Judge: Robert B. Broadbelt, Case: 21STCV44796, Date: 2022-08-23 Tentative Ruling

Case Number: 21STCV44796    Hearing Date: August 23, 2022    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                 Defendant Charter Communications, LLC

RESPONDING PARTY:       Plaintiff Sergio Witrago        

Motion to Compel Arbitration and Dismiss Action or, Alternatively, to Stay Action

The court considered the moving, opposition, and reply papers filed in connection with this motion.

REQUEST FOR JUDICIAL NOTICE

The court grants Defendant’s request for judicial notice.  (Evid. Code, § 452, subd. (d).)

The court grants Plaintiff’s request for judicial notice.  (Evid. Code, § 452, subd. (d).)

EVIDENTIARY OBJECTIONS

The court overrules Plaintiff’s March 28, 2022 evidentiary objection.

The court sustains Defendant’s evidentiary objections, filed on August 16, 2022.

DISCUSSION

On December 8, 2021, plaintiff Sergio Witrago (“Plaintiff”) filed this employment discrimination and retaliation action against defendant Charter Communications, LLC (“Defendant”).

Defendant now moves the court for an order (1) compelling Plaintiff to submit all his claims to binding arbitration under the terms of an arbitration agreement and the Federal Arbitration Act, and (2) dismissing, or, in the alternative, staying this action pending completion of arbitration.

1.     Existence of a Written Agreement to Arbitrate the Controversy

A written provision in any contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.  (9 U.S.C. § 2.)  The Federal Arbitration Act (“FAA”) requires courts to direct parties to proceed to arbitration on issues covered by an arbitration agreement upon a finding that the making of the arbitration agreement is not in issue.  (9 U.S.C. § 4; Chiron Corp. v. Ortho Diagnostic Sys. (9th Cir. 2000) 207 F.3d 1126, 1130.)  “The court’s role under the [FAA] is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.”  (Chiron Corp., supra, 207 F.3d at p. 1130.)  The FAA reflects “both a ‘liberal federal policy favoring arbitration,’ [citation], and the ‘fundamental principle that arbitration is a matter of contract,’ [citation].”  (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.)

A party seeking to compel arbitration bears the burden of proving a written agreement to arbitrate exists.  (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)  The burden of production as to this finding shifts in a three-step process.  (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.)  First, the moving party bears the burden of producing prima facie evidence of a written agreement to arbitrate, which can be met by attaching a copy of the arbitration agreement purporting to bear the opponent’s signature or by setting forth the agreement’s provisions.  (Ibid.)  If the moving party meets this burden, the opposing party bears, in the second step, the burden of producing evidence to challenge its authenticity.  (Ibid.)  If the opposing party produces evidence sufficient to meet this burden, the third and final step requires the moving party to establish, with admissible evidence, a valid arbitration agreement between the parties.  (Ibid.)

Defendant bases its motion on the terms set forth in its Mutual Arbitration Agreement, contending that the parties entered into the agreement following Defendant’s launch of its Solution Channel legal dispute resolution and arbitration program and Plaintiff’s failure to opt out of the program.  (Fries Decl., ¶ 5.) 

Defendant announced its Solution Channel program on October 6, 2017 by email to all non-union employees below the level of Executive Vice President, who were active and not on a leave of absence on that date.  (Fries Decl., ¶ 6.)  The October 6, 2017 announcement stated (1) the Solution Channel program would permit the employee and Defendant “to efficiently resolve covered employment-related legal disputes through binding arbitration” and (2) that participation in the Solution Channel program meant that both the employee and Defendant would “waive the right to initiate or participate in court litigation…involving a covered claim and/or the right to a jury trial involving such claim.”  (Fries Decl., Ex. A, p. 2; Fries Decl., Ex. E.)  The announcement also stated that, unless the recipient opted out of participating within the following 30 days, the employee would be automatically enrolled.  (Ibid.)  The announcement included a link to the Solution Channel webpage entitled “Panorama,” which explained that participation in the Solution Channel program meant that the parties agreed to waive any right to participate in court litigation and instead agreed to arbitrate those disputes.  (Fries Decl., ¶ 10; Fries Decl., Ex. B, pp. 1-2.)  The Panorama page also included a link to the Mutual Arbitration Agreement.  (Fries Decl., ¶ 10; Fries Decl., Ex. B, p. 2.)

The Mutual Arbitration Agreement contains a mutual agreement that all disputes, claims, and controversies that could be asserted in court or before an administrative agency or for which the employee or Defendant has an alleged cause of action related to pre-employment, employment, employment termination, or post-employment-related claims, whether denominated as tort, contract, common law, or statutory claims, would be submitted to binding arbitration.  (Fries Decl., Ex. C, Mutual Arbitration Agreement, § B, subd. (1).)  The covered claims specifically include claims for unlawful discrimination, harassment, and retaliation.  (Ibid.)  The Mutual Arbitration Agreement became effective as of the date of consent to participate in Solution Channel (i.e., upon the expiration of the final date to opt out of the program).  (Id. at p. 5, § V.)

Defendant presents evidence that (1) Plaintiff was included in the distribution list for the October 6, 2017 Solution Channels announcement, (2) Plaintiff did not opt out of the program during the allotted time period, and (3) Plaintiff was a participant in the program as of November 6, 2017.  (Fries Decl., ¶¶ 21-23; Fries Decl., Ex. E [email announcement from Paul Marchand, Executive Vice President, to Plaintiff]; Fries Decl., Ex. F [Solution Channel page indicating that Plaintiff is a participant of the program].)

The court finds that Defendant has met its burden to establish that a valid agreement to arbitrate exists between Plaintiff and Defendant.  As set forth above, Defendant has presented evidence that the parties agreed to enter into the Mutual Arbitration Agreement after Plaintiff received the Solution Channel announcement and declined to opt out of the program, thereby entering into the agreement.  

The court finds that Plaintiff has not met his burden of demonstrating that the Mutual Arbitration Agreement is invalid because Plaintiff has not demonstrated that there was a lack of mutual consent to its terms.

Plaintiff contends that there exists no mutual assent because Plaintiff (1) did not sign the Mutual Arbitration Agreement; (2) has no recollection of receiving the October 6, 2017 email; (3) “neither read nor saw anything regarding an arbitration agreement” from Defendant; and (4) never received a copy of the Mutual Arbitration Agreement.  (Fries Decl., Ex. C [Mutual Arbitration Agreement, unsigned by Plaintiff]; Witrago Decl., ¶¶ 3-5.)  Plaintiff argues that Defendant failed to present evidence that Plaintiff received a copy of the agreement, signed it, or acknowledged his receipt of the agreement or its terms, and therefore has failed to establish that both Plaintiff and Defendant consented to its terms.

            “To form a valid contract there must be a meeting of the minds, i.e., mutual assent.”  (Moritz v. Universal City Studios LLC (2020) 54 Cal.App.5th 238, 246; Civ. Code, §§ 1550, subd. (2), 1565.)  “‘Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.’”  (Chicago Title Ins. Co. v. AMZ Ins. Services, Inc. (2010) 188 Cal.App.4th 401, 422.)  Consent is not mutual unless the parties “all agree upon the same thing in the same sense.”  (Sieck v. Hall (1934) 139 Cal.App. 279, 291.)

The court finds that Plaintiff has not met his burden to establish that there was no meeting of the minds.  Defendant has produced evidence establishing that Plaintiff received the October 6, 2017 email containing the Solution Channel announcement.  (Fries Decl., Ex. E.)  While Plaintiff states in declaration that he has “no recollection of receiving an email dated October 6, 2017” from Defendant’s Paul Marchand, Plaintiff does not meaningfully dispute Defendant’s proffered evidence—a copy of the announcement that was emailed to “Witrago, Sergio L”—and does not state that he did not actually receive the announcement, only stating that he does not recall receiving it.  (Witrago Decl., ¶ 3.)

Plaintiff also argues that there is no evidence that he opened or acknowledged the Mutual Arbitration Agreement, and that the October 6, 2017 email is inconsistent because it contains both permissive and mandatory language when describing the agreement to arbitrate.  As to the first point, “a party’s acceptance of an agreement to arbitrate may be express [citations] or implied-in-fact where, as here, the employee’s continued employment constitutes [his] acceptance of an agreement proposed by [his] employer [citations].”  (Craig v. Brown & Root (2000) 84 Cal.App.4th 416, 420.)  Defendant’s evidence establishes that Plaintiff received the October 6, 2017 email. 

As to the second point, the court acknowledges that the October 6, 2017 email appears to contain conflicting language.  The email states that Defendant has launched Solution Channel, “a program that allows you and the company to efficiently resolve covered employment-related legal disputes through binding arbitration,” and appears to set forth the option to submit to arbitration.  (Fries Decl., Ex. E [emphasis added].)  Following this statement, however, is language that makes clear that arbitration is binding: “By participating in Solution Channel, you and Charter both waive the right to initiate or participate in court litigation (including class, collective and representative actions) involving a covered claim and/or the right to a jury trial involving any such claim.  More detailed information about Solution Channel is located on Panorama.  Unless you opt out of participating in Solution Channel within the next 30 days, you will be enrolled.”  (Fries Decl., Ex. E [emphasis added].)

Finally, the court notes that Plaintiff contends that there was no consideration presented to Plaintiff since he was already an employee at the time that Defendant sent its October 6, 2017 email.  However, the Mutual Arbitration Agreement states that the parties agree that the recipient has been offered sufficient consideration in the form of consideration of applications for employment, the recipient’s employment with Defendant, and/or Defendant’s mutual agreement to arbitrate disputes.  (Fries Decl., Ex. C, Mutual Arbitration Agreement, p. 5, § S.)  The court finds this to be sufficient evidence of consideration.  

The court finds (1) that the evidence establishes that Plaintiff received the October 6, 2017 email announcing the launch of the Solution Channel program; (2) that the email announcement sufficiently advised Plaintiff that, unless he opted out, he would be “enrolled” in the Solution Channel program and would therefore waive the right to initiate or participate in court litigation and the right to a jury trial involving covered employment-related legal disputes; and (3) that Plaintiff did not opt out within the requisite time period.  (Fries Decl., Exs. E-F.)  The court therefore finds that Plaintiff’s continued employment and failure to opt out of the Mutual Arbitration Agreement evidences his acceptance of the Mutual Arbitration Agreement.  (Craig, supra, 84 Cal.App.4th at p. 420.)

The court finds that Plaintiff’s claims fall within the scope of the claims the parties have agreed to arbitrate in the Mutual Arbitration Agreement.  The Mutual Arbitration Agreement applies to causes of action “related to pre-employment, employment, employment termination or post-employment-related claims, whether the claims are denominated as tort, contract, common law, or statutory claims (whether under local, state or federal law),” including claims for unlawful termination, unlawful discrimination or harassment, and claims for unlawful retaliation.  (Fries Decl., Ex. C, Mutual Arbitration Agreement, p. 1, § B, subd. (1).)  Plaintiff brings claims for physical disability harassment, discrimination, and retaliation, violation of the California Family Rights Act, and wrongful termination, and requests a declaration that Defendant committed acts of harassment, discrimination, and retaliation.  All of these employment-related causes of action fall within the scope of the Mutual Arbitration Agreement.

The court therefore finds that (1) a valid agreement to arbitrate exists, and (2) the agreement encompasses each of Plaintiff’s claims.

2.     Unconscionability

Plaintiff contends that the Mutual Arbitration Agreement is unconscionable and therefore unenforceable.

Arbitration agreements are subject to all defenses to enforcement that generally apply to contracts, and state contract law is applied to determine the validity of an arbitration agreement.  (Ingle v. Circuit City Stores, Inc. (2003) 328 F.3d 1165, 1170; 9 U.S.C. § 2.)  “The burden of proving unconscionability rests upon the party asserting it.”  (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (Kho).)  “‘[U]nconscionability 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.”  (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114 [citations omitted].)  “As a matter of general contract law, California courts require both procedural and substantive unconscionability to invalidate a contract.”  (Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5^th 485, 492 (Torrecillas).)  California courts “apply a sliding scale, meaning if one of these elements is present to only a lesser degree, then more evidence of the other element is required to establish overall unconscionability.  In other words, if there is little of one, there must be a lot of the other.”  (Ibid.) 

a.      Procedural Unconscionability

“Procedural unconscionability pertains to the making of the agreement . . . .”  (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.)  Procedural unconscionability “‘“focuses on two factors: ‘oppression’ and ‘surprise.’  [Citations.]  ‘Oppression’ arises from an inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice.’ [Citations.]  ‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.”’”  (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484 [citations omitted].)   

i.                 Oppression

“Oppression generally ‘takes the form of a contract of adhesion, “‘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.]”  (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84 (Carmona).)  “‘[A] predispute arbitration agreement is not invalid merely because it is imposed as a condition of employment.  [T]he mandatory nature of an agreement does not, by itself, render the agreement unenforceable.’ [Citation.]  But the adhesive nature of a contract is one factor that the courts may consider in determining the degree of procedural unconscionability.”  (Id. at p. 84, fn. 4.)  

As discussed above, “[o]pression . . . occurs when there is a lack of negotiation and meaningful choice.”  (Torrecillas, supra, 52 Cal.App.5^th at p. 493.)  “Adhesion contracts are form contracts a party with superior bargaining power offers on a take-it-or-leave-it basis.”  (Ibid.)  “Arbitration contracts imposed as a condition of employment are typically adhesive . . . .”  (Kho, supra, 8 Cal.5^th at p. 126.)  Plaintiff presents evidence that the Mutual Arbitration Agreement is an adhesion contract because it was offered in exchange for Plaintiff’s continued employment with Defendant, and because Plaintiff was not permitted to change its terms.  (Fries Decl., Ex. C, Mutual Arbitration Agreement, p. 5, § S; Witrago Decl., ¶ 6.)

ii.               Surprise

As discussed above, “[s]urprise is when a prolix printed form conceals the arbitration provision.”  (Torrecillas, supra, 52 Cal.App.5^th at p. 493.)  

Plaintiff argues that the October 6, 2017 email presents a “highly distorted picture” of the arbitration agreement, because (1) the email was entitled “Charter’s Code of Conduct and Employee Handbook;” (2) the email announcement uses language that is both permissive and mandatory, as described above; and (3) although the announcement referenced the ability to opt out of Solution Channel, it did not expressly state that, unless a recipient opts out, he will be required to submit all employment-related disputes through arbitration.  The court finds that these attributes, at most, indicate only a low level of surprise.  Although the email subject line did not make reference to arbitration, and although the language appears to use both permissive and mandatory language in a somewhat awkward manner, the court finds that the announcement itself made clear that (1) by participating in the Solution Channel, Plaintiff would be waiving his right to initiate and participate in court litigation and would be waiving his right to a jury trial, and (2) unless Plaintiff opted out of participating in Solution Channel, Plaintiff would be enrolled in the program.  (Fries Decl., Ex. E.)

Plaintiff next contends that the Mutual Arbitration Agreement does not state that the AAA Rules are applicable, and that Defendant did not provide Plaintiff with a copy of any arbitration rules.  (Witrago Decl., ¶ 6.)

The courts that have held that the failure to provide a copy of the arbitration rules “depended in some manner on the arbitration rules in question.”  (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246.)  The failure to attach the governing arbitration rules “standing alone, is insufficient grounds to support a finding of procedural unconscionability.”  (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1472.)  Accordingly, the court finds that Defendant’s failure to attach or transmit the AAA Rules does not establish that the agreement is procedurally unconscionable.

The court finds that Plaintiff has established that there is a low level of procedural unconscionability based on the adhesive nature of the Mutual Arbitration Agreement.  (Ajamian, supra, 203 Cal.App.4th at p. 796 [“Where there is no other indication of oppression or surprise, the degree of procedural unconscionability of an adhesion agreement is low”].)

“For [Plaintiff] to invalidate his agreement, then, minimal procedural unconscionability means [Plaintiff] would have to demonstrate a high degree of substantive unconscionability.”  (Torrecillas, supra, 52 Cal.App.5th at p. 496.)

b.     Substantive Unconscionability

 “‘Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided.  [Citations.]  A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be “so one-sided as to ‘shock the conscience.’”’”  (Carmona, supra, 226 Cal.App.4th at p. 85.)  “‘“[T]he paramount consideration in assessing [substantive] unconscionability is mutuality.”’”  (Ibid.)

Plaintiff contends that the Mutual Arbitration Agreement is substantively unconscionable because (1) it curtails Plaintiff’s FEHA remedies; (2) it does not provide for adequate discovery; and (3) the repeat player effect disadvantages Plaintiff.

First, Section K of the Mutual Arbitration Agreement states that Defendant will pay the AAA administrative fees and the arbitrator’s fees and expenses, but that “[a]ll other costs, fees and expenses associated with the arbitration, including without limitation each party’s attorneys’ fees, will be borne by the party incurring the costs, fees and expenses.”  (Fries Decl., Ex. C, Mutual Arbitration Agreement, § K.)  The court finds that this provision, in “requiring each party to bear its own attorney fees[,] deprives an employee of his or her statutory right to recovery attorney fees if the employee prevails on a FEHA claim.”  (Ramirez v. Charter Communications, Inc. (2022) 75 Cal.App.5th 365, 376, fn. 6.)  Section K further states that, if arbitration is compelled, “the party that resisted arbitration will be required to pay to the other party all costs, fees and expenses that they incur in compelling arbitration, including, without limitation, reasonable attorneys’ fees.”  (Fries Decl., Ex. C, Mutual Arbitration Agreement, § K.)  The court notes that, while this provision does impermissibly conflict with FEHA’s fee-shifting statute, Defendant has not sought attorney’s fees in connection with this motion.

The court therefore finds that Section K deprives Plaintiff of his right to recover attorney’s fees if he prevails on his FEHA claims and is therefore unconscionable for conflicting with FEHA’s fee-shifting provision.  (See Gov. Code, § 12965, subd. (c)(6).)  The court, however, finds that this term may be severed. 

Second, Plaintiff argues that the Mutual Arbitration Agreement does not provide for adequate discovery.  The Mutual Arbitration Agreement states that the arbitrator will decide all discovery disputes related to the arbitration.  (Fries Decl., Ex. C, Mutual Arbitration Agreement, p. 3, § I.)  In addition, the Solution Channel Guidelines provide that parties will have 90 days to exchange information and take depositions, and that each party will be permitted (1) to take up to four depositions; (2) to propound up to 20 total interrogatories, including subparts; and (3) to propound up to 15 total requests for documents.  (Fries Decl., Ex. C, Solution Channel Program Guidelines, pp. 17-18.)  The guidelines further provide that “[a]ny disagreements regarding the exchange of information or depositions will be resolved by the arbitrator to allow a full and equal opportunity to all parties to present evidence that the arbitrator deems material and relevant to the resolution of the dispute.”  (Id. at p. 18.)  “[A]dequate discovery is indispensable for the vindication of FEHA claims.”  (Armendariz, supra, 24 Cal.4th at p. 104.)  However, parties to an arbitration agreement are “permitted to agree to something less than the full panoply of discovery….”  (Id. at p. 105.) 

The court finds that the provisions regarding discovery do not render the Mutual Arbitration Agreement substantively unconscionable because (1) the discovery permitted by the Solution Channel Program Guidelines is adequate, and (2) the arbitrator has the ability to resolve discovery disputes in order to facilitate “a full and equal opportunity to all parties to present evidence” and therefore has the ability to permit more discovery if necessary to establish Plaintiff’s FEHA claims.

Finally, Plaintiff argues that the “repeat player” effect on the arbitration process confers a benefit on Defendant and renders the agreement unconscionable as to Plaintiff.  “While our Supreme Court has taken notice of the ‘repeat player effect,’ the court has never declared this factor renders the arbitration agreement unconscionable per se.”  (Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 178.)  The court finds that Plaintiff has not presented evidence indicating that Defendant’s participation in arbitration renders the Mutual Arbitration Agreement unconscionable as to Plaintiff. 

The court finds that Plaintiff has established that the terms set forth in Section K are unconscionable for the reasons set forth above, but that this section may be severed without affecting its other provisions or the main purpose of the agreement.  The court therefore orders the following terms set forth in Section K to be severed from the Mutual Arbitration Agreement: (1) “All other costs, fees and expenses associated with the arbitration, including without limitation each party’s attorneys’ fees, will be borne by the party incurring the costs, fees and expenses” and (2) “the party that resisted arbitration will be required to pay to the other party all costs, fees and expenses that they incur in compelling arbitration, including, without limitation, reasonable attorneys’ fees.”  (Civ. Code, § 1670.5, subd. (a).)

Because the court has ordered the substantively unconscionable terms to be severed from the Mutual Arbitration Agreement, the court finds that there is a low level of substantive unconscionability which is remedied by the court’s order severing those terms.

As set forth above, both procedural and substantive unconscionability must be shown for the defense of unconscionability to be established.  (Kho, supra, 8 Cal.5th at p. 125.)  Although Plaintiff has established a low level of procedural unconscionability due to the Mutual Arbitration Agreement being a contract of adhesion, Plaintiff has not established that the level of substantive unconscionability is so high that the Mutual Arbitration Agreement is unconscionable and should not be enforced. 

The court finds that the Mutual Arbitration Agreement is not permeated by unconscionability or a lack of mutuality, and that the unenforceable terms in Section K are collateral to the main purpose of the agreement and may be severed without affecting the main purpose of the agreement.  The court therefore finds that Plaintiff has not met his burden of proving that the Mutual Arbitration Agreement is unconscionable and unenforceable.

ORDER

The court grants defendant Charter Communications, LLC’s motion to compel arbitration and to stay the action.

The court orders that the following terms set forth in Section K are severed from the Mutual Arbitration Agreement: (1) “All other costs, fees and expenses associated with the arbitration, including without limitation each party’s attorneys’ fees, will be borne by the party incurring the costs, fees and expenses” and (2) “the party that resisted arbitration will be required to pay to the other party all costs, fees and expenses that they incur in compelling arbitration, including, without limitation, reasonable attorneys’ fees.”  (Civ. Code § 1670.5, subd. (a).)

The court orders (1) plaintiff Sergio Witrago and defendant Charter Communications, LLC to arbitrate the claims alleged in plaintiff Sergio Witrago’s complaint in this action, and (2) this action is stayed until arbitration is completed.

The court sets an Order to Show Cause re completion of arbitration for hearing on ___________________, 2023, at 11:00 a.m., in Department 53.

The court orders defendant Charter Communications, LLC to give notice of this order.

IT IS SO ORDERED.

DATED:  August 23, 2022

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court