Judge Stephanie M. Bowick, Case Number: 24STCV13988, Date: 2024-11-26 Tentative Ruling

Judge: Stephanie M. Bowick, Case: 24STCV13988, Date: 2024-11-26 Tentative Ruling

Case Number: 24STCV13988 Hearing Date: November 26, 2024 Dept: 19

REYES v. AEROTEK, INC., et al.

TENTATIVE RULING

After consideration of the briefings filed and oral argument at the hearing, Defendants Aerotek, Inc. and Allegis Group, Inc.’s Motion to Compel Arbitration and Stay Action is GRANTED.

The Court GRANTS Defendant TABC, Inc.’s “Notice Of Joinder In Defendants Aerotek, Inc. and Allegis Group, Inc.’s Motion To Compel Arbitration And Stay Proceedings” filed on August 27, 2024 and “Notice Of Joinder In Defendants Aerotek, Inc. And Allegis Group, Inc.’s Reply To Plaintiff’s Opposition To Motion To Compel Arbitration And Stay Proceedings” filed on November 19, 2024.

As such, the Court orders that Plaintiff’s claims against Defendants Aerotek, Inc., Allegis Group, Inc., and TABC, Inc. be arbitrated.

On November 13, 2024, after the Motion was filed, Defendant Duluth Services, Inc. (“Duluth”) was substituted in for DOE 1. In the Motion, Defendants Aerotek, Inc. and Allegis Group, Inc. contend that ¿“Duluth is an affiliate of Defendants Aerotek, Inc. (‘Aerotek’) and Allegis Group, Inc. (‘Allegis’)….” (Motion, p. 8.)

The Complaint alleges that Defendant Aerotek “¿is, upon information and belief… doing business... as itself, Allegis Group, Inc., and Duluth Services, Inc….,” (Compl., ¶ 6), and that Defendant Allegis “¿is, upon information and belief… a Maryland Corporation doing business… as itself, Aerotek, Inc., and Duluth Services, Inc.” (Id. at ¶ 7.) The Complaint also alleges that DOE 1 [now Duluth] “are the partners, joint ventures, parent companies, owners, shareholders or managers or employees of Defendants and therefore, were acting on behalf of Defendants,” that “each and all of the acts and omissions alleged herein were performed by, or are attributable to, all Defendants, each acting as the agent for the other, with legal authority to act on the other’s behalf,” that “each Defendant sued herein (both named and DOE Defendants) was the agent, servant, employer, joint venturer, joint employer, contractor, contractee, partner, division owner, subsidiary, division, alias, and/or alter ego with and/or of each of the remaining Defendants and was, at all times, acting within the purpose and scope of such agency, servitude, employment, contract, ownership, subsidiary, alias and/or alter ego and with the authority, consent, approval, control, influence and ratification of each remaining Defendant sued herein,” and that all Defendants were Plaintiff’s employer. (Id. at ¶¶ 10-14, 19.)

The arbitration agreement at issue is between Plaintiff and “¿Duluth Services, Inc.” (Lindsey Collum Decl., ¶ 21, Ex. 4.)

In Opposition, Plaintiff concedes that Plaintiff was employed by Duluth, (Opposition, p. 5), and asserts that “under the terms of the Agreement, Duluth, Aerotek, Allegis, and TABC, Inc. are all covered by the Agreement.” (Id. at p. 11.)

Thus, the Court also orders that Plaintiff’s claims against Defendant Duluth Services, Inc. be arbitrated.

The Court orders the entire action stayed pending arbitration of Plaintiff’s claims.

The Court signs the proposed order filed on August 20, 2024.

The Court sets a Status Conference Re: Arbitration ON August 26, 2025, at 8:30 a.m., in Department 19 of the Stanley Mosk Courthouse. The Court expects the parties to expeditiously schedule and complete the arbitration.

Counsel for Moving Defendants to give notice.

STATEMENT OF THE CASE

This is an employment dispute action. Plaintiff Kevyn Reyes (“Plaintiff”) brings suit against Defendants Aerotek, Inc. (“Aerotek”), Allegis Group, Inc. (“Allegis”), TABC, Inc. (“TABC”), and Duluth Services, Inc. (“Duluth”) (collectively, “Defendants”) alleging the following causes of action:

1. Disability Discrimination;

2. Failure to Reasonably Accommodate;

3. Failure to Engage in the Interactive Process;

4. Retaliation in Violation of FEHA;

5. Failure to Take All Reasonable Steps to Maintain a Workplace Free From Discrimination and Retaliation;

6. Wrongful Termination in Violation of Public Policy; and

7. Failure to Re-Hire in Violation of FEHA.

Defendants Aerotek and Allegis (hereafter, “Moving Defendants”) filed the instant Motion to Compel Arbitration and Stay Action (the “Motion”)

GROUNDS FOR MOTION

Pursuant to the Federal Arbitration Act, Moving Defendants move for an order compelling Plaintiff to arbitrate his claims and, pursuant to Code of Civil Procedure section 1282.4, for a stay of the proceeding pending arbitration on the ground that there exists a valid and enforceable written arbitration agreement covering Plaintiff’s claims.

JOINDER

On August 27, 2024, Defendant TABC filed a “Notice Of Joinder In Defendants Aerotek, Inc. and Allegis Group, Inc.’s Motion To Compel Arbitration And Stay Proceedings” (the “Joinder to Motion”) arguing that Defendant TABC also may also compel Plaintiff into arbitration, reasoning that (1) Defendant TABC is a third party beneficiary of the arbitration agreement at issue between Plaintiff and Duluth because Defendant Duluth is Defendant TABC’s client and the arbitration agreement at issue explicitly states that it applies to Duluth’s clients; and (2) the Complaint alleges that Defendants were the “agent, servant, employer, joint venturer, joint employer, contractor, contractee, partner, division owner, subsidiary, division, alias, and/or alter ego with and/or of each of the remaining Defendants,” and that Defendant TABC is a “joint employer[]” of Plaintiff. (Joinder to Motion, pp. 1-2 (quoting Compl., ¶¶ 14, 18).) (Joinder to Motion, pp. 1-2.)

As an initial matter, even when the Federal Arbitration Act (“FAA”) applies, state law governs whether a nonsignatory may invoke an agreement to arbitrate. (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614, fn. 7 (citing Arthur Andersen LLP v. Carlisle (2009) 556 U.S. 624, 630–632; Bank of America v. UMB Financial Services, Inc. (8th Cir.2010) 618 F.3d 906, 912).)

The general rule is that only a party to an arbitration agreement is bound by or it may enforce it. (See, e.g., JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236; Thomas, supra, 204 Cal.App.4th at 613 (citing Code Civ. Proc., § 1281.2; Jones v. Jacobson (2011) 195 Cal.App.4th 1, 17; Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 763).)

“There are, however, ‘exceptions to the general rule that a nonsignatory ... cannot invoke an agreement to arbitrate, without being a party to the arbitration agreement.’” (Thomas, supra, 204 Cal.App.4th at 614 (quoting Westra, supra, 129 Cal.App.4th at 765).)

“Under California law, a nonsignatory can be compelled to arbitrate under two sets of circumstances: (1) where the nonsignatory is a third party beneficiary of the contract containing the arbitration agreement; and 2) where ‘a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration agreement, making it equitable to compel the nonsignatory to also be bound to arbitrate his or her claim.’” (Crowley Maritime Corp. v. Boston Old Colony Ins. Co. (2008) 158 Cal.App.4th 1061, 1069–1070 (quoting County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 Cal.App.4th 237, 242 [Contra Costa]); see Jones, supra, 195 Cal.App.4th at 18 (quoting Nguyen v. Tran (2007) 157 Cal.App.4th 1032, 1036–1037) (internal citations omitted) [“‘Exceptions in which an arbitration agreement may be enforced by or against nonsignatories include where a nonsignatory is a third party beneficiary of the agreement and when a nonsignatory and one of the parties to the agreement have a preexisting agency relationship that makes it equitable to impose the duty to arbitrate on either of them.’”].)

The arbitration agreement at issue, (Lindsey Collum Decl., ¶ 21, Ex. 4), (hereafter, the “Arbitration Agreement”) is between Plaintiff and Defendant Duluth and provides that Plaintiff agrees to arbitrate “¿ all disputes, claims, complaints, or controversies” that he “may have against Duluth Services, Inc. and/or any of its subsidiaries, affiliates, officers, directors, employees, agents, and/or any of its clients or customers….” (Id. at Ex. 4, p. 1.) Moving Defendants provide evidence that Defendants Allegis and Duluth are “affiliated companies” with Defendant Aerotek and that Plaintiff was employed by Defendant Duluth to work for Defendant Duluth’s client, Defendant TABC. (Id. at ¶¶ 2-3.) Indeed, Plaintiff asserts in Opposition that “under the terms of the Agreement, Duluth, Aerotek, Allegis, and TABC, Inc. are all covered by the Agreement.” (Opposition, p. 11.)

Thus, the Court finds that Defendant TABC may enforce the Arbitration Agreement as a third party beneficiary.

Even assuming that Defendant TABC is not a third party beneficiary, “a plaintiff's allegations of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement.” (Thomas, supra, 204 Cal.App.4th at 614–615 (citing Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406, 418; RN Solution, Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1520; 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1210).)

In the Complaint, Plaintiff alleges an agency relationship among all Defendants, including Defendant TABC and Defendant Duluth—who was substituted in for DOE 1 on November 13, 2024—and that all Defendants were Plaintiff’s employer. (Compl., ¶¶ 13-14, 18; see id. at ¶ 10.)

Thus, the Court finds that, if Moving Defendants are entitled to compel Plaintiff to arbitrate his claims against them, then Defendant TABC is also entitled to compel Plaintiff to arbitrate his claims against it.

Accordingly, the Court GRANTS the Joinder to the Motion.

For the same reasons, the Court also GRANTS “Defendant TABC, Inc.’s Notice Of Joinder In Defendants Aerotek, Inc. And Allegis Group, Inc.’s Reply To Plaintiff’s Opposition To Motion To Compel Arbitration And Stay Proceedings” filed on November 19, 2024.

REQUEST FOR JUDICIAL NOTICE

The Court DENIES Moving Defendants’ request to take judicial notice of Exhibits 1 through 34, which are minute orders and arbitration agreements in other, unrelated cases involving different plaintiffs and different arbitration agreements. (See Budrow v. Dave & Buster's of California, Inc. (2009) 171 Cal.App.4th 875, 885 (citing Santa Ana Hospital Medical Center v. Belshé (1997) 56 Cal.App.4th 819, 831) [declining to take judicial notice of trial court ruling in other case because “[a] written trial court ruling in another case has no precedential value….”].)

EVIDENTIARY OBJECTIONS

The Court rules on Moving Defendants’ evidentiary objections as follows:

Declaration of Kevyn Reyes

OBJECTION #1: OVERRULED

OBJECTION #2: OVERRULED

OBJECTION #3: OVERRULED

OBJECTION #4: OVERRULED

OBJECTION #5: OVERRULED

OBJECTION #6: OVERRULED

OBJECTION #7: OVERRULED

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.”].)

Moving Defendants contend that the FAA applies on the ground that the Arbitration Agreement expressly states that it is to be governed by the FAA. (Motion, pp. 13-14.) In addition, Moving Defendants contend that that the FAA applies because Defendant Duluth’s business activities have a sufficient nexus with interstate commerce. (Id. at p. 14.)

Citing Garrido v. Air Liquide Industrial U.S. LP (2015) 241 Cal.App.4th 833, 839-840, Plaintiff argues that the provision in the Arbitration Agreement stating that it is to be governed by the FAA is insufficient, and that the FAA does not apply because Plaintiff’s job does not affect interstate commerce. (Opposition at pp. 15-16.)

However, the Court agrees with Moving Defendants, (see Reply, p. 2), that Plaintiff’s reliance on Garrido is misplaced because Garrido involved a transportation workers' employment agreement, with the Court of Appeal holding that “courts have found transportation workers' employment agreements exempt from the FAA, even when the agreements purport to be governed by the FAA.” (Garrido, supra, 241 Cal.App.4th at 840.) Here, however, Plaintiff concedes that “¿[h]e didn’t transport or deliver goods in any capacity as part of his employment,” (Opposition at p. 16 (citing Kevyn Reyes Decl., ¶ 4)), and does not contend that the exception in Section 1 of the FAA for transportation workers engaged in interstate commerce applies.

Thus, given the language in the Arbitration Agreement that it is “governed by the FAA ¿and, to the extent not inconsistent with or preempted by the FAA, by the laws of the state of California without regard to principles of conflicts of law,” (Collum Decl. at Ex. 4, p. 3), the Court finds that FAA preemption applies. (See Rodriguez, supra, 136 Cal.App.4th at 1115, 1122 [parties may agree in arbitration agreement to apply the FAA].)

In any event, the Court finds that Moving Defendants sustain their burden to present evidence establishing that the Arbitration Agreement has a substantial relationship to interstate commerce. (Gus Ruiz Decl., ¶¶ 3-4; Collum Decl. at ¶ 3.)

Below, the Court will address whether Plaintiff establishes a defense to the enforcement of the Arbitration Agreement on unconscionability grounds. (See Opposition at pp. 16-17.)

For the foregoing reasons, the Court finds that the FAA applies.

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 Moving Defendants comply with California Rules of Court, rule 3.1330. Moving Defendants state the provisions of the written Arbitration Agreement providing for arbitration, and incorporate by reference a copy of the Arbitration Agreement. (Motion at pp. 9-11.) Plaintiff does not oppose the Motion on the ground that Moving Defendants failed to comply with California Rules of Court, rule 3.1330. Moving Defendants also establish a refusal of a demand to arbitrate, (Michael S. Kun Decl., ¶ 2), and the filing of Plaintiff’s Complaint establishes that Plaintiff 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. Moving Defendants’ 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 Moving Defendants sustain their burden to prove, by a preponderance of the evidence, the existence of an arbitration agreement. (Collum Decl. at ¶¶ 2-22, Exs. 1-22.)

Indeed, Plaintiff does not contend that there does not exist an agreement to arbitrate, but rather asserts a defense to enforcement of the Arbitration Agreement, namely, that the Arbitration Agreement is unconscionable. (See Opposition at pp. 7-15; see id. at pp. 17-19.)

Accordingly, the Court finds that Moving Defendants sustain their burden by a preponderance of the evidence showing the existence of an arbitration agreement. (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. Moving Defendants’ Burden of Showing Claims within Scope of Agreement/Arbitrability

The Arbitration Agreement provides that, “[e]xcept as expressly set forth in the section, ‘Claims Not Covered by this Agreement,’” which are not applicable to Plaintiff’s claims alleged in the Complaint, that Plaintiff agrees that:

…all disputes, claims, complaints, or controversies (‘Claims’) that I may have against Duluth Services, Inc. and/or any of its subsidiaries, affiliates, officers, directors, employees, agents, and/or any of its clients or customers (collectively and individually the ‘Company’), or that the Company may have against me, including contract claims; tort claims; discrimination and/or harassment claims; retaliation claims; claims for wages, compensation, penalties or restitution; and any other claim under any federal, state, or local statute, constitution, regulation, rule, ordinance, or common law, arising out of and/or directly or indirectly related to my application for employment with the Company, and/or my employment with the Company, and/or the terms and conditions of my employment with the Company, and/or termination of my employment with the Company (collectively ‘Covered Claims’), are subject to confidential arbitration pursuant to the terms of this Agreement and will be resolved by Arbitration and NOT by a court or jury. The parties hereby forever waive and give up the right to have a judge or a jury decide any Covered Claims.

(Collum Decl. at Ex. 4, p. 1.)

Thus, the Court agrees with Moving Defendants that all of Plaintiffs’ claims fall within the scope of the Arbitration Agreement and are arbitrable. (Motion at p. 12.) Plaintiff does not dispute as such. (See, generally, Opposition.)

Accordingly, for all the foregoing reasons, the Court finds that Moving Defendants sustain their burden to show, by a preponderance of the evidence, the existence of an agreement to arbitrate and that all of Plaintiff’s claim fall within the scope of the agreement. Therefore, the burden shifts to Plaintiff 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.)

Plaintiff contends the Arbitration Agreement is unconscionable. (See Opposition at pp. 7-15; see id. at pp. 17-19.)

“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].)

a. 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].)

Plaintiff argues the Arbitration Agreement is procedurally unconscionable because (1) it was presented as a “take-it-or-leave it” adhesion contract that Plaintiff could not negotiate and was required to consent to its terms as a condition of employment; and (2) he felt that he needed to sign the Arbitration Agreement quickly and therefore the Arbitration Agreement is oppressive. (Opposition at pp. 8-10.)

i. Arbitration Agreement A “Take-It-Or-Leave It” Adhesion Contract

Moving Defendants contend that the Arbitration Agreement is not a contract of adhesion, presented on a “take-it-or-leave it” basis, that Plaintiff was required to sign as a condition of employment because, in the Arbitration Agreement, Plaintiff expressly acknowledged that he was entering into the agreement voluntarily. (Reply at p. 5.)

However, the fact that Plaintiff was not forced to sign the Arbitration Agreement under duress does not mean that the Arbitration Agreement is not a contract of adhesion.

“An adhesive contract is standardized, generally on a preprinted form, and offered by the party with superior bargaining power ‘on a take-it-or-leave-it basis.’” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (quoting Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245); see Armendariz, supra, 24 Cal.4th at 112 (quoting Neal v. State Farm Ins. Cos. (1961) 188 Cal.App.2d 690, 694) [“‘The term [contract of adhesion] 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.’”].) “Arbitration contracts imposed as a condition of employment are typically adhesive….” (Id.) “The pertinent question… is whether circumstances of the contract's formation created such oppression or surprise that closer scrutiny of its overall fairness is required.” (Id.)

Here, Plaintiff provides evidence that he was required to sign the Arbitration Agreement as a condition of employment and could not begin work unless he signed the Arbitration Agreement. (Reyes Decl. at ¶ 5.) Moving Defendants do not contend otherwise.

Plaintiff also provides evidence that he was not given any opportunity to negotiate any of the terms of the Arbitration Agreement. (Id.) Moving Defendants do not contend otherwise.

Indeed, the Arbitration Agreement itself provides that it is “consideration” for Plaintiff’s “application for and/or… employment with Duluth Services, Inc….” (Collum Decl. at Ex. 4, p. 1.)

As such, the Court finds that Plaintiff sufficiently demonstrates that Plaintiff was required to sign the Arbitration Agreement as a condition of employment, and that it was presented on a “take-it-or-leave it” basis.

In cases 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.) Yet, “[a]rbitration is favored in this state as a voluntary means of resolving disputes, and this voluntariness has been its bedrock justification” and “‘policies favoring the efficiency of private arbitration as a means of dispute resolution must sometimes yield to its fundamentally contractual nature, and to the attendant requirement that arbitration shall proceed as the parties themselves have agreed.’” (Id. (quoting Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 831).) The court must distinguish private arbitrations that resolve disputes faster and cheaper than judicial proceedings with private arbitrations that “‘become an instrument of injustice imposed on a ‘take it or leave it’ basis’” in order “‘to ensure that private arbitration systems resolve disputes not only with speed and economy but also with fairness.’” (Id. at 115 (quoting Engalla, supra, 15 Cal.4th at 989).)

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.)

Accordingly, although the Court finds that there exists some procedural unconscionability, the Court does not find that the Arbitration Agreement is unenforceable solely on the basis that the Arbitration Agreement was presented as a “take-it-or-leave it” adhesion contract that Plaintiff could not negotiate and was required to consent to its terms as a condition of continued employment.

ii. Other Elements of Oppression

Plaintiff also contends that the Arbitration Agreement was oppressive because Plaintiff wanted to start working as soon as possible and therefore felt he needed to sign the onboarding documents, including the Arbitration Agreement, quickly. (Opposition at pp. 9-10.)

As explained by the California Supreme Court in OTO, L.L.C.:

“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., supra, 8 Cal.5th. at 126-127 (quoting Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348, fn. omitted).)

However, the Court does not find that Plaintiff sufficiently demonstrates that he was rushed or pressured to sign the Arbitration Agreement quickly. While Plaintiff contends that he wanted to start working as soon as possible and therefore felt he needed to sign the onboarding documents, including the Arbitration Agreement, quickly, (Opposition at pp, 9-10), Plaintiff provides no evidence that he was rushed or pressured to sign the Arbitration Agreement quickly, and provides no legal or factual basis to conclude that an employee’s desire to start working as soon as possible is sufficient to find oppression by the employer.

Thus, the Court does not find any additional procedural unconscionability and proceeds to determine whether Plaintiff shows a level of substantive unconscionability sufficient to establish a defense to enforce of the Arbitration Agreement.

b. 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).)

Plaintiff argues that the Arbitration Agreement is substantively unconscionable because (i) its scope is overbroad and lacks mutuality; (ii) it contains a substantively unconscionable confidentiality clause; (iii) it requires JAMS’s future rules to be applied; and (iv) it contains a substantively unconscionable prohibition of class/collective/representative actions. (Opposition at pp. 10-15.)

i. Overbroad Scope/Lack of Mutuality

Plaintiff contends that the broad scope of the Arbitration Agreement is substantively unconscionable because “¿Plaintiff would be waiving any right to a jury trial not only in connection with his employment with Duluth, Aerotek, and Allegis, and Allegis’ 29 other subsidiary business entities (at least in North America), but also with any of Duluth’s clients or customers that Plaintiff may apply to or be employed with in the future, for claims that ‘arise out of and/or are directly or indirectly related to’ his application for employment, his employment, the terms and conditions of his employment, and/or the termination of his employment with any of these affiliated business entities, clients, agents, subsidiaries, etc.,” and “there is no limitation as to how long this Agreement will continue to remain in effect.” (Opposition at p. 12.)

Additionally, Plaintiff contends that the Arbitration Agreement is substantively unconscionable because there is a lack of mutuality, reasoning that it “¿provides benefits to an unknowable number of third parties, allowing them to compel arbitration against Plaintiff, but does not allow Plaintiff to compel arbitration against those third parties who are nonsignatories to the Agreement” leaving Plaintiff with “no means for enforcing the Agreement against those nonsignatory third parties because they have not consented to be bound by the Agreement.” (Id.)

The Court agrees with Moving Defendants, (see Reply at pp. 6-7), that Plaintiff’s arguments concerning scope are unpersuasive because the scope of the Arbitration Agreement is limited to covered claims “arising out of and/or directly or indirectly related to” Plaintiff’s “application for employment with the Company, and/or [his] employment with the Company, and/or the terms and conditions of [his] employment with the Company, and/or termination of [his] employment with the Company.” (Collum Decl. at Ex. 4, p. 1.)

Thus, the Court agrees with Moving Defendants that Plaintiff’s reliance on Cook v. University of Southern California (2024) 102 Cal.App.5th 312 is misplaced because the agreement at issue in Cook required the employee to arbitrate claims “regardless of whether they related to her employment relationship” with her employer and “survived the termination of that relationship for an indefinite period.” (Id. at 341, 343.) Here, in contrast, the Arbitration Agreement only requires Plaintiff to arbitrate covered claims “arising out of and/or directly or indirectly related to” Plaintiff’s “application for employment with the Company, and/or [his] employment with the Company, and/or the terms and conditions of [his] employment with the Company, and/or termination of [his] employment with the Company.” (Collum Decl. at Ex. 4, p. 1.) As such, the Court rejects Plaintiff’s argument that the Arbitration Agreement is substantively unconscionable because of the possible number of subsidiary business entities or lack of limitation as to how long the agreement would remain in effect.

As explained by the Court of Appeal in Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227:

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. The doctrine is meant to ensure that contracts, particularly contracts of adhesion, do not impose terms that are overly harsh, unduly oppressive, so one sided as to shock the conscience, or unfairly one sided. Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided. In assessing substantive unconscionability, the paramount consideration is mutuality.

(Id. at 241 (internal citations and quotations omitted).)

“A contractual provision that is substantively unconscionable ‘may take various forms, but may generally be described as unfairly one-sided.’” (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1281 (quoting Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071).)

The Court agrees with Plaintiff that the Arbitration Agreement contains substantive unconscionability because it permits “any” of Defendant Duluth’s “¿clients or customers,” as third party beneficiaries, to compel Plaintiff, a signatory to the Arbitration Agreement, to arbitrate any Covered Claims Plaintiff has against them, but does not permit Plaintiff to compel Defendant Duluth’s “¿clients or customers” to arbitrate any Covered Claims they have against Plaintiff because they are not signatories to the Arbitration Agreement and are entirely separate individuals and/or entities to Defendant Duluth or its subsidiaries. (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1332 [“Faced with the issue of whether a unilateral obligation to arbitrate is unconscionable, we conclude that it is.”]; accord, Armendariz, supra, 24 Cal.4th at 117.)

Moving Defendants’ arguments in Reply fail to account for Plaintiff’s argument that “¿Plaintiff is left with no means for enforcing the Agreement against those nonsignatory third parties because they have not consented to be bound by the Agreement.” (Opposition at p. 12.)

ii. Confidentiality Clause

Plaintiff argues that the inclusion of the confidentiality provision in the Arbitration Agreement gives rise to substantive unconscionability. (Opposition at pp. 13-14.)

The confidentiality provision in the Arbitration Agreement provides that:

¿The parties shall maintain the confidential nature of the arbitration proceeding and the award, including all disclosures in discovery, submissions to the arbitrator, the hearing, and the contents of the arbitrator's award, except as may be necessary in connection with a court application for a provisional remedy under Cal. Civ. Proc. Code Section 1281.8, a judicial action to vacate or enforce an award, or unless otherwise required by law or allowed by prior written consent of both parties. This provision shall not prevent either party from communicating with witnesses to the extent necessary to assist in arbitrating the proceeding. In all proceedings to confirm or vacate an award, the parties will cooperate in preserving the confidentiality of the arbitration proceeding and the award to the greatest extent allowed by the National Labor Relations Act or other applicable law.

(Collum Decl. at Ex. 4, p. 3.)

The Court rejects Plaintiff’s arguments and agrees with Moving Defendants that the confidentiality provision in the Arbitration Agreement is not substantively unconscionable.

“Our Supreme Court has held a confidentiality provision in an arbitration agreement is not per se unconscionable when it is based on a legitimate commercial need (such as to protect trade secrets or proprietary information).” (Hasty v. American Automobile Assn. etc. (2023) 98 Cal.App.5th 1041, 1061–1062 (citing Baltazar, supra, 62 Cal.4th at 1250); accord, Murrey v. Superior Court (2023) 87 Cal.App.5th 1223, 1254.)

However, the Court agrees with Moving Defendants that a legitimate commercial need is not required for a confidentiality provision to be permissible.

In Sanchez v. CarMax Auto Superstores Cal. LLC, 224 Cal.App.4th 398, the Court of Appeal held that a confidentiality provision requiring “that the arbitration (including the hearing and record of the proceeding) be confidential and not open to the public unless the parties agree otherwise, or as appropriate in any subsequent proceeding between the parties, or as otherwise may be appropriate in response to governmental or legal process” was not substantively unconscionable, reasoning that “[i]n regard to ‘the fairness or desirability of a secrecy provision with respect to the parties themselves, ... we see nothing unreasonable or prejudicial about it,’ and it is not substantively unconscionable.” (Id. at 408 (quoting Woodside Homes of Cal., Inc. v. Superior Court (2003) 107 Cal.App.4th 723, 732); accord, Poublon v. C.H. Robinson Company (9th Cir. 2017) 846 F.3d 1251.)

Since the confidentiality provision in the Arbitration Agreement requires confidentiality with respect to the parties themselves and permits either party to communicate with witnesses to the extent necessary to assist in arbitrating the proceeding, the Court agrees with Moving Defendants that the confidentiality provision in the Arbitration Agreement does not give rise to substantive unconscionability.

Plaintiff’s reliance on Murrey v. Superior Court (2023) 87 Cal.App.5th 1223 is misplaced. The Court of Appeal in Murray found Sanchez and Woodside Homes of Cal., Inc. unpersuasive “in the context of a workplace sexual harassment complaint.” (Id. at 1254.) The instant action, however, is not a workplace sexual harassment complaint.

Plaintiff’s reliance on Hasty is also misplaced because the confidentiality provision at issue in Hasty did not include the exception contained in the confidentiality provision in the Arbitration Agreement permitting either party to communicate with witnesses to the extent necessary to assist in arbitrating the proceeding. Moreover, the Court of Appeal in Hasty adopted the reasoning of Murrey, which was limited to the context of a workplace sexual harassment complaint.

iii. JAMS Future Rules

Plaintiff contends that the following provision in the Arbitration Agreement gives rise to unconscionability:

¿The parties will use Judicial Arbitration and Mediation Services ("JAMS"), subject to its then current employment arbitration rules and procedures (and the then-existing emergency relief procedures contained in the JAMS comprehensive arbitration rules and procedures if either party seeks emergency relief prior to the appointment of an Arbitrator), available at http:// www.jamsadr.com/rules-employment-arbitration, unless those rules and/or procedures.

(Collum Decl. at Ex. 4, p. 2.)

The Court agrees with Moving Defendants that this provision in the Arbitration Agreement does not give rise to any unconscionability.

Plaintiff cites to Hasty, where the Court of Appeal, in dicta, noted that:

Furthermore, although not addressed by the parties, we note the hyperlink to the “JAMS [e]mployment [a]rbitration [r]ules and [p]rocedures” in the arbitration agreement does not lead to a page with arbitration rules or procedures, and there is no evidence in the record to suggest that it ever worked. The link leads to a webpage stating, “Page Not Found” (last accessed October 26, 2023).3 Even if the hyperlink worked when Hasty signed the agreement, however, the arbitration agreement nonetheless provides that arbitration shall be conducted “in accordance with the applicable employment rules of JAMS then in effect.” It is unclear how an employee would know what terms he, she, or they were agreeing to at the time of signing the agreement when the rules and procedures may be different when a dispute arises in the future.

(Hasty, supra, 98 Cal.App.5th at 1060–1061.)

Although the failure to provide the arbitration rules to govern the arbitration could be a factor supporting a finding of procedural unconscionability where the failure would result in surprise to the party opposing arbitration, (see, e.g., Baltazar, supra, 62 Cal. 4th at 1246; Nelson v. Dual Diagnosis Treatment Center, Inc. (2022) 77 Cal.App.5th 643, 660; Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 690), the Court does not find that the Arbitration Agreement’s failure to specify or attach the rules that would govern the arbitration resulted in major surprise or oppression since the Arbitration Agreement clearly states that the arbitration would be governed by JAMS and includes, unlike in Hasty, a working link where the rules could be found.

Moreover, Plaintiff’s unconscionability claim does not depend upon the rules governing the arbitration. (See Baltazar, supra, 62 Cal. 4th at 1246 (collecting cases) [employee's unconscionability claim had nothing to do with employer's failure to attach arbitration rules].)

iv. Prohibition of Class/Collective/Representative Actions

Finally, the Court rejects Plaintiff’s argument that the Arbitration Agreement is substantively unconscionable because it includes a waiver of class actions, collective action, or representative actions. (Opposition at pp. 15-16.)

The Arbitration Agreement provides that “Covered Claims may not be initiated or maintained on a class action, collective action, or representative action basis either in court or arbitration,” “[e]xcept as prohibited by law.”

Since the Arbitration Agreement waives class action, collective action, or representative actions only if such waiver is permitted by law, it does not operate to waive any claims that are unwaivable.

Relying in Hasty and Navas v. Fresh Venture Foods, LLC (2022) 85 Cal.App.5th 626, Plaintiff argues that the provisions are one-sided. (Opposition at pp. 14-15.)

The Court finds Plaintiff’s argument unpersuasive. In Hasty, the Court of Appeal held “that the scope of the claims delineated to be brought in arbitration as to ‘disputes, claims, or causes of action, in law or equity, arising from or relating to [e]mployee's employment or the termination of [e]mployee's employment’ is not one-sided.” (Hasty, supra, 98 Cal.App.5th at 1059.) The scope of the “Covered Claims” in the Arbitration Agreement is the same as the scope of the covered claims at issue in Hasty.

The agreement at issue in Navas only included the type of claims that an employee would bring against an employer. (Navas, supra, 85 Cal.App.5th at 632.) Here, in contrast, the Arbitration Agreement included all claims “arising out of and/or directly or indirectly related to” Plaintiff’s “application for employment with the Company, and/or [his] employment with the Company, and/or the terms and conditions of [his] employment with the Company, and/or termination of [his] employment with the Company.” (Collum Decl. at Ex. 4, p. 1.)

Since the Court finds there is both some procedural and some substantive unconscionability, the Court proceeds to determine whether the Arbitration Agreement may nonetheless be enforced either by severing the unconscionable portions or limiting the application of any unconscionable clause as to avoid any unconscionable result.

c. Severability

The Arbitration Agreement provides that:

¿If any court of competent jurisdiction finds any part or provision of this Agreement void, voidable, or otherwise unenforceable, such a finding will not affect the validity of the remainder of the Agreement, and all other parts and provisions remain in full force and effect.

(Collum Decl. at Ex. 4, p. 3.)

Civil Code section 1670.5, subdivision (a) provides that:

If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(Civ. Code, § 1670.5(a); see Armendariz, supra, 24 Cal.4th at 695 [Civil Code section 1670.5 gives “a trial court some discretion as to whether to sever or restrict the unconscionable provision or whether to refuse to enforce the entire agreement.”].)

As explained by the California Supreme Court in Armendariz:

The basic principles of severability that emerge from Civil Code section 1599 and the case law of illegal contracts appear fully applicable to the doctrine of unconscionability. 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. That Civil Code section 1670.5 follows this basic model is suggested by the Legislative Committee comment quoted above, which talks in terms of contracts not being enforced if “permeated” by unconscionability, and of clauses being severed if “so tainted or ... contrary to the essential purpose of the agreement.”

(Armendariz, supra, 24 Cal.4th at 124.)

The only substantively unconscionable provision is the provision of the Arbitration Agreement that requires Plaintiff to arbitrate Covered Claims with Defendant Duluth’s “client or customers,” who are not signatories to the Arbitration Agreement and therefore cannot, as Plaintiff is, be forced to arbitrate Covered Claims.

Thus, the Court does not find, as argued by Plaintiff, that the Arbitration Agreement is “permeated” by unconscionability.

The Court finds that the provision of the Arbitration Agreement requiring Plaintiff to arbitrate Covered Claims with Defendant Duluth’s “client or customers” is collateral to the main purpose of the contract, that is, to require arbitration between Plaintiff and Defendant Duluth “¿and/or any of its subsidiaries, affiliates, officers, directors, employees, agents,” of claims “arising out of and/or directly or indirectly related to” Plaintiff’s “application for employment with the Company, and/or [his] employment with the Company, and/or the terms and conditions of [his] employment with the Company, and/or termination of [his] employment with the Company,” (Collum Decl. at Ex. 4, p. 1), and that the inclusion of “¿and/or any of its clients or customers” does not taint the central purpose of the Arbitration Agreement with illegality.

Thus, pursuant to Civil Code section 1670.5 and the terms of the Arbitration Agreement, the Court severs “and/or any of its clients or customers” from the agreement.

Accordingly, for all the foregoing reasons, Moving Defendants’ 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.