Judge Stephen P. Pfahler, Case 22CHCV00102 2022-10-11 Tentative Ruling

Joinder of Defendants Aaron Dietz, Sarah Monroe-Allen, David Edward, Lucas O’Connor and Collene Tully

Plaintiff Gina Larsen commenced employment with defendant Ojai Oil Company in June 2016.[1] Plaintiff alleges a “pattern of harassment, bullying, intimidation, and a hostile work environment,” from the individual employee defendants. On February 14, 2022 and March 1, 2022, Plaintiff filed a complaint and first amended complaint for Termination in Violation of Public Policy, Termination in Violation of Government Code sections 12900, et seq., Common Law Wrongful Termination, Harassment, Sexual Harassment, Hostile Work Environment, and Intentional Infliction of Emotional Distress.

The court takes judicial notice of the complaint, but not the content of the pleading for the truth of the matter asserted.

Defendant Ojai Oil Company (Ojai Oil) moves to compel arbitration. Defendant cites to the arbitration provision in the employment agreement, and maintains all causes of action are subject to arbitration. Defendant represents the agreement is enforceable under the Federal Arbitration Act (FAA), with the arbitration itself governed by California Arbitration Act (CAA) rules. Defendant also seeks to join the individual defendants as beneficiaries of the agreement.[2]

Plaintiff in opposition presents a myriad of arguments, including vagueness in the terms of the agreement, unconscionability due to fee allocation, and inability to sever out any terms violating the laws compelling arbitration.

Ojai Oil in reply deny any violation of California law. Defendants maintain that all claims are subject to arbitration.

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.) “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, 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.” (Code Civ. Proc., § 1281.2.)

The law creates a general presumption in favor of arbitration. In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin'l Securities Corp. (1996) 14 Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Ctr., Inc. (2006) 144 Cal.App.4th 754, 758.) Any challenges to the formation of the arbitration agreement should be considered before any order sending the parties to arbitration. The trier of fact weighs all evidence, including affidavits, declarations, documents, and, if applicable, oral testimony to determine whether the action goes to arbitration. (Hotels Nevada v. L.A. Pacific Ctr., Inc., supra, 144 Cal.App.4th at p. 758.)

The first step requires either presentation of a written agreement to arbitrate, or presentation of terms without dispute from the opposing party. (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164–165.) Ojai Oil presents evidence of the executed arbitration agreement. [Declaration of Sara Monroe-Allen, ¶ 5, Ex. A.] The existence of the agreement remains undisputed. (Ibid.) The court therefore considers the terms of the agreement.

Plaintiff challenges the scope of the arbitration agreement. Rules of contract interpretation govern arbitration agreements. (Jones v. Jacobson (2011) 195 Cal.App.4th 1, 17.) Contracts are interpreted under certain rules.

“‘A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.’ (Civ. Code, § 1636.) ‘The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.’ (Civ. Code, § 1638.) ‘When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; subject, however, to the other provisions of this Title.” (Civ. Code, § 1639.) “The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.’ (Civ. Code, § 1641.) ‘A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.’ (Civ. Code, § 1643.) ‘The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed.’ (Civ. Code, § 1644.) ‘However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.’ (Civ. Code, § 1648.) ‘Repugnancy in a contract must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses, subordinate to the general intent and purpose of the whole contract.’ (Civ. Code, § 1652.) ‘Stipulations which are necessary to make a contract reasonable, or conformable to usage, are implied, in respect to matters concerning which the contract manifests no contrary intention.’ (Civ. Code, § 1655.)”

The agreement states, “that any dispute with any party … that may arise from Employee’s employment or separation from employment … shall be resolved by mandatory, binding arbitration before a retired judge or other arbitrators selected by mutual agreement…” Said claims include “all statutory, contractual and/or common law claims from employment… including …” contract or tort based claims “for retaliation, discrimination or harassment of any kind … violation of any other federal, state, or other governmental law…” The agreement specifically excludes claims pending before certain government administrative agencies, workers compensation, unemployment, and/or the National Labor Relations Act. The court finds all pled causes of action in the operative first amended complaint are specifically addressed by the agreement and therefore subject to the arbitration agreement. Nothing in the opposition supports a finding of ambiguity or any other basis establishing claims outside the sought after relief.

Plaintiff specifically raises unconscionability as a means of precluding enforcement. Unconscionability constitutes a specific basis for avoiding arbitration under California law. Unconscionability claims have both a “‘procedural’” and “‘substantive’” element. (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1531.) “‘Procedural unconscionability’” concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1329.) “‘The procedural element focuses on two factors: “oppression” and “surprise.” “Oppression” arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice. “Surprise” involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.’” (Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1532.) “Substantive unconscionability” involves contracts leading to “‘“overly harsh”’” or “‘“one-sided”’” results.’” … “[U]nconscionability turns … on an absence of ‘justification “for it…” [and therefore] must be evaluated as of the time the contract was made.’” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532.)

In the employment context, a mandatory arbitration agreement is enforceable, if it “(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.) Required execution of an arbitration agreement as a condition of employment may constitute an unconscionable provision, where the contract lacks mutuality and/or imposes a disadvantage on the employee. (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at pp. 114-118; Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071-1072.)

While Plaintiff raises a number of conclusive arguments regarding unconscionability, nothing in the language addressed above in any way demonstrates a violation of California law. The agreement specifically provides the “Company shall pay the fees and costs of the Arbitrator.” In addition to the required appointment of a neutral arbitrator, the requirement for compliance with California law also provides a catch all provision insuring compliance with all other requirement, such as minimal discovery, a written reward, and availability of relief. The court therefore finds no basis for a finding of uncsonscionability, and denial of the motion on this basis.

The court next considers the joinder of the individual defendants, Aaron Dietz, Sarah Monroe-Allen, David Edward, Lucas O’Connor and Collene Tully. The corporate entity by its very nature acts through its officers, employees and agents.

“[S]ubject to limited exceptions, only parties to an arbitration contract may enforce it or be required to arbitrate. (Citation.) 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 (Citation) 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. (Nguyen v. Tran (2007) 157 Cal.App.4th 1032, 1036–1037.) A nonsignatory can be compelled to arbitrate when a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration agreement, making it equitable to compel the nonsignatory to arbitrate as well.” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1240.) “A nonsignatory plaintiff can be compelled to arbitrate a claim even against a nonsignatory party, when the claim is itself based on, or inextricably intertwined with, the contract containing the arbitration clause.” (JSM Tuscany, LLC v. Superior Court, supra, 193 Cal.App.4th at p. 1241.) While a person may not normally be bound by an agreement entered into by a corporate employer, the rule is not absolute. (Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1513.) “Every California case finding nonsignatories to be bound to arbitrate is based on facts that demonstrate, in one way or another, the signatory's implicit authority to act on behalf of the nonsignatory.” (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 304; Harris v. Superior Court (1986) 188 Cal.App.3d 475, 478–479; Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1290.)

The court finds the individual defendants are beneficiaries to the contract. Furthermore, given the inextricable nature of the claims against the individuals and the corporate entity, the court finds equity compels arbitration of all claims in a single proceeding.

The motion to compel arbitration is therefore granted in its entirety. The parties are ordered to comply with the terms of the agreement, which requires mutual agreement of an arbitrator. The parties are to select an arbitration organization, which may include the American Arbitration Association, or any other. Selection of the arbitrator shall proceed under the selected organization rules. If the parties cannot agree on an organization, or an arbitrator outside an organization, the court orders the parties to submit a list of one to two organizations and/or arbitrators from each party, where the court will select the organization or individual. If the selected organization or person lacks a set of California compliant rules, the court will select governing rules, which may include the American Arbitration Association employment practices standard. The parties have 30 days from the date of this order to begin the selection process. (Code Civ. Proc., § 1281.6.)

“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.” (Code Civ. Proc., § 1281.4.) The action is stayed.

The court will set a hearing regarding status of the arbitration at the time of the hearing.

[1]The court only summarizes the facts from the operative pleading.

[2]Individual defendants Aaron Dietz, Sarah Monroe-Allen, David Edward, Lucas O’Connor and Collene Tully also submitted a separately briefed joinder to arbitration.