Judge Randolph M. Hammock, Case Number: 24STCV21871, Date: 2024-12-05 Tentative Ruling

Judge: Randolph M. Hammock, Case: 24STCV21871, Date: 2024-12-05 Tentative Ruling

Plaintiff filed and served his opposition on November 21, 2024, eight court days before the hearing. “[A]ll papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days…before the hearing.” (CCP § 1005(b).) Due to the lack of any identified prejudice to Defendant, the court exercises its discretion to consider the untimely opposition.

“[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.)

Defendant moves to compel arbitration of Plaintiff’s individual PAGA claims. 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 provides that “[a]rbitration under this Agreement is governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.)” (Maldonado Decl. ¶ 5, Exh. 6, ¶ 1.) Courts will apply the FAA “if it is so stated in the agreement.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal. App. 5th 956, 963.) Therefore, the FAA applies here.

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 submits a declaration from Jamarie Maldonado, who is Supervisor, People Operations for Defendant’s parent company. (Maldonado Decl. ¶ 1.) Maldonado details the procedure in place for the signing of employee documents like the arbitration agreement. (Id. ¶¶ 1-6.) Maldonado attests that Plaintiff signed the arbitration agreement on October 27, 2023. (Id. ¶ 5.)

This Agreement applies to any dispute arising out of or related to Employee's (sometimes “you” or “your”) application for employment, employment with United Site Service of California, Inc., or one of its affiliates, successor, subsidiaries or parent companies ("Company") or termination of employment, regardless of its date of accrual and survives after the employment relationship terminates. This Agreement includes all claims, past, present, or future, that the Company may have against Employee or that Employee may have against: (1) the Company; (2) the Company’s officers, directors, principals, shareholders, members, owners, employees, or agents; (3) Company’s benefit plans or the plan’s sponsors, fiduciaries, administrators, affiliates, or agents; and (4) all successors and assigns of any of them. Each and all of the entities or individuals listed in (1) through (4) of the preceding sentence can enforce this Agreement…

The Agreement is broad, covering “any dispute” arising out of Plaintiff’s employment. But it is not without limits. Notably, the Agreement contains a “Class and Collective Action Waiver,” which provides in relevant part: “Private attorney general representative actions under the California Labor Code section 2699 et seq. are not arbitrable, not within the scope of this Agreement and may be maintained in a court of law.” (Id., ¶ 3.)

In the first sense, PAGA actions are ‘representative’ in that they are brought by employees acting as representatives—that is, as agents or proxies—of the State. But PAGA claims are also called ‘representative’ when they are predicated on code violations sustained by other employees. In the first sense, ‘every PAGA action is ... representative’ and ‘[t]here is no individual component to a PAGA action,’ Kim, 9 Cal.5th at 87, 259 Cal.Rptr.3d 769, 259 Cal.Rptr.3d, 459 P.3d at 1131 (quoting Iskanian, 59 Cal.4th at 387, 173 Cal.Rptr.3d 289, 327 P.3d at 151), because every PAGA claim is asserted in a representative capacity. But when the word ‘representative’ is used in the second way, it makes sense to distinguish ‘individual’ PAGA claims, which are premised on Labor Code violations actually sustained by the plaintiff, from ‘representative’ (or perhaps quasi-representative) PAGA claims arising out of events involving other employees.

Because this is a question of the scope of the agreement, it is one for this court to determine. The Agreement provides that “any dispute relating to the scope…of this Class Action Waiver or Collective Action Waiver…may only be determined by a court of competent jurisdiction and not by an arbitrator.” (Maldonado Decl., Exh. 6, ¶ 1.) In other words, this court must determine whether the agreement is referring to “representative actions” in the PAGA sense generally, or rather, “representative” in the sense of only nonindividual claims. (See e.g., Mondragon, supra, 101 Cal. App. 5th at 507-511 [undergoing this analysis].) Ultimately, if “representative” was used in the latter sense, then Plaintiff’s individual representative claims should be sent to arbitration. (See Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 640 [holding that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate].)

“When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is ‘reasonably susceptible’ to the interpretation urged by the party. If it is not, the case is over.” (Horath v. Hess (2014) 225 Cal.App.4th 456, 464.) “Whether the contract is reasonably susceptible to a party's interpretation can be determined from the language of the contract itself [citation] or from extrinsic evidence of the parties’ intent [citation].” (Id.)

No party has provided extrinsic evidence supporting its interpretation. Therefore, the analysis is based on the contract itself. As noted, the Agreement includes a “Class and Collective Action Waiver,” which provides in relevant part: “Private attorney general representative actions under the California Labor Code section 2699 et seq. are not arbitrable, not within the scope of this Agreement and may be maintained in a court of law.” (Maldonado Decl., Exh. 6, ¶ 3.)

Having concluded that the parties’ agreement is reasonably susceptible to Defendant’s proposed interpretation, the court moves to the second question: “[W]hat did the parties intend the language to mean?” (S. Cal. Edison Co. v. Superior Ct. (1995) 37 Cal. App. 4th 839, 848.) Where, as here, there is no conflict in the evidence, “the interpretation of the contract remains a matter of law.” (Wolf v. Walt Disney Pictures & Television (2006) 162 Cal. App. 4th 1107, 1134.)

The intent of the parties is not easily ascertainable from the text of the agreement. The parties’ briefs offer little aid on this point. Ultimately, the court must be mindful that “California has a strong public policy favoring arbitration and, as a result, ambiguities or doubts about the scope of the arbitration provision should be resolved in favor of arbitration.” (Duran v. EmployBridge Holding Co. (2023) 92 Cal. App. 5th 59, 65–66.)

Accordingly, the ambiguity must be interpreted as using the word “representative” to distinguish between individual claims—which are arbitrable—and nonindividual claims—which are not. In other words, the arbitration agreement does not contain a wholesale waiver of PAGA claims. Therefore, the court concludes that the parties agreed that injuries actually sustained by Plaintiff himself (e.g., his individual claims) are subject to arbitration.

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—it was offered as a condition of employment and he had no ability to negotiate its terms. “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—though little more than is seen in the typical employer-employee context. 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 also contends the agreement is substantively unconscionable. Plaintiff argues the agreement is nonmutual because it requires the employee to “arbitrate claims against not just the employer itself but a laundry list of third parties as well.” (Opp. 11: 24-27.) Plaintiff contends the agreement is further unconscionable because it applies to “all claims, past, present, or future,” and “survives after the employment relationship terminates.”

Plaintiff relies on Cook, in which “[t]he agreement require[d] Cook to arbitrate any and all claims she may have against USC ‘or any of its related entities, including but not limited to faculty practice plans, or its or their officers, trustees, administrators, employees or agents, in their capacity as such or otherwise”, but did not require USC’s “related entities” to arbitrate their claims against Cook. (Cook v. Univ. of S. California (2024) 102 Cal. App. 5th 312, 328.) The Court held this language meant “nonsignatories may enforce an arbitration agreement against a party to the agreement simply by showing they are intended third-party beneficiaries of the arbitration agreement.” (Id.) But, for Cook “to enforce the arbitration agreement against USC's agents or employees as third-party beneficiaries, she would have to show they actually accepted a benefit under the agreement”—a difficult task. (Id. at 328.)

But here, unlike in Cook, the Arbitration Agreement applies entirely mutually to any controversy or claim between Plaintiff and Defendant. Not only must Plaintiff arbitrate any claims against Defendant and its “officers, directors, principals, shareholders, members, owners, employees, or agents,” but these persons must also arbitrate any dispute they have against Plaintiff. (Maldonado Decl, Exh. 6. ¶ 1.) In other words, Plaintiff can compel any of the designated third-party beneficiaries to arbitrate the dispute, because under the plain language of the agreement, said beneficiaries essentially sit in the shoes of the employer. This does not support a finding of unconscionability.

Next, Plaintiff relies on a separate employment document presented to Plaintiff, the “Confidentiality and Protective Covenants Agreement” (“CPCA”). (See Maldonado Decl., Exh. 8.) Plaintiff points to the CPCA’s “one-sided carve-out” that permits the employer alone to seek injunctive relief. Specifically, the CPCA requires the employee to agree that:

[a] violation of [the CPCA] by me would cause not only actual and compensable damage, but also irreparable harm and continuing injury to the Company for which there would not be an adequate remedy at law. Accordingly, if I should breach or threaten to breach this Agreement, the Company shall be entitled to equitable remedies in the form of temporary and permanent injunctive relief to

enforce this Agreement in addition to, and not in lieu of, any and all other legal remedies to which it would otherwise be entitled. Where permissible, no bond will be required if an injunction is sought to enforce any of the covenants set forth herein; provided, however, that if a bond is deemed necessary for issuance of injunctive relief to enforce my obligations, a bond of $1,000 shall be presumed

The CPCA and Arbitration Agreement collectively govern Plaintiff’s hiring and “how to resolve disputes arising between” them. (Alberto v. Cambrian Homecare (2023) 91 Cal. App. 5th 482, 490–91.) Therefore, they should be read together, as unconscionability in the CPCA “can, and does, affect whether the Arbitration Agreement is also unconscionable.” (Id.)

The Court of Appeal has held that “[p]rovisions that waive the employer's need to obtain a bond before seeking an injunction, waive the employer's need to show irreparable harm, and require an employee to consent to an immediate injunction are unconscionable.” (Alberto v. Cambrian Homecare (2023) 91 Cal. App. 5th 482, 492.) Each of these factors is present here in the CPCA injunctive relief carve-out, arguably rendering it unconscionable.

However, to the extent this carveout might be unconscionable, it can be severed. “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 language of the CPCA might be unconscionable, the Arbitration Agreement itself 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 Arbitration 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 provision of the CPCA and enforce the Arbitration Agreement. Once accounting for the severed portion of the CPCA, Plaintiff has established little to no substantive unconscionability. Under the sliding scale approach, Plaintiff has not established the Arbitration Agreement is unconscionable.

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.