Judge Theresa M. Traber, Case Number: 24STCV00258, Date: 2024-06-26 Tentative Ruling

Judge: Theresa M. Traber, Case: 24STCV00258, Date: 2024-06-26 Tentative Ruling

Case Number: 24STCV00258 Hearing Date: June 26, 2024 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: June 26, 2024 TRIAL DATE: NOT SET

CASE: Darron Treude v. Orinda Care Center, LLC, et al.

CASE NO.: 24STCV00258

MOTION TO COMPEL ARBITRATION

MOVING PARTY: Defendants Orinda Care Center, LLC, Renew Health Consulting Services, LLC, Renew Health Group, LLC, and Crystal Solorzano.

RESPONDING PARTY(S): Plaintiff Darron Treude.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This is an action for fraud and wrongful termination that was filed on January 4, 2024. Plaintiff alleges that Defendants deprived him of a share of the profits from the business which he was promised as a condition of his employment. Plaintiff also alleges that he was terminated in retaliation for complaints of allegedly unlawful billing by Defendants.

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

TENTATIVE RULING:

Defendants’ Motion to Compel Arbitration is GRANTED.

This action is stayed pending resolution of the arbitration.

All further hearings are advanced to this date and vacated. The Court sets a Status Conference Re: Arbitration for Monday, December 16, 2024 at 8:30 AM.

DISCUSSION:

Defendants move to compel this matter to binding arbitration and stay this action pending resolution of the 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 contend that Plaintiff began his employment with Renew Health Consulting Services, LLC in 2017, transitioned to work at Orinda Care Center in 2020, transitioned back to Renew Health Consulting in August 2021, and then back again to Orinda Care Center on February 3, 2023. (Declaration of Damian Cardenas ISO Mot. ¶¶ 4-7.) As part of that transition, Plaintiff was required to complete onboarding documents. (Id. ¶ 8.) Defendants state that those papers included an “California Mutual Dispute Resolution Agreement,” a copy of which has been provided and which appears to bear Plaintiff’s electronic signature, though not the signature of any representative of Orinda, dated February 10, 2023 at 1:28 PM. (Declaration of Michael Holmes ISO Mot. Exh. B.) Defendants authenticate Plaintiff’s electronic signature via a declaration from Michael Holmes, the Vice President of Human Resources & Business Development for Orinda’s human resources contractor, CPE HR, Inc. Mr. Holmes describes the electronic system used for signing onboarding documents by Orinda, and states that the Agreement was signed using Plaintiff’s unique user ID and password. (Holmes Decl. ¶¶ 6-11.) Defendants have therefore demonstrated that Plaintiff entered into an arbitration agreement with Orinda Care Center.

Applicability of the FAA

The Agreement expressly states that any arbitration conducted pursuant to the terms of the Agreement "shall be governed by the Federal Arbitration Act.” (Holmes Decl. Exh. B. pp. 3, 4.) Plaintiff does not dispute that the Agreement is subject to the Federal Arbitration Act.

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.)

The Agreement states:

This Agreement applies to claims Employee may bring against the Company [Orinda Care Center, LLC] or CPE HR for wrongful termination, discrimination, harassment, retaliation, breach of contract, wage and hour violations, and claims related to any services provided by CPE HR to employee, whether directly or indirectly, and torts such as invasion of privacy, assault and battery, or defamation. This Agreement also applies to claims that the Company or CPE HR might bring against Employee such as, for example, theft of money or trade secrets, breach of a confidentiality Agreement, or breach of a contract. Included within the scope of this Agreement are all disputes, whether based on tort, contract, statute (for example, without limiting the scope of claims covered by this Agreement, the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act (including the Equal Pay Act), the Civil Rights Act of 1991, Section 1981 of U.S.C. Title 42, the Worker Adjustment and Retraining Notification Act, the Fair Credit Reporting Act, the California Consumer Credit Reporting Act, the Uniform Services Employment and Reemployment Rights Act, the Genetic Information Nondiscrimination Act, Family and Medical Leave Act, California Family Rights Act, the Families First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Consolidated Appropriations Act of December 2020 (CAA), the American Rescue Plan Act of 2021, the Occupational Safety and Health Act, the California Occupational Safety and Health Act, the California Labor Code and the California Wage Orders (including, but not limited to, claims for overtime wages, unpaid wages, vacation, paid sick leave and incentive compensation, and claims involving meal and rest breaks), or any other local, state, or federal law, order, directive, or regulation), equitable law, or otherwise, and all disputes related to employee benefits including those brought on behalf of an employee benefit plan or in Employee's capacity as a participant of an employee benefits plan.

Employee's agreement to arbitrate claims against the Company or CPE HR includes claims that Employee may bring against the Company's or CPE HR's respective parent, subsidiary, affiliated or client entities as well as against owners, directors, officers, managers, employees, agents, brokers, contractors, attorneys, including in their capacity as benefit plan administrators or fiduciaries to any employee benefit plan of which Employee is a participant or beneficiary and insurers of the Company or CPE HR (hereinafter "Company Entities"). Employee also agrees to arbitrate claims against any person or entity that Employee may allege to be a joint employer, joint enterprise, alter ego, or to have common ownership

with the Company.

(Holmes Decl. Exh. B. § 2 pp. 1-2.) Defendants contend that Plaintiff’s claims arise out of his employment on their face. Plaintiff does not dispute this contention.

Unconscionability

Plaintiff’s sole challenge to the Arbitration Agreement is that it 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 first argues that the arbitration agreement 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 Mot. p.8:4-22), that fact only demonstrates a minimal level of procedural unconscionability.

Plaintiff also contends that the Arbitration Agreement is procedurally unconscionable because of surprise. “Unfair surprise results from misleading bargaining conduct or other circumstances indicating that a party’s consent was not an informed choice.” (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205, 215 [internal citations omitted].) Surprise “covers a variety of deceptive practices and tactics.” (Id. at 216.) Plaintiff asserts that he was not given an opportunity to negotiate the agreement or to consult with counsel because he was informed that he had to complete the onboarding documents “immediately” or risk a delay in his paycheck. (Declaration of Darron Treude ISO Opp. ¶¶ 5, 7.) Plaintiff’s declaration to that effect is devoid of further details or supporting documentation that would establish the basis for his belief beyond an unspecified “instance” where another employee “had an issue receiving a paycheck.” (Id. ¶ 5.) Such conclusory statements are not sufficient to carry Plaintiff’s evidentiary burden to demonstrate further procedural unconscionability.

Finally, Plaintiff contends that the arbitration agreement is procedurally unconscionable because it does not provide the rules under which the arbitration agreement would operate or state where those rules may be found. Failure to provide arbitration rules or specify where they might be found is evidence of procedural unconscionability. (See, e.g., Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 244-46.) Here, however, this contention is plainly belied by the agreement on its face, which states, in relevant part:

At the beginning of any arbitration process under this Agreement, Employee and the Company or CPE HR will need to select an arbitrator by mutual agreement. Such an arbitrator shall be a retired California Superior Court Judge, or another qualified and impartial person that Employee and the Company or CPE HR decide upon. In the event Employee and the Company or CPE HR cannot agree on the selection of an arbitrator, they will select an alternative dispute resolution provider and request from that provider a list of an odd number of potential arbitrators. From that list Employee and the Company or CPE HR will alternatively strike arbitrators, with the Company or CPE HR going first, until one arbitrator is left. That arbitrator shall be the arbitrator who will hear the case. If Employee and the Company or CPE HR cannot agree on an alternative dispute resolution provider, an arbitrator will be appointed according to law.

Any arbitration proceeding under this Agreement shall proceed under and be governed by the Federal Arbitration Act ("FM") because Employee, the Company, and CPE HR are engaged in interstate commerce. The procedures of the California Arbitration Act ("Act") shall also apply, to the extent they are not contrary to the FM. The Act is found at California Code of Civil Procedure section 1280 and following sections, including section 1283.05, and all of the Act's other mandatory and permissive rights to discovery and provisional relief, shall also apply. In any arbitration proceeding under this Agreement, all California rules of pleading (including the right of demurrer), all rules of evidence, all rights to resolution of the dispute by means of motions for summary judgment, judgment on the pleadings, and judgment under Code of Civil Procedure Section 631.8 shall apply and be observed, unless Employee and the Company or CPE HR agree otherwise.

The arbitrator shall have the immunity of a judicial officer from civil liability when acting in the capacity of an arbitrator, which immunity supplements any other existing immunity. Likewise, all communications during or in connection with the arbitration proceedings are privileged in accordance with California Civil Code Section 4 7(b), to the extent permitted by law. The arbitrator's award(s) shall include the arbitrator's written reasoned opinion. Resolution of all disputes shall be based solely upon the law governing the claims and defenses pleaded, and the arbitrator may not invoke any basis (including but not limited to, notions of "just cause") other than such controlling law.

Following the issuance of the arbitrator's decision, any party may petition a court to confirm, enforce, correct or vacate the arbitrator's opinion and award under the Federal Arbitration Act, 9 U.S.C. §§ 1- 16, if applicable, and/or applicable state law.

(Holmes Decl. Exh. B.) Plaintiff’s argument in this respect is therefore without merit.

In sum, Plaintiff has demonstrated minimal procedural unconscionability based solely on the agreement’s undisputed nature as a contract of adhesion. Plaintiff thus bears a correspondingly greater burden to demonstrate substantive 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 substantially 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 the agreement only bears his own electronic signature and not the signature of Defendants or their agents. Plaintiff relies on Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 86, in support of that assertion. In that case, the Court of Appeal found that the arbitration agreements between a set of car wash employees and their employers were substantively unconscionable not because only the employees signed and initialed the agreement, but because the terms of the agreement allowed the employers to choose litigation or arbitration for breaches of a broad confidentiality sub-agreement. (Id. at 86-87.) In that context, the absence of employer signatures was evidence that the employers intended not to be bound by the agreement. (Id. at 86.) Here, however, Plaintiff does not point to any terms in the agreement that are unfair or one-sided so as to support a corresponding inference from the lack of an employer signature. Plaintiff has therefore failed to demonstrate that the agreement is substantively unconscionable.

As Plaintiff has failed to demonstrate that the agreement is substantively unconscionable, Plaintiff has likewise failed to demonstrate unconscionability on the whole, and Defendant Orinda Care Center is entitled to enforce the agreement.

Third-Party Enforcement

Plaintiff contends that even if Orinda Care Center is entitled to enforce the arbitration agreement, the remaining Defendants may not do so. Defendants, in response, argue that they are entitled to enforce the arbitration agreement as intended third-party beneficiaries.

“Someone who is not a party to a contractual arbitration provision generally lacks standing to enforce it.” (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal. App. 5th 840, 856 [Citations omitted].) A nonsignatory may enforce an arbitration provision “where they are intended third party beneficiaries or are assigned rights under the contract.” (Ibid. [Citations omitted].) This enforcement right is “in Civil Code section 1559, which provides: ‘A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.’” (San Diego Hous. Comm'n v. Indus. Indem. Co. (2002) 95 Cal. App. 4th 669, 685.) “It is well settled, however, that Civil Code section 1559 excludes enforcement of a contract by persons who are only incidentally or remotely benefited by the agreement. [Citations.] The Supreme Court has held: ‘A third party should not be permitted to enforce covenants made not for his benefit, but rather for others. He is not a contracting party; his right to performance is predicated on the contracting parties' intent to benefit him. [Citations.]’” (Harper v. Wausau Ins. Co. (1997) 56 Cal. App. 4th 1079, 1087.)

The California Supreme Court addressed the circumstances when a nonsignatory has standing to assert rights under a contract as a third-party beneficiary in Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817. Under Goonewardene, a non-party to a contract is a third-party beneficiary if demonstrates “not only (1) that it is likely to benefit from the contract, but also (2) that a motivating purpose of the contracting parties is to provide a benefit to the third party, and further (3) that permitting the third party to [assert rights under the contract] against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.” (Id., at p. 821.)

Here, the agreement expressly states that “Employee's agreement to arbitrate claims against the Company or CPE HR includes claims that Employee may bring against the Company's or CPE HR's respective parent, subsidiary, affiliated or client entities as well as against owners, directors, officers, managers, employees, agents, brokers, contractors, attorneys, including in their capacity as benefit plan administrators or fiduciaries to any employee benefit plan of which Employee is a participant or beneficiary and insurers of the Company or CPE HR (hereinafter "Company Entities"). Employee also agrees to arbitrate claims against any person or entity that Employee may allege to be a joint employer, joint enterprise, alter ego, or to have common ownership with the Company.” (Holmes Decl. Exh. B.) This language plainly establishes all three Goonewardene factors since Plaintiff’s Complaint expressly alleges that all the Defendants are joint employers and enterprises or alter egos of each other (Complaint ¶¶ 1, 4.) The remaining Defendants are therefore entitled to enforce the arbitration agreement as intended third party beneficiaries.

CONCLUSION:

Accordingly, Defendants’ Motion to Compel Arbitration is GRANTED.

This action is stayed pending resolution of the arbitration.

All further hearings are advanced to this date and vacated. The Court sets a Status Conference Re: Arbitration for Monday, December 16, 2024 at 8:30 AM.

Moving Parties to give notice.

IT IS SO ORDERED.

Dated: June 26, 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.