Judge Ronald F. Frank, Case Number: 24TRCV00596, Date: 2024-09-26 Tentative Ruling

Judge: Ronald F. Frank, Case: 24TRCV00596, Date: 2024-09-26 Tentative Ruling

Case Number: 24TRCV00596 Hearing Date: September 26, 2024 Dept: 8

Tentative Ruling

HEARING DATE: September 26, 2024

CASE NUMBER: 24TRCV00596

CASE NAME: Jessica Gandara v. Thekey of California, LLC, et al.

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MOVING PARTY: Plaintiff Jessica Gandara

RESPONDING PARTY: Defendant Liberalis, LLC

TRIAL DATE: Not Set.

MOTION:¿ Motion to Compel Arbitration

Tentative Rulings: Plaintiff’s Motion to Compel Arbitration and to stay the lawsuit pending the outcome of the arbitration is GRANTED. The Court will set an arbitration status conference in early 2025.

I. BACKGROUND¿

A. Factual¿

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On February 21, 2024, Plaintiff Jessica Gandara filed a complaint against Defendants Thekey of California, LLC, Thekey of Calabasas, LLC, Thekey Holdings, LLC, Home Care Assistance, Inc., Thekey, LLC, 123 Home Care Unlimited, LLC, and Liberalis, LLC, alleging (1) Failure to Provide Meal Periods; (2) Failure to Provide Paid Rest Breaks; (3) Unpaid Minimum Wages, Overtime, and Liquidated Damages; (4) Failure to Reimburse Business Expenses; (5) Willful Failure to Provide Compliant Wage Statements; (6) Failure to Provide Employee Wage Records Upon Written Request; (7) Failure to Keep Accurate Payroll Records; (9) Wages Not Timely Paid; and (10) Unfair Competition.

Plaintiff now files a Motion to Compel Arbitration.

B. Procedural

On May 7, 2024, the Court entered its order granting a stipulation between Plaintiff and the The Key defendants to this submit case to binding arbitration and stay the civil action, as to all but one Defendant, Liberalis LLC. Apparently, Plaintiff desired to pursue separate tracks, one track as to the The Key defendants and another track as to Liberalis. At the CMC on August 22, 2024, the The Key defendants advised the Court they had reached a settlement with Plaintiff and counsel discussed with the Court how the balance of the case would proceed. Plaintiff’s counsel indicated that they intended to file a motion to compel arbitration, which they did a few weeks later.

On September 3, 2024, Plaintiff filed a Motion to Compel Arbitration. On September 13, 2024, Defendant Liberalis, LLC filed an opposition. To date, no reply has been filed.

II. 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.) Subsequently, the moving party must establish with the preponderance of admissible evidence a valid arbitration agreement between the parties. (Ibid.) 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

Plaintiff argues that both parties are mutually bound by a valid arbitration agreement, which includes an arbitration clause that clearly states any claims, including those related to wage or compensation, must be resolved through binding arbitration. (Watson Decl. ¶ 5, Exh. C.) This agreement is undisputed. Plaintiff further asserts that the FAA governs the arbitration agreement since it is explicitly stated in the contract that the FAA applies. Plaintiff argues the arbitration clause is valid and enforceable, and the Defendant is obligated to arbitrate under the terms of the agreement. The scope of the arbitration agreement specifically includes wage and compensation claims, which are the basis of the Plaintiff’s lawsuit. Therefore, Plaintiff contends that the Defendant entered into a valid, enforceable agreement to arbitrate these claims. Additionally, Plaintiff requests that the court stay the legal proceedings while the arbitration is pending, as required by both the FAA and California law, which mandate a stay of proceedings in cases involving arbitration agreements.

In opposition, Defendant argues that Plaintiff’s claims should remain in state court and that Plaintiff has waived the right to compel arbitration. First, Defendant cites to the U.S. Supreme Court decision Morgan v. Sundance, Inc. (2022) 596 U.S. 411, 418, to assert that the federal policy favoring arbitration does not allow courts to create arbitration-specific procedural rules. The court must treat arbitration agreements like any other contract and should not give preference to arbitration. The key issue is not the validity of the arbitration agreement but whether Plaintiff has waived the right to arbitrate. Defendant argues that Plaintiff has waived this right. According to the Ninth Circuit’s two-part test, a waiver occurs when a party has knowledge of the right to compel arbitration and acts inconsistently with exercising that right. Additionally, Defendant cites to Morgan, which states that prejudice to the opposing party is irrelevant when a party has acted inconsistently with the right to arbitrate. (Morgan, supra, 596 U.S. at 417.) More recently, the California Supreme Court followed Morgan, holding that a trial court considering waiver of right to arbitration should treat the arbitration agreement as it would any other contract, without applying any special rules based on a policy favoring arbitration. (Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562.) The Quach Court opined that its desire for procedural uniformity weighed in favor of abrogating California's arbitration-specific prejudice requirement and applying the same principles as the federal courts in determining whether a party has lost the right to compel arbitration as would apply under generally applicable contract law. (Quach, supra, 16 Cal.5th at p. 582.) Accordingly, no showing of prejudice is required any longer under either federal or state law.

The parties do not dispute the validity or enforceability of the arbitration provision, but the issue at hand is whether Plaintiff waived her right to arbitrate. “To establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it.” (Quach, supra, 16 Cal.5th at p. 584.) The waiver inquiry is exclusively focused on the allegedly waiving party's words or conduct, as distinct from an estoppel defense which does require a showing of detrimental reliance on the other party’s conduct. Looking at the Quach Court’s decision to find waiver of the right to arbitrate, the Court discussed the following facts: “Rather than moving to compel arbitration at the outset of the case, Commerce Club answered the complaint and propounded discovery requests, suggesting it did not intend to seek arbitration. Although Commerce Club asserted in its answer that Quach should be compelled to arbitrate, its counsel did not otherwise raise the issue with Quach's counsel or with the court. Instead, it affirmatively indicated its preference for a jury trial and actively pursued discovery. On Commerce Club's initial case management conference statement, filed about three months after Quach filed his complaint, Commerce Club requested a jury trial, left the check box for indicating it was “willing to participate” in arbitration blank . . . .” (Quach, supra, 16 Cal.5th at p. 586.)

Defendant’s Opposition to the motion to compel arbitration recites similar facts, i.e., the lapse of time, the failure of Plaintiff to move to compel arbitration, the propounding of discovery, and positions taken in a CMC statement (including failure to check the box in the ADR section of the form for arbitration) that are inconsistent with a desire to arbitrate. However, there are other facts that militate in the other direction. Plaintiff DID seek to arbitrate with the The Key defendants, Plaintiff’s counsel emailed Liberalis’ counsel on May 13 stating that he preferred to arbitrate with Liberalis but in a separate or dual tracked arbitration, followed by a May 28, 2024 email indicating an intent to arbitrate with Liberalis if Liberalis had no intention of settling pre-litigation. A July 16, 2024 email from Plaintiff’s counsel expressed that ‘arbitration documents are prepared and ready for filing at any time.” On the record before this Court, Liberalis has failed to demonstrate by clear and convincing evidence that Plaintiff waived the right to arbitrate.

Plaintiff’s participation in litigation appears to be a tactical response while settlement discussions were ongoing, rather than an outright decision to forego arbitration. The totality of the circumstances does not show a definitive abandonment of the right to arbitrate. Therefore, the Court concludes that Plaintiff did not waive her right to arbitration, and grants Plaintiff’s motion to compel arbitration.

IV. CONCLUSION¿

Based on the foregoing, Plaintiff’s Motion to Compel Arbitration and to stay the lawsuit pending the outcome of the arbitration is GRANTED. The Court will set an arbitration status conference in early 2025.

Plaintiff is ordered to give notice and to post the arbitration fees within 30 days.