Judge: Ronald F. Frank, Case: 24TRCV02804, Date: 2025-01-09 Tentative Ruling
Case Number: 24TRCV02804 Hearing Date: January 9, 2025 Dept: 8
Tentative Ruling
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HEARING DATE: January 9, 2025
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CASE NUMBER: 24TRCV02804
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CASE NAME: Gabriel Pilowsky v.
Pelican Products, Inc., et al.
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MOVING PARTY: Defendant,
Pelican Products, Inc.
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RESPONDING PARTY: Plaintiff, Gabriel Pilowsky
TRIAL DATE: Not Set.
MOTION: Defendant’s Motion
to Compel Arbitration
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RULING: GRANT, and to
stay the litigation.
I.
BACKGROUND¿¿
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A. Factual¿¿
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On
August 21, 2024, Plaintiff, Gabriel Pilowsky (“Plaintiff”) filed a complaint
against Defendants, Pelican Products, Inc., and DOES 1 through 50. The
complaint alleges causes of action for: (1) Failure to Engage in a Good Faith
Interactive Process in Violation of Government Code §§ 12940, et seq.; (2)
Failure to Provide Reasonable Accommodations in Violation of Government Code §§
12940, et seq.; (3) Willful Violation of Occupational Safety and Health
Administration Codes; (4) Medical Discrimination in Violation of Government
Code §§ 12940, et seq.; (5) Age Discrimination in Violation of Government Code
§§ 12940, et seq.; (6) Retaliation in Violation of Government Code §§ 12940, et
seq.; (7) Failure to Prevent Discrimination, Harassment and Retaliation in
Violation of Government Code §§ 12940(k); (8) Wrongful Termination in Violation
of Public Policy; and (9) Negligent Infliction of Emotional Distress.
Defendant,
Pelican Products, Inc. (“Defendant”) seeks to enforce an arbitration clause
Plaintiff allegedly signed in connection with his employment with Defendant’s
company, seeks an order staying this matter pending the outcome of binding
arbitration, and seeks an order staying this action immediately pending a
ruling on this motion.
B. Procedural¿¿
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On October 23, 2024,
Defendant filed this Motion to Compel Arbitration. On December 27, 2024,
Plaintiff filed an opposition. On January 2, 2025, Defendant filed a reply
brief.
II.
REQUEST FOR JUDICIAL
NOTICE
With Defendant’s moving
papers, it seeks this Court to take judicial notice of the following documents:
1.
JAMS Employment Arbitration Rules & Procedures
(Eff. June 1, 2021) (English and Spanish versions), available at
https://www.jamsadr.com/rules-employment-arbitration/english and
https://www.jamsadr.com/rules-download/ (last visited October 23, 2024). (A
copy of the English version and Spanish version as Exhibit 1)
2.
JAMS Arbitration Schedule of Fees and Costs, available
at https://www.jamsadr.com/arbitration-fees (last visited October 23, 2024). (A
copy is as Exhibit 2.); and
3.
JAMS Policy on Employment Arbitration Minimum Standards
of Procedural Fairness (Eff. July 15, 2009), available at
https://www.jamsadr.com/employment-minimum-standards/ (last visited October 23,
2024) (A copy as Exhibit 3.)
The Court GRANTS
this request and takes judicial notice of the above documents.
III.
DISCUSSION
A.
Whether there is a Valid and Enforceable Arbitration Agreement
Defendant submits that on September 25, 2021, Plaintiff signed
an arbitration agreement that covers any claim including, but not limited to,
claims or controversies arising out of his employment, that incorporates the
FAA, and delegates all issues of arbitrability to the arbitrator. The
Arbitration Agreement reads as follows:
Both Employer and Employee
voluntarily agree that any claim, dispute, and/or controversy of any kind
between Employee and Employer (or its owners, directors, officers,
employees, agents, related and affiliated entities, and parties affiliated with
its employee benefit and health plans unless such plans provide a different
arbitration procedure), including but not limited to claims or
controversies arising out of the employment relationship between Employee and
Employer, past, present, or future, or its termination, shall be subject to
final and binding arbitration. The Claims covered under this Agreement
include, but are not limited to claims based on tort, contract, statute,
equity, or otherwise … Claims subject to this Agreement include without
limitation: claims for breach of any contract or covenant (express or implied);
tort claims; claims for discrimination or harassment (including, but not
limited to, race, sex, sexual orientation, religion, national origin, age,
marital status, physical or mental disability, or medical condition); claims
for retaliation; claims for benefits, theft, embezzlement, gross negligence,
destruction or property, conversion, overpayment of wages, misappropriation of
trade secrets, confidential information, and/or other intellectual property;
and claims for violation of any federal, state, local or other governmental
law, statute, regulation, or ordinance, including amendments, and including but
not limited to Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the
Rehabilitation Act, the California Labor Code, the Family and Medical Leave
Act, the Equal Pay Act, the False Claims Act, ERISA, the California Family
Rights Act, California Industrial Welfare Commission Orders, the Fair Labor
Standards Act, the California Fair Employment and Housing Act, the California
Unfair Competition Act, including, but not limited to, M.G.L. c. 151B, the
Massachusetts Wage Act and all other related statutes, regulations, local ordinances
or common law claims, and any other applicable state statutes governing
employment.
(Declaration of
Kim Russo (“Russo Decl.”), Ex. A, § 2.)
Here, Plaintiff’s allegations
against his former employer are certainly covered by the Arbitration Agreement
per its plain language. Plaintiff does not disagree that he signed the
Arbitration Agreement between the Parties. Instead, Plaintiff argues this Court
should not enforce the Arbitration Agreement on the grounds that: (1) it should
be invalidated due to fraud, duress, unconscionability, and one-sided contract
adhesion – noting Plaintiff is a 71-year-old who did not understand the
contents of the arbitration agreement, and did not know that such a contract
would bar him from filing suit; and (2) Plaintiff was required to sign an unconscionable
employment agreement containing an arbitration clause buried in it as a
condition of obtaining work with Defendant.
B.
Applicability
of the Federal Arbitration Act (“FAA”)
Plaintiff’s first
argument in his opposition is that the FAA does not apply in this case under Carbajal v. CWPSC, Inc. “The FAA applies to any ‘contract
evidencing a transaction involving commerce’ that contains an arbitration
provision.” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238 (“Carbajal”)
(quoting 9 U.S.C. § 2).) “‘[T]he phrase ‘involving commerce’ in the FAA is the
functional equivalent of the term ‘affecting commerce,’ which is a term of art
that ordinarily signals the broadest permissible exercise of Congress's
commerce clause power.’” (Id. (quoting Shepard v. Edward Mackay
Enterprises, Inc. (2007) 148 Cal.App.4th 1092, 1097, citing Citizens
Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 55).)
“[T]he United States
Supreme Court has identified ‘three categories of activity that Congress may
regulate under the commerce power: (1) the channels of interstate commerce, (2)
the instrumentalities of interstate commerce and persons or things in interstate
commerce, and (3) those activities having a substantial relation to interstate
commerce.’” (Id. (quoting Shepard, supra, 148 Cal.App.4th at
1098, citing United States v. Lopez (1995) 514 U.S. 549, 558–559).)
“The party asserting
FAA preemption bears the burden to present evidence establishing a contract
with the arbitration provision affects one of these three categories of
activity, and failure to do so renders the FAA inapplicable.” (Id.; see Giuliano
v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284-1288
[subjective intent of parties to contract not dispositive factor as to
whether FAA governs].)
Plaintiff’s opposition asserts that Defendant’s moving papers
assume the FAA governs because the arbitration says it does. The Court
disagrees. Defendant’s moving papers assert that its operations and activities
involve interstate commerce. Defendant states that its company is a
multinational company that produces portable lighting systems and
temperature-controlled packing and protective cases for various industries,
including fire safety, military, law enforcement, and consumer recreation.
Defendant asserts Pelican designs and manufactures both high-performance case
solutions and advanced portable lighting systems, is incorporated in Delaware,
and has offices in multiple states including California and Massachusetts.
Defendant also submits that Pelican has multiple manufacturing facilities,
multiple international sales offices, and multiple advanced case centers,
network stations, and service centers around the world. (Russo Decl., ¶¶ 18-19.) Further, Defendant
evidences that Pelican has a website that customers regularly use to purchase
products from any location they have internet access, sells its products on
amazon, regularly ships its products across state lines, and ships in the
United States, Europe, Canada, Australia, Japan, China, an Latin Aerica. (Russo
Decl., ¶ 20.)
The Court finds this to be sufficient to evidence Defendant’s
company involves interstate commerce, notwithstanding Plaintiff’s argument that
he was employed in California and was never required to work outside of
California. As noted by Defendant’s reply brief, Plaintiff has not provided any
evidence for the statements made in the opposition papers. Plaintiff contends
that he worked in Torrance, California as a mechanic and “would work
exclusively in the warehouse located in Torrance, CA to make sure that all
machines were running properly.” (Opposition at 4.) The Court does not believe
that this statement sufficiently removes Plaintiff’s employment contract from
the interstate commerce issue. Because the Court finds that the Arbitration
Agreement is governed by the FAA, the Court does not analyze Plaintiff’s
opposition argument regarding employment-contingent waivers of rights and
California public policy.
C.
Whether
the Agreement was Signed Under Duress
Plaintiff argues that the Arbitration Agreement is unenforceable
because it was signed under duress. Plaintiff relies on Degidio v. Crazy
Horse Saloon and Restaurant Inc. (4th Cir. 2018) 880 F.3d 135 (“Degidio”).
This Court finds Degidio to be inherently dissimilar to the case at bar.
Degidio involved a class action lawsuit where the defendant sought to
enforce arbitration agreements that were executed more than a year after
the litigation began. (Degidio, supra, 880 F.3d at 137.) The reason the
Court found duress in Degidio was because the arbitration agreements
were “executed without knowledge of the court and in the context of an
employment relationship in which the employer alone could profess the requisite
legal expertise [and]…falsely suggested that participation in the lawsuit would
deprive potential plaintiffs of important professional rights.” (Id. at
144.)
Here, Plaintiff’s opposition suggests that Defendant improperly
exerted undue influence on Plaintiff by conditioning the payment of wages on
signing the arbitration agreements. Plaintiff asserts that Defendant knew that
Plaintiff had not been paid for weeks, was in need of payment, and could not
afford to forego receipt of their last paycheck. Thus, Plaintiff states that he
signed the agreement in order to be paid their back wages and future wages.
Plaintiff’s statements in the Opposition as to duress and undue
influence are not supported by a declaration.
Further, the evidence before the Court, provided by the moving papers’
declaration, is that Plaintiff signed the Arbitration Agreement as part of his
onboarding process for his employment at Defendant’s company. Thus, the Court
wonders how Plaintiff had not been paid in weeks prior to the signing of the
onboarding paperwork.
D.
Unconscionability
Plaintiff next argues that the Arbitration Agreement
is procedurally and substantively unconscionable under Armendariz. 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 core concern of the
unconscionability doctrine is the “absence of meaningful choice on the part of
one of the parties together with contract terms which are unreasonably
favorable to the other party.” (Sonic-Calabasas, supra, 57 Cal.4th at
1145.) The unconscionability doctrine ensures that contracts—particularly
contracts of adhesion—do not impose terms that have been variously described as
overly harsh, unduly oppressive, so one-sided as to shock the conscience, or
unfairly one-sided. (Id.) Here,
Plaintiff has not identified any overly harsh or unduly oppressive provisions,
other than depriving them of the court system and the extensive discovery
procedures of the Discovery Act to resolve their dispute. The Court finds that
such a deprivation, without much more, is not overly harsh, unduly oppressive,
nor shocking of the conscience. Moreover,
the discovery limitations of a JAMS arbitration apply equally to both sides,
which mitigates the claim of unconscionability.
“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.)
i.
Procedural
Unconscionability
Plaintiff
argues that the Arbitration Agreement is procedurally unconscionable as it as adhesive
and presented to him under circumstances of oppression and surprise. Plaintiff
bases this argument on the unsupported statements that the Agreement was
presented as a condition of Plaintiff’s employment; that at Plaintiff’s age he
did not understand the contents of the three (3) page document among his
onboarding paperwork, and that he was not informed of any option to opt-out of
arbitration nor given the opportunity to review or understand the arbitration
provision.
The Court turns the Parties’ attention to the case of Gutierrez
v. Autowest, Inc. (2003) 114 Cal.App.4th 77. In Gutierrez, a
plaintiff entered into an automobile lease agreement with the defendant, an
automobile dealer. The plaintiff subsequently sued the dealer over alleged
fraud in the transaction, and the adhesive agreement contained an inconspicuous
arbitration clause. (Id. at 83-84.) There, based on the AAA rules in
effect at the time the defendant moved to compel arbitration, the Plaintiff
would have had to pay $8,000 in administrative fees to initiate arbitration. .
(Id. at 90-91.) The Gutierrez Court held that “where a consumer
enters into an adhesive contract that mandates arbitration, it is
unconscionable to condition that process on the consumer posting fees he or she
cannot pay.” (Id. at 89-90.) However, the contract in Gutierrez
was not even found to be unconscionable because it was adhesive.
In fact, the Gutierrez court noted that “simply because a provision
within a contract of adhesion is not read or understood by the
nondrafting party does not justify a refusal to enforce it.” (Id. at
88.) Instead, the Court reasoned that the unbargained-for term may only be
denied enforcement if it is also substantively unreasonable. (Ibid.) While there is a take-it-or-leave-it aspect
to the onboarding requirement of consent to the arbitration agreement, the
Court acknowledges there is some measure of procedural unconscionability.
Plaintiff cites to no legal precedent that Plaintiff, at
his age, could not have consented to or understood the Arbitration Agreement.
As an example, California Courts generally hold 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.) Plaintiff does not argue that he was incapable
of working past age 65, or that he lacks literacy or fluency in English, or
other matters sometimes raised by a party contesting an arbitration
agreement. Plaintiff has not presented
any evidence of trick or misrepresentation. Thus, his age being a factor of why
he could not consent to and understand the agreement, without any declaration
from Plaintiff to support these arguments by his counsel, is not sufficient to
raise the procedural unconscionability calculus to a moderate or high
level.
ii.
Substantive
Unconscionability
Next, Plaintiff argues that the
arbitration provisions is substantively unconscionable because the agreement
does not conform to the requirements of Armendariz. 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.)
Plaintiff
asserts that specifically, the Agreement is substantively unconscionable
because: (1) the claims subject
to arbitration are not “clear and unmistakable”; (2) the agreement fails to
guarantee Plaintiff’s right to statutory attorneys’ fees; and (3) fails to
provide for a neutral arbitrator. The
Court does not find there to be substantive unconscionability on the record
before the Court. Employment claims are
in fact clearly and unmistakenly described int eh arbitration agreement. The Arbitrator will be required to apply the
substantive law, and if Plaintiff is the prevailing party then the Arbitrator,
or this Court on a Petition to Confirm the arbitrator’s award, can address
attorneys fees. Finally, the Court is familiar
with JAMS and with its arbitrator panels drawn form some of the best and
brightest or retired judges and justices, and from highly respected members of the
bar. A JAMS arbitrator and the
arbitrator selection process provide for neutrality to a very similar extent as
the assignment of a judge in the court system.
Accordingly,
the Court finds the procedural unconscionability to be low and the substantive
unconscionability to be non-existent, and thus the arbitration agreement is not
unconscionable.
IV. CONCLUSION¿¿
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For the foregoing reasons, the Court’s tentative ruling is to
GRANT the Defendant’s Motion to Compel Arbitration, to stay the litigation rather
than dismiss it, and to set an arbitration status conference approximately 9
months out.
Defendant is ordered to
provide notice of this ruling, and to contact JAMS and pay the initial
arbitrator filing fee within 30 days.
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