Judge: Robert S. Draper, Case: 22STCV32453, Date: 2023-05-23 Tentative Ruling
Case Number: 22STCV32453 Hearing Date: May 23, 2023 Dept: 78
Superior Court of California
County of Los Angeles
Department 78
RODRIGO SANGUINO,
Plaintiff,
vs.
COPART, INC., et al.,
Defendants. Case No.: 22STCV32453
Hearing Date: May 23, 2023
[TENTATIVE] RULING RE:
DEFENDANT COPART, INC.’S MOTION TO COMPEL ARBITRATION.
The parties are ordered to appear (remotely or in person) at the hearing.
Assuming Plaintiff is in agreement that conducting discovery on the issue of the authenticity of the Arbitration Agreement does not constitute a waiver the right to arbitrate by Defendant, this matter will be continued to allow a short time for the completion of discovery.
The discovery will consist of the depositions of the four individuals listed in Plaintiff’s Request to Present Oral Testimony (filed on 2/24/2023). The topics will be limited to the items set forth in the filing.
At the hearing, a continued hearing date will be set, as well as a supplemental briefing schedule. Moving party to provide notice.
FACTUAL BACKGROUND
This Is an employment action brought under the Fair Employment and Housing Act (“FEHA”). The operative First Amended Complaint (“FAC”) alleges as follows.
Plaintiff Rodrigo Sanguino (“Plaintiff”) was hired by Defendant Copart, Inc. (“Copart”) in September, 2000. (FAC ¶ 11.) In the latter part of his employment with Copart, Plaintiff was diagnosed with a debilitating mental disability that required him to take a medical leave. (FAC ¶ 15.) Between 2015 and 2019 Plaintiff would need to take time off under the California Family Rights Act or the Family Medical Leave Act; Plaintiff’s treating physician certified Plaintiff’s absences and wrote a letter to Copart detailing Plaintiff’s treatment. (FAC ¶ 17.)
In 2019, Defendant Daniel Lamotte (“Lamotte”) began supervising Plaintiff; Lamotte did not want to accommodate Plaintiff’s disability and his necessary days off. (FAC ¶ 18.) Lamotte demoted Plaintiff and threatened him with disciplinary action for any future absences. (FAC ¶ 19.) This treatment aggravated Plaintiff’s condition. (Ibid.)
When Plaintiff returned from leave in late 2019 or early 2020, Lamotte encouraged Plaintiff go part-time instead of working full-time. (FAC ¶ 20.) Plaintiff declined as he needed the work. (Ibid.)
Shortly thereafter, Plaintiff received his first poor performance evaluation which stated that Plaintiff “lacks commitment to his work schedule and misses work regularly.” (FAC ¶ 21.)
In or around August 2020, after Plaintiff returned from a protected absence, Copart informed Plaintiff that they would no longer tolerate his absences. (FAC ¶ 23.) Copart asked Plaintiff to sign the write-up or face termination. (Ibid.) When Plaintiff asked if he could consider his options, Copart terminated him one day later. (Ibid.)
PROCEDURAL HISTORY
On October 4, 2022, filed a Complaint asserting nine causes of action:
1. FEHA Employment Discrimination;
2. Failure to Accommodate in violation of FEHA;
3. Failure to Engage in a timely & Good-faith Interactive Process in violation of FEHA;
4. FEHA Harassment;
5. FEHA Retaliation;
6. FEHA Failure to Prevent/Remedy Discrimination, Harassment or Retaliation;
7. Whistleblower Retaliation;
8. Wrongful Discharge in violation of Public Policy; and,
9. Intentional Infliction of Emotional Distress
On November 2, 2022, Plaintiff filed the operative First Amended Complaint adding a cause of action for Violation of Labor Code § 230.8.
On December 29, 2022, Copart filed an Answer.
On January 30, 2023, Copart filed the instant Motion to Compel Arbitration.
On February 17, 2023, Plaintiff filed an Opposition.
On February 24, 2023, Copart filed a Reply.
Also on February 24, 2023, Plaintiff filed a Request to Present Oral Testimony at Hearing.
On February 28, 2023, Copart filed an Objection to Plaintiff’s Request to Present Oral Testimony at Hearing.
On March 2, 2023, Plaintiff filed evidentiary objections to evidence submitted with Copart’s Reply.
DISCUSSION
I. EVIDENTIARY OBJECTIONS
Plaintiff’s Evidentiary Objections
Plaintiff’s Evidentiary Objections Numbers 1-14 are OVERRULED.
Plaintiff’s Evidentiary Objections Numbers 15-19 are OVERRULED as moot as the Court did not consider supplemental materials submitted on Reply in deciding this motion.
Copart’s Evidentiary Objections
Copart’s Evidentiary Objections Numbers 1-4 are OVERRULED.
II. MOTION TO COMPEL ARBITRATION
Defendant Copart, Inc. moves to compel arbitration pursuant to a Mutual Arbitration Agreement (the “Arbitration Agreement”) allegedly signed by Plaintiff on August 16, 2016.
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 motion 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 Arbitration Agreement
Copart contends that arbitration must be compelled pursuant to the Mutual Arbitration Agreement. (Santosuosso Decl., Ex. 2.)
The Arbitration Agreement states, in relevant part:
[T]he Company and I mutually agree to the resolution by arbitration of all claims or controversies, past, present or future, including without limitation, claims arising out of or related to my application for employment, employment, and/or the termination of my employment that the Company may have against me or that I may have against the Company. . . (Ex. 2. at p. 1.)
The last page of the Arbitration Agreement contains Plaintiff’s signed name and is dated August 16, 2016.
By attaching the completed arbitration agreement to its motion, Defendant has shown, by a preponderance of the evidence, the existence of a valid arbitration agreement. The burden now shifts to Plaintiff to show, by a preponderance of the evidence, any defense as to its enforcement.
1. Authenticity of Plaintiff’s Electronic Signature
Plaintiff’s primary argument is that Copart cannot show that the electronic signature affixed to the Arbitration Agreement is Plaintiff’s.
“An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” (Civ. Code, § 1633.9, subd. (a).) “The effect of an electronic record or electronic signature attributed to a person under subdivision (a) is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including the parties' agreement, if any, and otherwise as provided by law.” (Id., subd. (b).)
The authorities that provide the goalposts for this motion are Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836 and Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047. In Ruiz, the declaration seeking to authenticate the plaintiff’s electronic signature on an arbitration agreement was deemed insufficient where the declarant “summarily asserted” plaintiff electronically signed the agreement and “did not explain how she arrived at that conclusion or inferred [the plaintiff] was the person who electronically signed the agreement” or that the electronic signature “was ‘the act’” of the plaintiff. (Ruiz, supra, 232 CalApp.4th at pp. 844-845.) Thus, the court found the arbitration agreement at issue was unenforceable. (Id. at p. 846.)
By contrast, in Espejo the “declaration offered the critical factual connection that the declarations in Ruiz lacked,” by detailing “security precautions regarding transmission and use of an applicant’s unique username and password, as well as the steps an applicant [or employee] would have to take to place his or her name on the signature line.” (Espejo, supra, 246 Cal.App.4th at p. 1062.)
Here, Copart authenticates Plaintiff’s electronic signature through the declaration of Ralph Santosuosso, Copart’s Director of Human Resources. (Santosuosso Decl. ¶ 3.) Santuosso asserts that Copart assigns each employee a unique employee email, which the employees log in to using a unique password that they create and that only they know; Plaintiff’s email was Rodrigo.Sanguino@Copart.com. (Id. ¶ 9.)
In 2016 after Copart updated its Employee Handbook to add the Arbitration Agreement, Copart distributed the new Employee Handbook using employee emails. (Id. ¶ 10.) Once the employee signed or rejected the documents, both the employee and the sender of the initial email received a copy of the signed documents, which Copart maintains. (Ibid.) Copart can monitor when an employee accesses, reviews, and signs the relevant documents; Plaintiff’s Final Audit Report regarding the Arbitration Agreement is attached to Santosuosso’s declaration. (Ex. 3.)
According to Plaintiff’s Final Audit Report, Plaintiff received the Arbitration Agreement on June 21, 2016, first viewed the email containing the Arbitration Agreement on August 15, and signed the Arbitration Agreement on August 16, 2016. (Ibid.) Finally, Santosuosso attests that the Final Audit Report shows that Plaintiff accessed the Arbitration Agreement using an ISBN uniquely assigned to him. (Id. ¶ 14.)
The security mechanisms Santosuosso describes as authenticating Plaintiff’s electronic signature are substantially similar to those deemed sufficient to authenticate an electronic signature in Espejo, supra.
However, in Opposition, Plaintiff notes several inconsistencies in Copart’s authentication.
First, Plaintiff attests that he did not recall reading or signing the Arbitration Agreement, and that if he had, he would have asked his wife about the agreement, as she is more familiar with such business documents. (Sanguino Decl. ¶ 8.)
However, as Copart notes on Reply, that Plaintiff did not recall signing the Arbitration Agreement is insufficient alone to challenge the authenticity of the Agreement. (See Iyere v. Wise Auto Group (2023) 303 Cal.Rptr.3d, 842-43.)
Next, Plaintiff notes that when he requested his personnel file from Copart upon his termination, the Arbitration Agreement was not present in the provided documentation; similarly, Copart did not include the Arbitration Agreement in its initial discovery provided to Plaintiff’s Counsel. (Sanguino Decl. ¶¶ 4-5.)
On Reply, Copart contends that Copart’s failure to include the Arbitration Agreement in Plaintiff’s Personnel file is hardly surprising considering Plaintiff was employed there for twenty years and signed hundreds of documents during that period. Additionally, Copart argues that its failure to include the Arbitration Agreement in the initial discovery has no bearing on the authenticity of Plaintiff’s signature.
While Copart’s failure to include the Arbitration Agreement in its initial productions of Plaintiff’s personnel file does not alone indicate that the signature is a fake.
Next, Plaintiff argues that the fact that he received the Arbitration Agreement on June 21, 2016, but did not sign it until August 21, 2016, indicates fraud. However, as Copart notes on Reply, Plaintiff was out of work on medical leave for the majority of that period. (Santosuosso Decl., ¶¶ 6, 8.)
Finally, Plaintiff contends that he almost always checked his work email from a work station; Plaintiff argues that as his shift almost always started at 8:00 am, he would not have signed the Arbitration Agreement at 5:55 am. (Sanguino Decl. ¶ 6.)
Given all this, Plaintiff argues that it is possible, or likely, that someone else signed the Arbitration Agreement using his login at Copart’s computer station. (Sanguino Decl. ¶ 7.)
The Court finds that Plaintiff has not shown the inauthenticity of the electronic signature by a preponderance of the evidence. Much of Plaintiff’s argument is based on speculation that “someone” must have signed the Arbitration Agreement. However, Plaintiff does not explain why Copart or an agent of Copart would break into his password secure account to sign an Arbitration Agreement on his behalf, four years before his termination and six years before the instant litigation.
The security protections detailed by Copart overcome any argument as to the invalidity of Plaintiff’s signature on the Arbitration Agreement.
Accordingly, the Court finds that a valid Arbitration Agreement exists between Plaintiff and Copart.
And, as the Arbitration Agreement applies to Plaintiff’s employment with Copart, and as Plaintiff does not argue that the proffered Arbitration Agreement would not apply, the Court finds that it applies to the instant dispute.
B. Unconscionability
Next, Plaintiff contends that the Arbitration Agreement is unenforceable as both procedurally and substantively unconscionable.
Commonly formulated, unconscionability refers to the “absence of meaningful choice on the part of one of the parties together with the contract terms which are unreasonably favorable to the other party. [Citations.]” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145.) Unconscionability 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. (Sanchez v. Valencia Holding Company, LLC (2015) 61 Cal.4th 899, 910.) “But they need not be present in the same degree. . . . [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 v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)
1. Procedural Unconscionability
Plaintiff contends that the Arbitration Agreement is procedurally unconscionable, as it was an adhesive contract presented on a take-it-or-leave-it basis, and Plaintiff was not afforded an opportunity to ask questions regarding the Arbitration Agreement.
The mere fact that an arbitration agreement was adhesive typically does not, without more, support a finding of procedural unconscionability. (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1471, n.2.)
The Court finds that the adhesive nature of the Arbitration Agreement presents a minimal degree of procedural unconscionability. Where the degree of procedural unconscionability is low, the agreement will be enforced unless the degree of substantive unconscionability is high. (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)
2. Substantive Unconscionability
Next, Plaintiff contends that several elements of the Arbitration Agreement are substantively unconscionable.
a. Restrictive Confidentiality
First, Plaintiff contends that the Arbitration Agreement is substantively unconscionable as it restricts Plaintiff from discussing the arbitration.
The Arbitration Agreement states, “The Company and I agree to maintain the confidentiality of the arbitration, except: (i) to the extent agreed upon otherwise, (ii) as may be otherwise appropriate in response to a governmental agency or legal process, (iii) as is necessary to enforce, correct, modify or vacate the Arbitrator’s award, or (iv) if the law provides to the contrary.”
Plaintiff argues that the confidentiality provision prevents Plaintiff from conducting informal discovery, and that it is one-sided, as it allows Copart to keep its alleged labor abuses private.
In California, a confidentiality clause in an employee arbitration agreement is not per se unconscionable. For example, in Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 398, a confidentiality clause in an arbitration agreement required that “the arbitration (including the hearing and record of the proceeding) be confidential and not open to the public unless the parties agree otherwise.” (224 Cal.App.4th at p. 408.)
The court there dismissed the possibility of any substantive unconscionability in this requirement, noting that “in regard to ‘the fairness or desirability of a secrecy provision with respect to the parties themselves, . . . we see nothing unreasonable or prejudicial about it’ . . . .” (Ibid., citing Woodside Homes of Cal., Inc. v. Superior Court (2003) 107 Cal.App.4th 723, 732.)
However, as Plaintiff notes, in Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, the court held that a confidentiality clause substantially similar to the one here was unconscionable. The Ramos Court noted that the Sanchez Court failed to “address[] [plaintiff’s] argument that a confidentiality clause like the one at issue in this case would impair her ability to engage in informal discovery in pursuit of her litigation claims.” (Ramos at 1066.)
The Court finds that the confidentiality clause constitutes moderate substantive unconscionability as it inhibits Plaintiff from conducting informal investigation outside the costly formal discovery allowed by arbitration.
The Court then must consider whether this clause is severable from the Arbitration Agreement as a whole.
Both case law and statute instruct courts on how to determine if an unconscionable provision is severable. Civil Code section 1670.5, subdivision (a)¿is a statute that provides general guidance regarding the severability of contract provisions:
“If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”
The Court of Appeal in Armendariz, in determining whether an unconscionable provision in an employment contract was severable, elaborated:
“Two reasons for severing or restricting illegal terms rather than voiding the entire contract appear implicit in case law. The first is to prevent parties from gaining underserved benefit or suffering undeserved detriment as a result of voiding the entire agreement. . . . Second, more generally the doctrine of severance attempts to conserve a contractual relationship if to do so would not be condoning an illegal scheme. [Citations.] The overarching inquiry is whether ‘“the interests of justice ... would be furthered”’ by severance. [Citation.]” (24 Cal.4th at pp. 123-124.)
Here, the unconscionable confidentiality provision is severable. This is not a case where the agreement is permeated with unconscionability as a result of multiple objectionable terms. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 666 [finding substantive unconscionability where “the arbitration provisions . . . are entirely lacking in mutuality and basic fairness”].) Instead, the confidentiality clause represents an element of substantive unconscionability that may be severed from the remainder of the Arbitration Agreement to minimize unconscionability.
b. Limits on Discovery
Finally, Plaintiff contends that the Arbitration Agreement’s limit on discovery is substantively unconscionable. Plaintiff argues that the Arbitration Agreement limits Plaintiff to only four depositions, and that Plaintiff will need to conduct at least ten depositions to properly litigate his claim.
However, as Copart notes on Reply, the Arbitration Agreement states that the “parties have the right to conduct adequate civil discovery and present witnesses and evidence as needed to present their cases and defenses” and that “[e]ach party can request that the Arbitrator allow additional discovery, and additional discovery may be conducted by agreement or as ordered by the Arbitrator.” (Ex. 2.) Additionally, the Arbitration Agreement states that the arbitration shall be conducted under AAA Employment Rules, which allows for the arbitrator to “have the authority to order such discovery, by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary to a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration.” (Ex. 2 § 7.)
That the arbitration will be conducted under AAA rules is controlling here, as in Davis v. Kozack (2020) 53 Cal.App.5th 927, upon which Plaintiff relies to argue the discovery limitations are unconscionable, the court noted:
[R]ather than adopting AAA discovery procedures, [defendant’s] arbitration agreement provides instead for default discovery that makes no mention of written discovery or document production, that limits depositions to two per party, and that uses a less-defined “sufficient cause” standard for obtaining additional discovery. Indeed, the arbitration agreement effectively makes clear that AAA procedures would not apply to the extent they conflict with those of the agreement. (Davis at p. 939.)
Accordingly, the Court finds that the presumptive limit on discovery is not substantively unconscionable.
As the Arbitration Agreement contains minimal procedural unconscionability, and as the only substantively unconscionable provision of the Arbitration Agreement is severable, the Court finds that the Arbitration Agreement is enforceable.
C. Cross-Examination and Further Discovery
Finally, Plaintiff requests that the Court allow testimony from four Copart employees at the hearing on this matter such that Plaintiff may cross-examine them regarding the Arbitration Agreement.
Plaintiff cites Rosenthal v. Great Western Financial Securities Corp (1996) 14 Cal.4th 394 and Hotels Nevada v. L.A. Pacific Center Inc. (2006) 144 Cal.App.4th 754 as requiring the Court to allow such testimony.
However, the facts of those cases are distinguishable from the instant case.
In Rosenthal, the court allowed a plaintiff to present testimony in court regarding defendant’s fraud in obtaining plaintiff’s consent to the arbitration agreement where the plaintiff attested that defendant explicitly told the 81-year-old immigrant plaintiff who “cannot read English at all” that he would read the contract in question to her. (Rosenthal at p. 427.) Plaintiff attested that defendant did not read the arbitration agreement to her and did not mention it at all. (Ibid.)
However, the Rosenthal court held that co-plaintiffs who attested that defendant told them that the agreements were unimportant, and that plaintiffs did not need to read them, did not require an evidentiary hearing as “plaintiffs’ declarations do not establish any actual concealment by [defendant] of the arbitration clause, or any affirmative misrepresentations regarding the existence or meaning of an arbitration clause in the client agreements.” (Id. at p. 426.)
Similarly, in Hotels Nevada, the court held that plaintiff was due an evidentiary hearing regarding the enforceability of an arbitration agreement where plaintiff attested defendant had changed, modified, removed and replaced multiple provisions of the contract containing the arbitration agreement. (Hotels Nevada at p. 764.)
Here, the only evidence Plaintiff presents regarding fraud in the execution of the arbitration agreement is circumstantial and does not contain such direct evidence of fraudulent conduct as was present in both Rosenthal and Hotels Nevada.
Accordingly, the Court denies Plaintiff’s request for an evidentiary hearing.
Plaintiff also requests a continuation of the instant hearing to conduct further discovery regarding the Arbitration Agreement. Plaintiff contends that the absence of the Arbitration Agreement in initial discovery is indicative of fraud, which must be further explored.
On Reply, Copart contends that the failure to include the Arbitration Agreement in initial discovery was inadvertent, and that it refused to conduct more discovery per Plaintiff’s request prior to the instant hearing as doing so could constitute waiver of Copart’s right to arbitrate.
The Court believes that in light of Plaintiff’s contention that he did not sign the arbitration agreement and the fact that the arbitration agreement was not provided in two initial document productions to Plaintiff, there should be limited discovery regarding the authenticity of the arbitration agreement.
However, this should only be done if there is an express statement on the record that Plaintiff shall not argue that the conduct of such discovery shall constitute a waiver of Copart’s agreement to arbitrate.
DATED: May 23, 2023
___________________________
Hon. Jill Feeney
Judge of the Superior Court
