Judge Thomas D. Long, Case 22STCV22106 2022-10-20 Tentative Ruling

On July 8, 2022, Plaintiff Joel Okeny filed this action against Defendants ARD Inc. dba Tetra Tech, Tetra Tech Inc., American Environmental Group LTD, and Tetra Tech SWE. The complaint alleges (1) discrimination in violation of the Fair Employment and Housing Act (“FEHA”); (2) hostile work environment in violation of FEHA; (3) retaliation in violation of FEHA; (4) failure to prevent discrimination, harassment, or retaliation; (5) whistleblower retaliation under the Labor Code; (6) wrongful termination in violation of public policy; (7) intentional infliction of emotional distress; and (8) negligent supervision and retention.

On August 25, 2022, Tetra Tech, Inc. and American Environmental Group, LTD (collectively, “Defendants”) filed a motion to compel arbitration.

Defendant’s request for judicial notice of the JAMS Employment Arbitration Rules & Procedures is granted.

Plaintiff’s request for judicial notice of the complaints in Glumac, Tetra Tech Inc. et al., v. David Summers; Acco Engineered Systems, Inc. (Case No. BC687904) and Tetra Tech, Inc. v. Richard Campbell, John Borgersen, and Concord Engineering Group, Inc. (Colorado Case No. 2018CV30368) is denied. The documents are irrelevant to this case.

Defendants’ Evidentiary Objection Nos. 1-4 to the Declaration of John David are overruled.

Defendants’ Evidentiary Objection Nos. 1-11 to the Declaration of Joel Okeny are overruled. Plaintiff may state what he experienced and remembers.

Plaintiff’s Evidentiary Objection Nos. 1-13 are overruled. Tom Ludwick properly authenticates the business records and has personal knowledge of the existence of the records and their contents. He also has personal knowledge of the company’s customary hiring practices.

Plaintiff’s Evidentiary Objection Nos. 14-30 are also overruled, as Dallin Woodward has personal knowledge of how the online portal operates and of the existence of the records.

Plaintiff also filed a “procedural objection” to Defendants’ entire memorandum of points and authorities because it exceeded 15 pages without leave of court. (See California Rules of Court, rule 3.113(d).) Defendants’ memorandum is 18 pages long. However, Plaintiff identifies no prejudice from the oversized brief. As Defendants note in reply, they provided more than the statutorily required notice period, and Plaintiff fully opposed the motion on the merits. Plaintiff’s objection is therefore overruled.

When seeking to compel arbitration of a plaintiff’s claims, the defendant must allege the existence of an agreement to arbitrate. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219.) The burden then shifts to the plaintiff to prove the falsity of the agreement. (Ibid.) After the Court determines that an agreement to arbitrate exists, it then considers objections to its enforceability. (Ibid.)

The Court must grant a petition to compel arbitration unless the defendant has waived the right to compel arbitration or if there are grounds to revoke the arbitration agreement. (Ibid.; Code Civ. Proc., § 1281.2.) Under California law and the Federal Arbitration Act (“FAA”), an arbitration agreement may be invalid based upon grounds applicable to any contract, including unconscionability, fraud, duress, and public policy. (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 165-166.)

Plaintiff was employed by Defendant American Environmental Group, LTD, a wholly owned subsidiary of Defendant Tetra Tech, Inc. (Ludwick Decl. ¶¶ 3, 9.) Defendants contend that Plaintiff electronically signed a Binding Mutual Agreement to Arbitrate Claims in connection with his employment. (Ludwick Decl. ¶ 11.) Defendants provide a copy of the arbitration agreement. (Ludwick Decl., Ex. B [“Arbitration Agreement”].) Through the Arbitration Agreement, the parties agreed that “any controversy, claim or dispute between me and Tetra Tech, Inc. and/or any of its related entities, holding companies, parents, subsidiaries . . . will be submitted to final and binding arbitration as the sole and exclusive remedy, regardless of whether the dispute is initiated by Company or me.” The Arbitration Agreement is electronically signed by Plaintiff and a representative of the company using a plain font.

Plaintiff argues that he did not see or sign the Arbitration Agreement, and he believes the electronic signature is “a forgery.” (Motion at pp. 4-7.) On August 11, 2020, Plaintiff was emailed a link to access “some onboarding documents,” and “[f]rom what [he] remember[s], [he] just had to fill in some basic information about [him]self before working.” (Okeny Decl. ¶ 5.) Plaintiff declares that he never saw the Arbitration Agreement. (Okeny Decl. ¶ 6.)

When a plaintiff does not recall signing or agreeing to an electronic agreement, the defendant has the burden of proving by a preponderance of the evidence that an electronic signature or acceptance is authentic, i.e., that it was the act of the plaintiff. (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 846.) “[A] party may establish that the electronic signature was ‘the act of the person’ by presenting evidence that a unique login and password known only to that person was required to affix the electronic signature, along with evidence detailing the procedures the person had to follow to electronically sign the document and the accompanying security precautions.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 545.)

Defendants provide a declaration from Tom Ludwick, who was the Human Resources Manager for Tetra Tech, Inc. during Plaintiff’s employment and is now the Regional Manager of Human Resources. (Ludwick Decl. ¶ 5.) He has personal knowledge of and access to Defendants’ personnel and payroll records, and he is familiar with the process that was in place in August 2020 for hiring and onboarding new employees. (Ludwick Decl. ¶¶ 6, 12.)

As part of the application process, an applicant provides his personal email address to the recruiting team. (Ludwick Decl. ¶ 13.) Defendants contracted with third-party service provider 321Forms to build and maintain a secure online portal through which 321Forms electronically provides and maintains documents for Defendants’ new hires and employees. (Ludwick Decl. ¶ 7.) After a candidate is offered a position, Defendants’ recruiting team sets up a new employee profile in 321Forms for the purpose of creating a secure online portal for the new hire. (Ludwick Decl. ¶ 14.) The recruiter has the option of either autogenerating a temporary password or manually creating a temporary password for the employee to use to access their secure online portal. (Ludwick Decl. ¶ 14.) If an autogenerated password is created, an automated message is generated entitled “New Employment Paperwork” and is sent to the new employee with a permanent employee username, a temporary password, and a link to onboarding documents hosted on the 321Forms platform. (Ludwick Decl. ¶ 15.) If the recruiter creates a temporary password, he emails the new employee directly, providing the new hire a permanent employer username, a temporary password, and a link to the onboarding documents hosted on the 321Forms platform. (Ludwick Decl. ¶ 16.) In either method, the onboarding emails are sent to the new hire’s same personal email address that was used to apply for employment. (Ludwick Decl. ¶ 17.) Newly hired employees are required to create a unique and permanent password after they initially log in to the secure online portal, and the password will be known only to them. (Ludwick Decl. ¶ 18.) After a newly hired employee creates their permanent and unique password, they provide specific personal information to populate various onboarding forms, then they review and sign their required and optional onboarding documents. (Ludwick Decl. ¶ 20.) The new hire is provided as much time as necessary to review each document and complete the onboarding forms. (Ludwick Decl. ¶ 20.) After the documents are electronically signed, they are maintained on the 321Forms system under the employee’s individual account. (Ludwick Decl. ¶ 22.)

Defendants also provide a declaration from Dallin Woodward, the Project Manager at 321Forms, who is closely involved with the operation of 321Form’s servers and software, security reviews, and has an in-depth understanding of 321Form’s internal and client-facing applications. (Woodward Decl. ¶ 2.) He is personally familiar with the online tools that 321Forms makes available to its clients and their employees and is involved in the maintenance of the online portal and the online processes by which Defendants’ employees are provided with the Arbitration Agreement. (Woodward Decl. ¶ 6.) He also has access to Defendants’ portal and the information contained in the portal. (Woodward Decl. ¶ 6.)

The secure online portal built and maintained by 321Forms for Defendants’ is password-protected. (Woodward Decl. ¶ 9.) When employees access the online portal for the first time, they land on the Account Validation page. (Woodward Decl. ¶ 9.) The new hire’s permanent username is displayed and cannot be altered. (Woodward Decl. ¶ 9.) After going to the 321Forms secure portal and before proceeding any further in order to obtain access to the electronic onboarding and enrollment forms, the new hire must enter their unique permanent username and temporary password provided in the activation email. (Woodward Decl. ¶ 10.) The new hire is then taken to a new page, which requires the new hire to change their password, enter this new password twice, and select a secret question for which 321Forms will ask for the answer should they forget their password in the future. (Woodward Decl. ¶ 10.) Once an employee creates their permanent password, nothing in the 321Forms system shares that password with anyone, the permanent password is only known to the new hire, and the password cannot be manually retrieved from the system by anyone. (Woodward Decl. ¶ 11.)

Once the new hire signs into the 321Forms Employee Dashboard, they must consent or decline to consent to the electronic disclosure of employment-related documents, allowing 321Forms to electronically provide them documents concerning their employment with Defendants. (Woodward Decl. ¶ 12.) After the new hire accepts the Consent, the new hire verifies their name, types in their birthdate, clicks enter, and is directed to the Select Forms landing page, which lists the required and optional forms which need to be completed as part of the onboarding process. (Woodward Decl. ¶ 13.) They then are prompted through a series of screen to provide personal information, contact information, employment history, payroll method, and other information. (Woodward Decl. ¶ 14.) Once the new hire enters their personal information, they begin the review of all onboarding documents by clicking on the “View & Sign Documents” button, with no time limit for reviewing the documents. (Woodward Decl. ¶ 15.)

The signature area for each document is visible but cannot be accessed until the new hire has completed a multi-step process. (Woodward Decl. ¶ 15.) The process generally involves clicking the Adobe PDF icon, clicking a button to close the window that opened with the PDF document, and proceed past a pop-up screen which asks, “Did Everything Look Good?” (Woodward Decl. ¶ 16.) It is only after the new hire opens the PDF, views the document, closes the PDF, and selects “Yes, Continue” that they are able to reach the final step of electronically signing the document. (Woodward Decl. ¶ 16.)

Woodward personally reviewed 321Forms’ data regarding Defendants’ secure online portal system, including the data related to the individual online portal account created for Plaintiff, which are maintained by 321Forms in the ordinary course of business. (Woodward Decl. ¶ 17.) Plaintiff’s unique username “joelokeny” is assigned unique user ID 1275322, and he selected a security question and provided a security reminder answer on August 11, 2020. (Woodward Decl. ¶ 17 & Ex. B.) Plaintiff accepted the Consent to Electronic Disclosure. (Woodward Decl. ¶ 18 & Ex. C.) The Arbitration Agreement was presented to Plaintiff through his online portal account and executed on August 11, 2020 at 6:13 p.m. MDT (5:13 p.m. PDT). (Woodward Decl. ¶ 19.) To electronically sign the Arbitration Agreement, Plaintiff was required to type his full legal name in the box immediately under the acknowledgment and click the “Submit My Form” button. (Woodward Decl. ¶ 22.) When a client’s new hire completes all of their required onboarding documents through their secure online portal account, 321Forms’ system is designed to automatically generate an e-mail to the client’s representative notifying them that the onboarding documents have been completed. (Woodward Decl. ¶ 23.) On August 11, 2020, Ludwick received an email notice informing him that Plaintiff had completed the submission of his onboarding forms. (Ludwick Decl. ¶ 10 & Ex. A.)

In reply, Defendants provide another declaration from Nate Daugherty, the recruiter who personally interacted with Plaintiff and set up his new employee profile in 321Forms. (Daugherty Decl. ¶¶ 2-4.) He provided Plaintiff with a permanent unique username of “joelokeny” and a temporary password. (Daugherty Decl. ¶ 7 & Ex. A.)

Defendants have shown that Plaintiff used a unique login and password known only to him in order to sign the Arbitration Agreement, and the electronic signature could only be the act of Plaintiff. Plaintiff could not have proceeded to signing the document without opening it and confirming that he viewed it. If Plaintiff did not read the pages before he advanced, that is still not a basis for deny arbitration. “‘[I]t is generally unreasonable . . . to neglect to read a written agreement before signing it.’” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 914-915; Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [“An arbitration clause within a contract may be binding on a party even if the party never actually read the clause”].)

In sum, Defendants have satisfied their burden of showing the existence of an agreement to arbitrate.

Arbitration agreements for FEHA claims must (1) provide for neutral arbitrators, (2) provide for more than minimal discovery, (3) require a written award, (4) provide for all of the types of relief that would otherwise be available in court, and (5) not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum. (Armendariz, supra, 24 Cal.4th at p. 102.) These requirements may apply to non-FEHA employment claims. (See Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 254 [applying the Armendariz factors in the context of claims under the Labor Code].)

The arbitration agreement provides for arbitration with JAMS in accordance with the JAMS Employment Arbitration Rules and Procedures, with a neutral arbitrator. JAMS’s Employment Arbitration Rules and Procedures provide for discovery. (RJN, Ex. 1, Rule 17.) The arbitrator will have full authority to award all remedies that would be available in court, and the arbitrator will issue a written decision stating the essential findings and conclusions on which the award is based. Defendants will pay all arbitrator’s fees and costs beyond what would normally be incurred in court.

For an arbitration agreement to be unenforceable as unconscionable, both procedural and substantive unconscionability must be present. (Armendariz, supra, 24 Cal.4th at p. 114.) “[T]he 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.” (Ibid.)

“The relevant factors in assessing the level of procedural unconscionability are oppression and surprise.” (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 997.) “‘The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party.’” (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 656.) “The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.” (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348, fn. omitted.) “The component of surprise arises when the challenged terms are ‘hidden in a prolix printed form drafted by the party seeking to enforce them.’” (Ibid.) “The adhesive nature of the employment contract requires [the court] to be ‘particularly attuned’ to [Plaintiff’s] claim of unconscionability [citation], but [the court] do[es] not subject the contract to the same degree of scrutiny as ‘[c]ontracts of adhesion that involve surprise or other sharp practices’ [citation].” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245 (Baltazar).)

Plaintiff argues that the arbitration agreement is procedurally unconscionable because it is a contract of adhesion without an ability to negotiate. (Opposition at pp. 12-13.) Arbitration agreements that are “take it or leave it” have some degree of procedural unconscionability. (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 796.) The arbitration agreement therefore has some degree of unconscionability due to its adhesive nature.

Plaintiff contends that the Arbitration Agreement was hidden among numerous forms. (Opposition at p. 14.) However, that is contradicted by Plaintiff’s declaration stating that he never saw the Arbitration Agreement and “do[es] not recall receiving any paperwork or being told [he] had to sign any paperwork as part of [his] employment.” (Okeny Decl. ¶¶ 6, 8.) Plaintiff recalls only “fill[ing] in some basic information about [him]self before working.” (Okey Decl. ¶ 5.) Plaintiff has not shown that the Arbitration Agreement was hidden or surprising.

Plaintiff also argues that the Arbitration Agreement “consists of a 6-line run-on sentence in what looks to be 9-point font” that cites the California Arbitration Act, California Code of Civil Procedure, and Federal Arbitration Act, and it refers to a potential exclusion for matters within the jurisdiction of the Labor Commissioner. (Opposition at p. 14.) Defendant contends that “ [s]uch a convoluted sentence is confusing for any reader, lawyers included.” (Opposition at p. 14.)

Plaintiff compares the Arbitration Agreement here to the one in OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111 (OTO). (Opposition at p. 13.) The arbitration agreement in OTO was written in a single, dense, 51-line paragraph using “an extremely small font.” (OTO, supra, 8 Cal.5th at p. 128.) It contained complex sentences “filled with statutory references and legal jargon,” and it referred to the California Fair Employment and Housing Act; title VII of the Civil Rights Act of 1964; other unspecified “local, state or federal laws or regulations”; the National Labor Relations Act; the California Workers’ Compensation Act; “California Small Claims” actions; the Department of Fair Employment and Housing; the Employment Development Department; the “Equal Opportunity Commission”; the federal and California arbitration acts; and six different sections of California’s Civil Code and Code of Civil Procedure. (Ibid.)

Plaintiff’s characterization of the Arbitration Agreement here is not accurate. The Arbitration Agreement is a separate full page, with “BINDING MUTUAL AGREEMENT TO ARBITRATE CLAIMS” at the top in bold and underlined font. It is divided into multiple short paragraphs and is in a regular and easy-to-read font size. It states that it does not affect Plaintiff’s right to file with the National Labor Relations Board, the Equal Employment Opportunity Commission, or any state agency charged with enforcement of fair employment practice laws. It also states that it is governed by and enforceable under the Federal Arbitration Act. There are no other statutory references or code sections.

Accordingly, the presentation and format of the Arbitration Agreement do not establish procedural unconscionability.

Plaintiff also argues the Arbitration Agreement does not include a copy of the applicable arbitration ruled, relying in part on Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387 (Trivedi). (Opposition at p. 14.) In Trivedi and the cases cited therein, the unconscionability arguments depended on the arbitration rules in question. (Baltazar, supra, 62 Cal.4th at p. 1246.) Those cases “thus stand for the proposition that courts will more closely scrutinize the substantive unconscionability of terms that were ‘artfully hidden’ by the simple expedient of incorporating them by reference rather than including them in or attaching them to the arbitration agreement.” (Ibid.) When a challenge to the enforcement of an arbitration agreement has nothing to do with the particular rules, the failure to attach the rules does not affect unconscionability. (Ibid.) Here, the challenge has nothing to do with the particular rules. And in any event, the Arbitration Agreement states that the employee can obtain a copy of the most current JAMS Rules from the company’s Human Resources Department or by visiting a specific JAMS webpage.

In sum, this agreement has some degree of procedural unconscionability due to its adhesive nature, but as explained below, it is not enough.

“‘Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided. [Citations.] A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be “so one-sided as to ‘shock the conscience.’”’ [Citation.]’” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85.)

“[A]n arbitration agreement imposed in an adhesive context lacks basic fairness and mutuality if it requires one contracting party, but not the other, to arbitrate all claims arising out of the same transaction or occurrence or series of transactions or occurrences.” (Armendariz, supra, 24 Cal.4th at p. 120.)

Plaintiff argues the Arbitration Agreement lacks mutuality because “Defendants carve out an exception to seek injunctive relief against their employees,” and “defendants are exempt from arbitration for claims they are likely to bring against employees.” (Opposition at p. 9; see id. at p. 15.)

Plaintiff relies on the Employee Confidentiality and Invention Assignment Agreement (“Confidentiality Agreement”), which states: “Employee understands that monetary damages will not be sufficient to avoid or compensate for the unauthorized use or disclosure of any of the Confidential Information and that injunctive relief will be appropriate to prevent any actual or threatened use or disclosure of such Confidential Information.” (David Decl., Ex. 1 at p. 2, ¶ 7.) Plaintiff also notes that the Confidentiality Agreement states that it “constitutes the entire understanding and agreement between the parties with respect to the subject matter hereof and supersedes any and all prior or contemporaneous oral or written communications with respect hereto, all of which are merged herein.” (David Decl., Ex. 1 at p. 3, ¶ 10.5.) Therefore, according to Plaintiff, the Confidentiality Agreement supersedes the Arbitration Agreement, and Defendants have exempted themselves from arbitration with respect to some claims. (See Opposition at pp. 9-10.) But no part of the Confidentiality Agreement addresses litigation or arbitration of any claims, nor does any part state that Defendants exempt themselves from arbitrating any claims. No part of the Arbitration Agreement addresses confidentiality. The Confidentiality Agreement and the Arbitration Agreement deal with different subject matter, and thus the Confidentiality Agreement does not supersede and invalidate the Arbitration Agreement.

Plaintiff argues that “the disputes to which arbitration applies encompass claims such as those an employee would bring, but Defendants[] maintain the ability to seek injunctive relief and breach of contract against employees.” (Opposition at p. 12; see id. at p. 15.) That is not correct. The Arbitration Agreement requires arbitration of “any controversy, claim or dispute between [employee] and Tetra Tech, Inc. . . . regardless of whether the dispute is initiated by Company or [employee].” The arbitrator has “full authority to award all remedies that would be available in court.” The Arbitration Agreement therefore applies to all claims, including those brought by the employer or employee, for damages or injunctive relief.

The Arbitration Agreement does not lack mutuality, and it is not unconscionable on this ground.

Plaintiff argues the arbitration agreement contains an unlawful waiver of his right to bring PAGA representative actions and class actions. (Opposition at pp. 14-15.) But Plaintiff does not bring this action as a representative action under PAGA or as a class action. Even if he had, the Employee Agreement to Arbitrate states, “If any provision of this Agreement is found unenforceable, the remainder of this Agreement shall remain in full force and effect, as if the unenforceable or invalid provision did not exist.” Pursuant to that provision, the Court severs the waiver of class and representative actions.

Because the Court finds some procedural but no substantive unconscionability (after severing the prohibition on class and representative actions), the Arbitration Agreement should not be invalidated due to unconscionability.

The motion to compel arbitration is GRANTED. The entire action is STAYED pending the arbitration. A Status Conference re: Arbitration is scheduled for 10/20/2023 at 8:30 AM in Department 48 at Stanley Mosk Courthouse (October 20, 2023). Five court days before, the parties are to file a joint report stating the name of their retained arbitrator and the status of arbitration.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court