Judge Randolph M. Hammock, Case Number: 24STCV19424, Date: 2025-03-05 Tentative Ruling

Judge: Randolph M. Hammock, Case: 24STCV19424, Date: 2025-03-05 Tentative Ruling

Defendant’s request for judicial notice of a trial court opinion is DENIED. With certain exceptions, not applicable here, the Rules of Court generally prohibit judicial notice of unpublished opinions. (See Cal. Rules of Court, rule 8.1115(a); see also Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal. 5th 260, 269.) Trial court opinions are unpublished and have no precedential value. (Neary v. Regents of Univ. of Calif. (1992) 3 Cal.4th 273, 282.)

Defendant’s request for judicial notice of the declaration of April Paxton is also DENIED because the exhibit is not relevant to the disposition of this motion. (See Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal. App. 4th 471, 482 [declining to take judicial notice of irrelevant matters].)

“[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.)

In addition, the Arbitration Agreement states that the “Agreement is governed by the Federal Arbitration Act (the ‘FAA’).” (Jacobs Decl., Exh. A; 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 Shanesta Jacobs, its Director of Human Resources. Jacobs attests that Defendant uses the ADP system for managing some employee data and describes the onboarding process for new employees. (Jacobs Decl. ¶¶ 2-21.) Plaintiff further attests that Plaintiff executed a Mutual Agreement to Arbitrate through the ADP system at the onset of her employ with Defendant. (Id. ¶¶ 22-34; Exhs. A & B.)

The Arbitration Agreement is broad, applying to claims “brought under any contract, statute, local ordinance, or common law relating to my employment or other relationship with Prime, including those concerning any element of compensation, harassment, discrimination, retaliation, recovery of bonus, commission, sales incentive, or relocation benefits, leaves of absence, accommodations, or termination of employment.” (Id., Exh. A, p. 1.)

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.)

In opposition, Plaintiff contends only that Defendant cannot meet its burden to establish the existence of an agreement to arbitrate because “no signature exists on any arbitration documents.” (Opp. 4: 5.) Plaintiff is correct that no signature, electronic or physical, appears on the agreement. However, Defendant has demonstrated that Plaintiff clicked the box through which she “acknowledge[d], accept[ed], and agree[d] to be bound by” the Arbitration Agreement on September 13, 2023. (Jacobs Decl. ¶¶ 14, 27; Exh. B.) Plaintiff provides no authority suggesting that this process is insufficient to validly execute the Agreement. Authenticating an Arbitration Agreement is not, after all, “a difficult evidentiary burden to meet.” (Ruiz v. Moss Bros. Auto Grp. (2014) 232 Cal. App. 4th 836, 844.)

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.)

Here, 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 also argues the agreement is substantively unconscionable because (i) it contains improper cost-sharing requirements, (ii) requires Plaintiff to pay Defendant’s fees, (iii) contains severe discovery limitations, (iv) contains strict confidentiality requirements, (v) purports to require arbitration of unarbitrable disputes, (vi) exempts employer brought cases, and (vii) contains a PAGA waiver. These arguments are addressed in turn.

First, Plaintiff argues the Agreement is unconscionable because it forces Plaintiff to share the costs of arbitration. Plaintiff highlights an Addendum to the Arbitration Agreement, which provides in relevant part: “if I initiate arbitration proceedings against Prime, then all fees and expenses of the Arbitrator and all administrative/case management fees unique to the arbitration and assessed by the arbitration provider, if any (collectively, “Arbitration Costs”), shall be billed to and borne and shared equally by Prime and me…” (Opp., Exh. A.)

If either Prime or I file a Covered Claim in court, the defendant may notify the plaintiff of the existence of this Agreement, and request that the plaintiff dismiss or stay the case. Upon receipt of such request, the plaintiff will have ten (10) calendar days to move to dismiss or stay the claim. Failure to do so shall be deemed a material breach of this Agreement and shall entitle the defendant to recover its reasonable attorneys’ fees and costs incurred in appearing in any court proceeding initiated by the plaintiff and/or moving the court to compel arbitration, which fees and costs shall be recoverable in arbitration by submitting a request for payment to the arbitrator.

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.)

The Agreement provides: “(i) Each party shall be entitled to a maximum of ten (10) interrogatories in a form consistent with Rule 33 of the FRCP. (ii) Each party shall be entitled to a maximum of twenty-five (25) requests for production of documents in a form consistent with Rule 34 of the FRCP. (iii) Neither party will be entitled to make requests for admission under Rule 36 of the FRCP. (iv) Each party shall be entitled to a maximum of two (2) eight-hour days of depositions to include no more than four (4) witnesses in a form consistent with Rule 30 of the FRCP.” (Jacobs Decl., Exh. A, p. 4.) The Agreement further states that the Arbitrator may allow additional discovery “based on a showing of substantial need by either party or upon a showing of an inability to pursue or defend certain claims.” (Id.)

Armendariz requires only that an arbitration agreement “provide for more than minimal discovery.” (24 Cal.4th at p. 102.) The court cannot find that the agreement inhibits discovery in such a manner as to make it unconscionable. In addition, the arbitrator may allow additional discovery on sufficient showing by either party. On these considerations, this court does not find the discovery provision unconscionable.

The Agreement provides: “Prime and I hereby agree that, to the maximum extent permitted by law, any arbitration proceedings initiated hereunder shall be kept in the strictest of confidence, meaning that Prime and I agree not to disclose or cause to be disclosed to the media or any other third party the existence of the arbitration, the existence and amount of any settlement proposal by either party, the arbitral proceedings, the submissions made by the parties, and the decisions made by the arbitral tribunal, including its awards to the extent not already in the public domain, except in judicial proceedings related to the award…” (Jacobs Decl., Exh. A, p. 6.)

Such restrictions would prevent an employee from contacting other employees to assist in litigating (or arbitrating) an employee's case. An inability to mention even the existence of a claim to current or former O'Melveny employees would handicap if not stifle an employee's ability to investigate and engage in discovery. The restrictions would also place O'Melveny “in a far superior legal posture” by preventing plaintiffs from accessing precedent while allowing O'Melveny to learn how to negotiate and litigate its contracts in the future. [Citation]. Strict confidentiality of all “pleadings, papers, orders, hearings, trials, or awards in the arbitration” could also prevent others from building cases.

(Id.)

This court agrees that the confidentiality provision purporting to bar disclosure of the proceedings is overbroad. Construed as written, the provision would severely hinder Plaintiff’s ability to arbitrate the dispute, and highlights those concerns raised in Davis, supra. (485 F.3d at 1078.) Thus, this factor supports a finding of substantive unconscionability.

Next, Plaintiff contends the agreement is unconscionable because it lacks mutuality. Plaintiff emphasizes that the agreement exempts the types of cases that would commonly be brought by the employer. Notably, the Agreement exempts “claims for temporary equitable relief or injunctive relief, whether in aid of arbitration or in connection with Prime’s confidential information, intellectual property, and/or trade secrets…” (Jacobs Decl., Exh. A, p. 3.)

Courts have found provisions of this type to be 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”].)

However, the agreement here, viewed in context and its totality, requires that each party arbitrate disputes against the other. While the agreement does exclude certain claims from its reach, the excluded areas do not necessarily favor the employer to such a degree as to make the agreement unconscionable.

The Agreement states that Plaintiff “waive[s] the right to participate in or receive money or any other relief from any class, collective, consolidated, or representative proceeding, including pursuing representative actions under California’s Private Attorney General Act (commonly referred to as “PAGA”)…” (Jacobs Decl., Exh. A, p. 1.)

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.)

Defendant contends that any unconscionable provisions of the Agreement can be severed. The Addendum provides: “If this Addendum or any provision thereof is determined to be unenforceable or in conflict with a mandatory provision of applicable law, then the unenforceable or conflicting provision shall be automatically severed and the Mutual Agreement to Arbitrate between Prime and me – which evinces a mutual intent to arbitrate disputes on an individual basis rather than resorting to litigation in the court system, as well as waive the right to a trial by jury – shall not be affected.” (Addendum, ¶ 4.)

Similarly, the Agreement provides: “If any provision of this Agreement is determined to be unenforceable or in conflict with a mandatory provision of applicable law, the unenforceable or conflicting provision shall be automatically severed and the remainder of this Agreement shall not be affected, except that it shall be construed to incorporate any mandatory provision.” (Jacobs Decl., Exh. A, p. 5.)

“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 inclusion of these provisions may be unconscionable, the Agreement is not so “permeated” with unconscionability as to render it invalid. (Lange, supra, 46 Cal. App. 5th at 454.) Severance of the unconscionable provision will have 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 the unconscionable provisions and enforce the agreement as modified. Once accounting for the severed portions, Plaintiff has established little, if any, substantive unconscionability. Under the sliding scale approach, Plaintiff has not established the Agreement is unconscionable.