Judge: Theresa M. Traber, Case: 22STCV05188, Date: 2022-12-05 Tentative Ruling
Case Number: 22STCV05188 Hearing Date: December 5, 2022 Dept: 47
Tentative Ruling
Judge Theresa M. Traber, Department 47
HEARING DATE: December 5, 2022 TRIAL
DATE: NOT SET
CASE: Jimmy Enrique Yanes v. Ocean Park
Healthcare, LLC
CASE NO.: 22STCV05188 
MOTION
TO COMPEL ARBITRATION
MOVING PARTY: Defendants Ocean Park Healthcare, LLC and Sunset Park
Healthcare, LLC
RESPONDING PARTY(S): Plaintiff Jimmy
Enrique Yanes
CASE
HISTORY:
·
02/10/22: Complaint filed
·
03/17/22: First Amended Complaint filed.
STATEMENT
OF MATERIAL FACTS AND/OR PROCEEDINGS:
This is an action under the Private Attorneys General Act of 2004 for
multiple wage and hour violations. Plaintiff alleges that Defendants regularly
failed to pay wages owed, failed to provide meal and rest periods, and failed
to provide accurate wage statements, and terminated Plaintiff in retaliation
for complaining about these failures.
Defendants Ocean Park Healthcare,
LLC and Sunset Park Healthcare, LLC move to compel arbitration and stay this
action.
TENTATIVE RULING:
Defendants’
motion to compel Plaintiff’s individual non-PAGA claims to binding arbitration
is GRANTED. The motion to compel
arbitration of Plaintiff’s individual PAGA claims is DENIED, as is Defendants’
related request for a dismissal of the representative aspect of Plaintiff’s
PAGA claims.
DISCUSSION:
Defendants Ocean Park Healthcare,
LLC and Sunset Park Healthcare, LLC move to compel arbitration and stay this
action. Defendants also request that the Court dismiss Plaintiff’s
representative claims under the Tenth Cause of Action under the Private Attorneys
General Act of 2004 (PAGA).
Existence of Arbitration Agreement
Under California law, arbitration
agreements are valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract. (Blake v. Ecker (2001) 93 Cal.App.4th
728, 741 (overruled on other grounds by
Le Francois v. Goel (2005) 35 Cal.4th 1094).) A party petitioning to compel
arbitration has the burden of establishing the existence of a valid agreement
to arbitrate, and the party opposing the petition has the burden of proving, by
a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court
(1998) 62 Cal.App.4th 348, 356-57.)
Defendants
offer, as proof of an arbitration agreement with the Plaintiffs, a document
entitled Alternative Dispute Resolution Policy and Acknowledgement, presented
in both English and Spanish. (Declaration of Michael Holmes ISO Mot. Exh. A.)
The document bears Plaintiff’s digital signature and is dated February 25,
2021. (Id.) Plaintiff does not dispute that he signed the agreement.
The Court
therefore finds that there is an agreement to arbitrate between Defendants and
the Plaintiff.
Applicability of the FAA
The Policy
states “The parties acknowledge that this Agreement evidences a transaction
involving interstate commerce. Notwithstanding the provision in the preceding
paragraph with respect to applicable substantive law, any arbitration conducted
pursuant to the terms of this Agreement shall be governed by the Federal
Arbitration Act (9 U.S.C., Secs. 1-16).” (Holmes Decl. Exh. A. p.6.) Plaintiff does not dispute that the Federal
Arbitration Act governs the arbitration agreements.
Scope of the Arbitration Agreements
Defendants
contend that the scope of the Arbitration Agreements covers Plaintiffs’
individual PAGA claims. Plaintiffs dispute this contention.
“The scope
of arbitration is a matter of agreement between the parties.” (See, e.g., Ericksen,
Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35
Cal.3d 312, 323.) “A party can be compelled to arbitrate only those issues it
has agreed to arbitrate.” (Perez v. U-Haul Co. of California (2016) 3
Cal.App.5th 408, 419.)
The Policy
states, in relevant part:
Nothing in this Alternative Dispute
Resolution Policy is intended to require arbitration of any claim or dispute
which the courts of this jurisdiction have expressly held are not subject to
mandatory arbitration.
Nothing in this agreement is designed
to compel arbitration of any claims or causes of action expressly excluded by
the provisions of the 2010 Defense Appropriations Act (H.R. 3326).
Covered disputes include any dispute
arising out of or related to your employment, the terms and conditions of your
employment and/or the termination of your employment, including, but not
limited to, the following:
·
Alleged violations of federal, state and/or
local constitutions, statutes or regulations;
·
Claims of unlawful harassment, discrimination,
retaliation or wrongful termination that cannot be resolved by the parties or
during an investigation by an administrative agency (such as the Equal
Employment Opportunity Commission); Covered claims include, but are not limited
to, claims under Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Equal Pay Act,
and any other statutory scheme covering claims of discrimination or harassment
on the basis of race, color, age, religious creed, national origin, ancestry,
disability, sexual orientation, gender identity, sex or any other
characteristic protected by law;
·
Claims based on any purported breach of contract
(including breach of the covenant of good faith and fair dealing, claims of
wrongful termination or constructive termination);
.
. .
·
Claims alleging failure to compensate for all
hours worked, failure to pay overtime, failure to pay minimum wage, failure to
reimburse expenses, failure to pay wages upon termination, failure to provide
accurate, itemized wage statements, failure to provide meal and/or rest breaks,
entitlement to waiting time penalties and/or other claims involving employee
wages, including, but not limited to, claims brought under the Fair Labor
Standards Act and any other statutory scheme related to wages or working hours;
. . .
The following types of disputes are
expressly excluded and are not covered by this ADR Policy:
·
Disputes related to workers’ compensation and
unemployment insurance;
·
Disputes or claims that are expressly excluded
by statute or are expressly required to be arbitrated under a different
procedure pursuant to the terms of your benefit plan.
(Holmes Decl. Exh. A. p.1-2.) The policy also contains a
“Class Action Waiver” which states:
You understand and agree this ADR
Program prohibits you from joining or participating in a class action or
representative action, acting as a representative of others, excluding
private attorney general claims, or otherwise consolidating a covered claim
with the claim of others.
(Id. p.2.) Defendants contend that, in light of the
United States Supreme Court’s holding in Viking River Cruises v. Moriana,
(2022) 142 S. Ct. 1906 (“Moriana”), Plaintiff’s claims should be
compelled to arbitration and the representative claims under PAGA dismissed,
despite the express provision that Plaintiff has not waived his representative
PAGA claims. In opposition, Plaintiff contends that, under the explicit terms
of the agreement, Plaintiff is entitled to maintain his PAGA claim. The Court
must therefore address the threshold question of the effect of Moriana on
Plaintiff’s PAGA claim.
The California Supreme Court held
in its landmark decision in Iskanian v. CLS Transportation Los Angeles, LLC
(2014) 58 Cal.4th 380 (“Iskanian”) that where “an employment agreement
compels the waiver of representative claims under the PAGA, it is contrary to
public policy and unenforceable as a matter of state law.” (Id., at pp.
383-384.) The Court also ruled that an agreement that permitted the
employee to bring only “individual” PAGA claims does not permit its enforcement
because splitting the individual and representative claims in this manner “does
not serve the purpose of the PAGA.” (Id.,
at p. 384.) In addition, the Iskanian
Court held that a PAGA claim lies outside the FAA’s coverage because it is an
action held by the State, rather than a dispute between an employee and
employer. (Id., at p. 388.) Based on this reasoning, the Court concluded
that “California's public policy prohibiting waiver of PAGA claims, whose sole
purpose is to vindicate the Labor and Workforce Development Agency's interest
in enforcing the Labor Code, does not interfere with the FAA's goal of
promoting arbitration as a forum for private dispute resolution.” (Id., at pp. 388-389.)
In Moriana, the U.S. Supreme
Court approved the Iskanian rule that private arbitration agreements
cannot effectuate “a wholesale waiver of PAGA claims,” holding that such a
state rule is not preempted by the FAA.
(Moriana, at p. 1925.) In
so doing, the U.S. Supreme Court held that “the FAA does not require courts to
enforce contractual waivers of substantive rights and remedies.” (Id., at p. 1919.) It also resisted the employer’s contention
that a state rule invalidating contractual bans on representative PAGA actions
should be treated the same as state nullifications of class-action
prohibitions, which the high court had held to be preempted by the FAA in AT&T
Mobility LLC v. Concepcion (2011) 131 S. Ct. 1740. Instead, the Moriana Court held that a
representative PAGA action litigated by an aggrieved employee on behalf of the
State was significantly different from a class action where a plaintiff
prosecuted the individual claims of absent class members. (Id., at pp. 1920-1921.) It also dismissed the notion that allowing
arbitration of representative actions was necessarily contrary to the
“bi-lateral” nature of arbitrations and, thus, incompatible with the FAA. (Id., at pp. 1921-1923.) Accordingly,
the Court ruled that the FAA does not preempt state laws, like the holding in Iskanian,
that invalidate contractual prohibitions on arbitrating PAGA representative
claims. (Id.)
The Moriana Court next
addressed what it described as the secondary Iskanian rule and found it
to be preempted by FAA “insofar as it precludes the division of PAGA actions
into individual and non-individual claims through an agreement to
arbitration.” (Moriana, at p.
1924.) The Court’s analysis was based
principally on its interpretation of PAGA’s standing and claim joinder rules. (Id.
at pp. 1923-1924.) The Court observed that PAGA “permits ‘aggrieved employees’
to use the Labor Code violations they personally suffered as a basis to join to
the action any claims that could have been raised by the State in an
enforcement proceeding.” (Id., at p. 1923.) The Moriana Court
concluded that “Iskanian’s secondary rule prohibits parties from
contracting around this joinder device because it invalidates agreements to
arbitrate only ‘individual PAGA claims for Labor Code violations that an
employee suffered.’” (Id.) It
reasoned that Iskanian’s “prohibition on contractual division of PAGA
actions into constituent claims unduly circumscribes the freedom of parties to
determine ‘the issues subject to arbitration’ and ‘the rules by which they will
arbitrate,’ and does so in a way that violates the fundamental principle that
‘arbitration is a matter of consent.’” (Id.) Therefore, the Moriana Court
concluded, “state law cannot condition the enforceability of an arbitration
agreement on the availability of a procedural mechanism that would permit a
party to expand the scope of the arbitration by introducing claims that the
parties did not jointly agree to arbitrate.” (Id.)
As a bottom line, then, Moriana holds
that an employee who has entered into an enforceable agreement to arbitrate
PAGA actions may be compelled to arbitrate his “individual” PAGA claims, that
is, those arising from Labor Code violations suffered by the employee, rather
than other aggrieved parties. The
question of whether such a result should follow a judicial refusal to enforce a
waiver of representative PAGA claims involves analysis of the contract’s severability
provision, if any. (Id., at p. 1925.)
Applying Moriana’s holding
here, the Court must determine: (1) whether Plaintiff’s PAGA claims may be
compelled to arbitration under the parties’ agreement; (2) whether the parties’
agreement effectuates a “wholesale waiver” of representative PAGA claims and,
thus, is unenforceable as contrary to California public policy; and (3) if so,
whether the agreement’s severability clause permits arbitration of Plaintiff’s
“individual” PAGA claim. If such an
arbitration is warranted, the final question is what becomes of the
non-individual claims of other aggrieved employees.”
Although
neither party addressed the issue, it is plain that the arbitration agreement
does not include PAGA claims as matters that may be compelled to
arbitration. The agreement clearly
states: “Nothing in this Alternative Dispute Resolution Policy is intended to
require arbitration of any claim or dispute which the courts of this
jurisdiction have expressly held are not subject to mandatory arbitration.” The California Supreme Court – highest court
in “this jurisdiction” – unequivocally held in Iskanian that PAGA claims
may not be compelled to arbitration.
Accordingly, the arbitration provision at issue expressly excludes PAGA
claims from mandatory arbitration, thus permitting all aspects of such claims –
both the individual and representative parts – to be litigated in court. For this reason, the Court denies Defendants’
motion to the extent it seeks to compel arbitration of Plaintiff’s PAGA claims.
Nor is
there any basis to dismiss the representative portion of the PAGA claim. Not only does the arbitration agreement
permit the individual feature of the PAGA claim to remain in court, it also
preserves Plaintiff’s ability to bring and participate in the representative
facet of the PAGA claims. Again, the agreement
expressly excludes representative private attorney general claims from its
class action waiver. Thus, even if Defendants were correct that Plaintiff’s
individual PAGA claim could be compelled to arbitration under Moriana,
Defendants would not be entitled to dismissal of the representative PAGA
claims.
Because the
parties’ arbitration provision preserves Plaintiff’s right to bring his PAGA
claim in court and does not impair his right under California law to
participate in a PAGA representative action, the Court concludes that the
arbitration agreement between the parties permits mandatory arbitration only as
to Plaintiff’s non-PAGA individual claims.
Unconscionability
Plaintiff
also opposes Defendants’ motion to compel arbitration in its entirety on the
basis that the agreement is unenforceable because it is unconscionable.
1. Procedural Unconscionability
“‘To
briefly recapitulate the principles of unconscionability, the doctrine has
“‘both a “procedural” and a “substantive” element,’ the former focusing on
‘“oppression”’ or ‘“surprise”’ due to unequal bargaining ¿power, the latter on ‘“overly harsh”’ … or ‘“one-sided”’
results.” [Citation.] The procedural element of an unconscionable contract
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.’” … [¶] Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided.’
[Citation.]” (Citation omitted.)
“Under this approach, both the procedural and
substantive elements must be met before a contract or term will be deemed
unconscionable. Both, however, need not be present to the same degree. A
sliding scale is applied so that ‘the more substantively oppressive the
contract term, the less evidence of procedural unconscionability is required to
come to the conclusion that the term is unenforceable, and vice versa.’
(Citations omitted.)
(Walnut Producers of California v. Diamond Foods, Inc. (2010) 187 Cal.App.4th 634, 645
(bold emphasis added).)
Plaintiff argues that the agreements
are procedurally unconscionable because they are contracts of adhesion. This
argument presents only a minimal amount of unconscionability:
“The
procedural element of the unconscionability analysis concerns the manner in which
the contract was negotiated and the circumstances of the parties at that time.
[Citation.] The element focuses on oppression or surprise. [Citation.]
‘Oppression arises from an inequality of bargaining power that results in no
real negotiation and an absence of meaningful choice.’ [Citation.] Surprise is
defined as ‘“the extent to which the supposedly agreed-upon terms of the
bargain are hidden in the prolix printed form drafted by the party seeking to
enforce the disputed terms.”’ [Citation.]” (Citation omitted.)
Plaintiffs claim the Agreement is procedurally
unconscionable because it is an adhesion contract. An adhesion contract is “a
standardized contract … imposed upon the subscribing party without an
opportunity to negotiate the terms.” (Citation omitted.) “The term signifies a
standardized contract, 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. [Citation.]” (Citation omitted.)
The California Supreme Court has consistently
stated that “‘[t]he procedural element of an unconscionable contract generally
takes the form of a contract of adhesion … .’ ”
(Citations omitted.)
“Whether the challenged provision is within a
contract of adhesion pertains to the oppression aspect of procedural
unconscionability. A contract of adhesion is “imposed and drafted by the party
of superior bargaining strength” and “relegates to the subscribing party only
the opportunity to adhere to the contract or reject it.” (Citations omitted.) “[A]bsent unusual
circumstances, use of a contract of adhesion establishes a minimal degree of
procedural unconscionability notwithstanding the availability of market
alternatives.” (Citation omitted.)
(Walnut Producers of California, supra, 187
Cal.App.4th at 645-46 [bold emphasis added].) Thus, even accepting Plaintiff’s
argument as true, this would establish only a minimum of procedural
unconscionability. Defendants do not dispute that the agreements are contracts
of adhesion because they were presented as part of the employment documents.
Plaintiff
also contends that the agreement is procedurally unconscionable because he did
not have an opportunity to review or negotiate the terms, because they were
presented through an online portal that did not provide the option of
modification or refusal. However, Plaintiff offers no evidence of this
contention beyond conclusory statements in his declaration that he was given no
opportunity to modify the documents he signed, nor any notice of or information
about the arbitration clause when he signed it. (Declaration of Jimmy Yanes ISO
Opp. ¶¶ 3-4.) These statements, without more, are not sufficient to support
Plaintiff’s claims of procedural unconscionability.
Thus,
Plaintiff has established only a minimal degree of procedural unconscionability
on the basis that the contract was a contract of adhesion.
1. Substantive Unconscionability
Plaintiff argues that the agreement
is substantively unconscionable. As Plaintiff has shown a minimal degree of
procedural unconscionability, Plaintiff must establish a high level of
substantive unconscionability.
“A
provision is substantively unconscionable if it ‘involves contract terms that
are so one-sided as to “shock the conscience,” or that impose harsh or
oppressive terms.’ [Citation.] The phrases ‘harsh,’ ‘oppressive,’ and ‘shock
the conscience’ are not synonymous with ‘unreasonable.’ Basing an
unconscionability determination on the reasonableness of a contract provision
would inject an inappropriate level of judicial subjectivity into the analysis.
¿‘With a concept as nebulous as “unconscionability” it is important that courts
not be thrust in the paternalistic role of intervening to change contractual
terms that the parties have agreed to merely because the court believes the
terms are unreasonable. The terms must shock the conscience.’
[Citations.]”
(Walnut
Producers of California v. Diamond Foods, Inc. supra, 187 Cal.App.4th at 647-48.)
Plaintiff
first contends that the agreement is substantively unconscionable because it is
contrary to law and public policy insofar as it precludes Plaintiff from filing
claims with federal, state, and local administrative bodies. A cursory reading
of the agreement belies this contention. The severability clause of the
agreement expressly states:
In the event that any provision of this
ADR Policy is determined by a court of competent jurisdiction to be illegal,
invalid or unenforceable to any extent, such term or provision shall be
enforced to the extent permissible under the law and all remaining terms and
provisions of this ADR Policy shall continue in full force and effect.
Nothing in this Alternative Dispute
Policy is intended to preclude any employee from filing a charge with the Equal
Employment Opportunity Commission, the National Labor Relations Board or any
similar federal or state agency seeking administrative resolution. However, any
claim that cannot be resolved through administrative proceedings shall be
subject to the procedures of this ADR Policy.
(Holmes Decl. Exh. A. p. 3) Further, even if this provision
were not present, Plaintiff cites no law, and the Court is aware of none, that
would render an arbitration agreement substantively unconscionable merely
because it impermissibly extends to claims that are not subject to arbitration
as a matter of law. Such overbreadth would merely render the agreement
unenforceable with respect to those claims. What is more, the arbitration
provision here explicitly excludes from mandatory arbitration any claims that
have been found by California courts to be unsuitable for compelled
arbitration. As a result, Plaintiff has
not demonstrated that the agreement is unconscionable on this basis.
Second,
Plaintiff contends that, because the agreement provides that, if the parties
are unable to agree on an arbitrator, “a list of arbitrators will be obtained
from the Judicial Arbitration and Mediation Services (JAMS) Employment Panel,”
the agreement fails to provide for a neutral arbitrator. (Holmes Decl. Exh. A.
p.3.) Plaintiff contends that, under Mercuro v. Superior Court, the
“repeat player effect,” where arbitrations tend to favor employers who
regularly make use of the arbitration system, is evidence of substantive
unconscionability. (Mercuro v. Superior Court (2002) 96 Cal.App.4th 167,
178.) However, the Mercuro court expressly stated that the repeat player
effect, standing on its own, is not sufficient to establish substantive
unconscionability. (Id. at 179.) As this is the only plausible
contention of substantive unconscionability, Plaintiff has not demonstrated
that the agreement is substantively unconscionable on this basis as a matter of
law.
As
Plaintiff has failed to demonstrate that the agreement is substantively
unconscionable, Plaintiff has not established unconscionability.
CONCLUSION:
Moving
Parties to give notice.
IT IS SO ORDERED.
Dated: December 5, 2022 ___________________________________
Theresa
M. Traber
Judge
of the Superior Court
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