Judge: Teresa A. Beaudet, Case: 22STCV11561, Date: 2023-03-27 Tentative Ruling
Case Number: 22STCV11561 Hearing Date: March 27, 2023 Dept: 50
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LARISSA CORTEZ, Plaintiff, vs. MICHAELS STORES INC &
SUBS, et al. Defendants. |
Case No.: |
22STCV11561 |
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Hearing Date: |
March 27, 2023 |
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Hearing
Time: 10:00 a.m. [TENTATIVE] ORDER
RE: DEFENDANT’S
MOTION TO COMPEL ARBITRATION AND STAY CIVIL PROCEEDINGS |
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Background
Plaintiff Larissa Cortez
(“Plaintiff”) filed this action on April 5, 2022, against Defendants
Michaels Stores Inc & Subs,
Michaels Stores, Inc., Michaels Arts and Crafts, and Customer Doe.
Plaintiff asserts causes of action for
(1) actual/perceived disability discrimination in violation of FEHA, (2)
actual/perceived disability retaliation in violation of FEHA, (3) failure to
engage in the good faith interactive process, (4) failure to provide reasonable
accommodations, (5) violation of the California Family Rights Act, (6) failure
to pay overtime wages, (7) failure to provide meal and rest periods, (8)
unlawful business practices, (9) whistleblower violation, (10) unsafe
workplace, (11) retaliation and wrongful termination in violation of public
policy, (12) assault, (13) battery, and (14) intentional infliction of
emotional distress.
Michaels Stores, Inc.
(“Michaels”) now moves for an order (1) compelling arbitration of Plaintiff’s
claims in accordance with the terms of the parties’ written mutual agreement to
arbitrate; and (2) staying this action pending completion of the arbitration of
Plaintiff’s claims. Plaintiff opposes.
Request
for Judicial Notice
The
Court denies Michaels’s request for judicial notice.
Evidentiary
Objections
The Court rules on the Joint Statement
of Objections to Evidence Submitted Re Defendant Michaels Stores, Inc.’s Motion
to Compel Arbitration and to Stay Action Pending Arbitration as follows:
Plaintiff’s
Objections:
Objection
No. 1: overruled
Objection
No. 2: overruled
Objection
No. 3: overruled
Objection
No. 4: overruled
Objection No. 5: overruled
Objection No. 6:
overruled
Objection No. 7:
overruled
Objection No. 8:
overruled
Objection No. 9: overruled
Objection No. 10:
overruled
Objection No. 11: overruled
Objection No. 12:
overruled
Objection No. 13:
overruled
Michaels’s Objections:
Objection No. 1:
sustained as to “did not include any commerce transactions,” overruled
as to the remainder.
Objection No. 2: overruled
Objection No. 3:
sustained
Objection No. 4:
sustained
Legal Standard
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. Securities Corp. (1996) 14 Cal.4th 394, 413-414.)
Generally, on a petition
to compel arbitration, the court must grant the petition unless it finds either
(1) no written agreement to arbitrate exists; (2) the right to compel
arbitration has been waived; (3) grounds exist for revocation of the agreement;
or (4) litigation is pending that may render the arbitration unnecessary or
create conflicting rulings on common issues. ((Code
Civ. Proc., § 1281.2); ((see Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)
“California has a strong
public policy in favor of arbitration and any doubts regarding the
arbitrability of a dispute are resolved in favor of arbitration.” ((Coast Plaza Doctors Hospital v. Blue Cross of
California (2000) 83 Cal.App.4th
677, 686.) “This strong policy has
resulted in the general rule that arbitration should be upheld unless it can be
said with assurance that an arbitration clause is not susceptible to an
interpretation covering the asserted dispute.” ((Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring
arbitration agreements under the Federal Arbitration Act (“FAA”), which governs
all agreements to arbitrate in contracts “involving interstate commerce.” (9 U.S.C. section 2, et seq.; ((Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)
Discussion
A. Existence of Arbitration Agreement
Michaels asserts that
Plaintiff signed three separate arbitration agreements with Michaels. Michaels
states that “[f]or purposes of this Motion, Defendant seeks to enforce the 2020
Agreement, but is also relying the other two previously executed Arbitration
Agreements to demonstrate that Plaintiff consistently consented to
arbitration.” (Mot. at p. 6, fn. 1.)
2018 Arbitration
Agreements
Michaels indicates that
on October 6, 2018, Plaintiff applied for a Cashier/Sales Associate Position
with Michaels. (Creagan-Wysocki Decl., ¶ 5.)
Michaels further
indicates that Plaintiff electronically signed a “Mutual Arbitration Agreement”
on October 6, 2018. (Creagan-Wysocki Decl., ¶¶ 7-8, Ex. C.) The “Mutual
Arbitration Agreement” provides, inter alia, that “[i]n consideration
for being considered for employment and the mutual promises to arbitrate, the
Company (which includes Michaels Stores, Inc. and any parents, subsidiaries,
divisions, affiliates, and/or related entities) and I mutually understand and
agree, through this ‘Mutual Arbitration Agreement,’ that any and all claims or
disputes, past, present, or future, between me and the Company, including
without limitation those arising out of or related to my application for employment
the Company’s screening, verification, hiring, or selection processes, and/or
employment and/or termination of employment with the Company will be submitted
to and will be decided by a single arbitrator through binding arbitration and
not by way of court or jury trial.” (Ibid.)
Plaintiff does not
appear to dispute in her memorandum of points and authorities in opposition to
the instant motion that she signed this Mutual Arbitration Agreement, or that
it covers the claims she alleges in this action against Michaels.
In addition, Michaels
asserts as part of her onboarding in 2018, Plaintiff also signed another
arbitration agreement. Michaels indicates that in 2018, it “presented company
policies and agreements to its employees, such as its Mutual Agreement to
Resolve Issues and Arbitrate Claims, through MU, an online interface.” (Keller
Decl., ¶ 4.)
Michaels’s “2018 Team
Member Handbook curriculum consisted of a tutorial based on a series of 20
slides.” (Keller Decl., ¶ 7.) “The tutorial directed the employee to open a PDF
of the Team Member Handbook, which contained Michaels’ Arbitration Agreement
(on pages 42-48), and click a button, indicating that the employee had read the
Handbook…” (Ibid.) Michaels indicates that
the “final two slides of the tutorial relate to the Mutual Agreement to Resolve
Issues and Arbitrate Claims.” (Keller Decl., ¶ 10.) Michaels states that Plaintiff
“completed the ‘2018 US Team Member Handbook (California)’ training on October
23, 2018. If Cortez had not completed the online curriculum on the US Team Member
Handbook, including the portions related to the Mutual Agreement to Resolve
Issues and Arbitration Claims, there would be no date listed in the ‘Completion
Date’ column of Cortez’s transcript, and the status would state ‘In Progress.’”
(Keller Decl., ¶ 12.) The 2018 “Mutual Agreement to Resolve Issues and
Arbitrate Claims” provides, inter alia, that “[c]overed disputes include
all past, present, and future claims or disputes…related to or arising out of
your employment, your application for employment, and/or your termination.”
(Keller Decl., ¶ 14, Ex. D p. 43-44.)
Plaintiff also does not
appear to dispute that she signed this Mutual Agreement to Resolve Issues and
Arbitration Claims or that it covers the claims she alleges in this action
against Michaels.
2020 Arbitration
Agreement
Michaels also states
that “[i]n 2020, Michaels presented company policies and agreements to its
employees, such as the 2020 Arbitration Agreement through Workday, an online
software application.” (Kumar Decl., ¶ 4.) Michaels states that Plaintiff’s
profile on Workday “indicates that Plaintiff e-signed the 2020 Arbitration
Agreement on ‘7/17/20’ at ‘19:26.’” (Kumar Decl., ¶ 7, Ex. B.) Exhibit B to Mr.
Kumar’s Declaration references a “Document” and “Document Attached” as the “2020
Mutual Agreement to Resolve Issues and Arbitrate Claims.” (Ibid.) It then states “Signed By,” “Larissa
Cortez.” (Ibid.)
The 2020 “Mutual
Agreement to Resolve Issues and Arbitrate Claims” (herein, the “2020
Arbitration Agreement”) provides, inter alia, that “[c]overed disputes
include all past, present, and future claims or disputes, including without
limitation those claims related to or arising out of your employment, your
application for employment, and/or your termination of employment with the
Company, that the Company may have against You or that You may have against the
Company or its past, present, future officers, directors, principals,
shareholders, members, owners, employees, or benefit plans, including, but not
limited to, any of the following…” (Kumar Decl., ¶ 3, Ex. A.) The 2020 Arbitration
Agreement also provides, “any dispute or claim between You and the Company that
might normally be resolved by a court will go through arbitration, except for
disputes not subject to arbitration listed below.” (Ibid.)
Plaintiff
asserts that the 2020 Arbitration Agreement is not valid because “the
only signature on the purported agreement is by Jane Perelman, Vice President
& Assistant General Counsel for Defendant Michaels, and the document that
purportedly contains Plaintiff’s electronic signature is not a contract.”
(Opp’n at p. 4:5-7.) Plaintiff
notes that “none of the terms contained in the purported 2020 Agreement
are found in the second document purporting to contain Plaintiff’s electronic
signature.” (Opp’n at p. 5:11-13; see Kumar Delc., ¶ 7, Ex. B.)
Plaintiff notes that “[i]f a law requires a signature, an
electronic signature satisfies the law.” ((Civ.
Code, § 1633.7, subd. (d).) Plaintiff also notes that pursuant to Civil Code section 1633.5, subdivision (b), “[t]his title applies only to a transaction between parties each of
which has agreed to conduct the transaction by electronic means. Whether the
parties agree to conduct a transaction by electronic means is determined from
the context and surrounding circumstances, including the parties’ conduct…” Plaintiff
argues that here, “there is no valid arbitration agreement
because Plaintiff did not create an electronic signature for the purpose of
entering into an agreement to arbitrate claims with Defendant.” (Opp’n at p.
4:15-17, emphasis omitted.) Plaintiff’s declaration provides: “I was informed
about the requirement to sign up for the Workday software system in order to
clock in and out, submit and verify the hours I had worked and to request time
off from work...I was not told by Michaels that by signing up for Workday I
would be bound by my electronic signature to any document presented to me
through the application.” (Cortez Decl., ¶ 6.)
Michaels asserts that similar electronic signature procedures
to those here have been held sufficient to establish consent to an arbitration agreement. In Ruiz
v. Moss Bros. Auto Group, Inc. (2014)
232 Cal.App.4th 836, 844-845, the Court of Appeal found that “the burden of authenticating an electronic signature is not
great. ((Civ. Code, § 1633.9, subd.
(a) [an electronic signature is attributable to a person if it is the act of
the person, and this may be shown in any manner]).” Michaels
cites to Espejo v. Southern California
Permanente Medical Group (2016)
246 Cal.App.4th 1047, 1062,
where the Court of Appeal found that:
“the supplemental Tellez declaration
offered the critical factual connection that the declarations in Ruiz lacked. Tellez detailed SCPMG’s
security precautions regarding transmission and use of an applicant’s unique
username and password, as well as the steps an applicant would have to take to
place his or her name on the signature line of the employment agreement and the
DRP. Based on this procedure, she concluded that the name Jay Baniaga Espejo could have only been placed on the signature pages of
the employment agreement and the DRP by someone using Dr. Espejo’s unique user name and password…Given this process for
signing documents and protecting the privacy of the information with unique and
private user names and passwords, the electronic signature was made by
Dr. Espejo on the employment agreement and the DRP
at the date, time, and IP address listed on the documents. These details
satisfactorily meet the requirements articulated in Ruiz and establish that the electronic
signature on the DRP was the act of Espejo (Civil Code section 1633.9, subdivision (a)), and
therefore provide the necessary factual details to properly authenticate the
document.”
(Internal
quotations omitted.)
Similarly here, Mr. Kumar states
that “[t]eam members were
instructed by their store
management to complete certain tasks on Workday, including the Arbitration
Agreement. All
Michaels employees were presented with
a unique user name by management (which is not their employee number) and a
temporary, default password to access Workday.” (Kumar Decl., ¶ 5.) “Team
members were required to create a unique permanent password, which is necessary
for them to access and login to the Workday.” (Ibid.)
“The first, default password was set to the team members’ first four digits of
their social security number which they are required to change to a new
personal password upon the first log in.” (Ibid.)
“There was an automatic prompt to reset the default password and team members
cannot proceed further unless the password has been changed.” (Ibid.)
Mr. Kumar provides
screenshots of “the user interface on Workday that a team member of Michaels
would have viewed when accessing the Workday application to complete the 2020
Arbitration Agreement. The first screenshot on Workday shows the team members’
home page with items that are pending in the inbox. The second screenshot shows
that action is required to complete onboarding documents including the 2020
Arbitration Agreement. The team member would be able to view the 2020
Arbitration Agreement by clicking on the PDF, which would pop up with the text
of the 2020 Arbitration Agreement in full as set forth in Exhibit A.”
(Kumar Decl., ¶ 8, emphasis omitted.)
Mr. Kumar states that
“[t]o complete this review and e-signature process, Plaintiff would have had to
scroll through and review the entire 2020 Arbitration Agreement in Workday. At
the bottom of the agreement, she had to click ‘I Agree’ to finalize her
agreement. If she did not click ‘I Agree’ and assent to the 2020 Arbitration
Agreement, her Workday profile in Exhibit B would not have been automatically
updated to reflect her e-signature on July 17, 2020 at 19:26 pm.” (Kumar Decl.,
¶ 8.) Mr. Kumar states that “[a]s reflected on her Workday profile (Exhibit B),
Plaintiff completed the 2020 Arbitration Agreement by clicking on the ‘I Agree’
button on the 2020 Arbitration Agreement on July 17, 2020 at 19:26 pm.” (Kumar
Decl., ¶ 9.)
The
Court finds that Mr. Kumar’s declaration is sufficient to support a finding
that the electronic signature set forth in Exhibit “B” to Mr. Kumar’s
Declaration was “the act” of Plaintiff.
Plaintiff also states that she does “not
remember signing or agreeing to enter into any agreement to arbitrate claims
with Michaels on or around July 2020 as Defendant Michaels claims in their
Motion.” (Cortez Decl., ¶ 7.) Plaintiff also states, “I have reviewed the
purported ‘2020 Mutual Agreement to Resolve Issues and Arbitrate Claims’
submitted by Defendant attached to the Declaration of Selvamani Kumar as
Exhibit A, and the alleged electronic signature attached as Exhibit B, and I do
not recognize either of those documents. Further, I do not remember ever
electronically signing the purported agreement attached as Exhibit A, nor
electronically acknowledging, or agreeing to be bound by that agreement. I have
no memory of reading or otherwise being informed of the terms in the purported
agreement attached as Exhibit A. Nor do I recognize the electronic signature
attached as Exhibit B as my electronic signature, nor do I remember ever
clicking or hitting a button acknowledging or agreeing to the terms of the
purported agreement attached as Exhibit A.” (Ibid.)
Michaels asserts that Plaintiff’s contention that she does
not recall reviewing or understanding that she was providing her electronic consent to the 2020
Arbitration Agreement during is unavailing. Michaels cites to Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 383, where the Court of Appeal noted that
“plaintiff’s declaration states that he had no idea there was an arbitration provision
when he received the Employee Handbook The fact that defendant either
chose not to read or take the time to understand these provisions is legally
irrelevant.” (See
also Pinnacle Museum Tower Assn. v. Pinnacle Market
Development (US), LLC (2012) 55
Cal.4th 223, 236, “[a]n arbitration clause within
a contract may be binding on a party even if the party never actually read the
clause.”)
In
addition, although Plaintiff challenges the validity of the 2020 Arbitration Agreement,
Plaintiff’s memorandum of points and authorities in support of her opposition
does not address the two other 2018 arbitration agreements discussed above.
Plaintiff
also argues that her claims against Michaels cannot be submitted to
arbitration, because this would give rise to conflicting rulings on common
issues of law and fact. Plaintiff cites to Code of
Civil Procedure section 1281.2, subdivision (c), which provides as follows:
“[o]n petition of a party to an arbitration
agreement alleging the existence of a written agreement to arbitrate a
controversy and that a party to the agreement refuses to arbitrate that
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. For purposes of this section, a pending court action or
special proceeding includes an action or proceeding initiated by the party
refusing to arbitrate after the petition to compel arbitration has been filed,
but on or before the date of the hearing on the petition...”
Plaintiff does not argue that
she or any defendant in this action “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.” ((Id., § 1281.2, subd. (c).) Thus, the Court does not find that Code of Civil Procedure section 1281.2, subdivision (c)
is applicable here.
Plaintiff asserts that
the other defendants in this matter, Michaels Stores Inc & Subs, Michaels
Arts and Crafts, and Customer Doe “did not sign the purported
Agreement.” (Opp’n at p. 7:9-10.) Michaels’s motion does not contain any
argument that any of the three arbitration agreements here require Plaintiff to
arbitrate her claims against the other three defendants in this matter. The Court
notes that for the first time in the reply, Michaels argues that Plaintiff is
equitably estopped from denying arbitration with Customer Doe. The Court notes that “¿[p]oints raised for the
first time in a reply brief will ordinarily not be considered, because such
consideration would deprive the respondent of an opportunity to counter the
argument.¿” (American Drug Stores, Inc. v. Stroh (1992) 10
Cal.App.4th 1446, 1453¿.)
Lastly,
Plaintiff does not dispute that the 2020 Arbitration Agreement covers the claims alleged in the Complaint. Therefore, Court finds
that the burden now shifts to Plaintiff to prove a ground for denial.
Waiver
Plaintiff asserts that
Michaels waived the right to arbitrate by engaging in litigation. Plaintiff
cites to Berman v. Health Net (2000) 80 Cal.App.4th 1359, 1363-1364, where the Court of Appeal noted that “[t]here
is no single test for waiver of the right to compel arbitration, but waiver may
be found where the party seeking arbitration has (1) previously taken steps
inconsistent with an intent to invoke arbitration, (2) unreasonably delayed in
seeking arbitration, or (3) acted in bad faith or with willful misconduct.
While engaging in litigation of the matter may be inconsistent with an
intent to invoke arbitration, the party who seeks to establish waiver must show
that some prejudice has resulted from the other party’s delay in seeking
arbitration.” (Internal quotations
and citations omitted.)
On August 26, 2022 in this
action, Michaels filed a Motion to Quash Regarding Plaintiff’s Deposition
Subpoena for Production of Business Records to Upland Police Department.
Plaintiff contends that Michaels waived its right to arbitrate by filing this
motion.
Michaels asserts that there
is no waiver of the right to arbitrate here. Michaels cites to Gloster v. Sonic Automotive, Inc. (2014) 226 Cal.App.4th 438, 447, where the Court of Appeal noted that “[a]lthough
a court may deny a petition to compel arbitration on the ground of waiver,
waivers are not to be lightly inferred and the party seeking to establish a
waiver bears a heavy burden of proof.”
(Internal reference to [citation] omitted.) The
Gloster Court also
noted that “[i]n determining waiver, a court can consider (1)
whether the party’s actions are inconsistent with the right to arbitrate; (2)
whether the litigation machinery has been substantially invoked and the parties
were well into preparation of a lawsuit before the party notified the opposing
party of an intent to arbitrate; (3) whether a party either requested
arbitration enforcement close to the trial date or delayed for a long
period before seeking a stay; (4) whether a defendant seeking arbitration filed
a counterclaim without asking for a stay of the proceedings; (5) whether
important intervening steps [e.g., taking advantage of judicial discovery
procedures not available in arbitration] had taken place; and (6) whether the
delay ‘affected, misled, or prejudiced the opposing party.” (((Id. at p. 448 [internal quotations omitted].)
The Court does not find that
the “litigation machinery”
has been substantially invoked here or that Michaels delayed in moving to
compel arbitration. The Complaint in this action was filed on April 5, 2022, and
the instant motion was filed by Michaels on June 13, 2022. In addition, Plaintiff
does not indicate that the parties have engaged in any other motion practice, and does not assert that any
delay exists that resulted in prejudice to her. The Court does not find that Plaintiff has met her heavy
burden of demonstrating waiver here.
Plaintiff also asserts
that she “never agreed to be bound by the purported 2020 Agreement, but
even if the Court finds otherwise, it is rendered void or voidable under Lab. Code § 432.6.” (Opp’n at p. 3:3-4.) Labor Code section 432.6, subdivision (a) provides
that “[a] person
shall not, as a condition of employment, continued employment, or the receipt
of any employment-related benefit, require any applicant for employment or any
employee to waive any right, forum, or procedure for a violation of any
provision of the California Fair Employment and Housing Act…or this code,
including the right to file and pursue a civil action or a complaint with, or
otherwise notify, any state agency, other public prosecutor, law enforcement
agency, or any court or other governmental entity of any alleged violation.”
However,
as Michaels notes, ¿Labor Code
section 432.6¿ contains
another provision providing that, “[n]othing in this section is intended to
invalidate a written arbitration agreement that is otherwise enforceable under
the Federal Arbitration Act (¿9 U.S.C. Sec. 1¿¿¿et seq.).” (¿Lab. Code, § 432.6, subd. (f)¿.)
The 2020 Arbitration Agreement provides, “[t]his Agreement and the arbitration
proceedings are governed by a federal law called the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1 et
seq., and evidences a transaction involving
commerce.” (Kumar Decl., ¶ 3, Ex. A.) Thus, the Court does not find Plaintiff’s
argument pertaining to ¿Labor Code
section 432.6¿ persuasive.
Unconscionability
An arbitration agreement
must be both procedurally and substantively unconscionable to be unenforceable.
(((Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th
83, 114); ((Mission
Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1159
[unnecessary to decide whether insurance policy was adhesion contract and
procedurally unconscionable because it was not substantively unconscionable].) Plaintiff asserts that the 2020 Arbitration Agreement is
procedurally and substantively unconscionable.
i.
Procedural Unconscionability
Procedural unconscionability
concerns the manner in which the contract was negotiated and the parties’
circumstances at that time. It focuses on the factors of oppression or
surprise. (((Kinney v. United Healthcare
Servs. (1999) 70 Cal.App.4th 1322,
1329.) “Oppression generally takes the form
of a contract of adhesion, 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. In the case of arbitration agreements in
the employment context, 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.” (((Carmona v. Lincoln
Millennium Car Wash, Inc. (2014)
226 Cal.App.4th 74, 84 [quotations and citations omitted].) “Surprise
involves the extent to which the supposedly agreed-upon terms of the bargain
are hidden in a prolix printed form drafted by the party seeking to enforce the
disputed terms.” (((A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 484 [internal
quotations omitted].)
Here, Plaintiff asserts
that the 2020 Arbitration Agreement is procedurally unconscionable because it
was drafted by Michaels with no input from Plaintiff, and was presented to
employees as a condition of employment without the option to opt-out. Plaintiff
notes that the Declaration of Sara Creagan-Wysocki in support of Michaels’s
motion provides, “[s]ince 2018, Michaels required all applicants, as part of
their employment applications, to agree to arbitrate any claims arising from
the application process, and if the candidate was hired, their employment with
Michaels. As such, applicants could not complete Michaels’ employment
application process unless they reviewed and agreed to the Arbitration
Agreement.” (Creagan-Wysocki Decl., ¶ 3.)
While it is true that “the existence of
contract of adhesion supports a finding of procedural conscionability,” the
court must still weigh the level of procedural unconscionability against any
substantive unconscionability to determine whether the agreement can be
enforced. (((Baxter v. Genworth North
America Corp. (2017) 16
Cal.App.5th 713, 723.) “When …
there is no other indication of oppression or surprise, ‘the degree of
procedural unconscionability of an adhesion agreement is low, and the agreement
will be enforceable unless the degree of substantive unconscionability is
high.’” (((Serpa
v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)
Next, Plaintiff argues that the 2020 arbitration
agreement is procedurally unconscionable because it did not attach the
American Arbitration Association (“AAA”) employment rules. The 2020 Arbitration
Agreement provides, inter alia, “[t]he arbitration process is governed by this Agreement and the
current Employment
Arbitration Rules of the AAA (‘AAA Rules’). These rules are available at www.adr.org/employment.
You also may request a copy of the AAA Rules by emailing WorkplaceResolutions@michaels.com, or sending a
written request to Office
of the General Counsel, Michaels Stores, Inc., 8000 Bent Branch Drive, Irving TX 75063.” (Kumar Decl.,
¶ 3, Ex. A.)
It is generally true that the failure to
provide a copy of the arbitration rules supports a finding of procedural
unconscionability, but only if the unconscionability claim “depended in some
manner on the arbitration rules in question.” (((Baltazar
v. Forever 21, Inc. (2016) 62
Cal.4th 1237, 1246));
((see also
Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1472
[“Plaintiff does not argue that there are any other provisions in the Agreement
that would support a finding of procedural unconscionability. Nor does she
identify any feature of the AAA rules that prevent fair and full arbitration.
Thus, we find the failure to attach the AAA rules, standing alone, is
insufficient grounds to support a finding of procedural unconscionability.”])
Here,
Plaintiff does not challenge any of the AAA rules and does not argue that any
of the AAA rules are substantively unconscionable, so the Court finds that the
failure to attach those rules does not affect the unconscionability analysis.
Based on the foregoing, the Court finds that there is a low level of
procedural unconscionability.
ii.
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. A contract term
is not substantively unconscionable when it merely gives one side a greater
benefit; rather, the term must be so one-sided as to ‘shock the conscience.’” (((Carmona
v. Lincoln Millennium Car Wash, Inc.,
supra, 226 Cal.App.4th at p. 85 [internal quotations and citations
omitted].) “[T]he paramount consideration in
assessing [substantive] conscionability is mutuality.” (((Ibid. [brackets
in original].)
Plaintiff contends that “[t]he
Purported 2020 Agreement is unconscionable because it is not fully integrated
and it incorporates past agreements that were not attached to the current
agreement at the time of its purported formation, and which contain
unconscionable and oppressive terms, such as a confidentiality provision
contained in the 2018 arbitration agreement…” (Opp’n at p. 10:5-8.) As Michaels
notes, Plaintiff cites to a non-binding federal case in support of the
foregoing assertion, Ting v. AT&T (9th Cir. 2003) 319 F.3d 1126. In addition, the Court notes that
Plaintiff does not identify what specific confidentiality provision it contends
is unconscionable, nor the provision in the 2020 Arbitration Agreement
incorporating past agreements.
Plaintiff
also asserts that “[t]he purported 2020 Agreement is substantively
unconscionable because it shortens the statute of limitations on claims by
requiring pre-requisites to begin the arbitration process, such as first
attempting to resolve disputes through their own Human Resources (‘HR’)
department and writing a letter to Defendant requesting arbitration before the
statute of limitations runs out on Plaintiff’s claims.” (Opp’n at p. 11:2-5.)
Again, Plaintiff does not identify which specific provision of the
2020 Arbitration Agreement she is referring to. It appears Plaintiff could be
referring to the following provision: “[y]ou are welcome to contact
your HR representative or to use the confidential and anonymous Hotline to register all other concerns. If
these disputes cannot be resolved informally, any dispute or claim between You and the
Company that might normally be resolved by a court will go through arbitration, except for disputes not
subject to arbitration listed
below. (Kumar Decl., ¶ 3, Ex. A.)
Plaintiff cites to Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1282-1283, where the Court found that “[t]he
employment agreement—in addition to compelling plaintiff to arbitrate all of
his disputes with defendant—requires him to submit to discussions with his
supervisors in advance of, and as a condition precedent to, having his dispute
resolved through binding arbitration. While on its face, this provision may
present a laudable mechanism for resolving employment disputes informally, it
connotes a less benign goal. Given the unilateral nature of
the arbitration agreement, requiring plaintiff to submit to an
employer-controlled dispute resolution mechanism (i.e., one without a neutral
mediator) suggests that defendant would receive a ‘free peek’ at plaintiff’s
case, thereby obtaining an advantage if and when plaintiff were to later demand
arbitration.”
But as also noted by
Michaels, unlike Nyulassy, Plaintiff does not point to any provision
requiring her to submit to
an internal dispute resolution process prior to commencing
arbitration.
Rather,
the 2020 Arbitration Agreement provides, “[y]ou are welcome to contact
your HR representative or to use the confidential and anonymous Hotline to register all other concerns...” (Kumar
Decl., ¶ 3, Ex. A.)
Plaintiff also asserts, without
citing to any specific provision, that “the 2020 Agreement requires for
Plaintiff to send a written ‘Request for Arbitration’ to Defendant by mail
before the statute of limitations for Plaintiff’s claims have run out.” (Opp’n
at p. 11:17-19.) It appears Plaintiff may be referring to the requirement that
“[i]f You are making a demand for
arbitration, You must send a written Request for Arbitration to the Company by mailing to the Office of the
General Counsel, Michaels
Stores, Inc., 8000 Bent Branch Drive, Irving TX 75063, and to any United States office of AAA. A
party must make a demand before the deadline (statute of limitations) for the claim has passed.” (Kumar
Decl., ¶ 3, Ex. A.) Plaintiff argues that “[t]his essentially shortens
the statute of limitations on Plaintiff’s claims because the agreement does not
indicate how much time Defendant has to respond and process the request.”
(Opp’n at p. 11:19-21.) But as Michaels notes, Plaintiff does not show that the
2020 Arbitration Agreement contains
an abbreviated statute of limitations period.
Plaintiff
also asserts that the “purported 2020 Agreement is substantively
unconscionable because according to its terms, the arbitrator, and not a
federal nor state court, has exclusive authority to resolve disputes relating
to the agreement itself, running afoul to CCP § 1281,
and invalidating the purported ‘mutuality’ of its terms.” (Opp’n at p.
11:23-26.) Plaintiff does not cite to what provision of the 2020 Arbitration
Agreement she is referring to. Plaintiff cites to Murphy v. Check 'N Go of California,
Inc. (2007) 156 Cal.App.4th 138, 145, where the Court of Appeal “agree[d]
with the court below that, in this contract of adhesion, the provision for
arbitrator determinations of unconscionability is unenforceable. Under the
circumstances of this case, the judge is the proper gatekeeper to determine
unconscionability.” But this does not demonstrate
that a provision for arbitrator determinations of unconscionability
means that the agreement itself is unconscionable.
Based
on the foregoing, the Court finds that Plaintiff has not demonstrated a high
level of substantive unconscionability. In light of the finding of only a low
level of procedural unconscionability, the Court finds that Plaintiff has not
met her burden of demonstrating that the 2020 Arbitration Agreement is
unenforceable due to unconscionability. Moreover,
Plaintiff does not argue that the two 2018 arbitration agreements are
unconscionable.
Armendariz Requirements
Plaintiff notes that the
2020 Arbitration Agreement provides that “[w]homever initiates arbitration may be required to pay a filing fee
as required by the AAA Rules.” (Kumar Decl., ¶ 3, Ex.
A.) Plaintiff notes that in Armendariz v.
Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at pages 110-111, the California Supreme Court “conclude[d]
that when 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. This rule will ensure that employees bringing FEHA claims will not be
deterred by costs greater than the usual costs incurred during litigation, costs
that are essentially imposed on an employee by the employer.” (Emphasis omitted.)
But after the provision, “[w]homever initiates arbitration may be
required to pay a filing fee as required by the AAA Rules,” the 2020 Arbitration Agreement provides, “[t]hat filing fee will not be higher
than what You would pay to file a lawsuit. If You cannot afford to pay the
filing fee, You will be relieved of the obligation to pay the filing fee. Any
disputes about the payment of the initial filing fee will be decided by the
Arbitrator. The Company will pay all other fees and costs of the Arbitrator and
AAA.” (Kumar Decl., ¶ 3, Ex. A.)
Plaintiff also asserts
that the 2020 arbitration agreement “fails to provide for
adequate discovery in violation of the Armendariz factors.” (Opp’n at p.
13:2-3, emphasis omitted.) Plaintiff notes that the Armendariz Court “agree[d] that adequate discovery is
indispensable for the vindication of FEHA claims.” (((Id. at p.
104.)
The 2020 Arbitration Agreement
provides, “[y]ou and the
Company have the right to participate in a process
called ‘discovery,’ which includes both parties’ right
to take the deposition of three individuals and any expert witnesses. We both also have the right to request documents. The parties can
mutually agree to allow more discovery, and the
Arbitrator may allow additional discovery if You or the
Company can show the necessity, as determined by the Arbitrator. We both can request that the Arbitrator issue subpoenas to third parties
for documents or other evidence, both
during discovery and at the arbitration hearing.”
(Kumar Decl., ¶ 3, Ex. A.)
Plaintiff argues that “[a]ny
further discovery requires mutual agreement by both parties which places
Plaintiff at a significant disadvantage since Defendant has an incentive to
limit discovery if they deem it would be a threat to their position.” (Opp’n at
p. 13:15-18.) Plaintiff also asserts that “while the arbitrator may allow more
discovery, Plaintiff would first have to ‘show the necessity’ which is unclear
as to what standard is required to make such showing, and it involves another
obstacle for Plaintiff obtaining evidence to support her claims.” (Opp’n at p. 13:19-23.)
Michaels asserts that under the provision referenced above, the 2020
Arbitration Agreement permits
sufficient discovery for Plaintiff to pursue her claims. Michaels
contends that an even more
restrictive discovery provision
was found to satisfy Amendariz in Dotson
v. Amgen, Inc. (2010) 181 Cal.App.4th 975. In Dotson,
the subject discovery provision provided: “[e]ach party shall have the right to take the deposition
of one individual and any expert witness designated by another party. Each
party also shall have the right to make requests for production of documents to
any party. The subpoena right specified below in Paragraph 4 [[e]ach party
shall have the right to subpoena witnesses and documents for the arbitration]
shall be applicable to discovery pursuant to this paragraph. Additional
discovery may be had where the Arbitrator selected pursuant to this Agreement
so orders, upon a showing of need.” (Id. at
p. 982 [internal quotations omitted].) The Court of Appeal found that this provision was not unconscionable.
(Ibid.)
The Dotson Court noted that “arbitration
is meant to be a streamlined procedure. Limitations on discovery, including the number of depositions, is
one of the ways streamlining is achieved. In Armendariz, the court stated that the parties were entitled to discovery
sufficient to vindicate their claims. The court also acknowledged
that discovery limitations are an integral and permissible part of the
arbitration process. [A]dequate discovery does not mean unfettered
discovery. Armendariz specifically recognized
that parties may agree to something less than the full panoply of discovery
permitted under the California Arbitration Act, Code
of Civil Procedure section 1283.05.” (Dotson v. Amgen, Inc., supra, 181
Cal.App.4th at p. 983 [internal quotations and citations omitted].)
Lastly, Plaintiff asserts that the 2020 Arbitration Agreement fails to
provide for adequate injunctive relief. The 2020 Arbitration Agreement
provides, “[y]ou the Company may
apply to a court of competent jurisdiction for temporary or preliminary injunctive relief in connection with an
arbitrable controversy,
but all issues of final relief shall be decided in arbitration.” (Kumar
Decl., ¶ 3, Ex. A.) Plaintiff argues that she “is asserting several statutory
equitable claims afforded to her under FEHA and wage claims, for which public
policy strongly favors resolution by a court of equity––not through a private
arbitration proceeding. Therefore, Plaintiff is being denied the opportunity to
fully vindicate her claims since the equitable claims will not be fully
litigated in the appropriate forum, in violation of public policy.” (Opp’n at
p. 14:6-10.) But as Michaels notes, Plaintiff
offers no explanation as to what injunctive remedies are unavailable to render
the agreement unconscionable.
Motion to Stay
Code of Civil Procedure section 1281.4
states that the court shall stay the action or proceeding if the court has
ordered arbitration. (Code Civ. Proc., § 1281.4.) Accordingly,
the case is stayed pending completion of arbitration.
Conclusion
For the foregoing reasons, Michaels’s motion to compel
arbitration is granted as to Plaintiff’s claims against Michaels.
The Court orders that the entire action is stayed pending
completion of arbitration of Plaintiff’s arbitrable claims against Michaels.
The Court sets an arbitration completion status conference
on March 27, 2024, at 10:00 a.m. in Dept. 50. The arbitrating parties are
ordered to file a joint report regarding the status of the arbitration by March
20, 2024, with a courtesy copy delivered directly to Dept. 50.
Michaels is ordered to give notice of this Order.
DATED:
________________________________
Hon. Teresa A.
Beaudet
Judge, Los
Angeles Superior Court