Judge: Stuart M. Rice, Case: 24STCV21849, Date: 2025-05-20 Tentative Ruling
Case Number: 24STCV21849 Hearing Date: May 20, 2025 Dept: 1
Moving Party: Defendant 5.11, Inc.
Responding Party: Plaintiff Michael Anthony Apodaca
Ruling:
Motion granted in part. The FAA applies, and the transportation
worker exemption does not. The Court
will delegate Plaintiff’s challenges to the enforceability of the arbitration
agreement to the arbitrator pursuant to the delegation clause. Plaintiff’s class claims will be stayed
pending the arbitrator’s decision on the enforceability of the Agreement.
This is a wage and hour proposed class action. Plaintiff Michael Anthony Apodaca alleges
that he and others were employed by defendant 5.11, Inc. (Defendant) during
which employment Defendant committed various violations of labor law. Defendant moves to compel Plaintiff’s claims
to arbitration pursuant to an arbitration agreement he purportedly signed.
Legal Standards
Code of Civil Procedure section 1281.2
states, in relevant part:¿
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….¿
“California law reflects a strong public
policy in favor of arbitration as a relatively quick and inexpensive method for
resolving disputes. To further that policy, section 1281.2 requires a trial
court to enforce a written arbitration agreement unless one of three limited
exceptions applies. Those statutory exceptions arise where (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,
citations omitted.)¿
“There is no public policy favoring
arbitration of disputes which the parties have not agreed to arbitrate.” (Engineers
& Architects Assn. v. Community Development Dept.¿(1994) 30 Cal.App.4th
644, 653.) Nevertheless, the strong public policy promoting private arbitration
of civil disputes gives rise to a presumption in favor of arbitrability and
compels the Court to construe liberally the terms of the arbitration agreement.
(Vianna v. Doctors’ Management Co.¿(1994) 27 Cal.App.4th 1186, 1189).¿
¿¿
“The petitioner bears the burden of
proving the existence of a valid arbitration agreement by the preponderance of
the evidence, and a party opposing the petition bears the burden of proving by
a preponderance of the evidence any fact necessary to its defense. In these
summary proceedings, the trial court sits as a trier of fact, weighing all the
affidavits, declarations, and other documentary evidence, as well as oral
testimony received at the court's discretion, to reach a final determination.”
(Giuliano v. Inland Empire Personnel, Inc.¿(2007) 149 Cal.App.4th 1276,
1284.)¿¿ The movant may bear this initial burden “by attaching a copy of
the arbitration agreement purportedly bearing the opposing party's signature.” (Iyere
v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755 (Iyere);
Espejo v. Southern California Permanente Medical Group (2016) 246
Cal.App.4th 1047, 1060.) “At
this step, a movant need not ‘follow the normal procedures of document
authentication’ and need only ‘allege the existence of an agreement and support
the allegation as provided in [Rules of Court, Rule 3.1330].’” (Iyere, supra, 87 Cal.App.5th
at 755; Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th
215, 219 (Condee).)
“The party opposing arbitration has the
burden of demonstrating that an arbitration clause cannot be interpreted to
require arbitration of the dispute. Nonetheless, this policy does not override
ordinary principles of contract interpretation. The contractual terms
themselves must be carefully examined before the parties to the contract can be
ordered to arbitration: Although [t]he law favors contracts for arbitration of
disputes between parties, there is no policy compelling persons to accept
arbitration of controversies which they have not agreed to arbitrate.” (Rice
v. Downs¿(2016) 247 Cal.App.4th 1213, 1223, citations and quotations
omitted.)¿¿¿
“A party seeking
to enforce an arbitration agreement has the burden of showing FAA
preemption.” (Lane v. Francis Capital
Management, LLC (2014) 224 Cal.App.4th 676, 687; see also Nixon v.
AmeriHome Mortgage Company, LLC (2021) 67 Cal.App.5th 934, 946
[“The party seeking to enforce the arbitration agreement also bears the burden
of establishing the FAA applies and preempts otherwise governing provisions of
state law or the parties’ agreement.”].)
Evidentiary
Objections
Plaintiff objects to various portions of the declaration of Deborah
Ajeska. Objection 1 is overruled. Ms. Ajeska’s testimony is relevant to the
duties of the relevant class of workers, which is regional store managers
(RSMs). Ms. Ajeska is the Chief
Administrative Officer, leading the human resources department and
administering operations, and has personal knowledge of the duties of
RSMs. Her testimony does not relate hearsay
or state an inadmissible conclusion.
Objection 2 is sustained. Ms. Ajeska’s
estimate that RSMs spend 5% of their time on SFS orders does not have any
apparent foundation but appears merely speculative. Objection 3 is sustained on the same grounds.
The objections submitted by Defendant to the declarations of Plaintiff and
his counsel Joseph Lavi are not material to the disposition of this motion for
the reasons discussed below but are preserved for review.
Discussion
Plaintiff contends that the transportation worker exemption
of the FAA, 9 U.S.C. § 1, applies, and that under California law, the class
action waiver in the Agreement is unenforceable and the Agreement is
unconscionable.
I.
The Transportation Worker Exemption
9 U.S.C. § 1
provides:
“[C]ommerce”, as herein defined, means commerce among the
several States or with foreign nations, or in any Territory of the United
States or in the District of Columbia, or between any such Territory and
another, or between any such Territory and any State or foreign nation, or
between the District of Columbia and any State or Territory or foreign nation,
but nothing herein contained shall apply 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.)
“Engaged in commerce” is a narrower category than “affecting
commerce” and “involving commerce” which bring a contract within the FAA in the
first place. (See Circuit City
Stores, Inc. v. Adams (2001) 532 U.S. 105, 117-118 (Circuit City); Nieto
v. Fresno Beverage Co. (2019) 33 Cal.App.5th 274, 279-280 (Nieto).) “[A] transportation worker does not
necessarily have to physically cross state lines in order to engage in the
movement of goods in interstate commerce.”
(Nieto, supra, 33 Cal.App.5th at 282.) However, they must play a “direct and
‘necessary role in the free flow of goods’ across borders.” (Southwest Airlines Co. v. Saxon (2022)
596 U.S. 450, 458 (Saxon), quoting Circuit City, supra, 532 U.S.
at 121.)
Ortiz v. Randstad Inhouse Services,
LLC (9th Cir. 2024) 95 F.4th 1152 (Ortiz) is
instructive, though not binding. There,
the plaintiff unloaded packages of Adidas products and transported them to the
warehouse racks to organize them, transported the packages to the “picking
section” of the warehouse, assisted “Pickers” in obtaining packages to ship
out, and assisted the “Outflow Department” to “prepare packages to leave the
warehouse for their final destination.”
(Id. at 1158.) Relying on Saxon,
the Ninth Circuit held:
For these reasons, Ortiz's job description meets all three
benchmarks laid out in Saxon. Both Ortiz and Saxon fulfilled
an admittedly small but nevertheless “direct and necessary” role in the
interstate commerce of goods: Saxon ensured that baggage would reach its final
destination by taking it on and off planes, while Ortiz ensured that goods
would reach their final destination by processing and storing them while they
awaited further interstate transport.
Both were also “actively engaged” and “intimately involved
with” transportation: Saxon handled goods as they journeyed from terminal to
plane, plane to plane, or plane to terminal, while Ortiz handled them as they
went through the process of entering, temporarily occupying, and subsequently
leaving the warehouse—a necessary step in their ongoing interstate journey to
their final destination. Id. Both were actively engaged in the
interstate commerce of goods. If Saxon is an exempt transportation worker, Ortiz
is, too.
(Id. at 1162.)
The transportation worker exemption is concerned with
“classes” of workers, not merely individual workers. (See 9 U.S.C. § 1; see also Saxon, supra, 596
U.S. at 455-456 [defining the relevant “class of workers” for the analysis as
“airplane cargo loaders” and going on to analyze whether that class of workers
is “engaged in foreign or interstate commerce.”]) The analysis is therefore of the class of
workers to which Plaintiff belongs, not his individual duties. The Court agrees with Defendant that the appropriate
class is regional store managers (RSMs), Plaintiff’s job title.
Plaintiff declares as follows. From June 2020 to June 2024, he worked for
Defendant as a store manager in Upland, and then later in Commerce. (Apodaca Decl., ¶ 2.) While working at the Upland store, he would periodically
travel to other stores in Arizona and Idaho to observe and assist. (Ibid.) In November 2020, Defendant began a program
called “Ship From Store” or “SFS,” during which retail locations, including the
Upland and Commerce stores, would fulfill online orders which would otherwise be
filled by the distribution center. (Id.,
¶ 4.) Plaintiff describes the
process of processing SFS orders as follows:
• Go to the SFS computer or SFS computers
which would be in the stockroom, or in the
warehouse for stores with a
warehouse;
• Review the list of orders in the
“queue”;
• Print a “pick list” for an order
which shows the items that are part of the orders. We
would usually print a number of
orders at one time to be more efficient;
• Go into the stockroom or
warehouse, or within the retail store if the item is not
available in the stockroom or
warehouse, and “pick” the items that were part of each
order and organize the items
together into their orders;
• Package each order by placing the
items in sealable shipping pouches for each order,
but at times using boxes for bigger
items like shoes;
• Print the packing slip and UPS
shipping label for each order;
• Then, for each order, put the
packing slip in the shipping pouch or box with the items,
seal the bag or box, and affix the
UPS shipping label to the outside of the bag or box;
• Then, place the pouches and boxes
aside in the backroom or warehouse in an
organized manner, at times using
yellow UPS sort bags which could hold 30 to 60 of
the sealed pouches; and
• Return to the SFS computer to
repeat the process for orders or batches of orders in the queue and complete
the same process with as many items as we could during our shift.
(Apodaca Decl., ¶ 7.)
Plaintiff declares that when UPS trucks came to the store, SFS-processing
employees would assist in the loading of the packages onto the trucks. (Ibid.) Plaintiff declares that through printing the
mailing labels, he knew where the packages were going, and that between 40 and
80 percent of them were destined for outside California. (Id., ¶¶ 8-10.) At the Upland store, Plaintiff spent 50% of
his shift performing SFS duties, and in Commerce, 70%-80%. (Id., ¶ 12.)
Defendant presents the following evidence.
Plaintiff’s job description includes financial tasks, building customer
relationships, training, loss prevention, other managerial tasks. (See Ajeska Decl., Ex. A.) Defendant’s Chief Administrative Officer,
Deborah Ajeska, declares that “the significant majority of work performed by [regional
store managers] entails staff management, training, managing employee
performance, and maintaining their store’s performance” and that only “a very
limited percentage of RSMs’…job duties included those related to the SFS
process[.]” (Ajeska Decl., ¶ 7.)
Plaintiff testified at deposition that he did perform the work referenced
in the job description. (Horn Reply
Decl., Ex. A. pp. 17-19.) Plaintiff also
testified that he could have other people unload boxes and ship products
directly, rather than doing it himself.
(Id., p. 32.) Lucas
Holland, a former RSM and later District Manager and Plaintiff’s direct
supervisor declares that he witnessed Plaintiff performing the primary RSM
duties, and that the expectation of RSMs is not that they would spend “anywhere
near” 70%-80% of their time on SFS orders.
(Holland Decl., ¶¶ 1, 6, 9.) Mr.
Holland declares that as an RSM, he himself spent only 5%-10% of his time on
SFS orders. (Id., ¶ 10.) Mr. Holland likewise declares that carrying
packages to the UPS drivers while the UPS drivers stay in the truck is outside
the expected duties of any retail employee, including Plaintiff. (Id., ¶ 8.)
On balance, Defendant appears to have the better of this argument. As the proponent of the transportation worker
exemption, Plaintiff has the burden to establish the facts necessary to its
application. Even taking all of
Plaintiff’s testimony about his own work as true, including his testimony about
the destination of the SFS orders he handled, Plaintiff has failed to establish
that the class of workers to which he belongs is one that is “engaged in foreign
or interstate commerce.” (See Saxon,
supra, 596 U.S. at 497.) Plaintiff’s
argument that he should be understood as belonging to a more general class of
employees is unavailing. In Saxon, the
plaintiff ramp supervisor was considered to be part of a “class of employees”
that included “‘ramp agents,’ who physically load and unload baggage, airmail,
and freight” because it was undisputed that the ramp supervisors at the airport
frequently stepped in to load and unload cargo alongside ramp agents,
ostensibly generally and not just in the plaintiff’s case. (Saxon, supra, 596 U.S. at 454,
455.) Here, on the other hand, there is
no evidence that RSMs generally package and ship out SFS orders as a
class.
For comparison, the airplane cargo loaders in Saxon, generally
and as a class of workers, “physically load[ed] and unload[ed] cargo on and off
planes traveling in interstate commerce” and were therefore within the
transportation worker exemption. (Ibid.) Meanwhile, a worker “‘whose occupation is not
defined by its engagement in interstate commerce does not qualify for the
exemption just because she occasionally performs that kind of work.’ … By
contrast, for the other enumerated categories of workers in Section 1, seamen
and railroad workers, the interstate movement of goods and passengers over long
distances and across national or state lines is an indelible and ‘central part
of the job description.’” (Capriole
v. Uber Technologies, Inc. (9th Cir. 2021) 7 F.4th
854, 865 (Capriole).)
Examples of workers subject to the exemption include
warehouse equipment operators who worked “transporting packages to and from
storage racks, helping other employees in obtaining packages so they could be
shipped, and assisting the Outflow Department to prepare packages for their
subsequent shipment” (Ortiz v. Randstad Inhouse Services, LLC (9th
Cir. 2024) 95 F.4th 1152, 1161) and warehouse operators who spend
their time stacking pallets and wrapping them in saran wrap to load onto trucks
for shipping within and outside the state (Nair v. Medline Industries, Inc. (E.D.
Cal. 2023, No. 2:22-cv-00331-DAD-JDP) 2023 WL 2636464 at p. 3). RSMs, on the other hand, do not appear to be
the sort of employees for whom “the interstate movement of goods and passengers
over long distances and across national or state lines is an indelible and ‘central
part of the job description.’” (Capriole,
supra, 7 F.4th at 865.)
As the parties do not dispute that Plaintiff is subject to
the FAA, but it appears that Plaintiff is not within the transportation worker
exemption, the FAA applies.
II.
Delegation Clause
The Agreement contains the following delegation clause:
5. Except as expressly provided in
paragraph 7 of this Agreement, all jurisdictional and arbitrability disputes,
including disputes over the formation, existence, validity, interpretation or
scope of this Agreement, and who are proper parties to the arbitration, shall
be submitted to and ruled on by the arbitrator. The arbitrator has the sole
authority to determine such jurisdiction and arbitrability issues as a
preliminary matter.
(Jantz Decl., Ex. A, p. 2.)
Plaintiff contends that nonetheless, the validity of the
class action waiver and Plaintiff’s unconscionability challenge to the
Agreement must be resolved by the Court.
The Agreement does indeed provide that “[n]otwithstanding any other
provision of this Agreement or the JAMS Rules, disputes regarding the validity,
enforceability or breach of the Class Action Waiver may be resolved only by a
civil court of competent jurisdiction and not by an arbitrator.” (Jantz Decl., Ex. A, p. 3.) However, resolving that issue is premature. Where an arbitration agreement is valid and
the FAA applies, “a party may not be compelled under the FAA to submit to class
arbitration unless there is a contractual basis for concluding that the party agreed
to do so.” (Stolt-Nielsen S.A. v.
AnimalFeeds International Corp. (2010) 559 U.S. 662, 684.) However, if the arbitration agreement is not
valid, there is no need to consider that question at all.
That brings the Court to the unconscionability
challenge. Plaintiff contends that this
too must be resolved by the Court, because it depends on the enforceability of
the class action waiver, an issue which is committed to the Court as discussed
immediately supra. However,
Plaintiff’s arguments on that score are based on Gentry v. Superior Court (2007)
42 Cal.4th 443, which is preempted by the FAA. (See Iskanian v. CLS Transportation Los
Angeles, LLC (2014) 59 Cal.4th 348, 360 [where the FAA applies, Gentry
is preempted], abrogated in part in Viking River Cruises, Inc. v.
Moriana (2022) 596 U.S. 639; see also Garrido v. Air Liquide Industrial
U.S. LP (2015) 241 Cal.App.4th 833, 837 [citing Iskanian].) Because the Court has found the FAA applies
and the transportation worker exemption does not, Plaintiff’s argument based on
Gentry would not be germane for the arbitrator to consider. Plaintiff identifies no other challenge
involving the class action waiver that the Court or an arbitrator would need to
address. There is therefore nothing for
the Court to adjudicate at this time, and instead the Court will delegate all
arbitrability and enforcement questions to the arbitrator pursuant to the
delegation clause for consideration in the first instance. The Court will stay the class claims pending
a decision by the arbitrator that the Agreement is enforceable.
Conclusion
For the foregoing reasons, the motion to compel arbitration
is granted in part. Plaintiff is
required to arbitrate all questions of enforceability, scope, and application
of the Agreement pursuant to the delegation clause as discussed above. Plaintiff may be required to arbitrate all of
his individual claims if the arbitrator so decides. In the interim, Plaintiff’s class claims are
stayed, as is the rest of this action.
Defendant to give notice.