Judge Robert S. Draper, Case 22STCV07091 2022-08-08 Tentative Ruling

Defendants’ Motion to Compel Arbitration is GRANTED. All future proceedings are stayed pending arbitration.

This is an action for employment discrimination and wrongful termination. The Complaint alleges as follows.

Plaintiffs Faculty Doe 1 (“F.D. 1”) and Faculty Doe 2 (“F.D. 2” and with F.D.1, “Plaintiffs”) were employed by Defendant University of Southern California[1] (“USC”). Defendant James Cunningham (“Cunningham” and together with USC, “Defendants”) was an individual employed by USC during relevant time periods.[2] (Compl. ¶ 3.) Plaintiffs were subjected to sexual harassment and discrimination. (Compl. ¶¶ 25-26.) In response to Plaintiffs’ complaints about said behavior, Defendants “showed annoyance, exasperation, lack of sympathy and/or animosity toward Plaintiffs.” (Compl. ¶ 97.)

On February 25, 2022, Plaintiffs filed the Complaint asserting thirteen causes of action:

The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).)

1. Minute Order dated June 2, 2021 issued by the Hon. Jon R. Takasugi, Dept. 17, the matter Ali Abbas v. University of Southern California, Los Angeles Superior Court Case No. 20STCV28755. (Ex. A.)

2. Minute Order dated June 4, 2021 issued by the Hon. Jon R. Takasugi, Dept. 17, the matter Person Doe v. University of Southern California, et al., Los Angeles Superior Court Case No. 20STCV25830. (Ex. B.)

3. Minute Order dated May 2, 2022 issued by the Hon. Stephen I. Goorvitch, Dept. 39, the matter C.D. v. University of Southern California, et al., Los Angeles Superior Court Case No. 21STCV27760. (Ex. C.)

Defendants move the Court to compel arbitration pursuant to an arbitration agreement (the “Arbitration Agreement”) in Plaintiffs’ employment contracts.

California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, California Code of Civil Procedure section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967 [citations omitted]; Code Civ. Proc. § 1281.2.)

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) The trial court “sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Id.) General principles of contract law govern whether parties have entered a binding agreement to arbitrate. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236; see also Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

As Defendants are the moving parties, it is their burden to show, by a preponderance of the evidence, that a valid Arbitration Agreement exists.

Here, Defendants attach F.D. 1’s Arbitration Agreement to the Declaration of Christine Rahn. (Rahn Decl, Ex. C.) The Agreement contains F.D. 1’s signature (redacted for privacy) and is dated March 27, 2016. (Ibid.)

Next, Defendants attach F.D. 2’s Arbitration Agreement to the Declaration of Christine Rahn. (Rahn Decl., Ex. F.) The Arbitration Agreement contains F.D. 2’s signature (redacted for privacy) and is dated March 28, 2016. (Ibid.)

Both Agreements are labeled “AGREEMENT TO ARBITRATE CLAIMS” in capitalized, bold font, at the top of the page. (Rahn Decl., Exs. C, F.)

By attaching the hand signed Arbitration Agreements to their Motion, Defendants meet their initial burden of showing, by a preponderance of the evidence, the existence of a valid arbitration agreement.

Next, Defendants must show, by a preponderance of the evidence, that the Arbitration Agreement applies to the instant controversy.

The terms of the two Arbitration Agreements are identical. (Rahn Decl., Ex. C, F.) The Agreements state, in relevant part:

[T]he University and the faculty or staff named below (“Employee”) agree to the resolution by arbitration of all claims, whether or not arising out of Employee’s University employment, renumeration or termination, that Employee may have against the University or any of its related entities. . . and all claims that the University may have against employer.”

[T]he following claims are not covered by this agreement: (1) claims brought under Title VII of the Civil Rights Act of 1964; (2) tort claims (e.g., assault and battery, intentional infliction of emotional distress, false imprisonment or negligent hiring, supervision or retention) if they are related to or arising out of sexual assault or harassment; (3) claims for “whistleblowing” under the American Recovery and Reinvestment Act of 2009; (4) claims for workers’ compensation or unemployment compensation; (5) claims by or against faculty that are subject to review by writ of administrative mandamus under California Code of Civil Procedure Section 1094.5 or any successor statute; (6) claims that are arbitrable under a collective bargaining agreement governing Employee’s employment; (7) claims arising under the National Labor Relations Act; and (8) claims under the Ralph Civil Rights Act or the Tom Bane Civil Rights Act . . .

The Court finds that the subject of Plaintiffs’ Complaint arises from their employment relationship with USC, and therefore the Arbitration Agreement applies to Plaintiffs’ claims. The Court notes, however, that Plaintiffs’ claim for Sexual Harassment is explicitly excluded from the arbitration agreement, which will be discussed in greater detail below.

As Defendants have shown the existence of an Arbitration Agreement and its applicability to the instant action, Plaintiffs must now show, by a preponderance of the evidence, any facts necessary for their defense.

Plaintiffs assert a number of defenses in arguing that the arbitration agreement is invalid, or that it does not apply to the instant action. The Court will address these arguments in the order they are raised in Plaintiffs’ Opposition.

First, Plaintiffs contend that the Thirteenth Cause of Action for “Business and Professions Code Section 17200, et. seq. – Unlawful, or Fraudulent – Unenforceable Arbitration Agreements” serves as a petition for nonenforcement of the Arbitration Agreement. (Opposition at p. 11; Compl. at p. 28.) Plaintiffs argue that, as Defendants have not timely filed a verified denial, the allegations regarding the deficiencies in the Arbitration Agreement are deemed admitted.

However, as Defendants note, Code of Civil Procedure section 1281.7 states that “a petition pursuant to Section 1281.2,” which governs petitions to compel arbitration agreements, “may be filed in lieu of filing an answer to a complaint. The petitioning defendant shall have 15 days after any denial of the petition to plead to the complaint.”

Accordingly, Defendants were not statutorily required to submit a verified denial before filing the instant petition, and none of the allegations in the Complaint are deemed admitted.

Next, Plaintiffs argue that the Arbitration Agreement is precluded subsequent to Congress’ passing of the Forced Arbitration Act in February, 2022. Plaintiffs contend that section 402 of the Forced Arbitration act voids the Arbitration Agreement, as it concerns a dispute over sexual harassment.

[A]t the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.”

First, the Ending Forced Arbitration Act was signed into law on March 3, 2022, and explicitly applies to “any dispute or claim that arises or accrues on or after the date of enactment of this act.” (9 U.S.C. § 401(3).)

Plaintiffs argue that the “amendment to the FAA in the Forced Arbitration Act applies to a pending case based upon express language, federal law applying a statute that is in existence when a decision is rendered, clarifying statutes apply to pending cases, and/or that statutes ousting a forum of jurisdiction apply to pending cases.” (Opposition at p. 12.) Defendant, however, does not cite any statutory language, federal law, or other authority that states the EFAA applies to cases where the events constituting the Complaint, and the filing of the Complaint itself, preceded passage of the EFAA.

Additionally, section 402(a) applies to “any person alleging conduct constituting a sexual harassment dispute or sexual assault dispute. . .” Section 401(4) defines sexual harassment as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”

Here, Plaintiffs sexual harassment cause of actions is asserted under the Fair Employment and Housing Act (“FEHA”). (Compl. at p. 8.)

FEHA prohibits harassment of an employee “because of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, or military and veteran status.” (Gov. Code § 12940, subd. (j)(1).)

The elements of a cause of action for harassment under FEHA are: 1) plaintiff belongs to a protected group; (2) plaintiff was subject to harassment; (3) the harassment complained of was based on the plaintiff’s membership in the protected group; (4) the harassment complained of was sufficiently pervasive so as to alter the conditions of employment and create an abusive working environment; and (5) respondeat superior. (Jones v. Department of Corrections & Rehabilitation (2007) 152 Cal.App.4th 1367, 1377; CACI No. 2521A.)

To establish a claim for harassment based upon a hostile work environment pursuant to Government Code section 12940(j), a plaintiff must prove “that the conduct complained of was severe enough or sufficiently pervasive to alter the conditions of employment and create a work environment that qualifies as hostile or abusive to employees . . . .” (Miller v. Dep't of Corr., (2005) 36 Cal.4th 446, 462.) Whether harassment exists based upon a hostile work environment is determined by considering all the circumstances, which may include frequency, severity, and interference with one’s job. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 462.) “In determining what constitutes ‘sufficiently pervasive’ harassment, the courts have held that acts of harassment cannot be occasional, isolated, sporadic, or trivial, rather the plaintiff must show a concerted pattern of harassment of a repeated, routine or a generalized nature.” (Fisher v. San Pedro Peninsula Hosp. (1989) 214 Cal.App.3d 590, 610 (1989). The inquiry is whether “the social environment of the workplace [has become] intolerable.” (Roby v. McKesson Corp. (2006) 47 Cal.4th 686, 706.)

Here, the Complaint alleges that “[e]ach Defendant, on one or more occasion, communicated a harassing or harassing message because of protected status under Cal. Gov’t Code § 12940(j). . .” (Compl. ¶ 41.) Additionally, the Complaint alleges that “USC’s conduct included, without limitation, false or deceitful accusations, demeaning messages, dismissive messages, embarrassing messages, insulting or taunting messages, different treatment, expressions, and gestures, denying Plaintiffs support, giving Plaintiffs the cold shoulder, and other forms of prohibited harassment.” (Ibid.)

The Complaint does not contain any factual allegations regarding Defendants’ sexual harassment, only conclusory statements that fail to describe a “concerted pattern of harassment of a repeated, routine, or a generalized nature.”

Accordingly, Plaintiffs’ Complaint fails to allege a cause of action for Sexual Harassment and even if the Ending Forced Arbitration Act did not explicitly provide that the statute does not apply to this case, which it does, the Complaint does not state a cause of action under Government Code section 12940(j).

Next, Plaintiffs argue that arbitration is precluded pursuant to The Franken Amendment.

In 2009, President Obama signed into law the Fiscal Year 2010 Department of Defense Appropriations Act, a $636 billion spending measure. Section 8116(a) of the Act prohibits federal contractors receiving Department of Defense funds for contracts in excess of $1 million from requiring their employees or independent contractors to arbitrate certain disputes, including claims under Title VII of the Civil Rights Act of 1964 and certain tort claims. Such federal contractors also are required to certify that their subcontractors agree to these same restrictions.

This arbitration provision is known as the “Franken Amendment” as it was a modified version of an amendment submitted by Senator Al Franken (D-MN) during Senate consideration of Defense Appropriations legislation. Section 8116(a) of the DDAA requires that: None of the funds appropriated or otherwise made available by [the DDAA] may be expended for any Federal contract for an amount in excess of $1,000,000 that is awarded more than 60 days after the effective date of this Act, unless the contractor agrees not to: (1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention; or (2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention. (See also 48 C.F.R. § 222.7402(a).)

Although the Franken amendment was positioned as a response to a sexual assault claim, the restrictions in the DDAA apply to all Title VII claims (e.g., claims of race, sex, national origin, and religious discrimination), and, apparently, to any tort claims arising out of a claim of sex harassment or sexual assault. However, the DDAA does not address the arbitration of common law claims unrelated to sexual harassment or sexual assault, non-Title VII federal employment-related claims, such as claims under the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Fair Labor Standards Act, or employment claims brought under state statutes. (Evaluating and Using Employer-Initiated Arbitration Policies And Agreements, CV001 ALI-ABA 981, 1000.)

Here, Plaintiffs argue that the Franken Amendment should preclude arbitration as it applies to both FEHA and common law tort claims not related to sexual harassment. While Plaintiffs provide ample authority arguing that the statute should be read broadly, they do not provide an authority that states that the Franken Amendment applies to FEHA claims. Absent such authority, Plaintiffs’ argument is unavailing.

Next, Plaintiffs argue that JAMS has a financial interest in its relationship with USC such that JAMS is forbidden from arbitrating claims involving USC pursuant to Code of Civil Procedure section 1281.92.

Section 1281.92 forbids an arbitration company from administering consumer arbitration service “if the company has, or within the preceding year has had, a financial interest, as defined in section 170.5, in any party or attorney for a party.”

Section 170.5(b) defines financial interest as “ownership of more than a 1 percent legal or equitable interest in a party, or a legal or equitable interest in a party of a fair market value in excess of one thousand five hundred dollars, or a relationship as director, advisor or other active participant in the affairs of a party. . .”

Section 170.5(b)(2) excepts from this definition an “office in an educational, religious, charitable, fraternal or civic organization. . .”

Here, Plaintiffs argue that, as JAMS has an arrangement with USC to provide trainings to the public on ADR topics, and as JAMS provides neutral hearings officers under a Master Services Agreement to preside over Title IX sexual assault and harassment matters involving student conflicts.

However, none of these alleged conflicts qualify as a conflict pursuant to CCP section 1281.92, nor do Plaintiffs provide an authority stating that providing neutral arbitration services in student conflicts precludes JAMS from providing neutral arbitration services in employment contexts.

Accordingly, the relationship between JAMS and USC does not present any conflicts of interest sufficient to preclude arbitration.

Next, Plaintiffs argue that, as motions to compel are simply equitable suits for specific performance, the Arbitration Agreement is precluded from enforcement.

First, Plaintiffs contend that the Arbitration Agreement contains a unilateral right to revoke. Plaintiffs note that where specific enforcement is sought, it cannot “be stipulated that one of the parties may abandon the contract.” (Opposition at p. 21; quoting Sturgis v. Galindo (1881) 59 Cal. 28, 31.)

The Arbitration Agreement states that the agreement “Supersedes any prior or contemporaneous agreement on the subject, shall survive the termination of Employee’s employment, and may only be revoked or modified in a written document that expressly refers to the “Agreement to Arbitrate Claims” and is signed by the President of the University.” (Rahn Decl., Ex. F, ¶ 5.)

However, this provision does not present a unilateral right to revoke the contract as Plaintiffs characterize, but simply states that any attempt to revoke or modify the agreement, by either party, must be approved by the president of the university. Accordingly, Plaintiffs’ unilateral revocation argument is unavailing.

Next, Plaintiffs contend that the University has waived its right to revoke pursuant to the Franken Amendment. However, as the Franken Amendment does not apply, as addressed above, this argument is also unavailing.

Finally, Plaintiffs argue that the Arbitration Agreement is both substantively and procedurally unconscionable.

First, Plaintiffs argue that the Arbitration Agreement is procedurally unconscionable as it is an adhesion contract, which is in indicator of procedural unconscionability.

However, the adhesive nature of the agreements does not, in and of itself, render the arbitration agreements unconscionable. (See Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 981; McManus, supra, 109 Cal.App.4th at 89.) The adhesive nature of an agreement is just the beginning, not the end, of the inquiry into its enforceability. (Pinela v. Neiman Marcus Group., Inc. (2015) 238 Cal.App.4th 227, 242.)

Next, Plaintiffs argue that the Agreement is procedurally unconscionable as it fails to provide, discuss, or explain the JAMS arbitration rules which govern arbitrations under the Agreement.

Where the non-moving party has not been provided with a copy of the arbitration rules, the Court must make a factual determination deciding whether the non-moving party is prejudiced by the moving party’s failure to attach said rules. (See Peng v. First Republic Bank (2013) 219 Cal.App.4^th 1462, 1469-72.) Here, the Arbitration Agreement includes a hyperlink to the relevant rules, and states that “USC will provide a printed copy upon request.” (Rahn Decl., Ex. F, ¶ 5.) Accordingly, the Court does not find the failure to include the rules in the text of the agreement prejudicial.

First, Plaintiffs argue that the Agreement does not assure access to a neutral forum. However, as addressed above, Plaintiffs have not stated a reason that JAMS has a preclusive conflict of interest.

Next, Plaintiffs argue that the agreement limits statutorily imposed remedies. However, the Agreement states that the arbitrator “shall award all the remedies to which the prevailing party is legally entitled. . .under applicable law.” (Ibid.) Plaintiffs do not attempt to explain how this limits statutorily imposed remedies.

Next, Plaintiffs argue that the Agreement contains limitations and hurdles to procedures necessary to vindicate Plaintiffs claims. Plaintiffs do not explain where they find such hurdles in the Agreement, but the Agreement does allow the arbitrator to “afford the parties adequate discovery including deposition discovery, taking into account their shared desire to have a fast, cost-effective dispute-resolution mechanism.” (Ibid.)

Next, Plaintiffs argue that the Agreement “requires Plaintiffs to bear any type of expense that would not be required if free to litigate.” However, the Agreement states that “Employee’s share of the arbitrator fee and the JAMS filing fee shall be no more than the then-current filing fee in the California Supreme Court” and that “the arbitrator may grant a waiver of Employee’s share of these fees upon a showing of hardship.” (Ibid.) Plaintiffs do not attempt to explain how this places a financial burden on Plaintiffs beyond if they were free to litigate.

Next, Plaintiffs argue that the Agreement is contrary to equitable statute of limitations extensions. The Agreement does not reference any statute of limitations. Plaintiffs do not attempt to explain how the Agreement is contrary to equitable statute of limitations extension

Finally, Plaintiffs argue that the Arbitration Agreement’s one way representation waiver is unconscionable. This argument is more than a little hard to understand because it is hard to conceive what type of “representative” action USC might bring. In any event, the United States Supreme Court held in Epic Sys. Corp. v. Lewis (2018) 138 S. Ct. 1612, a case that Plaintiffs did not bother to distinguish or even cite, that the FAA preempts California law and waivers of class and representative actions in connection with an arbitration agreement are binding and enforceable.

The Court finds that Defendants have presented a valid and enforceable Arbitration Agreement that applies to the conflicts described in the Complaint. Accordingly, Defendants’ Motion to Compel Arbitration is GRANTED. Defendants’ Motion to Dismiss Representative Claims is GRANTED All future proceedings are stayed pending arbitration.

[1] The Court infers as such. The Complaint refers to USC as “employer Defendant” but neither explicitly states that USC employed Defendants, nor provides any information regarding their hiring date, status of employment, or job titles.

[2] This is the only information the Complaint provides regarding Defendant Cunningham or his relevance to this litigation.

F.D. 1, et al. Plaintiff; vs. University of Southern California, et al. Defendants.	Case No: 22STCV07091
	Hearing Date: August 8, 2022

	[TENTATIVE] RULING RE: Defendants’ motion to compel arbitration