Judge: Stephen P. Pfahler, Case: 23STCV016376, Date: 2024-08-08 Tentative Ruling

Case Number: 23STCV016376    Hearing Date: August 8, 2024    Dept: 68

Dept. 68

Date: 8-8-24

Case #23STCV16376

Trial Date: Not Set

ARBITRATION

MOVING PARTY: Defendants, Emerald Los Angeles, et al.

RESPONDING PARTY: Plaintiff, Claudia Salazar

RELIEF REQUESTED

Motion to Compel Arbitration

SUMMARY OF ACTION

On August 20, 2021, plaintiff Claudia Salazar began employment with Defendants Oceanside Laundry LLC dba Emerald Los Angeles, LLC, a Delaware Limited Liability Company, and Emerald Textiles Services, Northern California, LLC, as a Laundry Worker in Defendants city of Commerce facility. Plaintiff informed Defendants of her pregnancy. Plaintiff maintains Defendants offered no notice of any rights, such as a request for accommodation to avoid certain strenuous duties and pregnancy leave time. Notwithstanding, Plaintiff subsequently requested an accommodation upon the advice of her medical provider, limiting any lifting to no more than 20 pounds. No accommodation was made, and Plaintiff alleges the work strain caused a miscarriage at six months. Plaintiff was subsequently terminated in December 2022.

On July 13, 2023, Plaintiff filed a complaint for 1. Discrimination (Violation of Gov. Code § 12940(a)) 2. Retaliation in Violation of The FEHA and Pregnancy Disability Leave Law (Gov. Code §§ 12940, et seq.) 3. Interference in Violation of the Pregnancy Disability Leave Law (Violation of Gov. Code § 12945) 4. Violation of California Sick Leave Laws (Labor Code §§ 233, 246, 247.5, and 248 et seq.) 5. Failure to Engage in a Timely, Good Faith, Interactive Process (Violation of Gov. Code § 12940(n)) 6. Failure to Provide Reasonable Accommodation (Violation of Gov. Code § 12940(m)) 7. Failure to Prevent Discrimination (Violation of Gov. Code § 12940(k)) 8. Wrongful Discharge in Violation of Public Policy 9. Declaratory Relief, and 10. Injunctive Relief.

RULING: Denied

Defendants Emerald Los Angeles, LLC and Emerald Textiles Service Northern California, LLC move to compel arbitration on the complaint filed by Plaintiff Claudia Salazar. Defendants maintain all claims are subject to arbitration under the terms of the agreement, the agreement in no way presents unconscionable, and Emerald Northern California may also enforce the agreement as a non-signatory party. Plaintiff in revised opposition challenges enforcement of the agreement on grounds of the lack of an ability to enforce the agreement with a non-signatory party, and unconscionable practices due to the failure to present a Spanish language copy of the agreement and engagement of the onboarding process in Spanish. Defendants in reply challenges the 22 page (seven pages too long) opposition as establishing any defense to enforcement of the agreement. Defendants maintain the agreement is authentic and establishes the relationship between all parties. Defendants also deny any unconscionability, including a third party beneficiary relationship. Defendants include new, and additional deposition testimony in the reply, as well as a purported copy of the Spanish language arbitration agreement.

The court first considers the Federal Arbitration Act (FAA). “The FAA shall govern the interpretation and enforcement of this Agreement. If the FAA is held not to apply to this Agreement for any reason, and the state or district in which Employee is employed recognizes the enforceability of this Agreement and the arbitration award, then this Agreement and the arbitration award or decision are enforceable under the laws of the state or district in which Employee is employed.”

Defendants represent engaging in interstate commerce and therefore contend FAA rules govern. [Declaration of Steven Beach.] Plaintiff offers no challenge. Barring a conflict supporting a preemption of a specific provision under FAA, the court adheres to the California standard for compelling arbitration in that FAA and California adhere to the same standards for review of arbitration agreements. The court finds no conflict with the FAA under the terms of the agreement. (Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 477–479; Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 346; see Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1119; Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906.) 

“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. “‘Under “both federal and state law, the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate.”’” (Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 861.) “Private arbitration is a matter of agreement between the parties and is governed by contract law. (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313.) 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; Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164–165; 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.)

Defendants present a English copy of the arbitration agreement which includes signature on August 24, 2021. [Beach Decl, Ex. A.] The court finds the declaration of Beach sufficient to establish the existence of the executed agreement. [Ibid.] The subject matter of the instant action as covered within the scope of the arbitration clause also remains undisputed. The Spanish language copy of the agreement is neither signed by any party, nor accounted for as ever presented to Plaintiff. Other than acknowledging the document as presented due to a response to a discovery request, the court declines to consider the existence of the agreement.

The English language agreement lists the parties as employee and Oceanside Laundry, LLC (“Company”). Defendants concede Plaintiff was only employed by Oceanside Laundry, LLC (Oceanside), a company purportedly no longer in existence and only previously operating as a dba for or successor to Emerald Los Angeles, LLC. [Beach Decl.] Plaintiff specifically challenges Defendants’ lack any evidence regarding any relationship between Emerald Los Angeles, LLC and identified contracting party Oceanside. Plaintiff additionally challenges the admitted lack of any contractual relationship and establishment of any relationship between Emerald Northern California and Oceanside.

Notwithstanding the successor/dba discussion in the points and authorities, the only supported position itself relies on a representation that all Defendants operate under common ownership through Wash Encore Holdings, LLC (Wash Encore). [Beach Decl.] Defendants specifically rely on the language of the agreement which provides: “Any reference to Company includes the entity or entities that actually employs or has employed you, or that you have applied for employment with, including, but not limited to any of the Company’s parent or subsidiary entities, and all predecessors, successors and assigns of any entity included in this definition of Company.” Again, the language, including the term “Company” remain undisputed.

“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.) “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.) “Examples of the preexisting relationship include agency, spousal relationship, parent-child relationship and the relationship of a general partner to a limited partnership. (Citations.) In the absence of such a relationship, or third party beneficiary status, courts will generally not compel a nonsignatory to arbitrate.” (Crowley Maritime Corp. v. Boston Old Colony Ins. Co. (2008) 158 Cal.App.4th 1061, 1070.) “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.)

Defendant depends on a finding of a parent subsidiary relationship and unsupported successor interest, as the basis to compel arbitration among the parties not otherwise identified in the agreement. Defendant introduces the new beneficiary argument in the reply. The court finds no specific support for an estoppel or third party beneficiary claim, especially given the repeated claim of a successor acquisition, which disregarding any existing third party beneficiary basis. The court therefore only considers the parent subsidiary argument. [Beach Decl., ¶ 2.]

The parent subsidiary argument itself also lacks any factual support other than a statement of the existence of a parent company. Nothing in the declaration of Beach in any way addresses operational protocols regarding employee disputes and arbitration, such as whether claims remain within the subsidiary or are in fact addressed by a single parent entity. (See Waste Management, Inc. v. Superior Court (2004) 119 Cal.App.4th 105, 110; Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 548.) The motion additionally lacks any specific support for an agency argument, if Defendants are possibly alternatively suggesting such a relationship. (See Hernandez v. Meridian Management Services, LLC (2023) 87 Cal.App.5th 1214, 1220.) The reply and new deposition testimony submitted with the reply lacks an apparent basis of support. (Plaintiff also submits purported questions and answers regarding operations, but opposition lacks a declaration attesting to the time, place and source of the purported testimony.) The court otherwise declines to make the arguments for Defendants.

The court therefore finds no contractual basis for arbitration as to either defendant for purposes of the instant motion. The motion to compel arbitration is denied on this basis.

Even if the court accepted the succession of Emerald Los Angeles, as the successor in interest to Oceanside, the court still lacks sufficient support for Emerald Northern California. Again, the motion and reply lacks establishment of a relationship binding the parties.

The court, as a matter of policy, avoids potential piecemeal adjudication of cases, and maintains all parties either participate in arbitration or remain with the court. “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: … (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact...” (Code Civ. Proc., § 1281.2.)

The right of a trial court to refuse arbitration on the possibility of conflicting rulings remains an upheld statutory rule. (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 485-486; Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 101-102.) The court finds no conflict with FAA provisions. (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 394.) The motion is therefore denied on this basis as well, due to the inability to determine the basis for compelling all parties to arbitration.

Plaintiff finally challenges the arbitration agreement on grounds of unconscionability. 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.’” (Ibid.)

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.) A showing of procedural unconscionability will not invalidate an arbitration clause, but can lead to greater scrutiny under the substantive standard, thereby supporting invalidation. (Davis v. TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662, 674 accord OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 129-130.)

Cases addressing unconscionability offer guidance on the standard of the employment adhesion contract—an agreement substantively presented as “take or it leave it” the circumstances of which potentially impose a disadvantage on the employee. “With respect to preemployment arbitration contracts, we have observed that ‘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.’” (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at pp. 126-127 accord Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 115; Hasty v. American Automobile Association of Northern California, Nevada & Utah (2023) 98 Cal.App.5th 1041, 1055-1056; Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 179-181; see Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1351; Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 705; see also Ramirez v. Charter Communications, Inc. (Cal., July 15, 2024, No. S273802) 2024 WL 3405593, at *4.)

While the basis of review exists, the burden still remains on the challenging party to establish the defense. (Rosenthal v. Great Western Fin'l Securities Corp., supra, 14 Cal.4th at pp. 413-414; Gamboa v. Northeast Community Clinic, supra, 72 Cal.App.5th at pp. 164–165; Hotels Nevada v. L.A. Pacific Ctr., Inc., supra, 144 Cal.App.4th at p. 758.) Plaintiff essentially relies on a assertion of unconscionability based on a failure to present and review the agreement in Spanish.

Cases addressing unconscionability continues to offer guidance on the standard in the case of employment adhesion contract—an agreement substantively presented as a “take or it leave it” agreement imposing a potential disadvantage on the employee. “With respect to preemployment arbitration contracts, we have observed that ‘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.’” (OTO, L.L.C. v. Kho, surpa, 8 Cal.5th at p. 127 accord Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 115; Hasty v. American Automobile Association of Northern California, Nevada & Utah (2023) 98 Cal.App.5th 1041 [317 Cal.Rptr.3d 295, 309-311]; see Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1351.)

The subject circumstances depend on the lack of any Spanish copy or explanation. Again, the court finds no support that the Spanish language copy was ever presented given the lack of any executed copy, and the lack of any evidence attesting to Spanish language onboarding. The argument in favor of unconscionability therefore finds support due to the circumstantial imposition of a lack of mutuality from the English language presentation. (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84-86.) The court finds the English language agreement and context created an unconscionable position. The court denies the motion to compel on this basis as well.

The motion is therefore denied in its entirety. This order is appealable. (Code Civ. Proc., § 1294, subd. (a).)

The court will concurrently conduct the case management conference.

Defendants to provide notice.