Tentative Ruling 

 

HEARING DATE: January 25, 2024 

CASE NUMBER: 23TRCV02925 

 

CASE NAME: Svetlana Sanfilippo v. Enchant Christmas, LLC, et al. 

MOVING PARTY: Defendant, Enchant Christmas, LLC 

 

RESPONDING PARTY: Plaintiffs, Svetlana Sanfilippo 

TRIAL DATE: Not Set  

 

MOTION: (1) Motion to Compel Arbitration  

 

Tentative Rulings: (1) CONTINUE.  The arbitration provision at issue states that the law of Delaware will apply and neither side briefed the law of Delaware in their moving or opposing papers.  Further, the arbitration provision includes a mediation provision before submitting the dispute to arbitration, and while it is clear from the opposition that there is a dispute as to whether the employment dispute must be arbitrated there is no evidence of any effort to first mediate. In addition, Plaintiff’s opposing declaration and exhibit raise the specter of a dispute over the very validity of the arbitration agreement or fraud in the inducement, a point neither side effectively addresses in their briefing.  The Court is thus inclined to continue the hearing and allow the parties to address these issues before the Court grapples with the unconscionability analysis.  

 

NOTE: This matter has been reassigned to Judge Reinert in Torrance Department P, effective January 29, 2024.  With the addition of a 4th I/C court in the Southwest District, a percentage of matters currently assigned to the 3 existing 3 I/C courts are heading for Department P.  Accordingly, the continued hearing will be in Department P, not Inglewood’s Department 8.  The Court will set a briefing schedule and hearing date at the January 25 hearing after checking with counsel on their schedules.   

 

On September 6, 2023, Plaintiff, Svetlana Sanfilippo (“Plaintiff”) filed a Complaint against Defendant, Enchant Christmas, LLC and DOES 1 through 20. The Complaint alleges causes of action for: (1) Disability Discrimination in Violation of FEHA; (2) Sex Discrimination in Violation of FEHA; (3) Failure to Accommodate Physical Disability in Violation of FEHA; (4) Failure to Accommodate Condition Related to Pregnancy in Violation of FEHA; (5) Failure to Engage in the Interactive Process in Violation of FEHA; (6) Failure to Prevent Discrimination in violation of FEHA; (7) Retaliation in Violation of FEHA; and (8) Wrongful Termination in Violation of Public Policy.  

 

Defendant, Enchant Christmas, LLC (“Defendant”) now wishes to enforce an arbitration clause Plaintiff allegedly signed in connection with her employment with the Defendant company. 

 

B. Procedural  

 

On December 28, 2023, Defendant file a Motion to Compel Arbitration. On January 11, 2024, Plaintiff filed an opposition. On January 18, 2024, Defendant filed a reply brief.  

 

  

II. ANALYSIS 

 

“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.)¿ 

¿ 

However, it is not clear to this Court that California law applies to this motion.  Paragraph 13 of the Employment Agreement is entitled “GOVERNING LAW and Alternative Dispute Resolution”  (emphasis added.) The governing law per the alleged contract states in its first sentence that “This agreement is governed by and is to be interpreted in accordance with the laws of Delaware.”  But neither side provided the Court with citation to Delaware law on motions to compel arbitration.  While Defendant’s motion asserts that federal law, the Federal Arbitration Act (FAA), applies to this motion, Defendant’s supporting brief as well as Plaintiff’s opposition brief cite extensively to California state law under the California Arbitration Act and to procedural issues arising under California law.  Both sides seem to agree that state law governs issues as to the validity or enforceability of arbitration agreements even where the agreement is governed by the FAA.  Yet neither side provided quotations or references to the Delaware state law for “generally applicable contract defenses such as fraud, duress, or unconscionability” that per SCOTUS are judged by the standards applicable under the relevant state law.  (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 330.)   Delaware seems to be that state here.   

 

Plaintiff argues that the arbitration agreement is invalid because it is both procedurally and substantively unconscionable. But the standards Plaintiff cites for judging unconscionability are those discussed under California law, per Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 and Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910), not Delaware law.   

 

        Defendant notes that on April 21, 2022, Plaintiff signed her Employment Agreement with Defendant. Defendant contends that the Employment Agreement contained an arbitration clause whereby Plaintiff agreed to submit to arbitration: “any dispute between the parties concerning [the] agreement,” including “any controversy or claim arising out of or relating to [Plaintiff’s] employment with [Defendant].” Specifically, the arbitration provision in the employment agreement states:  

 

13. GOVERNING LAW AND ALTERNATIVE DISPUTE RESOLUTION 

(b) where a dispute is not resolved by mediation within a period of 30 days after the appointment of a mediator or within such further period of time to which the parties agree, any party may refer the dispute to be finally resolved by arbitration before the American Arbitration Association ("AAA") administered by a single neutral arbitrator pursuant to the then-existing AAA Employment Arbitration Rules and Mediation Procedures ("AAA Rules"). The neutral arbitrator shall issue a written award, which award shall be final and binding upon the parties, and judgment upon the award issued by the arbitrator may be entered in any court of competent jurisdiction. The Employee acknowledges that a court or an arbitration panel can issue an injunction to maintain the status quo pending the outcome of any arbitration proceeding that may be initiated, and further, that the propriety of temporary and preliminary injunctive relief will be decided by a court in the State of Delaware, and not by an arbitration panel should such relief be sought in court. The Employee further acknowledges that the Company operates in interstate commerce, and this agreement to arbitrate is governed by the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq. Notwithstanding the foregoing, nothing shall preclude any party from seeking equitable relief in conjunction with or prior to any arbitration in order to preserve the status quo or prevent irreparable injury. The Employee understands and agrees that the filing of an action by the Company to seek equitable relief to preserve the status quo or prevent irreparable injury shall not constitute waiver by the Company of its right to otherwise seek arbitration pursuant to this provision. The parties further irrevocably waive their right to a trial by jury with respect to any controversy or claim arising out of or relating to the Employee's employment with the Company.  

 

This Section 13 survives any termination of this agreement. 

 

(Declaration of Kim Scott (“Scott Decl.”), ¶ 7, Exhibit A, p.7.)  

 

           Here, this Court notes that based on the face of the arbitration agreement, and the Complaint, Plaintiff’s causes of action against Defendant involve Defendant’s alleged wrongful termination of Plaintiff’s employment agreement with Defendant while she was on leave for her pregnancy and birth of her child. (Complaint, ¶¶ 5-11.) As such, the Court finds that preliminarily, the causes of action brought by Plaintiffs would be covered by the arbitration agreement if it is valid and enforceable.  

 

Valid Arbitration Agreement  

 

           Plaintiffs argue in their opposition, that the Arbitration Agreement is not valid because it is both procedurally and substantively unconscionable. More specifically, Plaintiff argues that Plaintiff was rushed to sign the Employment Agreement, that she was told the Employment Agreement was not even a contract, but instead looked like a contract, but was not; that no one at Defendant’s company explained the significance of the documents in the Employment Agreement; that she was not told the Employment Agreement had an Arbitration Agreement contained in it; and that the agreement is unconscionable because it was presented on a take-it-or-leave-it bases.  

 

          This Court does not know whether Delaware law is the same or different from California’s guiding principle that “‘[o]rdinarily, one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he has not read it. If he cannot read, he should have it read or explained to him.” (1 Witkin, Summary of Cal. Law (9th ed. 1987), § 120, p. 145.)  Here, Plaintiff asserts that the agreement is not a valid one, because she asked Defendant’s Chief Marketing Officer if she should have an attorney look over the documents presented to her by Defendant, but was not encouraged to seek counsel because she was told the documents were “pretty standard.” (Declaration of Svetlana Sanfilippo (“Sanfilippo Decl.”), ¶ 3.) She also alleges that she was told by Defendant’s Chief Marketing Officer, via email, that the Employment Agreement “looks like a contract, but it isn’t.” (Sanfilippo Decl., ¶ 12, Exhibit 2.) 

 

           Although Plaintiff does not include a heading in her Memorandum of Points and Authorities challenging the validity of the arbitration agreement, the Court believes Plaintiff’s inclusion of the email asserting that she was not signing a contract to be a direct opposition to the validity of the arbitration clause. This Court notes that under the FAA, only generally applicable contract defenses such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening the FAA. (Aviation Data, Inc. v. American Express Travel Related Services Co., Inc. (2007) 152 Cal.App.4th 1522.) Here, Plaintiff’s assertion that LeeAnne Stables, the Defendant’s Chief Marketing Officer, via email, stated: “I wanted to let you know they are sending you the written offer (which looks like a contract, but it isn’t – you will be an at will employee so you can bolt if you don’t like it – haha.” (Sanfilippo Decl., ¶ 12, Exhibit 2.) To the Court, this could raise an issue as to the validity of the arbitration clause and may raise a question as to fraud in the inception.  

 

          As such, and because Plaintiff did not effectively provide case authority for evaluating a validity defense other than unconscionability and because Defendant did not address this issue in the Reply, the Court believes supplemental briefing would assist Judge Reinert in resolving that threshold issue.   

 

Unconscionability  

Next, Plaintiff argues in her opposition that the agreement is both procedurally and substantively unconscionable. Unconscionability is a valid defense to a petition to compel arbitration. (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143.) State law governs the “unconscionability” defense. (Doctor’s Assocs., Inc. v. Casarotto (1996) 517 US 681, 687.)  The parties should submit supplemental briefing bearing on the law of Delaware as to the unconscionability defense, and whether Delaware law recognizes both procedural and substantive unconscionability as well as the standards applicable to such a defense.