh due were each a “Manager, Officer, Shareholder, Director, Supervisor, Manager, Managing Agent, Owner, Principal, and/or Employee of Employer Defendant.” (Compl. ¶¶ 5, 6.) Plaintiff also alleges there was “a unity of interest and ownership” between the Defendants and that each of the Defendants have “been the officer, agent, employee and/or representative of the remaining Defendants and has acted within the course and scope of such agency and employment…” (Id. ¶¶ 8, 14.)

Plaintiff goes on to argue, that evening assuming an agreement to arbitrate exists, it 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 she was not provided a copy of the JAMS Rules. (See Lujan Decl. ¶ 8 [stating “I was not provided with a copy of the Judicial Arbitration and Mediation Services, Inc. (“JAMS’”) rules reference in the Agreement”].)

The employer’s failure to attach the arbitration rules to the agreement, however, is not dispositive (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.

Next, Plaintiff argues the agreement was 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).

Based on the circumstances, 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.)

Plaintiff next argues the agreement is substantively unconscionable, again relying on the assertion she was not provided the JAMS rules. But Plaintiff misstates the case law when arguing that Defendants’ failure to provide the rules is a factor for substantive unconscionability. (See e.g., Carbajal v. CWPSC, Inc. (2016) 245 Cal. App. 4th 227, 247; Harper v. Ultimo (2003) 113 Cal. App. 4th 1402, 1407; Fitz v. NCR Corp. (2004) 118 Cal. App. 4th 702, 721; Zullo v. Superior Ct. (2011) 197 Cal. App. 4th 477, 485.) Rather, in each of these cases, the Court addressed the employer’s failure to provide a copy of the governing arbitration rules as it pertained to procedural unconscionability.

Therefore, Plaintiff has failed to advance any argument that the agreement was substantively unconscionably. For that reason, the agreement is not unconscionable. (See Armendariz, supra, 24 Cal.4th at 114 [holding an arbitration agreement must be both procedurally and substantively unconscionable to invalidate it].)

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.