Judge: Theresa M. Traber, Case: 22STCV13843, Date: 2022-12-19 Tentative Ruling

Case Number: 22STCV13843    Hearing Date: December 19, 2022    Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE:     December 19, 2022                TRIAL DATE: NOT SET

CASE:                         Noemi Gomez v. Beauty Systems Group LLC et al.

CASE NO.:                 22STCV13843           

MOTION TO COMPEL ARBITRATION

MOVING PARTY:               Defendants Beauty Systems Group LLC and Sally Beauty Holdings, Inc.

RESPONDING PARTY(S): Plaintiff Noemi Gomez

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

            This is an employment discrimination action that was filed on April 26, 2022. Plaintiff alleges that she was subjected to extensive harassment and discrimination as a result of her pregnancy and was ultimately wrongfully terminated.

Defendants move to compel arbitration and stay this matter pending resolution of the arbitration.

TENTATIVE RULING:

Defendants’ Motion to Compel Arbitration is GRANTED.

This matter is ordered stayed pending resolution of the arbitration. All hearings are advanced to this date and placed off-calendar.

The Court sets a status conference for December 19, 2023, at 8:30 AM regarding the status of the arbitration.

DISCUSSION:

Defendants move to compel arbitration and stay this matter pending resolution of the arbitration.

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Defendants’ Evidentiary Objections

Defendants raise numerous evidentiary objections to the Declaration of Raymond E. Hane offered in support of Plaintiff’s opposition to this motion. Defendants cite no law, and the Court is aware of none, requiring the Court to rule on evidentiary objections in the context of a motion to compel arbitration, as opposed to a motion for summary judgment or summary adjudication. (Code Civ. Proc. § 437c.) The Court therefore declines to rule on Defendants’ evidentiary objections. To the extent the disputed evidence bears on the Court’s ruling, the Court will take account of Defendants’ objections in weighing the evidence offered.

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 Plaintiff, a document entitled “Workplace Resolution Program and Mutual Agreement to Arbitrate Claims.” (Declaration of Chuck Parker ISO Mot. ¶ 8-10, Exh. B-C.) The document bears Plaintiff’s digital signature and is dated January 27, 2021. (Id.) Plaintiff does not dispute that she signed the agreement.

            The Court therefore finds that there is an agreement to arbitrate between Defendants and the Plaintiff.

Applicability of the FAA

            The Agreement states “The Federal Arbitration Act (9 U.S.C. § 1 et seq.) shall govern this Agreement, which evidences a transaction involving commerce. All disputes covered by this Agreement between me and the Company shall be decided by an arbitrator through arbitration and not by way of court or jury trial.” (Parker Decl. Exh. A. [emphasis in original].)  Plaintiff does not dispute that the Federal Arbitration Act governs the arbitration agreements.

Scope of the Arbitration Agreement

             “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.)

            Defendants contend, and Plaintiff does not dispute, that the scope of the agreement encompasses Plaintiff’s claims.  The Agreement states, in relevant part:

The claims that are subject to arbitration under this Agreement are those that, in the absence of this Agreement, would have been justiciable under applicable state, federal, or other law. Except as otherwise provided, this Agreement covers all claims that either the Company or I could bring arising out of or relating to my employment relationship with the Company, including, but not limited to: (i) discrimination. . . (ii) retaliation . . . (iv) all employment related laws. . . [(v)] common law. . . wrongful discharge.

(Parker Decl. Exh. A.) As the parties do not dispute the scope of the agreement or that Plaintiff’s claims are covered by the agreement, the Court finds that Plaintiff’s claims are covered by the agreement.

Exclusion of Sexual Harassment Claims from Arbitration

            Plaintiff, in opposition, contends that her claims for sexual harassment are excluded under the recent amendments to the Federal Arbitration Act.

            On March 3, 2022, the President signed the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” into law. (Pub. L. No. 117-90, 136 Stat. 26, codified in 9 U.S.C. §§ 401, 402.) The effect of this provision is to preclude arbitration of disputes relating to conduct alleged to be sexual harassment under applicable law, including state law. (9 U.S.C. §§ 401, 402.) Section 3 of the Act states that it applies “to any dispute or claim that arises on or after the date of enactment of this Act.” (Pub. L. No. 117-90, 136 Stat. 26 § 3.) Under the Fair Employment and Housing Act, claims accrue when the adverse employment action occurs and the claimant suffers an injury. (McCaskey v. California State Auto Assn. (2010) 189 Cal.App.4th 947, 997.) The Complaint alleges that Plaintiff was terminated on September 18, 2021 and does not allege any injuries after that date. (See Complaint ¶ 13.) Thus, as alleged, Plaintiff’s claim accrued on or before September 18, 2021, before the amendments were enacted. Therefore, these provisions do not apply to this dispute.

Waiver

            Plaintiff argues in opposition that Defendants waived the right to compel arbitration.

“As with any other contractual right, the right to arbitration may be waived.” (Chase v. Blue Cross of California (1996) 42 Cal.App.4th 1142, 1151 [citing Code Civ. Proc. § 1281.2(a)].) “A party seeking to prove waiver of a right to arbitration must demonstrate (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1203.)

            Plaintiff contends that Defendants resisted arbitration because Defendants contended that Plaintiff’s arbitration demand was defective. However, Plaintiff has not produced the arbitration demand in any of her opposition papers. As Defendants state in reply, the Agreement contains express provisions controlling the proper form of an arbitration demand:

A written Request for Arbitration to the Company or its officers, directors, employees, or agents shall be sent to its Legal Department, currently at: Arbitration Intake, Sally Beauty Holdings, Inc., 3001 Colorado Blvd., Denton, Texas 76210. I will be sent a written Request for Arbitration at the last home address I provided in writing to the Company. The Request For Arbitration shall, unless otherwise required by law, clearly state “Request For Arbitration” at the beginning of the first page and shall identify and describe the nature of all claims asserted, the facts upon which such claims are based, and the relief or remedy sought in accordance with pleading standards applicable to claims for relief under the Federal Rules of Civil Procedure. The Request for Arbitration shall be sent to the other party by certified or registered mail, return receipt requested, and first class mail

(Parker Decl. Exh. A § 5.) Without a copy of the arbitration demand, the Court cannot determine whether Defendants’ response to the demand was warranted under the arbitration agreement or an attempt to evade arbitration themselves. Additionally, although Plaintiff argues that Defendants’ attempt to remove this case to federal court constitutes waiver, Plaintiff cites no precedent standing for the proposition that removal to federal court constitutes an act inconsistent with an intent to arbitrate.

            Further, even assuming that these contentions were sufficient to establish that Defendants acted inconsistent with the intent to arbitrate—and they are not—Plaintiff makes no showing whatsoever of any prejudice resulting from this conduct. Under current California law, a party seeking to establish waiver must demonstrate, inter alia, that the opposing party’s the delay caused it prejudice.  (St. Agnes Medical Care Center v. Pacificare of California (2003) 31 Cal. 4th 1187, 1204; but see Morgan v. Sundance, Inc. (2022) 142 S. Ct. 1708, 1711 [no showing of prejudice required under the FAA to establish waiver].) 

For all these reasons, the Court concludes that Plaintiff has not demonstrated that Defendants waived the right to arbitration.

Unconscionability

            Plaintiff also opposes Defendants’ motion to compel arbitration in its entirety on the basis that the agreement is unenforceable because it is unconscionable.

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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 she 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, involving complex and confusing legal terms. In support of this contention, Plaintiff cites OTO LLC v. Kho (2019) 8 Cal.5th 111, in which our Supreme Court found that an arbitration agreement contained in a single dense paragraph in barely legible type was procedurally unconscionable. (Id., 8 Cal.5th at 128.) However, as Defendants state in reply, this case is factually distinguishable, as the agreement here is spread across multiple pages in legible type. (See Parker Decl. Exh. A.) Thus, Plaintiff has not demonstrated procedural unconscionability on this basis.

            Plaintiff further argues that the agreement is unconscionable because Plaintiff was not provided with a copy of the procedural rules governing the arbitration agreement. In Carabajal v. CWPSC, Inc., on which Plaintiff relies, the Court of Appeal found that a failure to provide an employee with the procedural rules constituted a “moderate level” of unconscionability. (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 244-45.) Carabajal is distinguishable, however, in that the agreement in that case did not specify the procedural rules, nor inform the employee where the rules could be found. (Id.) In contrast, the agreement here expressly states that the “then current Employment Arbitration Rules of the AAA” apply, and that Plaintiff could obtain a copy from the human resources department, or from the web address provided. (Parker Decl. Exh. A.) When the rules are clearly specified without modification and are made available on the internet, failure to provide a copy of the rules does not render the agreement procedurally unconscionable. (Lane v. Francis Captial Mgmt LLC (2014) 224 Cal.App.4th 676, 691-92.) Plaintiff has therefore not demonstrated procedural unconscionability on this basis.

            Thus, Plaintiff has established only a minimal degree of procedural unconscionability on the basis that the contract was a contract of adhesion.

2.      Substantive Unconscionability

            Plaintiff argues that the agreement is substantively unconscionable. As Plaintiff has shown a minimal degree of procedural unconscionability, Plaintiff must establish an extreme 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 provides that any questions regarding the enforceability, validity, or unconscionability conflicts with the Federal Arbitration Act. In making this contention, Plaintiff again relies on the 2022 amendments to the Federal Arbitration Act, which are not applicable to this case, as the amendments were not retroactive, as addressed above. Thus, Plaintiff has not demonstrated substantive unconscionability on this basis.

            Plaintiff next contends that the agreement is substantively unconscionable because it contains an improperly restrictive discovery provision.

Each 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 propound requests for production of documents to any party. Additional discovery may be had by mutual agreement of the parties or where the Arbitrator selected so orders pursuant to a request by either party. Each party shall have the right to subpoena witnesses and documents for the arbitration, as well as documents relevant to the case from third parties.

(Parker Decl. Exh. A. § 11 [emphasis added].) Plaintiff contends that the restrictions in this provision are unconscionable, relying on Fitz v. NCR Corp (2004) 118 Cal.App.4th 702. However, as Defendants state in reply, the agreement in Fitz constrained the arbitrator’s discretion to order additional discovery unless the parties could demonstrate that a fair hearing was impossible without further discovery. (Fitz, supra¸118 Cal.App.4th at 716.) In contrast, well-established California precedent holds that discovery provisions in arbitration agreements that limit discovery to a single person are not unconscionable where, as here, they give the arbitrator discretion to allow more discovery as needed. (See Dotson v. Amgen Inc. (2010) 181 Cal.App.4th 975, 984.) Thus, Plaintiff has not demonstrated substantive unconscionability on this basis.

            Finally, Plaintiff contends that the agreement is substantively unconscionable because it states that its scope covers claims “without limitation” arising out of or related to Plaintiff’s employment. Plaintiff thus argues that a literal reading of this language extends the agreement to cover any disputes between Plaintiff and Defendants or their affiliates, even claims outside the employment context. Plaintiff cites no statute or precedent establishing that this ambiguity renders the agreement substantively unconscionable. The Court declines to conclude that this provision renders the agreement substantively unconscionable.

            As Plaintiff has not demonstrated substantive unconscionability, Plaintiff has not established that the agreement is unconscionable.

CONCLUSION:

Accordingly, Defendants’ Motion to Compel Arbitration is GRANTED.

This matter is ordered stayed pending resolution of the arbitration. All hearings are advanced to this date and placed off-calendar.

The Court sets a status conference for December 19, 2023, at 8:30 AM regarding the status of the arbitration.

Moving Parties to give notice.

IT IS SO ORDERED.

Dated:  December 19, 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.