Judge: Richard S. Whitney, Case: 37-2023-00019236-CU-OE-CTL, Date: 2023-12-22 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - December 21, 2023

12/22/2023  10:30:00 AM  C-68 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Richard S. Whitney

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Civil - Unlimited  Other employment Motion Hearing (Civil) 37-2023-00019236-CU-OE-CTL HEREDIA VS SUNBELT TOWING INC [E-FILE] CAUSAL DOCUMENT/DATE FILED:

TENTATIVE RULING: DEFENDANT SUNBELT TOWING, INC. dba WESTERN TOWING'S MOTION TO COMPEL ARBITRATION AS TO INDIVIDUAL CLAIMS AND DISMISS CLASS CLAIMS is GRANTED.

Defendant SUNBELT TOWING, INC. dba WESTERN TOWING ('Defendants') seek to compel Plaintiff PHILLIP HEREDIA's ('Plaintiff') claims related to Plaintiff's employment to be arbitrated. Defendants' request of judicial is granted.

CCP section 1281.2 provides On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement. (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact....

(CCP §1281.2.) The moving party must prove by a preponderance of the evidence the existence of the arbitration agreement and the dispute is covered by the agreement. (Rosenthal v. Great Western Fin.

Securities Corp. (1996) 14 Cal.4th 394, 413.) The burden then shifts to the resisting party to prove by a preponderance of the evidence a ground for denial, e.g., unconscionability. (Id.) It is undisputed that the arbitration agreement exists, and that Plaintiff's claims are covered by the arbitration agreement. Plaintiff first argues that Plaintiff had the option to cancel the underlying contract at any time and that Plaintiff has cancelled the contract such that the arbitration provision within the contract is unenforceable.

Ordinarily, the court cannot consider any claim that the contract as a whole is invalid. Under Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967) 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (Prima Paint ), when the Federal Arbitration Act (9 U.S.C. § 1, et seq.) (FAA) applies, 'arbitration clauses as a matter of federal law are 'separable' from the contracts in which they are embedded....' (Prima Paint, at p. 402, 87 S.Ct. 1801, fn. omitted.) As a result, an arbitration clause may be enforceable regardless of whether the contract surrounding it is enforceable. (Id. at p. 404, 87 S.Ct. 1801.) Calendar No.: Event ID:  TENTATIVE RULINGS

3003920  51 CASE NUMBER: CASE TITLE:  HEREDIA VS SUNBELT TOWING INC [E-FILE]  37-2023-00019236-CU-OE-CTL (Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1283.) 'California has adopted the severability doctrine and made it applicable, as a matter of state law, even to contracts that do not fall under the FAA.' (Id. at 1285.) Plaintiff's argument fails. The agreement contains a severability clause. The Court is obliged to limit its consideration to the arbitration provision itself, not the enforceability of the remainder of the contract, whether as a whole or certain provisions. (See Id. 1283-1284.) Thus, Plaintiff's arguments as to unconscionable terms outside of the arbitration provision are irrelevant.

'A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.' (Civ.

Code, § 1643.) The court considers the contract as a whole and interprets the language in context, rather than in isolation. (Civ. Code, § 1641.) And where the language is clear and explicit, and does not involve an absurdity, the plain meaning governs. (Civ. Code, § 1638.) In this same vein, the court 'should avoid an interpretation which will make the contract unusual, extraordinary, harsh, unjust or inequitable [citations], or which would result in an absurdity ....' (Harris v. Klure (1962) 205 Cal.App.2d 574, 578, 23 Cal.Rptr. 313.) (West Pueblo Partners, LLC v. Stone Brewing Co., LLC (2023) 90 Cal.App.5th 1179, 1185.) The Court agrees that Plaintiff's interpretation would lead to the absurd result that any at-will employment agreement would essentially be meaningless as to all other provisions of the contract. The employee would have the ability to circumvent confidentiality clauses and other obligations without consequence. The contract would essentially be illusionary. The contract as a whole indicates that the parties did not intend to make all other provisions of the agreement superfluous. The arbitration agreement would be superfluous if the employee could render it unenforceable at will. The same applies to the employer. The Court rejects Plaintiff's argument.

Plaintiff also argues the arbitration agreement is unconscionable.

The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.' (Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1533 (Stirlen).) But they need not be present in the same degree. 'Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.' (15 Williston on Contracts (3d ed.

1972) § 1763A, pp. 226-227; see also A & M Produce Co., supra, 135 Cal.App.3d at p. 487.) In other words, 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. (2000) 24 Cal.4th 83, 114.) The procedural unconscionability element focuses on 'oppression' or 'surprise' due to unequal bargaining power. The substantive unconscionability element focuses on 'overly harsh' or 'one-sided' results. (Id.) 'The general principles of unconscionability are well established. A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party.' (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125.) 'Arbitration contracts imposed as a condition of employment are typically adhesive.' (Kho, supra, 8 Cal.5th at 126.) Where there is no other indication of oppression or surprise, the degree of procedural unconscionability of an adhesion agreement is low. (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.) Substantive unconscionability 'traditionally involves contract terms that are so one-sided as to 'shock the conscience,' or that impose harsh or oppressive terms.' (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1213.) Calendar No.: Event ID:  TENTATIVE RULINGS

3003920  51 CASE NUMBER: CASE TITLE:  HEREDIA VS SUNBELT TOWING INC [E-FILE]  37-2023-00019236-CU-OE-CTL Here, unlike in Kho, Plaintiff has not demonstrated the arbitration agreement was presented to Plaintiff at Plaintiff's workspace. The arbitration agreement was clearly labeled as 'optional.' While the text is somewhat small, it is not unreadable. There is bolding and separate subsections. It is relatively short.

Unlike in Kho, the arbitration agreement was not a paragon of prolixity. The language is relatively straight forward and understandable. In sum, the agreement was not a surprise as it was in Kho.

Plaintiff also argues the agreement is ambiguous as to the arbitrations rules that would apply. While it is true the hyperlink in the agreement does not work, the 'National Rules for the Resolution of Employment Disputes' can easily be found as there is one set by 'the American Arbitration Association' that applies.

The apparent problem is that the rules are found in the archived section of the AAA website. In sum, the Court finds Plaintiff has demonstrated, at best, very low, if any, procedural unconscionability.

As to substantive unconscionability, Plaintiff asserts there is lack of mutuality. Plaintiff points to the provision that permits Defendant to obtain an injunction from a court (with damages determined by an arbitrator) as to 'Employee's nondisclosure obligation or any Protective Covenant.' This is a narrow unilateral right. It is in the context of this narrow right that the attorney's fees provision appears. The provision states that 'Employee agrees to pay the Company's costs, including attorney's fees, for having to enforce any of the provisions of this Agreement.' Unlike in Mills v. Facility Solutions Group, Inc. (2022) 84 Cal.App.5th 1035, the attorney's fees provision is not contained within the arbitration provision. (Mills v. Facility Solutions Group, Inc. (2022) 84 Cal.App.5th 1035, 1057.) Even if the Court were to interpret the attorney's fees provision as applying to the arbitration provision, it could sever it. Further, the Court agrees that Defendant had 'reasonable justification' for the provision as it merely allows injunctive relief to be sought for a narrow kind of circumstance where it makes sense for the employer to want immediate relief from a court. (Armendariz, supra, 24 Cal.4th at 120.) Again, the Court could sever this provision as well.

Plaintiff also argues the arbitration agreement waives representative PAGA claims. This is a somewhat disingenuous argument as Plaintiff currently has a PAGA action pending in another court and Defendant has answered the complaint and not sought to dismiss the action. To the extent the arbitration agreement waives representative PAGA claims, the Court severs that portion.

Finally, Plaintiff asserts the agreement illegally restricts Plaintiff's ability to pursue employment. First, Plaintiff points to provisions outside of the arbitration agreement. As discussed above, the Court need not consider the enforceability of the agreement outside of the arbitration agreement. Plaintiff first cites the provision that states, 'While employed by the Company, Employee will not render or perform services for any other corporation, firm, or entity without prior written consent of the CEO of the Company, or other authorized representative of the Company.' '[Plaintiff does] not cite -- and we have not found -- a single case in which Section 16600 was held to invalidate an agreement not to compete with one's current employer while employed by that employer.' (Techno Lite, Inc. v. Emcod, LLC (2020) 44 Cal.App.5th 462, 473.) While the provision does not limit the restriction to a competitor, presumably the reason the CEO must give consent first is to ensure the work would not be with a competitor. To the extent that the provision can be interpreted as restricting work with noncompetitors, the Court finds it likely violates Business & Professions Code section 16600. However, when the other provisions cited by Plaintiff are analyzed, the Court can glean that the parties did not intend to violate Business & Professions Code section 16600.

Plaintiff cites (d) and (e) of section 2. The agreement provides in section 2 (d) that the employee may not 'with the use or disclosure of Confidential Information ... provide services to a business in competition with the Company....' Further, section 2 (d) states the restrictions 'are expressly intended to be limited to prohibition of solicitation utilizing the Confidential Information, as defined herein, and shall not otherwise restrict or, impede any lawful solicitation under Business & Professions Code § 16600.' Clearly the agreement intends to avoid violations of Business & Professions Code § 16600. Read as a whole, the Court believes the provisions relating to restrictions on working for other companies are limited to those situations that would likely lead to disclosure of confidential information, namely working with a competitor. Section 2 (e) addresses damages for violations of the other subsections, but it does not impose employment restrictions itself. Therefore, the Court concludes that, even if the provisions outside Calendar No.: Event ID:  TENTATIVE RULINGS

3003920  51 CASE NUMBER: CASE TITLE:  HEREDIA VS SUNBELT TOWING INC [E-FILE]  37-2023-00019236-CU-OE-CTL of the arbitration agreement were relevant, the agreement does not violate Business & Professions Code § 16600 so as to render the agreement unenforceable. The agreement, like in Jones v. Humanscale Corp. (2005) 130 Cal.App.4th 401, is concerned with confidential information and improper poaching.

In sum, Plaintiff fails to demonstrate, by a preponderance of the evidence, that the agreement is unconscionable. The motion is granted. The case is hereby stayed pursuant to CCP section 1281.4. The Court sets a status conference for June 21, 2023, at 10 am.

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