Judge: Theresa M. Traber, Case: 23STCV19881, Date: 2024-05-13 Tentative Ruling
Case Number: 23STCV19881 Hearing Date: May 13, 2024 Dept: 47
Tentative Ruling
Judge Theresa M. Traber, Department 47
HEARING DATE: May 13, 2024 TRIAL DATE: NOT
SET
CASE: Julio Landeros Beltran v. Ozong Etta, et
al.
CASE NO.: 23STCV19881 
MOTION
TO COMPEL ARBITRATION AND STAY ACTION PENDING RESOLUTION OF ARBITRATION
MOVING PARTY: Defendants Ozong Etta, Brian Dennis Helgoe, and
Monarch Landscape Holdings, LLC.
RESPONDING PARTY(S): Plaintiff Julio
Landeros Beltran
STATEMENT
OF MATERIAL FACTS AND/OR PROCEEDINGS:
This is a PAGA action that was filed on August 18, 2023. Plaintiff
alleges that Defendants engaged in numerous wage and hour violations against
various employees.
Defendants move to compel
Plaintiff’s individual claims to arbitration and stay the remainder of the
action pending resolution of arbitration.
TENTATIVE RULING:
Defendants’ Motion to Compel
Arbitration is GRANTED. Plaintiff’s claims as a representative of other
aggrieved parties under PAGA are STAYED pending resolution of the arbitration.
DISCUSSION:
Defendants move to compel
Plaintiff’s individual claims to arbitration and stay the remainder of the
action pending resolution of arbitration.
Existence of an 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.)
As to the burden of production,
rather than persuasion, courts have articulated a three-step burden shifting
process:
First, the moving party bears the
burden of producing “prima facie evidence of a written agreement to arbitrate
the controversy.” [citation] The moving party “can meet its initial burden by
attaching to the [motion or] petition a copy of the arbitration agreement
purporting to bear the [opposing party’s] signature.” [citation] Alternatively,
the moving party can meet its burden by setting forth the agreement’s
provisions in the motion. [citations] For this step, “it is not necessary to
follow the normal procedures of document authentication.” [citation] If the
moving party meets its initial prima facie burden and the opposing party does
not dispute the existence of the arbitration agreement, then nothing more is
required for the moving party to meet its burden of persuasion.
If the moving party meets its initial
prima facie burden and the opposing party disputes the agreement, then in the
second step, the opposing party bears the burden of producing evidence to
challenge the authenticity of the agreement. [citation] The opposing party can
do this in several ways. For example, the opposing party may testify under oath
or declare under penalty of perjury that the party never saw or does not
remember seeing the agreement, or that the party never signed or does not
remember signing the agreement. [citations]
If the opposing party meets its burden
of producing evidence, then in the third step, the moving party must establish
with admissible evidence a valid arbitration agreement between the parties. The
burden of proving the agreement by a preponderance of the evidence remains with
the moving party. [citation].
(Gamboa v. Northeast Community Clinic (2021) 72
Cal.App.5th 158, 165-66.) An electronic record or signature is attributable to
a person if it was the act of the person. (Civ. Code § 1633.9(a).) The act of
the person may be shown in any manner. (Id.) As described by the Court
of Appeal, “the burden of authenticating an electronic signature is not great.”
(Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 844.)
Defendants
have provided a copy of a document entitled “Mutuo Acuerdo de Arbitrate,” in
Spanish, which bears Plaintiff’s signature dated January 13, 2022. (Declaration
of Sergio Hernandez ISO Mot. Exh. D.) Defendants have also provided a certified
translation of this document into English, titled “Mutual Arbitration Agreement.”
(Declaration of Michelle Roberts Gonzales ISO Mot. Exh. A.) This document
states that the parties agree to arbitrate:
[A]ny controversy,
claim or dispute between [Plaintiff] and MONARCH LANDSCAPE HOLDINGS, LLC,
and/or any of its related entities, holding companies, parents (including
Monarch Landscape Holdings), subsidiaries, divisions, officers, shareholders,
directors, employees, agents, underwriters, predecessors, successors and
assignees (collectively, "The Company") relating to or arising out of
your employment or the termination of that employment, including any breach of
this intimate Arbitration Agreement ("Arbitration Agreement") shall
be submitted to final and binding arbitration.
This Arbitration
Agreement covers all employment-related claims, including, but not limited to,
claims for unpaid wages, breach of contract, breach of public law,
discrimination, harassment or any other employment-related claim under state or
federal statutes or laws relating to an employee's relationship with his or her
employer, regardless of whether such dispute is initiated by you or the
Company. This Agreement also covers any and all claims the Company may have
against you, including claims for misappropriation of Company property,
disclosure of proprietary information or trade secrets, gross negligence or any
other claim for alleged wrongful conduct.
(Gonzales Decl. Exh. A.) Plaintiff does not dispute that he
signed the agreement.
Applicability of
the FAA
Defendants argue 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.)
Plaintiff argues that Defendants
have not shown that interstate commerce is implicated in their business or in
the agreement itself. The Agreement
plainly states, however, that it is “governed by and enforceable under the
Federal Arbitration Act, 9 U.S. C. Section 1 et seq. as amended.” (Gonzales
Decl. Exh. A. p.1.) The Court therefore finds that the Federal Arbitration Act
applies to the agreement.
//
//
Scope of the Arbitration Agreements
Defendants
contend that the scope of the Arbitration Agreements covers Plaintiff’s
individual PAGA claims. As Plaintiff expressly concedes this issue, the Court
finds that the arbitration agreement covers Plaintiff’s individual PAGA claims.
Disposition of Representative Claims
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”) and the California
Supreme Court’s holding in Adolph v. Uber Technologies, Inc. (2023) 14
Cal.5th 1104, 1114 (“Adolph”), Plaintiff’s representative PAGA claims
should be stayed pending resolution of arbitration.
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 arbitration agreement 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. Although the high court in Moriana dismissed the
representative claims for lack of standing, that portion of the ruling was
based on the court’s interpretation of California law. (Id., at p.
1925.) Because “[t]he highest court of each State . . . remains the final
arbiter of what is state law” (Montana v. Wyoming (2011) 563 U.S. 368,
378 fn. 5) the Court is not bound by the high court’s interpretation in the
face of a contrary ruling from the California Supreme Court. Indeed, our
Supreme Court reached just such a conclusion in Adolph, holding
that an order compelling arbitration of individual PAGA claims does not strip
the plaintiff of standing as an aggrieved employee to litigate the
representative claims. (Adolph, supra, 14 Cal.5th at, 1114.) Instead, the
decision whether to stay litigation of the representative claims while the
individual claims are arbitrated is within the discretion of the trial court. (Id.
at 1124-25.)
Plaintiff argues that the
representative claims should not be stayed because delaying resolution of the
representative claims would undermine the purpose of the act, and because the
individual and representative claims are “distinct.” Adolph suggests
that our Supreme Court does not find a stay of the representative claims would
be contrary to the purpose of the Act, or else it would not have left that
matter to the trial court. (Adolph, supra, 14 Cal.5th at 1124-25.)
Further, Plaintiff’s conclusory argument overlooks that the issue of whether
Plaintiff himself is an aggrieved party should logically be decided before
permitting Plaintiff to pursue claims as a representative of others. Further,
for the reasons stated infra, Plaintiff has not demonstrated that the
agreement is unconscionable. The Court therefore finds that a stay of the
representative claims is appropriate.
Unconscionability
Plaintiff
argues 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 arbitration provision is procedurally unconscionable because it
is a contract of adhesion. Contracts of adhesion only demonstrate a minimum
amount of procedural 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,
although it is undisputed that the Arbitration Agreement is a condition of
Plaintiff’s employment (see Gonzales Decl. Exh. A.), that fact only
demonstrates a minimal level of procedural unconscionability.
2.
Substantive Unconscionability
Plaintiff argues that the agreement
is substantively unconscionable. As Plaintiff has shown only a minimal level of
procedural unconscionability, Plaintiff bears a higher burden to demonstrate
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.) An
agreement is not substantively unconscionable if it:
(1)
provides for neutral arbitrators, (2) provides for more than minimal discovery,
(3) requires a written award, (4) provides for all of the types of relief that
would otherwise be available in court, and (5) does not require employees to
pay either unreasonable costs or any arbitrators’ fees or expenses as a
condition of access to the arbitration forum. Thus, an employee who is made to
use arbitration as a condition of employment "effectively may vindicate
[his or her] statutory cause of action in the arbitral forum.’ "
(Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83,
102.)
Plaintiff
contends that the agreement is substantively unconscionable because it
prohibits asserting claims that are otherwise covered by the Arbitration
Agreement in a class, collective, or representative action. The Agreement
specifically state that these claims are prohibited only “[e]xcept as otherwise
required by law.” (Gonzales Decl. Exh. A. p. 2.) Plaintiff contends that this
term is nevertheless substantively unconscionable under Brown v. Ralphs
Grocery Co. (2011) 197 Cal.App.4th 489. However, contrary to
Plaintiff’s assertion, Brown does not hold that a class action and
representative waiver together render an arbitration agreement substantively
unconscionable by their existence, and, in fact, required the trial court to
consider whether the representative waiver could be severed. (Brown, supra, 197
Cal.App.4th at 498-503.) Moreover, even accepting Plaintiff’s contention that
this provision is per se improper, that argument merely renders this
term ineffective by its own language. This single term in the agreement is not
sufficient to meet Plaintiff’s heightened burden to demonstrate substantive
unconscionability.
Thus, for the foregoing reasons,
the Court finds that Plaintiff’s individual claims should be compelled to
arbitration and the representative claims stayed pending resolution of the
arbitration.
CONCLUSION:
Accordingly,
Defendants’ Motion to Compel Arbitration is GRANTED. Plaintiff’s claims as a
representative of other aggrieved parties under PAGA are STAYED pending
resolution of the arbitration.
Moving
Parties to give notice.
IT IS SO ORDERED.
Dated: May 13, 2024 ___________________________________
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.