Judge: Robert S. Draper, Case: 22STCV21586, Date: 2022-10-14 Tentative Ruling

Case Number: 22STCV21586    Hearing Date: October 14, 2022    Dept: 78

Superior Court of California 

County of Los Angeles 

Department 78 

Defendants Alpha Group Marketing, Inc., Mela Group, Inc., and Michael Flynt’s Motion to Compel Arbitration is GRANTED. All future proceedings are stayed pending arbitration.

FACTUAL BACKGROUND 

This is an action for workplace discrimination, harassment, and wrongful termination. The Complaint alleges as follows.

Plaintiff Cheree Simmons (“Plaintiff”) was employed by Defendants Alpha Group Marketing, Inc. (“Alpha”) and MELA Group, Inc. (“MELA” and together with Alpha, “Employer”) beginning in September 2021. (Compl. ¶ 16.) Plaintiff was supervised by non-party Tim Johnson and Defendant Michael Flynt (“Flynt” and together with Employer, “Defendants”). (Compl. ¶ 20.)

In a September 13, 2021, staff meeting, Flynt used racial epithets to refer to Plaintiff and other African American employees and made numerous other racist remarks. (Compl. ¶ 22.) In addition, Flynt made repeated racist remarks regarding other races, as well as sexist, and homophobic remarks. (Compl. ¶¶ 23-25.) Other employees confirmed to Plaintiff that Flynt was a serial harasser who frequently harassed employees based on their race, sex, and sexual orientation. (Compl. ¶ 27.)

Plaintiff made several written complaints to Employer regarding this harassment. (Compl. ¶ 29.) Instead of addressing the issue, Employer retaliated against Plaintiff, threatening her job and telling her that this was just the way Flynt operates. (Compl. ¶ 38.) Plaintiff was terminated from employment on October 22, 2021. (Compl. ¶ 40.)

PROCEDURAL HISTORY

On July 5, 2022, Plaintiff filed the Complaint asserting eleven causes of action:

1.    Race/National Origin/Color Discrimination in violation of FEHA;

2.    Sex/Gender/Sexual Orientation Discrimination in Violation of FEHA;

3.    Hostile Work Environment in Violation of FEHA;

4.    Retaliation for Opposing Practices Forbidden by FEHA;

5.    Failure to Prevent Discrimination, Harassment and Retaliation;

6.     Wrongful Termination/Adverse Employment Action in Violation of Public Policy;

7.    Violation of California Labor Code §§ 221 and 226;

8.    Negligent Hiring and Retention;

9.    Intentional Infliction of Emotional Distress;

10.                  Retaliation in Violation of Labor Violations of Labor Code § 17200, et seq.

11.                  Violations of Business and Professions Code § 17200, et seq.

DISCUSSION 

I.              MOTION TO COMPEL ARBITRATION

Defendants move to compel arbitration pursuant to an arbitration agreement entered into between Plaintiff and Employer.

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.) 

A.  Existence of a Valid Agreement

Here, Defendant attaches a copy of the arbitration agreement (the “Arbitration Agreement”) to the Declaration of Timothy Johnson. (Johnson Decl., Ex. 1). The Arbitration Agreement is located within a broader “At-Will Employment Agreement,” but is located on its own page, titled, in capital, bold letters, MUTUAL DISPUTE-RESOLUTION AND ARBITRATION POLICY. (Ibid.)

Plaintiff signed and dated the Arbitration Agreement on the bottom of the page. (Ibid.)

By attaching the signed and dated Agreement to its filing, Defendants have shown by a preponderance of the evidence the existence of a valid arbitration agreement. Plaintiff does not dispute the existence of the arbitration agreement.

B.  Applicability of Arbitration Agreement as to Instant Claims

The Arbitration Agreement states, in relevant part:

“Covered Claims” are all claims or disputes of any kind (other than Excluded Claims) directly or indirectly arising out of or relating to: your application or candidacy for employment, employment, or termination of employment with Employer; or any work or services relating to any of Employer's shareholders, parents, subsidiaries, affiliates, members, managers, partners, suppliers, clients, contractors, agents, brokers, intermediaries, retail event hosts, or service providers and their or Employer’s respective employees, shareholders, members, owners, officers, directors and agents, whether individuals or entities (“Key Third Parties ”).  You and Employer agree that Covered Claims include claims arising before, as well as after, the date of this Policy and claims asserted by or against either of them or against any Key Third Party.  Employer and you also agree that any Key Third Party against whom or which a Covered Claim is asserted may enforce this Policy and may join and participate in any arbitration proceeding as to such Covered Claim. (Johnson Decl., Ex. 1 at p. 1.)

The Agreement explicitly applies to all claims “directly or indirectly arising out of or relating to: [Plaintiff’s] application or candidacy for employment, employment, or termination of employment with Employer.” (Ibid.) As the entirety of Plaintiff’s Complaint arises from her employment, and subsequent termination, with Defendants, the Arbitration Agreement facially applies to this suit.

C.  Defenses

While Plaintiff does not dispute the existence or authenticity of the Agreement, she argues several defenses preclude its enforcement.

1.    Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021

First, Plaintiff argues that arbitration is precluded here by the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.

On March 3, 2022, President Joe Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “EFA”). The EFA amends the Federal Arbitration Act, 9 U.S.C. § 1, et seq., and renders unenforceable (at option of person alleging assault or harassment) pre-dispute arbitration agreements relating to claims of sexual assault or sexual harassment: 

Notwithstanding any other provision of this title, at 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. (9 U.S.C. § 402, subd. (a).)

Plaintiff argues that several of her causes of action are brought specifically for sexual harassment, and that the majority of her causes of action are related to sexual harassment. Accordingly, Plaintiff contends that the entire claim is precluded from arbitration under the EFA.

However, the EFA has limitations on the timing of claims. The EFA became effective March 3, 2022, and states: “This Act, and the amendments made by this Act, shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” (PL 117-90, March 3, 2022, 136 Stat 26, emphasis added.) 

Here, Plaintiff argues that her claim arose upon the filing of her Complaint in July 2022. Under this interpretation, arbitration would be precluded under the EFA. However, as Defendants note in their Reply, employment related claims accrue on or before the date of discharge as that is when the facts giving rise to the cause of action have occurred. (Coppinger-Martin v. Solis (9^th Cir. 2010) 627 F.3d 745, 749.)

Here, as the Complaint specifically alleges that Plaintiff was terminated in October 2021, and all the events constituting her claim occurred prior that date, her claim accrued before the passage of the EFA.

Accordingly, arbitration is not precluded by the EFA.

2.    Unconscionability

Next, Plaintiff argues the Agreement is unenforceable as it is both procedurally and substantively unconscionable.

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). Courts analyze the unconscionability standard in Civil Code section 1670.5 as invoking elements of procedural and substantive unconscionability. (See id. at 1280-81.) 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.) The substantive element addresses the existence of overly harsh or one-sided terms. (Id.) 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, Armendariz held, ‘[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, at 114).” (McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87 (citations omitted).)  

a.    Procedural Unconscionability

As to procedural unconscionability, Plaintiff argues, first, that the arbitration agreement was an adhesion contract, offered on a take it or leave it basis. (Simmons Decl, ¶¶ 4-6, 10.)

“[T]he 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.)

The Court finds that the alleged adhesive nature of the Agreement warrants minimal procedural unconscionability.

Next, Plaintiff argues that Defendants failed to inform Plaintiff that any of the documents were an arbitration agreement. (Simmons Decl., ¶ 14.) Plaintiff contends that Johnson rushed Plaintiff through the signing process, and merely informed her that the documents were policy documents about pay and employee relations. (Ibid.)

As a general rule under California law, arguments that arbitration provisions are unenforceable because the party did not carefully read the agreements, did not understand the significance of the arbitration provisions, and did not knowingly waive their right to a jury trial may not be used to invalidate a written arbitration provision. (Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102, 1109.) 

Plaintiff’s failure to fully understand a contract that she signed is not an indication of procedural unconscionability, especially here, where the Arbitration Agreement was on a separate paper and clearly titled MUTUAL DISPUTE-RESOLUTION AND ARBITRATION POLICY. (Johnson Decl, Ex. 1.)

Accordingly, the Court finds minimal procedural unconscionability due to the adhesive nature of the Arbitration Agreement.

b.    Substantive Unconscionability

As to substantive unconscionability, first, Plaintiff argues that the pre-arbitration dispute resolution process is substantively unconscionable.

That section states:

Step One:  Grievance.  Before pursuing any other form of legal or equitable relief, the party asserting a Covered Claim (“Claimant”) shall send the party against which the claim is asserted (“Respondent”) a written “Grievance.”  If the Respondent is you, any other individual, or Employer, the Grievance must be sent by certified mail, return receipt requested, or by FedEx or UPS, otherwise, the Grievance must be sent to the Respondent’s agent for service of process.  A Grievance form is available at DisputeResolutionGrievanceForm.com. Whether or not the Grievance form is used, the Grievance must include: 

• the Claimant’s full name and contact information;

• a short statement of the facts, circumstances, actions and events giving rise to each Covered Claim; 

• a statement of the amount of money and any other relief sought; 

• if the Claimant is you, your signature and Social Security Number; and

• a statement that the Grievance is intended to assert a Covered Claim through the dispute-resolution process set forth in this Policy. 

A Grievance must be sent to a Respondent within 6 months after the Claimant first knew or would have discovered through the exercise of reasonable diligence the facts upon which a Covered Claim is based, or the Covered Claim will be waived, provided however that this sentence shall not apply to any Covered Claim with a limitations period that cannot be shortened by contract.

Step Two:  Meeting.  If the Respondent so requests, the Claimant shall meet with the Respondent at a mutually agreeable date, time and location to discuss the Grievance.  The Respondent’s request for such a meeting must be made in writing within 14 days of the Respondent’s receipt of the Grievance.  The Respondent shall choose whether the meeting will be in-person, by telephone or by video, but the Claimant shall have no obligation to attend an in-person meeting unless it can be held consistent with any public-health restrictions and within 30 miles of the Claimant’s home or regular place of business. 

Step Three:  Arbitration.  If a Covered Claim is not resolved to the Claimant’s satisfaction within 30 days after the Respondent’s receipt of a Grievance, the Claimant may send the “Arbitration Administrator” (defined below): (i) written notice that the Claimant wishes to submit the Grievance to arbitration; and (ii) a signed attestation that Claimant has complied with Steps One and Two above.  The written notice, attestation and Claimant filing fee constitute an arbitration demand (“Demand”).  No Respondent shall be obligated to pay the Arbitration Administrator any filing fee on account of or otherwise take steps to respond to any submission that does not comply with the requirements stated above for a valid Demand.  The Claimant and the Respondent shall then resolve the Covered Claim(s) through final and binding arbitration, by a single arbitrator, in accordance with the “Arbitration Rules” (defined below), subject to the modification that the filing fee shall be paid by the Employer.

Plaintiff argues that the pre-arbitration process constitutes an unconscionable “free peak” at the other side’s case. Plaintiff contends that the California Court of Appeal held such free peaks unconscionable in Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4^th 1267.

In Nyulassy, the Court held that a pre-arbitration agreement that required the plaintiff to discuss his grievance with several supervisors prior to having his dispute resolved through arbitration was unconscionable. In holding that section unconscionable, the Court stated:

While on its face, this provision may present a laudable mechanism for resolving employment disputes informally, it connotes a less benign goal. Given the unilateral nature of the arbitration agreement, requiring plaintiff to submit to an employer-controlled dispute resolution mechanism (i.e., one without a neutral mediator) suggests that defendant would receive a “free peak” at plaintiff’s case, thereby obtaining an advantage if and when plaintiff were to later demand arbitration.

The Nyulassy Court explicitly states that the unconscionability of the pre-arbitration process stems from its unilateral nature. Here, neither the Arbitration Agreement nor the pre-arbitration process is unilateral, as both apply to Employer and Employee. Accordingly, Nyulassy is inapplicable here, and the pre-arbitration process is not substantively unconscionable.

Next, Plaintiff argues that the section placing a six-month limitation on any claims is substantively unconscionable as it would shorten the statute of limitations for all of Plaintiff’s causes of action.

However, as Defendants note, that provision also states that the limitation “shall not apply to any Covered Claim with a limitations period that cannot be shortened by contract.”

Causes of action brought under FEHA cannot be shortened by contract. (Ellis v. U.S. Security Associates (2014) 224 Cal.App.4^th 1213.) As to any non-statutory claims, a six-month statute of limitations is not substantially unconscionable under California law. (Soltani v. Western & Southern Life Ins. Co (2001) 258 F.3d 1038, 1044.)

Accordingly, the six-month statute of limitations is largely unapplicable to Plaintiff’s claim and is otherwise not unconscionable.

Next, Plaintiff argues that the Arbitration Agreement’s carve out for interim injunctive relief is unconscionable, as injunctive relief is more frequently sought by an employer than an employee.

This is an argument recently rejected by the Supreme Court of California in Balatzar v. Forever 21, Inc. (2016) 62 Cal.4^th 1237.

In Balatzar, the Court, responding to an argument that an arbitration agreement containing a bilateral carveout for injunctive relief was unconscionable as employers more frequently seek injunctive relief, found that “regardless of whether [the employer] is, practically speaking, more likely to seek provisional remedies than its employees, simply reciting the parties’ rights under section 1281.8 does not place [the employee] at an unfair disadvantage. (Balatzar at p. 1248.) In so doing, the Court explicitly disapproved of Trivedi v. Curexo Technology Corporation, a case upon which Plaintiff relies.

As in Balatzar, the subject provision here largely recites the rights afforded to both parties in CCP section 1281.8. Accordingly, the provision is not unconscionable.

Finally, Plaintiff argues that the arbitration agreement’s waiver of class action and PAGA representative claims is unconscionable.

However, as Defendants note, this argument was rejected by the Supreme Court in Epic Systems Corp. v. Lewis (2018) 138 S.Ct. 1612. Accordingly the waiver is not unconscionable.

Therefore, the Court finds that there exists minimal procedural unconscionability, and no substantive unconscionability, and the Arbitration Agreement is not void as unconscionable.

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

DATED: October 14, 2022 

____________________________

Hon. Robert S. Draper 

Judge of the Superior Court