Judge: Serena R. Murillo, Case: 23STCV15996, Date: 2023-10-31 Tentative Ruling
Case Number: 23STCV15996 Hearing Date: October 31, 2023 Dept: 31
TENTATIVE
Defendant’s motion to compel arbitration is GRANTED. Further, the
action is stayed as to all parties pending the arbitration.
Legal Standard
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.) Under both the Federal Arbitration Act and
California law, arbitration agreements are valid, irrevocable, and enforceable,
except on such grounds that exist at law or equity for voiding a contract. (Winter
v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The petitioner bears the burden of proving the existence of
a valid arbitration agreement by the preponderance of the evidence, the party
opposing the petition then bears the burden of proving by a preponderance of
the evidence any fact necessary to demonstrate that there should be no
enforcement of the agreement, and the trial court sits as a trier of fact to
reach a final determination on the issue. (Rosenthal v. Great Western
Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) The Court is
empowered by Code of Civil Procedure section 1281.2 to compel parties to
arbitrate disputes pursuant to an agreement to do so.
Code of Civil
Procedure section 1281.2 states that:
The court shall
order the petitioner and the respondent to arbitrate the controversy if it
determines that an agreement to arbitrate the controversy exists, unless it
determines that:
(a) The right to
compel arbitration has been waived by the petitioner; or
(b) Grounds exist
for the revocation of the agreement.
(c) A party to
the arbitration agreement is also a party to a pending court action or special
proceeding with a third party, arising out of the same transaction or series of
related transactions and there is a possibility of conflicting rulings on a
common issue of law or fact. For purposes of this section, a pending court
action or special proceeding includes an action or proceeding initiated by the
party refusing to arbitrate after the petition to compel arbitration has been
filed, but on or before the date of the hearing on the petition. This
subdivision shall not be applicable to an agreement to arbitrate disputes as to
the professional negligence of a health care provider made pursuant to Section
1295.
(Code of Civ.
Proc. § 1281.2.)
The party
petitioning to compel arbitration under written arbitration agreement bears the
burden of proving the existence of a valid arbitration agreement by a
preponderance of the evidence, and party opposing petition must meet the same
evidentiary burden to prove any facts necessary to its defense. The trial court
acts as the trier of fact, weighing all the affidavits, declarations, and other
documentary evidence. (Code of Civ. Proc. § 1281.2; Provencio v. WMA
Securities, Inc. (2005) 125 Cal.App.4th 1028, 1031.)
Discussion
Defendants move to compel arbitration and stay the
proceedings in this matter.
I.
Existence
of Arbitration Agreement
Defendant has a long-standing policy of
resolving employment-related disputes through arbitration, and every employee
is presented with an arbitration agreement to review and sign upon commencement
of employment. (Acosta-Smith Decl., ¶ 3.) According to the metadata associated
with the digital stamp on Plaintiff’s Arbitration Agreement, Plaintiff accessed
the Mutual Voluntary Agreement For Individual Arbitration (“Arbitration
Agreement” or “Agreement”) on February 24, 2020 from a device located at PPMS’s
West Covina Branch. (Rivas Decl., ¶ 16.) Plaintiff read the Arbitration
Agreement and signed it, stating that he understood and agreed to the terms of
the Agreement. (Acosta-Smith Decl., ¶ 4, Exh. A.) The Arbitration
Agreement, in part, stated as follows:
The Employee and the Company agree to
resolve, through binding arbitration, all past, present or future disputes,
claims, causes of action, lawsuits, proceedings, and/or controversies
(“Claims”), related to or arising out of the employment relationship of the
Employee or the termination of such relationship with the Company....
(Id.)
As such, Defendant has shown that a valid agreement
to arbitrate exists. Plaintiff does not present any arguments to dispute this.
II.
Unconscionability
In general, the doctrine of unconscionability refers to “ ‘ “an 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
A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) In other words, the
doctrine consists of procedural and substantive components, “ ‘the former
focusing on oppression or surprise due to unequal bargaining power, the latter
on overly harsh or one-sided results.’ ” (Ibid.)
If unconscionable, the arbitration agreement is not a valid contract and
therefore is unenforceable. (Armendariz, supra, 24 Cal.4th
at p. 114.) Although both components of unconscionability must be present
to invalidate an arbitration agreement, they need not be present in the same
degree. (Id.) “ ‘Essentially a
sliding scale is invoked which disregards the regularity of the procedural
process of the contract formation, that creates the terms, in proportion to the
greater harshness or unreasonableness of the substantive terms themselves.
[Citations.] In other words, the more substantively unconscionable 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.)
a. Procedural Unconscionability
Procedural unconscionability has to
do with matters relating to freedom of assent. (Kinney v. United Healthcare
Servs. (1999) 70 Cal.App.4th 1322, 1329.) The procedural element focuses on
two factors: oppression and surprise. (Id.) “Oppression” arises
from an inequality of bargaining power which results in no real negotiation and
an absence of meaningful choice. (Id.) “Surprise” involves the extent to
which the supposedly agreed-upon terms of the bargain are hidden in the printed
form drafted by the party seeking to enforce the disputed terms. (Id.)
A “contract of adhesion” creates some amount of procedural
unconscionability – the term signifies a standardized contract, which, imposed
and drafted by the party of superior bargaining strength, relegates to the
subscribing party only the opportunity to adhere to the contract or reject it.
(Neal v. State Farm Ins. Cos. (1961) 188 Cal.App.2d 690, 694.) In
addition, a lack of effort to highlight the presence of an arbitration
provision, such as through bold lettering, larger font, or capitalization, has
been found to indicate procedural unconscionability. (See Higgins v.
Superior Court (2006) 140 Cal.App.4th 1238.) However, when there is no other
indication of oppression other than the adhesive aspect of an agreement, the
degree of procedural unconscionability is low. (Serpa v. California Surety
Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)
“[T]he fact that the arbitration agreement is an adhesion contract does
not render it automatically unenforceable as unconscionable. Courts have
consistently held that the requirement to enter into an arbitration agreement
is not a bar to its enforcement.” (Serafin v. Balco Properties Ltd., LLC
(2015) 235 Cal.App.4th 165, 179; see also AT&T Mobility LLC v.
Concepcion (2011) 563 U.S. 333, 346-47 [“the times in which consumer
contracts were anything other than adhesive are long past”].)
1.
Contract of Adhesion
Here, Plaintiff argues that the agreement is procedurally unconscionable
because the agreement was drafted by Defendant, was presented on a take it or
leave it basis, and was presented among other documents. (Aguilera Decl., ¶ 4.) Moreover, when Mr. Aguilera did attempt to
ask questions about the forms, he was told to simply sign them as they were
standard in any employment agreement. (Id.) Mr. Aguilera was in no position to
bargain: he could not afford to lose his employment opportunity with Defendant
because he desperately needed income. Mr. Aguilera either had to quickly sign
the Agreement and several other documents or lose his employment opportunity
with Defendant. (Aguilera Decl., ¶¶ 3-4.)
However, as explained above, the fact that it is an adhesion contract
does not render it automatically unenforceable as unconscionable. Further, the
requirement to enter into an arbitration agreement is not a bar to the
agreement’s enforcement. (Serafin, 235 Cal.App.4th at
179.) As such, the
Court finds that there was some degree of procedural unconscionability.
2.
Oppression
“The
circumstances relevant to establishing oppression include, but are not limited
to (1) the amount of time the party is given to consider the proposed contract;
(2) the amount and type of pressure exerted on the party to sign the proposed
contract; (3) the length of the proposed contract and the length and complexity
of the challenged provision; (4) the education and experience of the party; and
(5) whether the party’s review of the proposed contract was aided by an
attorney.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111,
126-127.) “In both the prehiring and posthiring settings, courts
must be particularly attuned to the danger of oppression and
overreaching.” (Id. at 127.) “[A] complaining party need not
show it tried to negotiate standardized contract terms to establish procedural
unconscionability.” (Id.) With respect to
the employment agreement “Kho was required to sign [it] immediately and return
[it] to the porter, who waited in [Kho’s] workstation.” (Id.)
The arbitration provision in the employment agreement was “contained in a
dense, single-spaced paragraph, written in very small typeface that fills
almost an entire page.” (Id. at 119.) The Kho court
indicated that Kho was presented with the contract containing the arbitration
provision “in his workspace, along with other employment-related documents . .
. [and] [n]either its contents nor its significance was explained.” (Id.
at 127.) The Kho court found that the arbitration provision was
“complex . . . [and] filled with statutory references and legal jargon.”
(Id. at 128.) The Kho court also found that with respect to
arbitration costs and fees, the agreement did not explicitly indicate that the
employer would pay for arbitration-related costs and that references to
statutory cost provisions “would not be evident to anyone without legal
knowledge or access to the relevant authorities.” (Id. at
128-129.) The Kho court held that the arbitration provision was
procedurally unconscionable because “it [was] virtually impossible to conclude
that Kho knew he was . . . voluntarily agreeing to arbitration.” (Id.
at 129.)
Aguilera was told he had to sign the
agreement immediately prior to commencing work and was pressured to sign
quickly. (Aguilera Decl., ¶ 3; Exh. A.) Defendant’s employee would check each
page to ensure there was a signature before allowing an applicant to start
working. (Id.) Aguilera felt pressured into signing the Agreement because he
was told he was required to sign it prior to him starting work, and he could
not afford to lose his employment. (Id., ¶¶ 2, 4.) The Agreement itself is four
pages and includes multiple long, block paragraphs, and was written in no
larger than 8-point font. Further, it contains legal jargon which was difficult
for Aguilera to understand. Because he has no legal background and because no
one gave him an explanation of the arbitration agreement, he would not have
understood its contents. (Id. ¶ 5.)
First,
the arbitration agreement is not contained in a dense, single-spaced
paragraph like in Kho. Moreover, Aguilera does not explain his level of
education and experience. He only states he does not have a legal background,
but he does not need to have legal background to understand the agreement.
Nevertheless, the Court finds that the Agreement possesses a moderate level of
procedural unconscionability.
3. Provision of Applicable Arbitration Rules
Third, Plaintiff contends that the agreements are procedurally and
substantively unconscionable because the
arbitration rules and procedures were not attached for Plaintiff’s
review.
“The failure to attach a copy of the arbitration rules could be a factor
supporting a finding of procedural unconscionability where the failure would
result in surprise to the party opposing arbitration.” (Lane v. Francis
Capital Management LLC (2014) 224 Cal.App.4th 676, 690.) In Lane,
the Court concluded, “The failure to attach a copy of the arbitration rules
could be a factor supporting a finding of procedural unconscionability where
the failure would result in surprise to the party opposing arbitration.” (Id.)
The Lane Court ultimately determined that “the failure to attach a copy
of the AAA rules did not render the agreement procedurally unconscionable.
There could be no surprise, as the arbitration rules referenced in the
agreement were easily accessible to the parties—the AAA rules are available on
the Internet.” (Id. at p. 691.)
In Baltazar, the Supreme Court recognized that an employer’s
failure to attach the AAA rules to an arbitration agreement requires courts to
more closely scrutinize the substantive unconscionability of terms that were
“artfully hidden” but does not otherwise add to the procedural
unconscionability of the agreement. (E.g., Baltazar, 62 Cal.4th at
p. 1246; Nguyen, 4 Cal.App.5th at pp. 248-249.)
Here, the Agreement specifically
incorporates the American Arbitration Association (“AAA”) Rules, which are
widely available on the internet. (Karapetyan Decl., ¶ 4, Exs. C and D.)
Notably, the Agreement includes the website http://www.adr.org/employment,
where Plaintiff can access the rules. (Karapetyan Decl., ¶ 4, Ex. B.) The
Agreement also specifies that Plaintiff may obtain a copy of the rules upon
request. (Id.) The AAA rules provide the process to exchange information
and conduct discovery, including depositions and written discovery. (Karapetyan
Decl.,¶ 4; Ex. C.) Plaintiff
does not identify any specific provisions of the AAA rules that he contends
render the agreement substantively unconscionable; thus, Defendants’ failure to
attach the AAA Rules and its incorporation of the rules by reference does not
add to the procedural unconscionability of the arbitration provisions.
B. Substantive Unconscionability
An agreement is substantively unconscionable if it
imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably
favorable,” or “so one-sided as to ‘shock the conscience.’ ” (Sanchez
v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910-911.) “All of
these formulations point to the central idea that unconscionability doctrine is
concerned not with ‘a simple old-fashioned bad bargain’ [citation], but with
terms that are ‘unreasonably favorable to the more powerful party.’
[Citation.]” (Id. at p. 911.) “These include ‘terms that
impair the integrity of the bargaining process or otherwise contravene the
public interest or public policy; terms (usually of an adhesion or boilerplate
nature) that attempt to alter in an impermissible manner fundamental duties
otherwise imposed by the law, fine-print terms, or provisions that seek to
negate the reasonable expectations of the nondrafting party, or
unreasonably and unexpectedly harsh terms having to do with price or other
central aspects of the transaction.’ ” (Id. at p. 911.)
Plaintiff also argues that Defendant’s Agreement is
substantively unconscionable because it contains contradictory terms that
cannot be reconciled—while stating that his claims for retaliation under Cal.
Lab. Code section 1102.5 must be subject to arbitration, it contradicts itself
by stating that claims within the jurisdiction of the California Labor
Commissioner—which necessarily include 1102.5 claims—are not covered by the
Agreement. (Aguilera Decl., ¶ 4; Exh. A.)
The California Supreme Court has recognized that
“[w]hen an arbitration provision is ambiguous, we will interpret that
provision, if reasonable, in a manner that renders it lawful, both because of
our public policy in favor of arbitration as a speedy and relatively
inexpensive means of dispute resolution, and because of the general principle
that we interpret a contractual provision in a manner that renders it
enforceable rather than void.” (Pearson Dental Supplies, Inc. v.
Superior Court (2010) 48 Cal.4th 665, 682 (Pearson).)
After reading the language the Court finds that it
does not contain contradictory terms that cannot be reconciled. Section 1 of
the Arbitration Agreement clearly indicates that Plaintiff’s section 1102.5
claim is subject to the Agreement. (Karapetyan Decl., ¶ 4, Ex. B.)
Defendants also contend that if the
Court were to find this provision substantively unconscionable, severance would
be authorized. In Armendariz, the California Supreme Court recognized
that Civil Code, section 1670.5 gives trial courts some discretion as to
whether to sever or restrict unconscionable provisions or whether to refuse to
enforce the entire agreement, but that it also appears to contemplate the
latter course only when an agreement is “permeated” by unconscionability.
(Armendariz, supra, 24 Cal.4th 83, 122.) After reviewing
the relevant law, the Supreme Court held: “Courts are to look to the various
purposes of the contract. If the central purpose of the contract is
tainted with illegality, then the contract as a whole cannot be enforced.
If the illegality is collateral to the main purpose of the contract, and the
illegal provision can be extirpated from the contract by means of severance or
restriction, then such severance and restriction are appropriate. (Id.
at p. 124.)
Here, the Court finds that even if
the identified terms were substantively unconscionable, these terms would not
render the arbitration provisions “permeated” by unconscionability and would
thus be severable.
For these reasons, the Court finds
that the identified terms do not render the arbitration provisions
substantively unconscionable.
As such, Plaintiff has not
shown any substantive unconscionability. Because both substantive and
procedural components of unconscionability need to be present, Plaintiff has
not shown the contract was unconscionable.
III.
Stay
CCP § 1281.4 provides:
If a court of
competent jurisdiction, whether in this State or not, has ordered arbitration
of a controversy which is an issue involved in an action or proceeding pending
before a court of this State, the court in which such action or proceeding is
pending shall, upon motion of a party to such action or proceeding, stay the
action or proceeding until an arbitration is had in accordance with the order
to arbitrate or until such earlier time as the court specifies.
Thus, Defendant’s motion to stay the action pending arbitration is
granted.
Conclusion
Based on the foregoing, Defendants’ motion to compel arbitration is
GRANTED. Further, the action is stayed as to all parties pending the
arbitration.
Moving party
is ordered to give notice.