Judge: Stephanie M. Bowick, Case: 24STCV08120, Date: 2024-11-25 Tentative Ruling
Case Number: 24STCV08120 Hearing Date: November 25, 2024 Dept: 19
TENTATIVE RULING
After consideration of the
briefings filed and oral argument at the hearing, Defendant Walmart, Inc. (sued as
Walmart, Inc. dba Spark)’s Motion to Compel Arbitration is GRANTED.
The Court orders the entire
action stayed pending arbitration
of Plaintiffs Pamela Sullivan, Javal Ashley, and Hilario Garcia’s claims.
The Court signs the proposed order filed on August 22,
2024.
The Court sets a Status Conference Re: Arbitration on
August 23, 2025, at 8:30 a.m., in Department 19 of the Stanley Mosk Courthouse.
Counsel for Defendant to give notice.
STATEMENT OF THE CASE
This is a consumer rights
action. Plaintiffs Pamela
Sullivan, Javal Ashley, and Hilario Garcia (collectively, “Defendants”) bring
suit against Defendant Walmart, Inc. (sued as Walmart, Inc. dba Spark)
(“Defendant”) alleging the following causes of action:
1. Consumer Legal Remedies Act (CLRA) (Cal. Civ. Code § 1750 Et Seq.);
2. False Advertising (Cal. Bus. & Prof. Code §§ 17500 And 17509);
3. Unfair Business Practices (Cal. Bus. & Prof. Code §§ 17200 - 17208);
and
4. Injunctive Relief.
Plaintiffs allege that they
were drivers for Defendant’s “Spark By Walmart,” an alleged crowdsourced delivery
platform which utilizes independent contractors for delivery of Defendant’s
store items to customers. Plaintiffs allege that Defendant made false and
deceptive misrepresentations in advertisements concerning drivers’ earning and
pay.
Defendant filed the instant
Motion to Compel Arbitration (the “Motion”).
GROUNDS FOR MOTION
Pursuant to the Federal Arbitration Act, Defendant moves
for an order compelling Plaintiffs to arbitrate their claims and for a stay of
the proceeding pending arbitration on the ground that there exists a valid and
enforceable written arbitration agreement covering Plaintiffs’ claims.
DISCUSSION
I.
APPLICABLE LAW
The Federal Arbitration Act (“FAA”) provides that arbitration agreements
in contracts are valid, irrevocable, and enforceable, except upon such grounds
as exist at law or in equity for the revocation of any contract, (9 U.S.C. §
2), and preempts any state-law rule that stands as an obstacle to the FAA’s
strong public policy in favor of enforcement of arbitration agreements. (Iskanian
v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 173,
abrogated in part on other grounds in Viking River Cruises, Inc. v. Moriana
(2022) 142 S.Ct. 1906.)
“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 (quoting 9 U.S.C. § 2; citing Khalatian v. Prime
Time Shuttle, Inc. (2015) 237 Cal.App.4th 651, 657).) “‘[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.’” (Carbajal, supra, 245 Cal.App.4th at 238 (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].)
The issue of whether the FAA governs
the arbitration agreement “is a question of law involving interpretation of
statutes and the contract (with no extrinsic evidence).” (Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1117.) “The party asserting the FAA bears the burden
to show it applies by presenting evidence establishing the contract with the
arbitration provision has a substantial relationship to interstate commerce….”
(Carbajal, supra, 245 Cal.App.4th 227, 234; see Shepard v. Edward
Mackay Enterprises, Inc. (2007) 148 Cal.App.4th 1092, 1101 [“The party
claiming a state law is preempted by federal legislation has the burden of
demonstrating preemption.”].)
Defendant contends that the
FAA applies because, in the written arbitration agreements between Plaintiffs
and Defendant, (hereafter, collectively, the “Arbitration Agreements”), the
parties agreed that the FAA would govern. (Motion, pp. 5-7.)
The “Arbitration Provision”
in each of the three Arbitration Agreements, one for each of the Plaintiffs,
provides, in relevant part, that:
¿ 1.A ARBITRATION OF CLAIMS: The Parties expressly agree that this
Arbitration Provision is governed exclusively by the Federal Arbitration Act ,
9 U.S.C. §§ 1-16 (“FAA”), and evidences a transaction involving commerce, and
Contractor agrees that this is not a contract of employment involving any class
of workers engaged in foreign or interstate commerce within the meaning of
Section 1 of the FAA. The validity, interpretation, and enforcement of this
Arbitration Provision shall be governed by the FAA even if Claimant and/or
Walmart are otherwise exempt from the FAA. The provisions of this Arbitration
¿Provision shall remain in
force after the Parties’ contractual relationship ends. Except as it otherwise
provides, this Arbitration Provision is intended to apply to the resolution of
all disputes between the Parties, and requires all such disputes to be resolved
on an individual basis and only by an arbitrator through final and binding arbitration
and not by way of a court or jury trial, nor a proceeding before any other
governmental body, and not by way of a class, collective, mass, or
representative action or proceeding.
A.i State Arbitration Acts: As stated above, the Parties expressly agree
that this Arbitration Provision is governed exclusively by the FAA, and it is
the Parties’ express intent that this Arbitration Provision shall be
enforceable to the fullest extent of law even if it is determined that the FAA
does not apply. Moreover, if, and only if, it is determined that the FAA does not
apply to this Arbitration Provision, the arbitration laws of the State(s) in
which Contractor performed Services contemplated by this Agreement shall apply.
(Ashley O’Brien Decl., ¶ 6,
Ex. A at § II, ¶¶ 1.A, A.i [agreement with Plaintiff Javal Ashley]; id.
at ¶ 8, Ex. B at § II, ¶¶ 1.A, A.i [agreement with Plaintiff Hilario Garcia]; id.
at ¶ 16, Ex. C at § II, ¶¶ 1.A, A.i.)
Given that Plaintiffs and
Defendant, in their respective arbitration agreement, agreed that the FAA would
govern, the Court agrees with Defendant that the FAA applies. (See, e.g.,
Rodriguez, supra, 136 Cal.App.4th at 1115, 1122 [parties may agree in
arbitration agreement to apply the FAA].)
Plaintiffs do not dispute
that the FAA applies, but rather contend that, as transportation workers
engaged in interstate commerce, they are exempt pursuant to Section 1 of the
FAA. (Opposition, pp. 8-9 (citing New Prime Inc. v. Oliveira (2019) 586
U.S. 105; Rittmann v. Amazon.com, Inc. (9th Cir. 2020) 971 F.3d 904).)
The Court rejects
Plaintiffs’ argument.
As explained by the Court
of Appeal in Betancourt v. Transportation Brokerage Specialists, Inc.
(2021) 62 Cal.App.5th 552:
The FAA was enacted by Congress in 1925 as “a response to hostility of
American courts to the enforcement of arbitration agreements, a judicial
disposition inherited from then-longstanding English practice.” (Circuit
City Stores, Inc. v. Adams (2001) 532 U.S. 105, 111… (Circuit City).)
Section 2 of the FAA provides that contracts “evidencing a transaction
involving commerce” and containing arbitration provisions “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.)
Section 1 of the FAA, however, provides a limited exemption from FAA
coverage to “contracts of employment of seamen, railroad employees, or any
other class of workers engaged in foreign or interstate commerce.” (9 U.S.C. §
1.) In Circuit City, the United States Supreme Court concluded that the
catchall clause in section 1—“any other class of workers engaged in foreign or
interstate commerce”—does not refer to all workers involved in foreign or
interstate commerce, but rather only to “transportation workers.” (Circuit
City, supra, 532 U.S. at p. 119….) Circuit City reasoned that
such an interpretation was consistent with “Congress’ demonstrated concern with
transportation workers and their necessary role in the free flow of goods,”
which “explains the linkage to the two specific, enumerated types of workers
identified in the preceding portion of the sentence.” (Id. at p. 121….) Circuit
City did not, however, elaborate on what job types or duties would qualify
an employee as a “transportation worker” under this catchall. (Id. at p.
119….)
(Id. at 558-559.)
Whether a particular
employee can be defined as a “transportation worker” under the FAA exemption
requires “a case-by-case factual determination, with the party opposing the
motion to compel arbitration bearing the burden to demonstrate that the
exemption applies.” (Id. at 559 (citing Muller v. Roy Miller Freight
Lines, LLC (2019) 34 Cal.App.5th 1056, 1069; Performance Team
Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1241).)
California courts have held
that delivery drivers who only made intrastate deliveries are nonetheless
“engaged” in interstate commerce and exempted pursuant to Section 1 of the FAA
where such transportation of goods wholly within a state are still part of a
“continuous” interstate “journey” involving movement of interstate goods to
their destination. (Id. at 559-561 (citing Nieto v. Fresno
Beverage Co., Inc. (2019) 33 Cal.App.5th 274, 284; Muller, supra,
34 Cal.App.5th at 1069; Rittmann, supra, 971 F.3d at 916).)
Here, the Court agrees with
Defendant (see Reply, pp. 6-7) that
Plaintiffs fail to meet their burden to demonstrate that the exemption
applies. Plaintiffs failed to file any evidence in support of their Opposition,
and the Court agrees with Defendant that nothing in Plaintiffs’ Complaint
indicates that Plaintiffs were “workers engaged in foreign or interstate
commerce.” (9 U.S.C. § 1.)
Moreover, Plaintiffs
expressly agreed in the Arbitration Agreements that the arbitration provision
“is not a contract of employment involving any class of workers engaged in
foreign or interstate commerce within the meaning of Section 1 of the FAA.”
(O’Brien Decl. at ¶¶ 6, 8, 16, Exs. A-C at § II, ¶¶ 1.A, A.i.)
Accordingly, the Court
finds that Defendant sustains its burden to demonstrate that the FAA applies,
that Plaintiffs fail to sustain their burden to demonstrate that they are
exempt pursuant to Section 1 of the FAA, and therefore the FAA governs.
II.
THRESHOLD PROCEDURAL
REQUIREMENTS
California Rules of Court, rule 3.1330 provides that a
motion or petition to compel arbitration pursuant to Code of Civil Procedure
sections 1281.2 and 1281.4 “must state, in addition to other required
allegations, the provisions of the written agreement and the paragraph that
provides for arbitration.” (Cal. R. Ct., 3.1330.) “The provisions must be
stated verbatim or a copy must be physically or electronically attached to the
petition and incorporated by reference.” (Id.)
Further, Code of Civil Procedure
section 1281.2 requires a party seeking to compel arbitration “to plead and
prove a prior demand for arbitration under the parties’ arbitration agreement
and a refusal to arbitrate under the agreement.” (Mansouri v. Superior Court
(2010) 181 Cal.App.4th 633, 640-41 [“…if proof of a demand and refusal to
arbitrate under the agreement is a necessary prerequisite to a petition to
compel arbitration under section 1281.2, the failure to prove such demand and
refusal is a failure to state a cause of action—a fundamental error that
permits us to review the issue despite a party's failure to raise the theory in
the trial court.”].) However, Code of Civil Procedure section 1281.2 “does not
include a requirement that the petitioning party have made a demand for
arbitration, only that the other party has refused to arbitrate” and
arbitration can be made without a formal demand ever having been made. (Hyundai
Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 577.) The
filing of a lawsuit rather than commencing arbitration proceedings as required
by the agreement affirmatively establishes the refusal to arbitrate the
controversy requirement. (Id.)
Here, the Court finds that Defendant
complies in all respects with California Rules of Court, rule 3.1330. Defendant
states the provisions of the written Arbitration Agreements that provide for
arbitration and incorporate by reference a copy of the Arbitration Agreements.
(Motion at pp. 3-4 (citing O’Brien Decl. at ¶¶ 6, 8, 16, Exs. A-C).) Plaintiffs
do not oppose the Motion on the ground that Defendant failed to comply with
California Rules of Court, rule 3.1330. The filing of Plaintiffs’ Complaint
establishes that Plaintiffs refused to arbitrate the controversy.
III.
ANALYSIS ON MOTION TO
COMPEL ARBITRATION
In deciding a petition to compel arbitration, trial courts must decide
first whether an enforceable arbitration agreement exists between the parties,
and then determine the second gateway issue of whether the claims are covered
within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004)
118 Cal.App.4th 955, 961; see also Pinnacle Museum Tower Assn. v. Pinnacle
Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [“[g]eneral
principles of contract law govern whether parties have entered a binding
agreement to arbitrate”].)
A.
Defendant’s Burden of Showing Existence of
Agreement to Arbitrate
The party seeking to compel arbitration bears the burden of proving the
existence of an arbitration agreement by the preponderance of the evidence. (Engalla
v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972; see 9 U.S.C.
§ 2 […an agreement in writing to submit to arbitration an existing controversy
arising out of such a contract, transaction, or refusal, shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.”].) General principles of contract law determine if the
parties have entered into a binding agreement to arbitrate. (Craig v. Brown
& Root, Inc. (2000) 84 Cal.App.4th 416, 420 (citing Chan v.
Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, 640-641).)
The Court finds that Defendant sustains
its burden of proving, by a preponderance of the evidence, the existence of an
arbitration agreement between Defendant and each of the Plaintiffs. (O’Brien
Decl. at ¶¶ 4-21, Exs. A-I),
Indeed, Plaintiffs do not contend that
there does not exist agreements to arbitrate between them and Defendant, but instead
assert a defense to enforcement of the Arbitration Agreements, namely, that
they are unconscionable. (See Opposition at pp. 9-11.)
Accordingly, the Court finds that Defendant sustains its burden by a
preponderance of the evidence showing the existence of an arbitration agreement between
Defendant and each of the Plaintiffs. (See Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219 [where authenticity of the agreement never challenged, defendant meets
burden merely by attaching a copy of the agreement to its petition to compel
arbitration]; see Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144
Cal.App.4th 754, 765 [petitioner “may meet its burden by complying with”
California Rules of Court, rule 3.1330].)
B. Defendant’s Burden of Showing Claims within Scope of Agreement/Arbitrability
Defendant argues that all of Plaintiffs’ claims fall within the scope of
the Arbitration Agreements and therefore are arbitrable, (Motion at pp. 7-11),
but that, “¿even if that were not the case, an arbitrator—and not the Court—should
resolve any question of the scope of the claims covered.” (Id. at p. 11;
see id. at p. 12.)
Plaintiffs do not dispute that all of their claims fall within the scope
of the Arbitration Agreements and therefore are arbitrable, but instead contend
that “¿[t]he Court should retain authority over the question of arbitrability
in this case, as the claims involve public injunctive relief and unwaivable
statutory rights under California law.” (Opposition at p. 9 (citing First
Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938).)
Unless the parties clearly and unmistakably provide otherwise, the
question whether they agreed to arbitrate the particular dispute is to be
decided by the court, not the arbitrator. (First Options of Chicago,
Inc., supra, 514 U.S. at 944; Henry Schein, Inc. v. Archer and
White Sales, Inc. (2019) 586 U.S. 63, 68 [“When the parties' contract
delegates the arbitrability question to an arbitrator, a court may not override
the contract. In those circumstances, a court possesses no power to decide the
arbitrability issue. That is true even if the court thinks that the argument
that the arbitration agreement applies to a particular dispute is wholly
groundless.”]; Rent-A-Center, West, Inc. v. Jackson (2010) 561
U.S. 63, 68–69 [“We have recognized that parties can agree to arbitrate ‘gateway’
questions of ‘arbitrability,’ such as whether the parties have agreed to
arbitrate or whether their agreement covers a particular controversy.”].)
Here, the Arbitration Agreements include a delegation clause providing,
in relevant part, that:
¿Only an arbitrator, and not
any federal, state, or local court or agency, shall have the exclusive
authority to resolve any dispute arising out of or relating to the
interpretation, applicability, enforceability, or formation of this Arbitration
Provision, including without limitation any dispute concerning arbitrability. However,
the preceding sentence shall not apply to any dispute relating to or arising
out of the Class Action Waiver and/or Representative Action Waiver… which must
proceed in a court of competent jurisdiction and cannot be heard or arbitrated
by an arbitrator.
(O’Brien Decl. at Exs. A-C,
§ II, ¶ A.iii.)
Thus, the Court finds that
the parties agreed that the arbitrator, not the Court would decide the issue of
arbitrability.
In any event, the Court
agrees with Defendant that it sustains its burden to demonstrate that all of
Plaintiffs’ claims fall within the scope of the Arbitration Agreements and
therefore are arbitrable.
Here, the Arbitration
Agreements provide that the arbitration provisions:
…¿.shall apply to any and all disputes between the Parties regardless of whether
brought by Walmart against Contractor or by Contractor against Walmart or any
of its agents, employees, affiliates, successors, assigns, or subsidiaries
(each of which are intended third party beneficiaries of this Arbitration
Provision), including but not limited to: (1) disputes arising out of or
related to this Agreement; (2) disputes arising out of or related to Contractor’s
classification as an independent contractor; (3) disputes arising out of or
related to the actual or any alleged relationship between Contractor and
Walmart, including termination of the relationship, whether arising under
federal, state, or local law; and (4) disputes arising out of or relating to
Contractor’s performance of Services. This Arbitration Provision also applies,
without limitation, to disputes regarding any city, county, local, state, or
federal wage-and-hour law, employment law, trade secrets, unfair competition,
compensation, meal or rest periods, expense reimbursement, uniform maintenance,
training, termination, discrimination or harassment and claims arising under
the Fair Credit Reporting Act, Defend Trade Secrets Act, Title VII of the Civil
Rights Act of 1964, 42 U.S.C. §1981, the Rehabilitation Act, the Civil Rights
Acts of 1866 and 1871, the Civil Rights Act of 1991, 8 U.S.C. § 1324b (unfair immigration
related practices), the Pregnancy Discrimination Act, Equal Pay Act, Americans
With Disabilities Act, Age Discrimination in Employment Act, Family Medical
Leave Act, Fair Labor Standards Act, Employee Retirement Income Security Act (except
for claims for employee benefits under any benefit plan sponsored by the
Company and (a) covered by the Employee Retirement Income Security Act of 1974 or
(b) funded by insurance), Affordable Care Act, Genetic Information Non-Discrimination
Act, Uniformed Services Employment and Reemployment Rights Act, Worker
Adjustment and Retraining Notification Act, Older Workers Benefits Protection
Act of 1990, Occupational Safety and Health Act, Consolidated Omnibus Budget Reconciliation
Act of 1985, False Claims Act, state or local statutes or regulations
addressing the same or similar subject matters, and all other federal, state,
or local statutory and legal claims (including without limitation torts)
arising out of or relating to Contractor’s relationship with Walmart or the
termination of that relationship.
(O’Brien Decl. at Exs. A-C,
§ II, ¶ A.ii.)
Thus, all of Plaintiffs’
claims fall within the scope of the Arbitration Agreements, and Plaintiffs fail
to provide a sufficient legal or factual basis to conclude that any of their
claims, as alleged in the Complaint, are not arbitrable on public policy or
statutory grounds. (See Opposition at p. 9.) The Court also agrees with
Defendant that, based on the allegations in the Complaint, the requested relief
will primarily benefit ¿current and prospective qualified drivers using the Spark Driver
platform—not the general public. (Reply at pp. 2-5.) In any event, as discussed
above, the parties agreed that the arbitrator, not the Court, will determine
the issue of arbitrability, and Plaintiffs provide no legal authority to
conclude that, notwithstanding the delegation clause, the Court is to decide
issues of arbitrability where claims involve “public injunctive relief and
unwaivable statutory rights under California law.”
For all the foregoing
reasons, the Court finds that Defendant sustains its burden to show, by a
preponderance of the evidence, the existence of an agreement to arbitrate and
that all of Plaintiffs’ claim fall within the scope of the Arbitration
Agreement. Therefore, the burden shifts to Plaintiffs to set forth a defense to
enforcement.
C. Plaintiff’s Burden Establishing Defense to Enforcement
It is well-established that
“arbitration agreements are valid, irrevocable, and enforceable, except upon
grounds that exist for the revocation of a contract generally.” (Ajamian v.
CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 781; see Code Civ.
Proc., § 1281.)
Like the FAA, California’s statutory
scheme, Code of Civil Procedure sections 1280 et seq., reflects a strong public
policy in favor of arbitration and requires the court to enforce a written
arbitration agreement unless one of the following three limited exceptions
apply: “(1) a party waives the right to arbitration; (2) grounds exist for
revoking the arbitration agreement; and (3) pending litigation with a third
party creates the possibility of conflicting rulings on common factual or legal
issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213
Cal.App.4th 959, 967; see Code. Civ. Proc. § 1281.)
The party opposing the
motion to compel arbitration bears the burden of proving by a preponderance of
the evidence any facts necessary to establish any defense to enforcement of an
arbitration agreement. (Engalla, supra, 15 Cal.4th at 972.)
Plaintiffs contend the
Arbitration Agreements are unconscionable. (See Opposition at pp. 9-11.)
“The party resisting arbitration bears the burden of
proving unconscionability.” (Pinnacle Museum Tower Assn., supra,
55 Cal.4th at 247.) “Unconscionability consists of both procedural and
substantive elements. The procedural element addresses the circumstances of
contract negotiation and formation, focusing on oppression or surprise due to
unequal bargaining power.” (Id. at. 246.) Substantive unconscionability
addresses overly harsh or one-sided results. (Armendariz v. Foundation
Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.) Both procedural
unconscionability and substantive unconscionability must be shown, but “they
need not be present in the same degree” and are evaluated on “a sliding scale.”
(Pinnacle, supra, 55 Cal.4th at p. 247.) “[P]rocedural
unconscionability requires oppression or surprise.” (Id.) Oppression
occurs “where a contract involves lack of negotiation and meaningful choice,
surprise where the allegedly unconscionable provision is hidden within a prolix
printed form." (Id.; see also Carmona v. Lincoln Millennium Car
Wash, Inc. (2014) 226 Cal.App.4th 74, 83–84 [finding surprise where
enforceability clause was “hidden” by failing to translate that portion in
English only, where companies knew plaintiffs required Spanish translations
because they provided some translation].)
i.
Procedural Unconscionability
The procedural element of unconscionability “addresses
the circumstances of contract negotiation and formation, focusing on oppression
or surprise due to unequal bargaining power.” (Id. at 246.)
“[P]rocedural unconscionability requires oppression or surprise.” (Id.)
Oppression occurs “where a contract involves lack of negotiation and meaningful
choice, surprise where the allegedly unconscionable provision is hidden within
a prolix printed form." (Id.; see also Carmona, supra. 226
Cal.App.4th at 83–84 [finding surprise where enforceability clause was “hidden”
by failing to translate that portion in English only, where companies knew
plaintiffs required Spanish translations because they provided some
translation].)
Plaintiffs argue the Arbitration Agreements are
procedurally unconscionable because they were presented on a “take-it-or-leave
it” basis, the terms of which could not be realistically modified or
negotiated, and contained a convoluted and difficult to understand or access opt-out
process. (Opposition at pp. 7-9.)
In Reply, (Reply at pp. 8-9), Defendant contends there is
no procedural unconscionability because the Arbitration Agreements contain the
following provision, presented in a clear and straightforward
manner:
¿1.G RIGHT TO OPT-OUT OF ARBITRATION:
This Arbitration Provision is not a mandatory component of this Agreement or Contractor’s
contractual relationship with Walmart. If Contractor does not want to be
subject to this Arbitration Provision, Contractor may opt out by notifying
Walmart in writing of Contractor’s desire to opt out of this Provision. To be effective,
the writing indicating Contractor’s intent to opt out must be dated, signed,
and submitted to Walmart within 30 days of Contractor’s execution of this
Agreement, by U.S. Mail to the Attention of the Legal Department, Walmart Inc.,
702 Southwest 8th Street, Bentonville, Arkansas 72716. The written notice must
be signed by the Contractor, and not any attorney, agent, or other
representative of Contractor. A written notice submitted to Walmart indicating
Contractor’s intention to opt out may apply, at most, to that Contractor.
Contractor (and Contractor’s agent or representative) may not effectuate an opt
out on behalf of other Contractors. Contractor’s writing opting out of this Arbitration
Provision will be filed with a copy of this Agreement and maintained by
Walmart. If Contractor opts out this Arbitration Provision, Contractor will not
be subject to any adverse action as a consequence of that decision and may
pursue available legal remedies without regard to this Arbitration Provision.
If Contractor does not opt out of this Arbitration Provision within the thirty
(30) day period, Contractor and Walmart will be bound by the terms of this Arbitration
Provision. If Contractor opts out of this Arbitration Provision and at the time
of Contractor’s receipt of this Agreement was bound by an existing agreement to
arbitrate disputes arising out of or relating to Contractor’s performance of
Services contemplated by this Agreement, then that existing arbitration
agreement shall remain in full force and effect.
(O’Brien Decl. at Exs. A-C,
§ II, ¶ 1.G.)
Although the Court agrees with Defendant that the opt-out
provision is not, as argued by Plaintiffs, overly complex or difficult to
understand or access, the Court nonetheless agrees with Plaintiffs that the
Arbitration Agreements contain low procedural unconscionability.
As explained
by the California Supreme Court, where an arbitration agreement is imposed on
employees as a condition of employment with no opportunity to negotiate, “the
economic pressure exerted by employers on all but the most sought-after
employees may be particularly acute, for the arbitration agreement stands
between the employee and necessary employment, and few employees are in a
position to refuse a job because of an arbitration requirement.” (Armendariz,
supra, 24 Cal.4th at 115.) Thus, in the employment setting, courts must
be “particularly attuned” to the dangers of oppression and overreaching. (Baltazar
v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244 (quoting Armendariz,
supra, 24 Cal.4th at 115).) However, “cases uniformly agree that
a compulsory pre-dispute arbitration agreement is not rendered unenforceable
just because it is required as a condition of employment or offered on a ‘take
it or leave it’ basis.” (Lagatree v. Luce, Forward, Hamilton & Scripps
(1999) 74 Cal.App.4th 1105, 1127.)
Defendant provides no legal authority to conclude that
Plaintiffs’ classification as “independent contractors” means that, for
purposes of procedural unconscionability, the Arbitration Agreements were not
“preemployment” agreements, or that the dangers of oppression and overreaching
are not present if the job being applied for is classified as an independent
contractor position.
While Section II, Paragraph 1.G of the Arbitration
Agreements states that the agreement to arbitrate “is not a mandatory component”
and that Plaintiffs could opt out, the Arbitration Agreements still required
Plaintiffs, before they could submit their application to become drivers for
Spark, to agree to the entirety of the agreements as-is, including the
agreement to arbitrate, without any opportunity for negotiation of its terms.
Only after Plaintiffs agreed to the entirety of the agreements as-is, including
the agreement to arbitrate, could Plaintiffs later opt-out of the provision
requiring arbitration. (See O’Brien Decl. at ¶ 13 [“¿Drivers were not able to access the Spark
Driver platform without first signing the Agreement, though they could opt out
of the arbitration provisions as described above.”]
Here, laintiffs
were required to agree to
the entirety of the agreements as-is, including the agreement to arbitrate,
without any opportunity for negotiation of its terms, before submitting their
application to become drivers for Spark. Only after Plaintiffs agreed to the
entirety of the agreement as-is, including the agreement to arbitrate, could
Plaintiffs opt-out of the provision requiring arbitration..
Since Plaintiffs needed to agree to the entirety of the
agreements before working for Defendant as Spark drivers, could not negotiate
any of its terms, and could opt out of the arbitration provision only after
agreeing to the entirety of the agreements, the Court finds that the
Arbitration Agreements contain low procedural unconscionability.
The Court proceeds to determine whether Plaintiffs show a
level of substantive unconscionability sufficient to establish a defense to
enforcement of the Arbitration Agreements.
ii.
Substantive Unconscionability
“Substantive unconscionability pertains to the fairness
of an agreement's actual terms and to assessments of whether they are overly
harsh or one-sided.” (Pinnacle Museum Tower Assn., supra, 55
Cal.4th at 246 (citing Armendariz, supra, 24 Cal.4th at 114; Mission
Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197
Cal.App.4th 1146, 1159).)
Plaintiffs argue that there
is substantively unconscionability because the Arbitration Agreements require
Spark Drivers to share the costs of arbitration thereby creating a prohibitive
financial barrier for the drivers. (Motion at pp. 10-11 (citing Lim v.
TForce Logistics, LLC (9th Cir. 2021) 8 F.4th 992; Sonic-Calabasas A,
Inc. v. Moreno (2013) 57 Cal.4th 1109).)
The Arbitration Agreements
provide that:
¿1.D ATTORNEYS’ FEES AND
ARBITRATION COSTS: Each Party shall pay the fees for its own attorneys, subject
to any remedies to which that Party may later be entitled under applicable law,
as determined by the Arbitrator. Costs incidental to the arbitration, including
the Arbitrator’s fees and costs for the meeting site (“Arbitration Costs”),
will be borne by Walmart and Contractor equally, unless otherwise required by
applicable law. Any dispute regarding a Party’s obligation to pay Arbitration
Costs shall be determined by the Arbitrator. In the event Contractor contends that,
as a matter of law, Contractor is not responsible for payment of any or all
Arbitration Costs, Contractor shall have no obligation to pay any portion of
the contested Arbitration Costs until, and only if, the Arbitrator determines
that Contractor is responsible for the costs. If necessary for arbitration of
the dispute, Walmart agrees to advance the amount of the Arbitration Costs contested
by Contractor until such time as the Arbitrator determines payment
responsibility. If the Arbitrator determines that Contractor is responsible for
any amount of the Arbitration Costs already paid by Walmart, Contractor shall
remit payment of that amount to Walmart within 30 days or a reasonable time
(whichever is later) of the Arbitrator’s determination.
(O’Brien Decl. at Exs. A-C,
§ II, ¶ 1.D.)
The Court agrees with
Defendant that the cost provisions of the Arbitration Agreements do not give
rise to any substantive unconscionability because Plaintiffs were given the
opportunity to op-out. As discussed above, Section II, Paragraph 1.G of the
Arbitration Agreements provide that “¿[t]his Arbitration Provision is not a mandatory component of this
Agreement or Contractor’s contractual relationship with Walmart,” and gives
Plaintiffs the option to opt out of the arbitration provisions in their
entirety without having to terminate the employment relationship. (O’Brien
Decl. at Exs. A-C, § II, ¶ 1.G.)
Thus, the Court agrees with
Defendant that Plaintiffs’ reliance on Lim and Sonic-Calabasas A,
Inc. is misplaced because those cases involved mandatory arbitration provisions.
(Lim, supra, 8 F.4th at 1002; Sonic-Calabasas A, Inc., supra,
57 Cal.4th at 1144; see Johnmohammadi v. Bloomingdale's, Inc. (9th Cir.
2014) 755 F3d 1072, 1077 [if the employee is given the right to opt out of an
arbitration provision at the commencement of employment and the opt-out
provision is not exercised, the employer is entitled to enforce the provision].)
Moreover, the Arbitration
Agreements provide that:
¿…the Arbitrator may award
any Party any remedy to which that Party is entitled under applicable law, but
such remedies shall be limited to those that would be available to a Party in
his or her or its individual capacity in a court of law for the claims
presented to and decided by the Arbitrator, including but not limited to the imposition
of sanctions under the Federal Rules of Civil Procedure, and no remedies that
otherwise would be available to an individual in a court of law will be
forfeited by virtue of this Arbitration Provision.
(O’Brien Decl. at Exs. A-C,
§ II, ¶ 1.E.)
Thus, the Court finds, as
argued by Defendant, (Motion at p. 14), that the Arbitration Agreements do not
impose any limitation on Plaintiffs’ ability to recover attorney’s fees and
costs were they to be the prevailing party.
Since the Court finds that
Plaintiffs fails to
establish any substantive unconscionability, the Court finds that Plaintiffs
fail to meet their burden establishing a defense to enforcement of the
Arbitration Agreements.
Accordingly, for all the foregoing reasons, Defendant’s
Motion is GRANTED.
Pursuant to Code of Civil Procedure section 1281.4, the
Court orders the entire action stayed pending arbitration of Plaintiff’s
claims.
Defendant to give notice.
The Court reminds the parties that they must
expeditiously schedule and complete the arbitration and must be prepared to
discuss their progress at the Status Conference.