Judge Teresa A. Beaudet, Case Number: 23STCV01820, Date: 2023-07-20 Tentative Ruling

Plaintiff Yvonne Hanson (“Plaintiff”) filed this action on January 27, 2023 against Defendants Radiance Hospice, Inc. (“Radiance Hospice”) and Kent E. Chesley (“Chesley”) (jointly, “Defendants”). Plaintiff filed the operative First Amended Complaint (“FAC”) on May 31, 2023, asserting causes of action for (1) retaliation, (2) retaliation, (3) wrongful termination in violation of public policy, (4) breach of written contract, and (5) breach of the implied covenant of good faith and fair dealing.[1]

Defendants now move for an order requiring Plaintiff to submit her individual claims to binding arbitration and dismissing this action, or in the alternative, staying this action pending completion of the arbitration. Plaintiff opposes.

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. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

Defendants indicate that Plaintiff was employed by Radiance Hospice from November 29, 2021 through November 3, 2022, as the Director of Patient Care Services. (Chesley Decl., ¶ 2.) Defendants state that Plaintiff signed an Employment Agreement “as part of Plaintiff's confirmation of her terms of employment to cover her period of employment” (herein, the “Employment Agreement”). (Chesley Decl., ¶ 7, Ex. A.) The subject Employment Agreement is attached as Exhibit “A” to the Declaration of Kent E. Chesley, the owner and president of Radiance Hospice. (Chesley Decl., ¶¶ 2, 7, Ex. A.) Chesley states in his declaration that “[m]y signature on behalf of [Radiance Hospice] is also on Exhibit A, signed contemporaneously with Plaintiff, on November 29, 2021.” (Chesley Decl., ¶ 8.) The Employment Agreement contains the following provision:

“DISPUTE RESOLUTION AGREEMENT. By signing my name below and/or by accepting and/or continuing employment with the Company or compensation as set forth in this Agreement, I agree to pursue any claims I might have against the Company that currently exist or that may arise in the future exclusively through binding arbitration; similarly, the Company agrees to pursue any claims it might have against me that currently exist or that may arise in the future exclusively through binding arbitration. By agreeing to binding arbitration, we waive our rights to have any and all claims decided in an administrative hearing, in a judge/bench trial, and/or in a jury trial. I understand that our only recourse for pursuing claims is through binding arbitration according to the rules set forth herein and/or those rules incorporated by reference in this agreement. I understand I have the right to arrange for an attorney to represent me or to represent myself during the arbitration proceedings. I understand that neither I nor the Company may later decide that one of us does not want to arbitrate all such claims.” (Chesley Decl., ¶ 7, Ex. A.)

In the opposition, Plaintiff asserts that she “never agreed to be bound by the provision to arbitrate.” (Opp’n at p. 7:6.) However, Plaintiff does not appear to provide any evidence in support of this assertion. Rather, Plaintiff states in her declaration in support of the opposition, “I signed the Employment Agreement on my first day of work.” (Hanson Decl., ¶ 7.) Thus, Plaintiff does not dispute that he signed the Employment Agreement. In addition, Plaintiff does not dispute that the Employment Agreement covers the claims Plaintiff alleged against Defendants in this matter.

Based on the foregoing, the Court finds that Defendants have demonstrated the existence of an arbitration agreement and that it covers the claims asserted by Plaintiff in this action. Thus, the burden now shifts to Plaintiff to prove a ground for denial.

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 [internal 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 cites to Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 398, 403, where the Court of Appeal found that “[t]he adhesive nature of the agreement is evidence of some degree of procedural unconscionability.” The Court notes that although Plaintiff cites to legal authority in the opposition concerning contracts of adhesion, Plaintiff does not appear to argue in the memorandum of points and authorities in support of the opposition that the Employment Agreement is a contract of adhesion. However, the Court notes that in her declaration, Plaintiff states that “[t]he Employment Agreement was presented to me as a non-negotiable preemployment contract (except as to my specific compensation and employment benefits).” (Hanson Decl., ¶ 6.)

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.)

Plaintiff also notes that the Employment Agreement provides, inter alia, that “I understand that our only recourse for pursuing claims is through binding arbitration according to the rules set forth herein and/or those rules incorporated by reference in this agreement.” (Chesley Decl., ¶ 7, Ex. A.) In her declaration, Plaintiff states that “I was not provided any additional information regarding the applicable Rules, the forum, the arbitration costs, or any other specifics of the Arbitration Provision. In particular, I was not provided with additional documents such as ‘. . .the rules set forth herein and/or those rules incorporated by reference in this agreement.’” (Hanson Decl., ¶ 5, emphasis omitted.) The Court also notes that no additional rules are attached to the Employment Agreement provided by Defendants in connection with the motion. (See Chesley Decl., ¶ 7, Ex. A.)

Plaintiff cites to Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246, where “Baltazar argue[d] that a somewhat greater degree of procedural unconscionability is present here—warranting closer scrutiny of the substantive fairness of the agreement’s terms—because Forever 21 did not provide Baltazar with a copy of the AAA’s rules for arbitration of employment disputes, which, by the terms of the arbitration agreement, govern any arbitration between the parties.” In addition, Plaintiff cites to Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 247, where the Court of Appeal “conclude[d] the Agreement has a moderate level of procedural unconscionability based on its adhesive nature, the employment context in which it arose, its failure to identify the governing AAA rules, and CW Painting’s failure to provide Carbajal with a copy of the governing rules or the opportunity to review any rules before she was required to sign the Agreement.”

In the reply, Defendants cite to Fuentes v. Empire Nissan, Inc. (2023) 90 Cal.App.5th 919, 934, where the Court of Appeal found that “Fuentes’s final argument is that the arbitration agreement is unfair because it did not explain how to initiate arbitration. This same invalid complaint appeared in a recent case. There, an employee said an arbitration agreement was unfair because it ‘did not tell her how to initiate arbitration.’ (Alvarez v. Altamed Health Services Corp. (2021) 60 Cal.App.5th 572, 590 [274 Cal. Rptr. 3d 802].) The Alvarez court rejected this complaint. It reasoned ‘the failure to provide a copy of the arbitration rules generally raises procedural unconscionability concerns only if there is a substantively unconscionable provision in the omitted rules. The agreement in this case states the procedures of the California Arbitration Act will apply. There are no substantively unconscionable rules in the Act.’…We follow Alvarez. Fuentes’s agreement states the procedural rules of the California Arbitration Act apply. Fuentes does not challenge these rules, which are not unconscionable. In this situation, failing to include instructions does not establish substantive unconscionability.” But as Plaintiff notes, here, the arbitration provision does not designate a forum for the arbitration. In addition, as discussed, the applicable rules are not specified. Thus, Plaintiff asserts that “[e]ven assuming that Plaintiff had wanted to demand arbitration at the outset, to whom? By what means? Under what rules? According to what procedures? At what cost?” (Opp’n at p. 9:6-8.)

Based on the foregoing, the Court finds that Plaintiff has demonstrated that the “Dispute Resolution Agreement” section of the Employment Agreement has a moderate level of procedural unconscionability.

Lastly, Plaintiff asserts that “[t]he ambiguity concerning payment of costs unique to arbitration is yet another example evidencing lack of consent, and lack of agreement, on all material terms to the Arbitration Provision.” (Opp’n at p. 10:1-3.) Plaintiff cites to Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 115, where the California Supreme Court noted that “[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.” (Internal quotations omitted, emphasis in original.)

In the reply, Defendants contend that “[i]t has been black letter law since the California

Supreme Court issued the Armendariz decision that an arbitration clause in an employment agreement cannot require an employee/plaintiff to pay any unique costs of arbitration, but there is zero legal support for an argument that the agreement must include language to ensure that point. To the contrary, Armendariz expressly acknowledges that silence in the agreement regarding payment of those unique costs is deemed to place those costs on the employer.” (Reply at p. 6:20-26.) Defendants note that the California Supreme Court in Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at page 113 provides, “[w]e therefore hold that a mandatory employment arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration. Accordingly, we interpret the arbitration agreement in the present case as providing, consistent with the above, that the employer must bear the arbitration forum costs. The absence of specific provisions on arbitration costs would therefore not be grounds for denying the enforcement of an arbitration agreement.”

Moreover, as set forth above, Plaintiff does not appear to argue in the opposition that the subject “Dispute Resolution Agreement” in the Employment Agreement is substantively unconscionable. “¿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]¿.) Here, Plaintiff does not assert in the opposition that the terms of the Dispute Resolution Agreement are overly harsh or one-sided.

Defendants cite to Basith v. Lithia Motors, Inc. (2023) 90 Cal.App.5th 951, 960-961, where the Court of Appeal found that “[t]he unconscionability defense requires a party to establish both procedural and substantive unconscionability. Because there is no substantive unconscionability, Basith’s attack on this contract fails.” (Internal citation omitted.)

Based on the foregoing, the Court does not find that Plaintiff has not demonstrated substantive unconscionability in the Employment Agreement. In light of the finding of only a moderate level of procedural unconscionability, the Court finds that Plaintiff has not met her burden of demonstrating that the Employment Agreement is unenforceable due to unconscionability. ¿

For the foregoing reasons, Defendants’ motion to compel arbitration is granted.

The entire action is stayed pending completion of arbitration of Plaintiff’s arbitrable claims against Defendants.

The Court sets an arbitration completion status conference on July 22, 2024, at 10:00 a.m. in Dept. 50. The parties are ordered to file a joint report regarding the status of the arbitration five court days prior to the status conference, with a courtesy copy delivered directly to Department 50.¿¿

[1]The first and second causes of action are alleged against both Defendants. The third, fourth, and fifth causes of action are alleged against Radiance Hospice only.

Superior Court of California

County of Los Angeles

Department 50