Judge: Randy Rhodes, Case: 22CHCV00529, Date: 2023-03-01 Tentative Ruling

Case Number: 22CHCV00529    Hearing Date: March 1, 2023    Dept: F51

Dept. F-51

Date: 3/1/23

Case #22CHCV00529

MOTION TO COMPEL ARBITRATION

Motion filed on 9/22/22.

MOVING PARTY: Defendant 13333 Fenton Ave, LLC, a California limited liability company, dba Mountain View Convalescent Hospital (“Defendant”)

RESPONDING PARTY: Plaintiff Giovanni Santillan (“Plaintiff”)

NOTICE: ok 

RELIEF REQUESTED: An order: (1) compelling arbitration of Plaintiff’s Private Attorney General Act (“PAGA”) claim on an individualized basis; (2) dismissing the representative PAGA claims on behalf of other allegedly aggrieved employees; and (3) staying further proceedings in this action pending the outcome of arbitration.

TENTATIVE RULING: The motion is granted in part. Plaintiff is ordered to submit his individual PAGA claim to arbitration pursuant to the arbitration agreement. The Court defers the issue of dismissal of Plaintiff’s representative claims pending the outcome of Adolph v. Uber Technologies, Case No. S27467. Plaintiff’s evidentiary objections are overruled.

BACKGROUND

Plaintiff, a former employee of Defendant, brings this Private Attorney General Act (“PAGA”) action in a representative capacity on behalf of the State of California and other aggrieved employees, alleging against Defendant various Labor Code violations.

On 7/15/22, Plaintiff filed his representative action against Defendant for Violation of California Labor Code § 2698, et seq. On 9/22/22, Defendant filed the instant motion to compel arbitration. On 1/31/23, Plaintiff filed his opposition. On 2/6/23, Defendant filed its reply.

ANALYSIS

A.    Legal Standard

Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ. Proc. § 1281.2.) This is usually done by presenting a copy of the signed, written agreement to the court. “A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, rule 3.1330.)

The moving party must also establish the other party’s refusal to arbitrate the controversy. (Code of Civ. Proc. § 1281.2.) The filing of a lawsuit against the moving party for a controversy clearly within the scope of the arbitration agreement affirmatively establishes the other party’s refusal to arbitrate the controversy. (Hyundai Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 577.)

Here, Defendant has attached a copy of the purported arbitration agreement to the declaration of Kiana Moten, its Administrator. The parties entered into the agreement, which was included in the employee handbook, upon Plaintiff’s employment with Defendant on 4/30/18. The arbitration agreement reads, in relevant part:

“Accordingly any dispute, controversy or claim between us, including without limitation, contract claims, tort claims, breach of duty claims, wrongful termination claims, wage claims, claims of discrimination or harassment (whether in the hiring process or after employment) and all other common law and statutory claims, including all claims based upon federal or state civil rights laws, including claims under the EEOC, FEHA or otherwise (collectively “Claims”), to the extent the law provides Claims may be arbitrated, shall at the request of either the employee or the Facility be submitted to and settled by binding arbitration … Employee also knowingly and voluntarily waives (gives up) the right to be a party in or to any class action and/or collective action lawsuit against Employer, whether filed in federal or state court, as part of Employee’s agreement to arbitrate all disputes with Employer by binding arbitration. If the law permits waivers of employees bringing PAGA cases in State Court, then this Arbitration Agreement shall also require such claims to be arbitrated. …

If any portion of this arbitration agreement is held invalid or unenforceable, the remainder shall still be valid and enforceable.” (Ex. B to Moten Decl.)

““I KNOWINGLY AND VOLUNTARILY AGREE TO SUBMIT AND SETTLE ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO MY EMPLOYMENT RELATIONSHIP WITH MOUNTAIN VIEW CONVALESCENT HOSPITAL TO ARBITRATION AS DESCRIBED IN THE ‘ARBITRATION AGREEMENT’ SECTION OF THIS HANDBOOK. I AGREE THAT THE ARBITRATION OF SUCH ISSUES, INCLUDING THE DETERMINATION OF ANY AMOUNT OF DAMAGES SUFFERED, SHALL BE FINAL AND BINDING UPON ME AND ALL PARTIES TO THE MAXIMUM EXTENT PERMITTED BY LAW. I REALIZE BY AGREEING TO ARBITRATION, I WILL HAVE WAIVED MY RIGHT TO TRIAL BY JURY. THIS POLICY CANNOT CHANGE EXCEPT BY WRITTEN AGREEMENT BETWEEN MYSELF AND MOUNTAIN VIEW CONVALESCENT HOSPITAL.” (Ex. A to Moten Decl. [emphasis in original].)

B.     Admissibility of Arbitration Agreement

A business record is admissible notwithstanding the general rule against hearsay evidence if: “(a) The writing was made in the regular course of a business; (b) The writing was made at or near the time of the act, condition, or event; (c) The custodian or other qualified witness testifies to its identity and the mode of its preparation; and (d) The sources of information and method and time of preparation were such as to indicate its trustworthiness.” (Evid. Code § 1271.)

Plaintiff objects to the admissibility of the proffered agreement on various bases, including that it constitutes inadmissible hearsay, and lacks foundation and the witness’ personal knowledge of the authenticity of the document. Plaintiff argues that “Ms. Moten’s declaration is based on assumptions she made after reviewing the PAA and is not based on personal knowledge she has in witnessing Plaintiff review, comprehend, and execute the PAA.” (Pl.’s Opp. 5:19–21.)

Defendant argues in reply that Ms. Moten’s declaration sufficiently establishes that she is the custodian of records for Defendant, and, as such, “need not prove that … she was present at the time a document was created, reviewed or executed.” (Def.’s Reply, 6:14–15.) Defendant further argues that the agreement is admissible as a business record of Defendant, and that “‘[A]ny qualified witness who is knowledgeable about the documents may lay the foundation for introduction of business records—the witness need not be the custodian or the person who created the record.’” (Def.’s Reply 6:15–18, quoting Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 324.)

  Ms. Moten’s declaration states that as the Administrator for Defendant, she acts as, inter alia, the custodian of records for the company, that the document that Plaintiff signed was kept in the ordinary course of business with Plaintiff’s employee file, and that Defendant’s personnel practices are reliable and trustworthy to ensure the authenticity of employee records. (Moten Decl. ¶¶ 3–7.) Based on the foregoing, the Court finds that Defendant has sufficiently laid the foundation for the admissibility of the proffered agreement as a writing made in the regular course of business under Evidence Code section 1271.

C.    Mutual Assent

In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) Arbitration is a matter of contract and a party cannot be required to arbitrate a dispute he has not agreed to submit. (Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230.) “If a party can show that it did not know it was signing a contract, or that it did not enter into a contract at all, both the contract and its arbitration clause are void for lack of mutual assent.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1200.)

Here, Plaintiff argues that because the agreement was entered into in 2018, it “thus clearly manifests the intent of the Parties to only agree to what was permitted by then-existing law and the above-described authorities foreclosed compelling PAGA claims to arbitration.” (Pl.’s Opp. 8:8–10.) Defendant argues in reply that the agreement “provides for enforcement coextensive with California law, whatever it may be,” and that the then-existing law has since been ruled as violative of the FAA. (Def.’s Reply 8:1–5; Viking River v. Moriana (2022) 142 S.Ct. 1906.)

Based on the foregoing, the Court finds that Plaintiff’s argument that the agreement is invalid for lack of mutual assent lacks merit, noting that Plaintiff has not asserted a lack of knowledge that the document he signed was a contract.

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D.    Unconscionability

Unconscionability generally includes the absence of meaningful choice on the part of one of the parties together with contract terms that unreasonably favor the other party. (Carboni v. Arrospide (1991) 2 Cal.App.4th 76, 82-83.) As the party asserting unconscionability, Plaintiff has the burden of proving both procedural and substantive unconscionability. (Crippen v. Central Valley RV Outlet. Inc. (2004) 124 Cal.App.4th 1159, 1165). “Our Supreme Court has upheld employment agreements that require the employee to arbitrate disputes, so long as the arbitration clause does not impair the employee's statutory rights and is not unconscionable.” (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1271.) Courts analyze the unconscionability standard in Civil Code section 1670.5 as invoking elements of procedural and substantive unconscionability. (Id. at 1280–1281.)

1.      Procedural Unconscionability

Procedural unconscionability focuses on whether there is “oppression” arising from an inequality of bargaining power or “surprise” arising from buried terms in a complex printed form. (Id. at 1280.) Circumstances relevant to establishing oppression include but are not limited to: (1) the amount of time a party is given to consider the proposed agreement; (2) the amount and type of pressure exerted on the party to sign the proposed agreement; (3) the length of the proposed agreement and the length and complexity of the challenged provision; (4) the party's education and experience; and (5) whether an attorney assisted the party in reviewing the proposed agreement. (OTO, L.L.C. v Kho, (2019) 8 Cal.5th 111, 126–127.) However, it is well settled law that failure to read or understand an arbitration clause is no defense to enforcement or grounds to avoid arbitration. (Metters v. Ralphs Grocery Co. (2008) 161 Cal.App.4th 696, 701.)

When a contract is an adhesion contract, imposed and drafted by the party with superior bargaining power, the adhesive nature of the contract is evidence of some degree of procedural unconscionability. (Sanchez v Carmax Auto Superstores Cal., LLC (2014) 224 Cal.App.4th 398, 403.) Arbitration agreements imposed as a condition of employment are typically adhesive. (OTO, 8 Cal.5th at 126–127.)

Here, Plaintiff argues that the subject agreement was procedurally unconscionable for numerous reasons including: (1) Plaintiff was given a large quantity of documents to read and sign; (2) the agreement was “hidden” in the 45-page employee handbook; (3) Plaintiff does not recall signing the arbitration agreement; and (4) “Plaintiff does not recall anyone explaining or even mentioning what an arbitration agreement was, that he would be signing such an agreement, that it was voluntary, negotiable, or that he could consult with an attorney.” (Pl.’s Opp. 11:24–26.)

Defendant argues in reply that the 2.5 day employee onboarding period was ample time for Plaintiff to review the agreement before signing it, the arbitration provisions were on pages 7–8 of the employee handbook, with the acknowledgment thereof displayed prominently at the end of the handbook, and Plaintiff’s alleged failure to read the agreement does not prevent its enforcement. (Def.’s Reply, 7:11–23.)

Given the employer-employee relationship between the parties, the Court finds a degree of procedural unconscionability under the given circumstances. However, this procedural unconscionability is not as extreme nor oppressive as Plaintiff argues, especially where the arbitration provisions were specifically referenced in capitalized font at the end of the entire employee handbook, and, as previously mentioned, where Plaintiff does not dispute that the signature on the document is in fact his. (Ex. A to Moten Decl.) Accordingly, the Court finds that Plaintiff has shown that the arbitration agreement contains a moderate degree of procedural unconscionability.

2.      Substantive Unconscionability

An agreement to arbitrate is unenforceable only if both the procedural and substantive elements are satisfied. (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1533.) However, “the 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 v. Foundation Health Psychcare Services, Inc. (2004) 24 Cal. 4th 83, 114).

The substantive element addresses the existence of overly harsh or one-sided terms. (Nyulassy, 120 Cal.App.4th at 1280.) “‘Substantive unconscionability’ focuses on the terms of the agreement and whether those terms are ‘so one-sided as to shock the conscience.’”  (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1330.)

Here, Plaintiff argues that the agreement “is substantively unconscionable because it seeks to require Plaintiffs to relinquish unwaivable statutory rights designed for the protection of a class of employees.” (Pl.’s Opp., 12:8–10.) However, as discussed below, the law permits Plaintiff’s PAGA claims to be separated into individual and representative claims for arbitration of the individual claim while preserving the representative claims.

Accordingly, the Court finds that Plaintiff has failed to show the requisite degree of substantive unconscionability required for the agreement to be found unconscionable and therefore unenforceable.

E.     Arbitrability of PAGA Claims

The parties disagree as to whether the U.S. Supreme Court’s holding Viking River v. Moriana (2022) 142 S.Ct. 1906, applies to the instant case, thus requiring Plaintiff to submit his individual PAGA claims to arbitration and dismissing his representative claims. Plaintiff argues that the arbitration agreement purports to waive Plaintiff’s right to bring a representative PAGA action and is therefore invalid as it attempts to defeat Plaintiff’s statutory rights to bring a representative PAGA claim. (Pl.’s Opp. 9:12–13.)

Specifically, Plaintiff argues that the contractual language makes no distinction between individual and representative PAGA claims, thus rendering the provision unenforceable as a wholesale PAGA waiver. (Id. at 9:18–19.) However, the Court finds that this language does not restrict arbitration of Plaintiff’s individual PAGA claims, but rather merely the representative ones. The scope of the arbitration agreement includes “any dispute, controversy or claim arising out of or relating to” Plaintiff’s employment, “including without limitation, contract claims, tort claims, breach of duty claims, wrongful termination claims, wage claims, claims of discrimination or harassment (whether in the hiring process or after employment) and all other common law and statutory claims, including all claims based upon federal or state civil rights laws, including claims under the EEOC, FEHA or otherwise.” (Exs. A and B to Moten Decl.)

Defendant argues that Plaintiff’s individual claim should be severed and submitted to arbitration. Under the previous rule set forth in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, an employee’s individual PAGA claims were not arbitrable even if the parties had agreed to arbitrate individual claims. The defendant employer in Iskanian had attempted to argue that “the arbitration agreement at issue here prohibits only representative claims, not individual PAGA claims for Labor Code violations that an employee suffered.” (59 Cal.4th at 383.) Rejecting this, the California Supreme Court held that such a separation “frustrates the PAGA's objectives” because “a single-claimant arbitration under the PAGA for individual penalties will not result in the penalties contemplated under the PAGA to punish and deter employer practices that violate the rights of numerous employees under the Labor Code.” (Id. at 384.)

However, the U.S. Supreme Court overturned this restriction, holding that “Iskanian’s prohibition on contractual division of PAGA actions into constituent claims unduly circumscribes the freedom of parties to determine the issues subject to arbitration and the rules by which they will arbitrate … and does so in a way that violates the fundamental principle that arbitration is a matter of consent.” (Viking River, 142 S.Ct. at 1923.) According to the U.S. Supreme Court, Iskanian’s rule was improper because it coerced parties to litigate all PAGA claims even where the parties agreed to arbitrate claims arising out of Labor Code violations suffered by the plaintiff. (Id. at 1924.)

The U.S. Supreme Court then partially abrogated the rule in Iskanian. Specifically, the Court held that the Federal Arbitration Act preempts a prohibition on PAGA claims from being divided into “individual” and “non-individual” claims and compelling the individual claims to arbitration. (Id. at 1925.) Additionally, if an agreement contains a severability clause, then the employer is “entitled to enforce the agreement insofar as it mandate[s] arbitration of [the employee’s] individual PAGA claim.” (Ibid.)

Here, the parties have agreed to arbitrate their individual employment disputes. Under the previous rule in Iskanian, Plaintiff’s individual PAGA claims would have been indivisible from the representative claims, thus precluding arbitration of the individual claims. However, under Viking River, this division is now permitted, and the agreement to arbitrate Plaintiff’s individual claims must be enforced. Additionally, the Agreement contains a valid severability provision, which allows these claims to be severed. (Ex. B to Moten Decl., (“If any portion of this arbitration agreement is held invalid or unenforceable, the remainder shall still be valid and enforceable.”).)

Accordingly, Plaintiff’s individual PAGA claim is subject to arbitration pursuant to the arbitration agreement entered into between the parties.

F.     Standing/Dismissal of Remaining Claims

If the Court has ordered arbitration, the action or proceeding shall be stayed. (Code Civ. Proc. § 1281.4.) Here, however, Defendant argues that Plaintiff’s remaining representative PAGA claims should be dismissed.

The Viking River Court held that a plaintiff loses standing to assert a non-individual PAGA claim once her own individual claims are compelled to arbitration. (Viking River, 142 S.Ct. at 1925.) However, as Plaintiff notes, the Supreme Court also recognized that this is ultimately an issue of state law. The California Supreme Court is set to decide the issue in Adolph v. Uber Technologies, Case No. S27467. The California Supreme Court granted review on 7/20/22, and on 8/1/22, set the issue to be briefed as: “Whether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee…maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ in court or in any other forum the parties agree is arbitrable.”

Accordingly, this Court will defer its ruling only as to the issue of dismissal of the remaining representative claim pending the California Supreme Court’s decision in Adolph. Nevertheless, as discussed above, Plaintiff is compelled to submit his individual PAGA claim to arbitration.

CONCLUSION

The motion is granted in part. Plaintiff is ordered to submit his individual PAGA claim to arbitration pursuant to the arbitration agreement. The Court defers the issue of dismissal of Plaintiff’s representative claims pending the outcome of Adolph v. Uber Technologies, Case No. S27467. Plaintiff’s evidentiary objections are overruled.