Judge: Ronald F. Frank, Case: 23TRCV01864, Date: 2023-09-07 Tentative Ruling
Case Number: 23TRCV01864 Hearing Date: September 7, 2023 Dept: 8
Tentative
Ruling
HEARING DATE: September 7, 2023
CASE NUMBER: 23TRCV01864
CASE NAME: Arlene Parra,
individually, and on behalf of other aggrieved employees pursuant to the
California Private Attorneys General Act v. Marksman Security Corporation, et
al.
MOVING PARTY: Defendants, Controlled Contamination Services, LLC
RESPONDING PARTY: Plaintiff, Arlene Parra
TRIAL DATE: None Set.
MOTION: (1)
Motion to Compel Arbitration
Tentative Ruling: (1) An arbitration
agreement between the parties exists.
(2) The arbitration agreement is not
unconscionable.
(3) The arbitration agreement contains a poison
pill which prevents its enforcement.
I. BACKGROUND
A. Factual
¿
On
June 9, 2023, Plaintiff, Arlene Parra, individually, and on behalf of aggrieved
employees pursuant to the California Private Attorneys General Act
(“Plaintiff”) filed a Complaint against Defendant, Marksman Security
Corporation, a Florida corporation, and DOES 1 through 100. The Complaint
alleges causes of action for enforcement under the Private Attorneys General
Act, California Labor Code § 2698, et seq.
Defendant
now seeks to enforce a “Dispute Resolution Agreement” (hereinafter “DAR”) which
mandates arbitration of any and all disputes between the parties, including all
disputes with Defendant on an individual basis, and covers all of Plaintiff’s
individual claims, including her individual PAGA claim.
B. Procedural
¿
On August 7, 2023,
Defendant filed this Motion to Compel Arbitration. On August 24,
2022, Plaintiff filed an opposition. On August 30, 2023, Defendant filed a
reply brief.
II. REQUEST
FOR JUDICIAL NOTICE
Plaintiff requested this
Court take judicial notice of the following documents:
1.
The arbitration agreement at issue in Viking
River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906. The arbitration agreement
was included as pages JA-78 through JA-90 of the parties’ Joint Appendix that
was filed on January 31, 2022 in Viking River Cruises, Inc. v. Moriana, United
States Supreme Court Case No. 20-1573. Relevant portions of the Joint Appendix,
including the cover page, table of authorities, and pages JA-79 through JA-90
are attached hereto as Exhibit A.
The Court GRANTS Plaintiff’s request and takes judicial
notice of the above.
III. EVIDENTIARY OBJECTIONS
Plaintiff’s Objections to Defendant’s Evidence:
Defendant’s Objections to Plaintiff’s Evidence:
The court has considered defendant’s blanket objection to
plaintiff’s affidavit and OVERRULES that objection.
ANALYSIS
A. Legal Standard
The Federal Arbitration
Act (“FAA”) states that “[a] written provision in any . . . contract evidencing
a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction . . . 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.) California law
incorporates many of the basic policy objectives contained in the Federal
Arbitration Act, including a presumption in favor of arbitrability. (Engalla
v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.)
California law states
that “[o]n petition of a party to an arbitration agreement alleging the existence
of a written agreement to arbitrate a controversy and that a party to the
agreement refuses to arbitrate that controversy, the court shall order the
petitioner and the respondent to arbitrate the controversy if it determines
that an agreement to arbitrate the controversy exists….” (Code Civ. Proc, §
1281.2.) “The party seeking arbitration bears the burden of proving the
existence of an arbitration agreement, and the party opposing arbitration bears
the burden of proving any defense, such as unconscionability.” (Pinnacle
Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55
Cal.4th 223, 236.)
Pursuant to Code of Civil
Procedure §1281.2, generally, on a petition to
compel arbitration, the court must grant the petition unless it finds either
(1) no written agreement to arbitrate exists; (2)¿the right to compel
arbitration has been waived; (3) grounds exist for revocation of the agreement;
or (4) litigation is pending that may render the arbitration unnecessary or
create conflicting¿rulings on common issues.
When seeking to compel
arbitration, the initial burden lies with the moving party to demonstrate the
existence of a valid arbitration agreement by preponderance of evidence.
(Ruiz v. Moss Bros. Auto Group (2014) 232 Cal.App.4th 836, 841-42; Gamboa
v. Northeast Community Clinic (2021), 72 Cal.App.5th 158, 164-65.) It
is sufficient for the moving party to produce a copy of the arbitration
agreement or set forth the agreement’s provisions. (Gamboa, 72
Cal.App.5th at 165.) The burden then shifts to the opposing party to
prove by a preponderance of evidence any defense to enforcement of the contract
or the arbitration clause. (Ruiz, 232 Cal.App.4th at 842; Gamboa,
72 Cal.App.5th at 165.) The trial court then weighs all the
evidence submitted and uses its discretion to make a final determination.
(Ibid.) “California law, ‘like [federal law], reflects a strong
policy favoring arbitration agreements and requires close judicial scrutiny of
waiver claims.’” (Wagner Const. Co. v. Pacific Mechanical Corp.
(2007) 41 Cal.4th 19, 31.)
If the court orders arbitration,
then the court shall stay the action until arbitration is completed. (See
Code Civ. Proc., § 1281.4.)
B. Discussion
Existence of
an Arbitration Agreement
Here, Defendants argue that there
can be no dispute that an arbitration agreement exists between Plaintiff and Defendant
to arbitrate all causes of action in Plaintiff’s Complaint. The Arbitration
Agreement provides in part:
It is agreed the undersigned employee
(hereinafter referred to as “Employee”) and Marksman Security Corporation
(“Marksman”) will use binding arbitration to resolve all disputes that may
arise out of the employment context. Both Marksman and Employee agree that any
claim, dispute, and/or controversy that either Employee may have against
Marksman (or its owners, directors, officers, managers, employees, agents, and
parties affiliated with its employee benefits and health plans) or Marksman may
have against Employee, arising from, related to, or having any relationship or
connection whatsoever with Employee seeking employment with, employment by, or
the cessation of employment with Marksman or other association with Marksman
shall be submitted to and determined exclusively by binding arbitration under
the Federal Arbitration Act, 9 U.S.C. § 1 et seq., regardless of the state in
which the arbitration is held or the substantive law applied in the
arbitration.
(Declaration of Ann Klink (“Klink
Decl.”), ¶ 13, Exhibit 2.) Defendant maintains that the Arbitration Agreement
further provides that “Employee agrees to bring claims only on an individual
basis and shall not be allowed to submit Employee’s claim(s) against Marksman
to arbitration as a representative of or participant to a class or collective
action or a claim seeking class or collective relief. (Ibid.) Defendant
notes that based on Plaintiff’s personnel file, she electronically signed the
Marksman’s Employee Handbook and Arbitration Agreement on June 22, 2022. (Klink
Decl., ¶ 13.)
This
Court notes that pursuant to Civil Code § 1633.7, electronic signature have the
same legal effect as a handwritten signature. However, Plaintiff argues in her
opposition that a party seeking to compel arbitration must satisfy basic
contract formation principles, authenticate an agreement, and prove that there
is a valid arbitration agreement before the contents of an alleged agreement
may be received into evidence. (citing Ruiz v. Moss Bros. Auto Group, Inc.,
(2014) 232 Cal.App.4th 836, 841–844; Cal. Evid. Code § 1401; and Cal. Civ. Code
§ 1633.9(a).) Plaintiff’s reliance on Ruiz is directly relevant, and
discussed below.
In
Ruiz, the Court of Appeal held that the defendant moving for an order
compelling arbitration “did not present sufficient evidence to support a finding
that the electronic signature on the 2011 agreement was the act of [the
plaintiff].” (Id.) “Under Civil Code section 1633.7, enacted in 1999 as part of
the Uniform Electronic Transactions Act (Civ. Code, § 1633.1 et seq.; Stats.
1999, ch. 428, § 1, pp. 2809–2816), an electronic signature has the same legal
effect as a handwritten signature (Civ. Code, § 1633.7, subd. (a) [“A ...
signature may not be denied legal effect or enforceability solely because it is
in electronic form.”] ). (Id. at 842-843.) In Ruiz, the defendant
submitted a declaration which summarily asserted “that Ruiz was the person who
electronically signed the 2011 agreement ‘on or about September 21, 2011,’” but
. . . did not explain how [the declarant] arrived at that conclusion or inferred
Ruiz was the person who electronically signed the 2011 agreement.” (Id.
at 843.) Furthermore, the plaintiff “averred he did not recall electronically
signing the 2011 agreement . . .” (Id. at 844.) The declarant explained
that “the 2011 agreement was part of an employee acknowledgment form that ‘is’
presented to all Moss Bros. employees as part of a series of changes to the
company's employee handbook, and each employee is required to log into the
company's HR system, using his or her ‘unique login ID and password,’ to review
and sign the employee acknowledgment form,” but the Court of Appeal again noted
that the declarant “did not explain how, or upon what basis, she inferred that
the electronic signature on the 2011 agreement was ‘the act of’ Ruiz.” (Id.)
The Ruiz court maintained this reasoning even considering that “[t]o be sure,
“Ernesto Zamora Ruiz (Electronic Signature)” and “9/21/2011 11:47 AM” appear in
print on signature and date lines of the 2011 agreement, and [the declarant]
apparently retrieved the proffered ‘true and correct copy” of the 2011
agreement from Moss Bros.'s personnel records.” (Id. at 843.) The court
ultimately concluded as follows:
Though Ruiz did not deny that the
electronic signature on the 2011 agreement was his, he claimed he did not
recall signing the 2011 agreement and would not have signed it had it been
presented to him. In the face of Ruiz's failure to recall signing the 2011
agreement, Moss Bros. had the burden of proving by a preponderance of the
evidence that the electronic signature was authentic (Evid. Code, § 1401), that
is, it was the Moss Bros. claimed it was: “the act of” Ruiz (Civ. Code,
§ 1633.9, subd. (a)). Moss Bros. did not meet this evidentiary burden.
(Id. at
846.) More specifically, the Court in Ruiz noted that the declaration did not
explain that an electronic signature in the name of “Ernesto Zamora Ruiz” could
only have been placed on the 2011 agreement (i.e., on the employee
acknowledgement form) by a person using Ruiz's “unique login ID and password”;
that the date and time printed next to the electronic signature indicated the
date and time the electronic signature was made; that all Moss Bros. employees
were required to use their unique login ID and password when they logged into
the HR system and signed electronic forms and agreements; and the electronic
signature on the 2011 agreement was, therefore, apparently made by Ruiz on
September 21, 2011, at 11:47 a.m. Rather than offer this or any other
explanation of how she inferred the electronic signature on the 2011 agreement
was the act of Ruiz, the declaration only offered her unsupported assertion
that Ruiz was the person who electronically signed the 2011 agreement.
The
Court notes that like the Plaintiff in Ruiz, Plaintiff claims to have no
memory of signing any arbitration agreement, and also claims that if she had
understood what arbitration was, she would not have signed the agreement. (Parra
Decl., ¶¶ 3, 4, 6.) Further, Plaintiff argues that under Ruiz, Defendant
cannot authenticate the electronic signature. Specifically, Plaintiff argues
that Klink cannot verify that Plaintiff signed anything since she was not there
to witness it, does not provide any information regarding the circumstances in
which Plaintiff was purportedly asked to sign the agreement, or what she was
told at the time. Klink’s declaration describes her knowledge of the Marksman
standard practice to maintain copies of signed acknowledgments to employee
handbooks and arbitration agreements in the employee’s personnel files from at
least January 1, 2022 to present. (Klink Decl., ¶ 6.) Klink also notes that she
has personally reviewed Plaintiff’s complete personnel file and because of
this, has knowledge of her employment with Defendant. (Id. at ¶ 7.) The
declaration indicates that when Plaintiff was hired on June 22, 222, it was
common practice of Defendant to have a prospective employee fill out an
application form that included the applicant’s name, personal email address,
and phone number. (Id. at 10.) The declaration further indicates that if
the applicant was provided a conditional offer of employment, Defendant would
send the prospective employee an onboarding email, to their personal email
address, through Defendant’s human resources platform, ADP. (Ibid.) It
was then, according to Klink, that ADP would send the employee a copy of
Marksman’s onboarding documents to the prospective employee’s personal email,
and when the employee was required to review and electronically sign
Defendant’s Employee Handbook and Arbitration Agreement. (Ibid.) Klink
further notes that throughout her tenure with Defendant, it has been the
business practice to place a copy of the signed arbitration agreement in each
employee’s respective electronic personnel file following the employee signing the
document. (Id. at ¶ 11.) After review of Plaintiff’s personnel file,
Klink notes in her declaration that Plaintiff signed the Arbitration Agreement
on June 22, 2022. (Id. at ¶¶ 12, 13.)
Attached to the declaration are two documents: Exhibit 1 is an “Applicant
Information” sheet which is filled out and signed by hand, apparently by
plaintiff; Exhibit 2 is a “Dispute Resolution Agreement” which includes a hand-drawn
signature made electronically.
On August 30, 2023, Ann Klink
submitted a supplemental declaration stating that at the time Plaintiff was
hired, Marksman used ADP to onboard employees, and that he is very familiar
with the operations of how ADP transmits information to employees, stores
employee information, and allows managerial users the opportunity to retrieve
employee data. (Supplemental Declaration of Ann Klink (“Klink Supp. Decl.”), ¶
4.) Klink further notes that employees are required to create an account with
ADP by creating their own username and personally-selected password. (Klink Supp.
Decl., ¶ 5.) The supplemental declaration notes that after the employee sets up
their ADP account, the employee is required to complete onboarding documents,
including the I-9, tax forms, direct deposit selection, and is also required to
review and electronically sign the Arbitration Agreement. (Ibid.) Klink
contends that no one at Marksman, including managers, Human Resources, nor
Klink herself has access to another employees’ ADP login information, not can
any other employee login to ADP to modify or sign another employee’s personnel
documents. (Klink Supp. Decl., ¶ 6.)
Here, based on the declarations, the
Court finds that Defendant has sufficiently authenticated the document pursuant
to Ruiz. Klink has established that the Exhibits 1 and 2 are business
records kept in the normal course of defendant’s business and that they relate
to Plaintiff. Unlike in Ruiz, the electronic signature in
this instance is apparently hand-drawn and similar in appearance to the
handwritten signature on the “Applicant Information” worksheet. Given that detail, plaintiff’s mere assertion
that she “does not remember” signing the document is insufficient to overcome
the evidence that the agreement is authentic.
Existence of a PAGA or Representative
Action Waiver in the DRA
Defendant
argues that the arbitration agreement covers all of Plaintiff’s claims, noting
it states: “any claim, dispute, and/or controversy that either Employee may
have against Marksman. . . or Marksman may have against Employee, arising from,
related to, or having any relationship or connection whatsoever with Employee
seeking employment with, employment by, or the cessation of employment with
Marksman or other association with Marksman.” (Klink Decl., ¶ 9, Ex. 2.)
Further, the Arbitration Agreement includes “all disputes, whether based on
tort, contract, statute… or any other state, local or federal statutes, laws or
regulations, whether in law or in equity.” (Ibid.) Defendant relies on Viking
River to argue that parties can agree to arbitrate PAGA claims on an
individual basis. (Viking River Cruises, Inc. v. Moriana (2022) 142 S.
Ct. 1906, 1924-25.) When an employee’s own dispute is
pared away from a PAGA action, the employee is no different from a member of
the general public, and PAGA does not allow such persons to maintain
suit.” (Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct.
1906, 1925 (Viking River Cruises).)
However, in Viking River Cruises, the Supreme Court
also recognized that this is ultimately an issue of state law. The Court of
Appeal recently “conclude[d] that a plaintiff is not stripped of standing to
pursue non-individual PAGA claims simply because his or her individual PAGA
claim is compelled to arbitration.” (Seifu v. Lyft, Inc. (2023) 89
Cal.App.5th 1129, 1134. (Seifu).) Like the plaintiff in Seifu,
Plaintiff alleges that she was employed by Defendant and that one or more
alleged Labor Code violations were committed against her and thus she is an
“aggrieved” employee within the meaning of PAGA with standing to assert PAGA
claims on behalf of herself and other employees. (Id.at 1135.)
Plaintiff argues that the agreement does not include waiver of
individual PAGA claims. Plaintiff contends that unlike the agreement in Viking
River, which contained an explicit waiver of PAGA rights, the DRA does not
address any waiver of the right to bring a law enforcement proceeding under
PAGA whatsoever. Despite the lack of
explicit reference to PAGA claims, the court finds that, by including reference
to “any…state, local or federal statutes, laws or regulations” the DRA
necessarily includes PAGA claims, which are purely statutory in nature.
Unconscionability
Plaintiff
contends that the Arbitration Agreement is unconscionable. “The procedural
element of unconscionability focuses on whether the contract is one of
adhesion. (Armendariz, supra, 24 Cal.4th at p. 113; Mercuro v.
Superior Court, supra, 96 Cal.App.4th at p. 174.) 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. (Armendariz, supra, 24 Cal.4th at p. 114; Mercuro
v. Superior Court, supra, 96 Cal.App.4th at p. 174.) The substantive
element addresses the existence of overly harsh or one-sided terms. (Little
v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071 [130 Cal.Rptr.2d 892,
63 P.3d 979]; Armendariz, supra, 24 Cal.4th at p. 114.) An
agreement to arbitrate is unenforceable only if both the procedural and
substantive elements are satisfied. (Armendariz, supra, 24
Cal.4th at p. 113; Mercuro v. Superior Court, supra, 96
Cal.App.4th at p. 174.) 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 p. 114; see also Kinney
v. United HealthCare Services, Inc., supra, 70 Cal.App.4th at p. 1329.).” McManus
v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87.)
Additionally, under Armendariz, an agreement
requiring the arbitration of statutory claims to be enforceable must include
the following: (1) a neutral arbitrator; (2) adequate discovery; (3) a written
award; (4) make available to the parties all of the types of relief that would
otherwise be available in court; and (5) the agreement must “not require
employees to pay either unreasonable costs or any arbitrators’ fees or expenses
as a condition of access to the arbitration forum.”
Procedural Unconscionability
Plaintiff
argues that the Arbitration Agreement is procedurally unconscionable because it
is a contract of adhesion. Plaintiff contends she arrived at a Los
Angeles hotel—among nearly 30 other new hires—at Defendant’s behest, witnessed
the chaos, told to click through all the documents, and was presumably told to
electronically sign those documents. (Parra Decl., at ¶ 5.) However, Plaintiff
argues that she was not told what those documents signified, nor did anyone representing
what those documents signified. (Ibid.) Additionally, Plaintiff argues
that Defendant’s Arbitration Agreement involves a high level of surprise. Plaintiff
asserts that Courts hae found procedural unconscionability exists where the
employer fails to provide a copy of the rules that apply to the arbitral forum.
(citing Carmona v. Lincoln Millennium Car Wash, Inc., (2014) 226
Cal.App.4th 74, 84-85 (holding employer’s reference to the AAA rules, without
providing a copy of the rules, forced the employee “to go to another source to
find out the full import of what he or she is about to sign”). Plaintiff
asserts that based on the agreement, it is unclear which arbitral rules will
apply as the agreement only mentions the rules of evidence and the California
Code of Civil Procedure.
The Court
does not disagree that the contract is one of adhesion, as are many in
employment cases. However, this alone does not make an Arbitration Agreement to
be per se unconscionable. California Courts have upheld arbitration agreements
in employment contracts despite claims that they were contracts of adhesion.
The Court notes that the agreement appears to have been presented in a clear
way, the DRA was two pages, and was in a readable font and size, and the
signature was on the last page of the Arbitration Agreement. The Court finds
that the DRA was minimally procedurally unconscionable.
Substantive Unconscionability
An arbitration agreement is generally
enforceable, if it (1) provides for neutral arbitrators, (2) provides for more
than minimal discovery, (3) requires a written award, (4) provides for all of
the types of relief that would otherwise be available in court, and (5) does
not require the parties to pay unreasonable costs and fees as a condition of
access to an arbitration forum. (See Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.)
In
her opposition, Plaintiff maintains that there is substantive unconscionability
because of a cost shift in the event of Defendant prevailing. However, the
Court notes that although the agreement allows Defendant to recover costs as a
prevailing party, recoverable costs are limited to those recoverable “to the
extent permitted by law.” Next, Plaintiff argues that the PAGA waiver is
unconscionable because in California “[t]he waiver of a right to assert
a representative PAGA claim in any forum is unenforceable[.]” (citing Williams
v. Superior Ct., (2015) 237 Cal. App. 4th 642, 645; Arias v. Superior
Ct., (2009) 46 Cal. 4th 969, 986; Iskanian, supra, 59 Cal.4th at
360, 383–384.) Plaintiff further
argues that in considering whether an arbitration agreement is
substantively unconscionable, a Court is also required to read the agreement
together with other agreements executed on the same day, as they constitute
separate aspects of single transaction of the former employee's hiring. (Alberto
v. Cambrian Homecare, (2023) 91 Cal. App. 5th 482, 490–91 (holding that
documents executed alongside an arbitration agreement must be considered in
determining whether an alleged arbitration agreement is enforceable.)
Having considered
the DRA in its entirety, the court finds no Substantive Unconscionability as
defined by Armendariz.
The Poison
Pill
Finally, plaintiff contends that the
DRA is unenforceable by its own terms because, under the DRA, plaintiff’s PAGA
claim must necessarily be split between plaintiff’s individual claim, which is
subject to arbitration, and the class claims, which are not.
The DRA includes a savings clause which provides: “If any
term or provision, or portion of this Agreement is declared void or
unenforceable it shall be severed and the remainder of this Agreement shall be
enforceable, except that the parties do not agree to arbitrate claims
subject to this Agreement if the provision prohibiting class or collective
relief is declared void or unenforceable.” (emphasis added)
Prior to Viking River
Cruises, it was clear that, in California, PAGA claims could not be subject
to mandatory arbitration and could not be waived. Iskanian v. CLS
Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 383. The effect of Viking River Cruises was
to sever the individual PAGA claim from the representative claim – permitting
arbitration of the former. Subsequent cases
make clear that such severing does not preclude a plaintiff from prosecuting
both claims. Vaughn v. Tesla, Inc. (2023) 87 Cal.App.5th 208, 234.
When assessing a demand that
a claim be subject to arbitration, a court necessarily looks to the intent of
the parties. “We…rely on the parties’
intent, expressed through the language and structure of the agreement. Here,
the ‘Savings Clause & Conformity Clause’ states that the arbitration
agreement is ‘invalid’ if the ‘Waiver of Class and Collective Claims’ is ‘found
to be unenforceable.’ This is an unambiguous expression of the parties’ intent
to avoid parallel litigation before an arbitrator and before a court.” Westmoreland
v. Kindercare Educ. LLC, (2023) 90 Cal.App.5th 967, 979.
In this case, defendant
argues the DRA is broad enough to encompass PAGA claims. The court agrees. However, by its own terms, the DRA then exempts
those very claims from arbitration. “Had [Marksman] simply included a waiver of
representative claims in its arbitration agreement, and not included the poison
pill [within] the agreement, the result here could have been substantially
similar to that in Viking River.” Id. at 982. However, the terms of the DRA make clear that
if the PAGA waiver is unenforceable, then the entire DRA is unenforceable.
IV. CONCLUSION
For the foregoing reasons, this
Court DENIES Defendants’ Motion to Compel Arbitration.
Plaintiff is ordered to give notice.