Judge Theresa M. Traber, Case 22STCV08555 2022-10-12 Tentative Ruling

Judge: Theresa M. Traber, Case: 22STCV08555, Date: 2022-10-12 Tentative Ruling

Case Number: 22STCV08555 Hearing Date: October 12, 2022 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: October 12, 2022 TRIAL DATE: NOT SET

CASE: Steven Wyatt Ordonio v. Cotti Foods California, Inc. et al.

CASE NO.: 22STCV08555

MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

MOVING PARTY: Defendants Cotti Foods California, Inc., Peter Capriotti, and Wendy’s International, LLC.

RESPONDING PARTY(S): Plaintiff Steven Wyatt Ordonio

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This is an employment discrimination and wage and hour action filed on March 9, 2022. Plaintiff alleges that Defendants discriminated against him on the basis of his race, retaliated against him for complaining about his mistreatment, culminating in his wrongful termination, and failed to pay him all wages due and denied him meal and rest breaks as required by law.

Defendants move to compel arbitration of Plaintiff’s claims and to stay this action.

TENTATIVE RULING:

Defendants’ motion to compel arbitration is GRANTED. This litigation is ordered stayed pending arbitration pursuant to CCP § 1281.4.

Any and all future dates are advanced and vacated. A Status Conference/OSC re: Dismissal is set for October 12, 2023 at 8:30 a.m. If there are no appearances and/or the parties have not completed the arbitration without good cause, this case may be dismissed.

DISCUSSION:

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 have produced the arbitration agreement which they contend is the operative agreement in this matter. (See Declaration of Rosemary Castro ISO Mot. Exh. A.) The agreement states that “[t]o the fullest extent allowed by law, any controversy, claim, or dispute between [Plaintiff] and Cotti Foods California, Inc. or any of its related entities . . . relating to arising out of [Plaintiff’s] employment will be submitted to final and binding arbitration.” (Id.)

The Agreement bears the signature of Robert Aguayo, a company representative, and the signature of Plaintiff, and is dated March 28, 2017, underneath a statement in block capital letters that “BY AGREEING TO THIS BINDING MUTUAL ARBITRATION PROVISION, BOTH YOU AND THE COMPANY GIVE UP ALL RIGHTS TO A TRIAL BY JURY.” (Id.) Plaintiff does not dispute that he signed the arbitration agreement. The Court therefore finds that there is a valid agreement to arbitrate between the parties.

Applicability of the FAA

Defendant argues that the FAA governs the arbitration agreement at issue. An arbitration clause is governed by the FAA if the agreement is a contract “evidencing a transaction involving commerce.” (9 U.S.C. § 2.) Courts “broadly construe” this phrase, because the FAA “embodies Congress’ intent to provide for the enforcement of arbitration agreements within the full reach of the Commerce Clause.” (Giuliano v. Inland Empire Pers., Inc. (2007) 149 Cal.App.4th 1276, 1286.)

Here, the Agreement expressly states that it is “governed by and enforceable under the Federal Arbitration Act.” (Castro Decl. Exh. A. ¶ 6.) Plaintiff argues in opposition that the Federal Arbitration Act does not apply to this matter because Plaintiff was not engaged in interstate commerce. This argument is not relevant where, as here, the parties expressly agreed that the FAA is the governing law. The Court therefore finds that the Federal Arbitration Act applies to this agreement.

Claims to Be Arbitrated

Plaintiff alleged thirteen causes of action in the Complaint: (1) Discrimination on the basis of race (Gov. Code §§ 12940 et seq.); (2) Harassment on the basis of race (Id.); (3) Retaliation in violation of FEHA (Id.); (4) Retaliation in violation of Labor Code section 1102.5(b); (5) Hostile Work Environment (Gov. Code §§ 12940 et seq.); (6) Failure to prevent harassment, discrimination, and retaliation (Id.); (7) Wrongful termination in violation of public policy (Gov Code §§12940 et seq; Lab. Code § 1102.5(b)); (8) Intentional Infliction of Emotional Distress (Civ. Code § 3294); (9) Unfair Business Practices (Bus. & Prof. Code §§ 17200 et seq); (10) Failure to pay earned wages (Lab. Code §§ 204, 206, 216, 218.5, 218.6); (11) Failure to provide rest breaks (Lab. Code § 226.7); (12) Failure to provide meal breaks (Id.); and (13) waiting time penalties (Lab. Code §§ 201, 202, 203.)

Defendants argue that the agreement applies to all of Plaintiff’s causes of action. Paragraph 4 of the Agreement states “This Agreement covers all employment-related claims including, but not limited to, claims for unpaid wages, breach of contract, wrongful termination, retaliation, violation of public policy, discrimination, harassment, and any other employment related claim under any state or federal statutes or laws relating to your relationship with the Company, regardless of whether any such dispute is initiated by you or the company.” (Castro Decl. Exh. A. ¶ 4.)

Plaintiff does not dispute that all of his causes of action are within the scope of the arbitration agreement. However, Plaintiff argues that the tenth, eleventh, twelfth, and thirteenth causes of action may not be arbitrated under Labor Code section 229. Defendant does not address this argument in reply.

Under California law, actions for the “collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.” (Labor Code § 229.) The intent of section 229 is to “assure a judicial forum where there exists a dispute as to wages, notwithstanding the strong public policy favoring arbitration.” (Hoover, supra, 206 Cal.App.4th at 1207.) “Wages” includes “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” (Labor Code § 200(a).) ¿

On their face, the tenth through twelfth causes of action relate to nonpayment of wages, and thus appear not to be subject to the arbitration agreement. Recent U.S. Supreme Court decisions hold, however, that the Supremacy Clause of the U.S. Constitution (Article VI) dictates that the FAA trumps any state laws attempting to unreasonably restrict the broad applicability of the FAA. AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, and its progeny, provide broad preemptive protection against state laws that discriminate against arbitration or “disfavor contracts that (oh so coincidentally) have the defining features of arbitration agreements.” (Kindred Nursing Centers, Ltd. Partnership v. Clark (2017) 137 S. Ct. 1421, 1427 (per curium).)

The U.S. Supreme Court has left little doubt that Congress’s intent in establishing the FAA was to promote the practice of binding arbitrations due to its “informality, efficiency, reduced costs and speed.” (American Exp. Co. v. Italian Colors Restaurant (2013) 570 U.S. 228, 238.) Indeed, to the extent that these arbitration agreements conflict with state laws, those laws should be disfavored, since they would effectively consign parties to “the litigation [the FAA] was meant to displace.” (Epic Systems Corp. v. Lewis (2018) 138 S. Ct. 1612, 1623.)

In light of the explicit agreement that the FAA governs this agreement and the state and federal public policy described above that favors arbitration, the Court concludes that Plaintiff’s tenth through thirteenth causes of action are also arbitrable. (Cf. Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, 688 [concluding that a claim for unpaid wages could not be arbitrated because there was insufficient evidence that the plaintiff’s employment involved interstate commerce and therefore the FAA did not preempt Labor Code § 229].) The Court also notes that at least one published appellate case has concluded that causes of action for failure to provide meal and rest periods, failure to provide itemized wage and hour statements, and waiting time penalties – Plaintiff’s fourth, fifth, sixth, and eighth causes of action – do not fall within the scope of Labor Code § 229, because they are not claims for “unpaid wages.” (Id. at 684.) For all of these reasons, the Court concludes that all of Plaintiff’s claims are arbitrable.

Unconscionability

Plaintiff’s final argument is 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 agreement was unconscionable because it was a contract of adhesion, because it was one of 41 separate documents that Plaintiff was required to sign without sufficient time to review the agreement, and because the agreement violates Labor Code section 432.6.

Plaintiff’s first argument, that the Agreement is procedurally unconscionable because it is a contract of adhesion, presents a minimal degree 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. . . . The element focuses on oppression or surprise. . . . ‘Oppression arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.’ . . . 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.”’ . . .

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.” . . . “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.” . . .

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 … .’”

“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.” . . . “[A]bsent unusual circumstances, use of a contract of adhesion establishes a minimal degree of procedural unconscionability notwithstanding the availability of market alternatives.”

(Walnut Producers of California, supra, 187 Cal.App.4th at 645-46 [Citations omitted; bold emphasis added].) Thus, even accepting Plaintiff’s argument as true, this would establish only a minimum of procedural unconscionability.

Plaintiff also argues that the agreement is procedurally unconscionable because Plaintiff did not have an opportunity to review the agreement before he signed it. Specifically, Plaintiff states that Defendant’s General Manager gave him more than 40 documents to sign but the manager was “in a rush, so he forced [Plaintiff] to sign the paperwork in a hurry not allowing [him] time to review the paperwork or read the documents.” (Ordonio Decl., ¶¶ 9-12.) Plaintiff also declared Defendant never gave him a copy of the documents he signed during the onboarding process. “Ordinarily, one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he has not read it.” (Randas v. YMCA of Metropolitan Los Angeles (1993) 17 Cal.App.4th 158, 163.) Here, however, the evidence reveals that Plaintiff was hurried into signing the onboarding documents without an adequate opportunity to review them. This evidence enhances Plaintiff’s showing of procedural unconscionability.

Turning to the agreement itself, and assuming that Plaintiff has been able to review it before signing, there is nothing in the form of the arbitration agreement that lends itself to an unconscionability finding. Courts have acknowledged the possibility of surprise when terms are contained 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, 486.) However, “unfair surprise” is generally understood to refer to “deceptive practices and tactics,” like, for example, “hiding a clause in a mass of fine print or phrasing a clause in language that is incomprehensible to a layperson.” (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205, 216.) When an arbitration provision is plainly identified in a freestanding document relating solely to arbitration, procedural unfairness is limited. (See Serafin v. Balco Props. Ltd., LLC (2015) 235 Cal.App.4th 165, 179.)

Here, the agreement was contained in a separate, freestanding document relating solely to arbitration and identifying itself in bold, underlined, capital letters as a “MUTUAL AGREEMENT TO ARBITRATE.” (Castro Decl. Exh. A.) The agreement states at the bottom right corner that it is “Page 6,” which indicates that it was part of a set of multiple documents. (Id.) Nonetheless, the evidence shows that the Agreement is a separate document independent of any other paperwork Plaintiff was provided, and therefore limits the claim of procedural unconscionability.

Plaintiff’s argument that Labor Code section 432.6, which prohibits requiring that an employee waive the right to pursue a civil action for violation of FEHA or the Labor Code as a condition of employment, renders this agreement unenforceable and unconscionable is similarly unpersuasive. Labor Code section 432.6 subdivision (h) expressly states that this provision applies only to contracts for employment entered into, modified, or extended on or after January 1, 2020. (Lab. Code § 432.6(h).) Plaintiff entered into the Arbitration Agreement in March of 2017. (Castro Decl. Exh. A.) Therefore, section 432.6 is inapplicable.

Therefore, the Court finds that Plaintiff has demonstrated procedural unconscionability both because of the take-or-leave-it character of the arbitration clause and because Plaintiff was denied sufficient time to review it before signing. The Court now examines Plaintiff’s contention that the Agreement reflects terms that are substantively unconscionable.

2. Substantive Unconscionability

Plaintiff argues that the Agreement is substantively unconscionable, which is defined as follows:

“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 argues that the agreement was substantively unconscionable because Plaintiff was not provided a copy of the JAMS procedures, nor was it explained to him what JAMS is or how it functions, and, because Plaintiff did not have access to Wi-Fi at work, he had no access to the JAMS policies. This argument is properly an argument for procedural unconscionability, not substantive unconscionability. Even so, failure to attach these rules could support a finding of unconscionability “where the failure would result in surprise to the party opposing arbitration.” (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 690.) Here, however, the reference to the JAMS rules is prominent in the agreement, and the rules are “easily accessible to the parties . . . on the Internet.” (Id. at 691.) Plaintiff’s contention that he could not access the agreement without Wi-Fi access is not well taken when Plaintiff admits that he could have accessed the JAMS rules with his own internet. (Declaration of Steven Wyatt Ordonio ISO Opp. ¶¶ 20-21.) Thus, the Court finds that the failure to provide the JAMS rules does not render the agreement unconscionable.

As Plaintiff has not demonstrated that the Arbitration Agreement is substantively unconscionable, Plaintiff has failed to establish that the agreement is unconscionable as a matter of law.

Accordingly, for the foregoing reasons, Defendants are entitled to compel this matter to arbitration and stay the proceedings pending final resolution of the arbitration.

CONCLUSION:

For the reasons explained above, the motion to compel arbitration is GRANTED. This litigation is ordered stayed pending arbitration pursuant to CCP § 1281.4.

Moving party to give notice, unless waived.

IT IS SO ORDERED.

Dated: October 12, 2022 ___________________________________

Theresa M. Traber

Judge of the Superior Court

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.