Judge: Stuart M. Rice, Case: 24STCV25774, Date: 2025-04-02 Tentative Ruling



Case Number: 24STCV25774    Hearing Date: April 2, 2025    Dept: 1

Moving Party:      Defendant Emes Management, Inc. dba Country View Assisted Living

Responding Party:      Plaintiff Justen Jaurigue

Ruling:          Motion to compel arbitration is granted.

This is a wage and hour proposed class action.  Plaintiff Justen Jaurigue (Plaintiff) alleges that he and others were employed by defendant Emes Management, Inc. d.b.a. Country View Assisted Living (Defendant) during which employment Defendant committed various violations of labor law.  Defendant moves to compel Plaintiff’s claims to arbitration pursuant to an 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.”].)

 

Discussion

 

Plaintiff does not dispute that he signed the Agreement or that, if enforceable, it would apply to all his claims in this action.  He claims only that the Agreement is unconscionable.

 

I.                   Unconscionability

 

Unconscionability is a valid defense to a petition to compel arbitration. (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143 (Sonic II).) State law governs the unconscionability defense. (Doctor’s Assocs., Inc. v. Casarotto (1996) 517 US 681, 687.) 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.” (Sonic-Calabasas A, Inc., 57 Cal.4th at 1145.) The unconscionability doctrine ensures that contracts—particularly contracts of adhesion—do not impose terms that have been variously described as overly harsh, unduly oppressive, so one-sided as to shock the conscience, or unfairly one-sided. (Id.)

 

The prevailing view is that procedural and substantive unconscionability must both be present for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) But they need not be present in the same degree; the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa. (Ibid.)  However, when there is no other indication of oppression other than the adhesive aspect of an agreement, the degree of procedural unconscionability is low. (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 (Serpa).)

 

a.      Procedural Unconscionability

 

“A procedural unconscionability analysis ‘begins with an inquiry into whether the contract is one of adhesion.’ [Citation.]  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, LLC v. Kho (2019) 8 Cal.5th 111, 126 (OTO).)  “Arbitration contracts imposed as a condition of employment are typically adhesive[.] The pertinent question, then, is whether circumstances of the contract's formation created such oppression or surprise that closer scrutiny of its overall fairness is required.”  (Ibid.)  “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.” (Ibid.)

 

Here, the Agreement is by its own terms adhesive, as Plaintiff had to sign it as a condition of employment.  (Torres Decl., Ex. A, p. 1.)  Defendant does not deny this.  Adhesion supplies a small amount of procedural unconscionability.  (Serpa, supra, 215 Cal.App.4th at 704.)

b.      Substantive Unconscionability

Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create an overly harsh or one-sided result. (Armendariz, supra, 24 Cal.4th at 114.)  Where provisions of the arbitration contract are unconscionable, courts may sever or restrict the operation of those provisions.  (Id. at 124.)  Where the “central purpose of the contract is tainted with illegality,” then severance is not appropriate and the contract should be voided.  (Ibid.)  Where “multiple defects indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage [,]” voiding the contract rather than severing the unconscionable provisions is appropriate.  (Ibid.) “Although procedural unconscionability alone does not invalidate a contract, its existence requires courts to closely scrutinize the substantive terms ‘to ensure they are not manifestly unfair or one-sided.’”  (OTO, supra, 8 Cal.5th at 130.)

 

Plaintiff challenges several provisions as unconscionable, which the Court will address in turn.

 

1.      Lack of Mutuality

 

Plaintiff contends that the Agreement is non-mutual because of its repeated use of first-person language (“I,” “my”).  However, the agreement begins with very clear language:

 

Both the company and I agree to resolve all disputes, claims or controversies arising out of my application for employment, my employment, or termination of my employment through binding arbitration.

(Torres Decl., Ex. A, p. 1.)

 

The Agreement then goes on to list examples, such as violations of the Civil Rights Act, Age Discrimination and Employment Act, and the Americans with Disabilities Act.  Although these are all likely claims that would be brought by employees against employers and not the other way around, they are examples given for the employee’s benefit, not the exclusive scope of the Agreement (which as shown above applies to all disputes involving Plaintiff’s employment).  The Agreement is intended to be read and agreed to by the employee, and so examples and language tailored to the employee are appropriate.  The Agreement remains mutual in operation.

 

Plaintiff points out that the Agreement also contains a class, collective, and representative action waiver, something that affects only employees (as employers are unlikely to require class or collective litigation to vindicate rights against their employees).  While this provision may be seen as non-mutual, class action waivers have been upheld routinely and not interpreted as substantively unconscionable for lacking mutuality. Indeed, the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian) has expressly rejected prior holdings that class-action waivers in general or in the employment context in particular are unconscionable, as those holdings are preempted by AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 351-352.  (Iskanian, supra, 59 Cal.4th at 363-364.)  The collective and representative action waiver is discussed below.

 

2.      PAGA Waiver

 

The Agreement states:

 

I also understand and agree that I may pursue claims under this agreement only in an individual capacity and not as a plaintiff or class member in any purported class action or collective representative action. 

(Torres Decl., Ex. A, p. 2.) 

 

A wholesale waiver of the right to bring a Private Attorney Generals Act (PAGA) action is unlawful.  (Iskanian, supra, 59 Cal.5th at 384; Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1117-1118 (Adolph).)  Defendant does not address the “representative” language in this provision, but only claims that PAGA claims are not a “collective” action.  Of course, all PAGA claims are representative claims, as the government is always the real party in interest.  (See Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 81; Adolph, supra, 14 Cal.5th at 1117.)  An agreement which contains unlawful terms misinforms the employee about their legal rights, which discourages the employee from bringing valid claims and creates substantive unconscionability. 

 

3.      Waiver of Berman Process Before the Labor Commissioner

 

The Agreement provides that all claims arising out of Plaintiff’s employment must be arbitrated, which would include wage claims subject to the Labor Commissioner’s Berman process.  OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111 (OTO) contains a helpful summary of the Berman process:

 

The Labor Code provides an administrative procedure for recovery of unpaid wages. When an employer does not pay wages as required, the employee may either: (1) file a civil action in court, or (2) file a wage claim with the Labor Commissioner under sections 98 to 98.8. The administrative option was added in 1976 and is commonly known as a “Berman” hearing.

 

If an employee files an administrative complaint, the Labor Commissioner may either accept the matter and conduct a Berman hearing; prosecute a civil action on the employee's behalf; or take “no further action ... on the complaint”. The commissioner's staff may try to settle the complaint before holding a hearing or filing suit. Subject to extensions of time, Berman hearings must generally be held within 90 days after a matter is accepted.

 

A Berman hearing is conducted by a deputy commissioner, who may issue subpoenas. The procedure “is designed to provide a speedy, informal, and affordable method of resolving wage claims.” Pleadings are limited to a complaint and answer. There is no discovery process. Technical rules of evidence do not apply, and all relevant evidence is admitted “if it is the sort of evidence on which responsible persons are accustomed to rely in the conduct of serious affairs.” The hearing officer may assist the parties with cross-examination and explain issues and terms involved. If necessary, a translator will be provided. The claim must be decided within 15 days of the hearing.

[¶…¶]

The Berman process is optional for both claimants and the Labor Commissioner. Aggrieved employees may take their wage claims directly to superior court. Likewise, the commissioner may decline to act on a filed complaint. However, Berman procedures can significantly reduce the costs and risks of pursuing a wage claim. They provide “an accessible, informal, and affordable” avenue for employees to seek resolution, with assistance available if necessary. They discourage unmeritorious appeals through a bond requirement and a fee-shifting scheme that favors employees. They permit the commissioner to represent claimants on appeal and facilitate award collection.

(Id. at 121-123, citations and footnotes deleted, emphasis added.)

 

Under OTO, “an arbitration agreement is not categorically unconscionable solely because it entails a waiver of the Berman procedure. An agreement to arbitrate wage disputes can be enforceable so long as it provides an accessible and affordable process for resolving those disputes.”  (Id. at 118.) 

 

Plaintiff contends that the Agreement’s effective Berman waiver (by requiring all claims, including wage claims, to be arbitrated) is unconscionable because “[a] signatory employee would have to proceed with a full-fledged arbitration to vindicate any wage claims.”  Plaintiff makes no argument that the arbitration process contemplated by the Agreement would not be “an accessible and affordable process for resolving those disputes” over wages.  (See OTO, supra, 8 Cal.5th at 118.)  Rather, Plaintiff is urging that the Agreement is per se unconscionable because it replaces a Berman hearing with arbitration.  This is precisely the categorical rule of Berman-waiver unconscionability that Sonic-Calabasas A held was preempted by the FAA:

 

Under [AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333], the FAA preempts Sonic I 's rule that waiver of a Berman hearing necessarily renders an adhesive arbitration agreement unconscionable regardless of what the terms of the agreement provide or how the agreement was formed. State law may not categorically require arbitration to be preceded by an administrative hearing because the hearing interferes with arbitral efficiency by substantially delaying arbitration. Thus, the fact that arbitration supplants an administrative hearing cannot be a basis for finding an arbitration agreement unconscionable.

(Sonic II, supra, 57 Cal.4th at 1146.)

 

Plaintiff does not dispute that the FAA applies here, and the Agreement expressly provides that it does.  (See Torres Decl., Ex. A, p. 1.)  Because there is no per se rule against the conscionability of a Berman process waiver, and Plaintiff identifies no deficiencies in the contemplated arbitration that make it not an accessible and affordable process for resolving wage claims, Plaintiff’s contention fails.

 

4.      Imposition of Arbitration Costs on Employee

 

“[W]hen an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.”  (Armendariz, supra, 24 Cal.4th at 110-111.)  The Agreement provides that Plaintiff must pay a $50 fee to initiate arbitration, after which “[t]he company will pay the fees of the arbitrator.”  (Torres Decl., Ex. A, p. 1.) 

 

These provisions are not unconscionable.  An initiation fee is the same kind of fee that an employee would need to pay in Court (and as Defendant notes on reply, the Court’s fees are much higher even for non-complex cases).  The Agreement provides that all other fees will be paid by Defendant.  Plaintiff’s claim that additional clarifying language is needed to make clear that Plaintiff will not need to pay anything more than $50 is baseless and rejected.  The Agreement is clear that all other fees will be paid by the Defendant. 

 

5.      Unconscionability Summary

 

Plaintiff has shown a small amount of procedural unconscionability stemming from adhesion, as well as a small amount of substantive unconscionability from the collective and representative action waiver and the illegality of that waiver as it applies to PAGA.  The Court can cure the illegality by simply striking the words “or collective representative action” from the waiver, leaving no ambiguity that PAGA claims are not waived.  The unconscionability does not rise to the level of unenforceability.  The Court will therefore enforce the Agreement.

 

Conclusion

 

For the foregoing reasons, the motion is granted.  Plaintiff’s class claims are dismissed.  The Court will stay this action pending the outcome of arbitration and set a future date for an arbitration status conference at the hearing on this motion.  Defendant to give notice.