Judge Salvatore Sirna, Case 21PSCV00640 2023-02-23 Tentative Ruling

Judge: Salvatore Sirna, Case: 21PSCV00640, Date: 2023-02-23 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 21PSCV00640 Hearing Date: February 23, 2023 Dept: G

Respondent: Plaintiff Hakob Manoukian

TENTATIVE RULING

Defendants Envision WC MB Auto, LLC; Envision Motors Holdings, LLC; Envision WC Toy Auto, LLC; Envision WC AU Auto, LLC; Envision WC CDJR Auto, LLC; Envision NWK Toy Auto, LLC; Envision Escondido Auto, LLC; and Envision CE LRJ Auto, LLC’s Motion to Compel Individual Arbitration and Dismiss or Stay Proceedings is GRANTED as to Plaintiff’s PAGA claim for violations suffered individually by Plaintiff. However, Plaintiff’s claims on the behalf of other employees are STAYED pending the California Supreme Court’s ruling in Adolph v. Uber Technologies, Case No. S274671.

BACKGROUND

This is a wage and hour action brought under Private Attorneys General Act (PAGA). Envision WC MB Auto, LLC; Envision Motors Holdings, LLC; Envision WC Toy Auto, LLC; Envision WC AU Auto, LLC; Envision WC CDJR Auto, LLC; Envision NWK Toy Auto, LLC; Envision Escondido Auto, LLC; and Envision CE LRJ Auto, LLC (collectively, Defendants) employed Plaintiff Hakob Manoukian as an hourly non-exempt employee. On August 9, 2021, Plaintiff filed a complaint individually and on behalf of other aggrieved employees against Defendant and Does 1 through 50, alleging violations of Labor Code section 2698 et seq. for (1) failure to provide employment records, (2) failure to pay overtime/double time, (3) failure to provide meal and rest periods, (4) failure to pay minimum wages, (5) failure to keep accurate and provide itemized wage statements, (6) failure to pay reporting time, (7) failure to pay “split shift” premiums, (8) failure to timely pay wages during employment, (9) failure to timely pay wages upon termination, (10) failure to provide information required by the Wage Theft Prevention Act, (11) failure to reimburse necessary business-related expenses and costs, and (12) failure to provide notice of paid sick time and accrual.

Defendants answered on October 7, 2021, and amended their answers on March 9, 2022. On June 30, 2022, Defendants’ counsel set email correspondence to Plaintiff’s counsel requesting a stipulation to arbitrate Plaintiff’s individual claims and dismissal of Plaintiff’s PAGA claims which Plaintiff’s counsel rejected. (Eheart Decl., ¶ 2-3.)

On October 4, 2022, Defendant Envision WC MB Auto, LLC filed the present motion. The other Defendants filed a notice of joinder to the present motion. At a hearing on December 1, the court continued the hearing and directed parties to provide supplemental briefing.

A hearing and case management conference are set for February 23, 2023.

REQUEST FOR JUDICIAL NOTICE

Defendants request judicial notice of a case filed by Plaintiff on March 11, 2022 in the Superior Court of California, County of San Bernardino. However, the attached exhibit appears to be the complaint filed in the present action. Accordingly, Defendants’ request is denied.

In opposition to the Defendant’s motion to compel arbitration, Plaintiff has requested the court take judicial notice of orders entered by trial courts in four other cases, as well as a copy of the California Supreme Court’s current docket for Case No. S274671. Pursuant to Evidence Code, section 452, subdivision (d), the court may take judicial notice of state court records. The court denies Plaintiff’s request for judicial notice of trial court orders because they are neither precedent nor binding authority for this court. (B.F. v. Superior Court (2012) 207 Cal.App.4th 621, 627, fn. 2.) However, the court will take judicial notice of the California Supreme Court’s docket.

In reply to Plaintiff’s opposition, Defendants have requested the court take judicial notice of orders by trial courts in two other cases. For the same reasons given above, the court denies this request as well.

ANALYSIS

Defendants argues Plaintiff’s PAGA claims are subject to a binding arbitration agreement and requests the court compel Plaintiff’s “individual PAGA claims” to arbitration, dismiss “non-individual PAGA” claims for lack of standing, and stay this matter pending arbitration. The court agrees Plaintiff’s PAGA claims for individual violations are subject to binding arbitration.

Legal Standard

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.)¿ The court must grant a petition to compel arbitration unless it finds no written agreement to arbitrate exists, the right to compel arbitration has been waived, grounds exist for revocation of the agreement, or litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues.¿ (Code Civ. Proc., § 1281.2.) A petition to compel arbitration functions as a motion. (Code Civ. Proc., § 1290.2.)

“[T]he moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa).) Once the court finds an arbitration agreement exists, the opposing party bears the burden of establishing a defense to enforcement by preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) In interpreting an arbitration agreement, courts apply the same principles used to interpret contractual provisions with the fundamental goal of giving effect to the parties’ mutual intentions and applying contractual language if clear and explicit. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177.) Because public policy strongly favors arbitration, “any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)

Existence of an Arbitration Agreement

Under the Federal Arbitration Act (FAA), the court’s role “is limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 840, quoting U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC (9th Cir. 2017) 871 F.3d 791, 796.)

In this case, Defendants claim Plaintiff entered into an arbitration agreement on January 10, 2020 by signing it as part of Plaintiff’s salesperson compensation agreement. (Sessions Decl., ¶ 4, Ex. A, p. 10.) Plaintiff does not contest the existence of the arbitration agreement or that Plaintiff signed in, instead arguing the agreement is unenforceable because it is unconscionable. (Manoukian Decl., ¶ 9-11.) Thus, the court finds an arbitration agreement exists and applies to the present action.

Unconscionability

“Under both federal and state law, arbitration agreements are valid and enforceable, unless they are revocable for reasons under state law that would render any contract revocable” including “fraud, duress, and unconscionability.” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) In this case, Plaintiff argues the arbitration agreement is unenforceable due to procedural and substantive unconscionability.¿

“‘[U]nconscionability 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.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, quoting A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 486-487.) While both elements must be present to prevent enforcement, courts evaluate them as a sliding scale in that “the 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.” (Ibid.)

Procedural Unconscionability

Plaintiff contends the arbitration agreement is procedurally unconscionable for two reasons. First, Plaintiff claims Plaintiff lacked a meaningful opportunity to negotiate or reject the agreement. However, when “there is no other indication of oppression or surprise, ‘the degree of procedural unconscionability of an adhesion agreement is low, and the agreement will be enforceable unless the degree of substantive unconscionability is high.’” (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704, quoting Ajamian v. CantorCO2e (2012) 203 Cal.App.4th 771, 796.)

Here, Plaintiff does not point to any specific instances of oppression or surprise. Instead, Plaintiff merely claims Defendants’ staff failed to review the agreement with Plaintiff and did not provide anyone to answer Plaintiff’s questions. (Manoukian Decl., ¶ 5, 10-14.) Furthermore, the arbitration agreement allowed Plaintiff to opt-out of the agreement’s waiver of the right to bring representative actions under PAGA. (Sessions Decl., Ex. A, p. 8.)

Second, Plaintiff claims Plaintiff was not provided a copy of the AAA arbitration rules. (Manoukian Decl., ¶ 7, 13-14.) While the most current arbitration agreement provided a link to AAA rules, Plaintiff claims the link is inaccessible and that rules were not provided in any other format. (Manoukian Decl., ¶ 13-14.) In arguing the failure to provide AAA rules was procedurally unconscionable, Plaintiff relies on Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227 (Carbajal). In Carbajal, the court noted failure to provide a copy of the arbitration rules supports a finding of procedural unconscionability. (Id., at p. 244-245.) However, our supreme court clarified that “the failure to provide a copy of the arbitral rules, standing alone, does not heighten the degree of procedural unconscionability” as a proper inquiry looks at the actual rules in question. (Davis v. Kozak (2020) 53 Cal.App.5th 897, 909, citing Baltazar Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246.)

Here, while Plaintiff objects to Defendants’ failure to provide a copy of the AAA arbitration rules, Plaintiff does not point to any substantive unconscionability in the AAA rules. Thus, the court finds as minimal any procedural unconscionability in this arbitration agreement, and now considers Plaintiff’s argument regarding the agreement’s substantive unconscionability.

Substantive Unconscionability

Plaintiff maintains the arbitration agreement is substantively unconscionable because it forces Plaintiff to arbitrate Plaintiff’s PAGA claims. Defendants argue the U.S. Supreme Court has recently held an employee’s “individual PAGA claims” may be compelled to arbitration in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1924-1925 (Viking River Cruises).

As an initial matter, the court notes there is no such thing as an “individual PAGA claim.” Pursuant to PAGA, “an aggrieved employee” may bring an action “on behalf of himself or herself and other current or former employees” and collect civil penalties allowed by the Labor Code. (Labor Code, § 2699, subd. (a).) “There is no individual component to a PAGA action because ‘every PAGA action . . . is a representative action on behalf of the state.’” (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 87, quoting Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 387 (Iskanian).) “Plaintiffs may bring a PAGA claim only as the state's designated proxy, suing on behalf of all affected employees.” (Ibid; see also Reyes v. Macy’s, Inc. (2011) 202 Cal.App.4th 1119, 1123 ([“A plaintiff asserting a PAGA claim may not bring the claim simply on his or her own behalf but must bring it as a representative action . . . .”].) Nonetheless, at least one or more of the alleged violations pursuant to PAGA must have been committed against the employee for the employee to be defined as an “aggrieved employee.” (Labor Code, § 2699, subd. (c).)

In Iskanian, our supreme court held an arbitration agreement that waives representative PAGA claims is unenforceable as a violation of public policy. (Iskanian, supra, 59 Cal.4th at 384.) The court noted individual arbitration of PAGA claims undermines the purpose of PAGA. (Id.) However, the U.S. Supreme Court has since abrogated Iskanian in Viking River Cruises. There, the court held “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Viking River Cruises, supra, 142 S.Ct. at p. 1924.)

To the extent PAGA’s scheme allowed an aggrieved employee to allege violations as to other employees, Viking River Cruises now allows employees to waive that right in arbitration agreements. (Ibid.) Thus, while an aggrieved employee may still bring a PAGA action as a representative of the state in arbitration, that employee can be precluded from alleging violations not committed against that employee. (See id., at p. 1922-1923.) Therefore, the arbitration agreement’s waiver of Plaintiff’s right to assert labor violations on behalf of other employees is not substantively unconscionable.

Accordingly, because the arbitration agreement lacks substantive unconscionability, its minimal procedural unconscionability fails to render it unenforceable.

Stay or Dismissal of Plaintiff’s PAGA Claim

In the event the court compels arbitration, Plaintiff argues the court should stay the non-individual portions of Plaintiff’s PAGA claim. The court agrees.

In Viking River Cruises, the court noted an arbitration agreement cannot be a “wholesale waiver of PAGA claims.” (Id., at p. 1924-1925.) In fact, Viking River Cruises suggests a Plaintiff could separately assert violations on the behalf of other employees in a separate action before the court while individual violations are subject to arbitration. (Id., at p. 1925.) As noted by Plaintiff, our supreme court granted review in Adolph v. Uber Technologies, Case No. S274671, on July 20, 2022, and on August 1, 2022, set the issue to be briefed as: “Whether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee…maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ in court or in any other forum the parties agree is arbitrable.”

Accordingly, this court defers its ruling only as to the issue of dismissal of the remaining representative claims, pending the supreme court’s decision in Adolph.¿ If Plaintiff retains standing to assert the representative PAGA claims, those claims are stayed pending the arbitration of the individual claims.

CONCLUSION

Based on the foregoing, Defendants’ motion to compel arbitration of Plaintiff’s PAGA complaint is GRANTED as to Plaintiff’s PAGA claim for violations suffered individually by Plaintiff. However, Plaintiff’s claims on the behalf of other employees are STAYED pending the California Supreme Court’s ruling in Adolph v. Uber Technologies, Case No. S274671.