Judge Thomas D. Long, Case Number: 22STCV32376, Date: 2023-08-31 Tentative Ruling

On October 4, 2022, Plaintiff Juan Vargas filed this action against Defendants Express Services Inc., Express Employment Professionals, Patton Sales Corp., and Kimberly Guard. The Complaint alleges (1) failure to provide meal breaks; (2) failure to provide rest breaks; (3) failure to pay wages; (4) failure to pay overtime; (5) failure to provide accurate itemized wage statements; (6) violations of the California Unfair Competition Law (“UCL”); (7) medical disability discrimination in violation of the Fair Employment and Housing Act (“FEHA”); (8) failure to accommodate; (9) failure to engage in the interactive process of accommodation; (10) failure to prevent discrimination and harassment in violation of FEHA; (11) retaliation in violation of FEHA; (12) wrongful termination in violation of public policy and FEHA; (13) hostile work environment in violation of FEHA; (14) intentional infliction of emotional distress; and (15) negligent infliction of emotional distress.

On January 26, 2023, Express Services Inc. (“Defendant”) filed a motion to compel arbitration.

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.)

Defendant contends that on June 29, 2021, Plaintiff electronically signed a Mutual Agreement to Arbitrate Claims in connection with his employment onboarding. (Homsey Decl. ¶ 5.) Defendant provides a copy of the arbitration agreement. (Homsey Decl., Ex. B [“Arbitration Agreement”].) Through the Arbitration Agreement, the parties agreed that “all legal disputes and claims between [Plaintiff and Defendant] shall be determined exclusively by final and binding arbitration,” including “all claims pertaining to [Plaintiff]’s employment or other relationship with [Defendant].” The Arbitration Agreement is electronically signed by Plaintiff and a representative of the company using a plain font.

Plaintiff argues that he does not recall signing the Arbitration Agreement and that Defendant has not proven that he electronically signed it. (Opposition at pp. 5-7.)

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.)

Defendant’s Vice President of Franchise Systems has reviewed Defendant’s business and personnel records pertaining to Plaintiff. (Homsey Decl. ¶¶ 1, 3.) After accepting an employment offer, associates receive an email containing a unique link to access and review initial onboarding documents. (Homsey Decl. ¶ 4.) Associates are informed they have the option to review and sign the initial onboarding documents in hard copy, and they must consent to receive, review, access, sign, and authenticate documents electronically. (Homsey Decl. ¶ 4.) If the associate wishes to review and sign these documents electronically, the associate must check a box at the end of the E-Signature Disclosures and Consent form and click “Accept.” (Homsey Decl. ¶ 4.) Only an individual using Plaintiff’s unique link could have checked the box electronically to indicate his consent, and Plaintiff’s signature and date of signing were recorded on the Arbitration Agreement. (Homsey Decl. ¶¶ 5, 7.)

Plaintiff does not provide a declaration or contrary evidence. Therefore, Defendant has proven by a preponderance of the evidence that the electronic signature is Plaintiff’s.

Defendant has 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 AAA in accordance with the AAA Employment Arbitration Rules. If the parties do not agree on an arbitrator, then a neutral arbitrator will be selected pursuant to AAA’s rules. The arbitrator shall have the authority to issue subpoenas to compel the production of documents during discovery and the attendance of witnesses at the arbitration hearing. The arbitrator will decide the claims “consistent with controlling law,” “shall have the power to award all legal and equitable relief that would be available in court under applicable law,” and “ shall render a written award setting forth findings of fact and conclusions of law.” Defendant will pay all costs unique to arbitration, including the arbitration fees and expenses.

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. (Opposition at pp. 8-9.) 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.) Here, however, employees could opt out of the Arbitration Agreement within thirty days by providing written notice. (Arbitration Agreement, ¶ 10.)

Plaintiff also argues the Arbitration Agreement does not include a copy of the applicable arbitration rules, relying in part on Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387 (Trivedi). (Opposition at p. 10.) 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 includes links to obtain a copy of the most current AAA rules. (Arbitration Agreement, ¶ 5.)

“‘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.)

Plaintiff argues that the Arbitration Agreement is substantively unconscionable because it bans PAGA representative actions. (Opposition at p. 11.) But Plaintiff does not bring this action as a representative action under PAGA or as a class action. Even if he had, Plaintiff’s characterization of the Arbitration Agreement is not accurate. The arbitrator is “prohibited from fashioning a proceeding as a class, collective, representative, joint, or group action or awarding relief to a group of claimants or employees in one proceeding, to the maximum extent permitted by law.” (Arbitration Agreement, ¶ 7.) If such a prohibition on representative actions is invalid, then “the parties hereby waive any right to arbitration of the class, collective, representative, joint, or group action at issue and instead agree and stipulate that such claims will be heard only by a judge and not an arbitrator or jury, to the maximum extent permitted by law.” (Arbitration Agreement, ¶ 7.) Thus, this is not an invalid wholesale waiver of PAGA claims. Instead, it provides that representative actions must proceed in court, not in arbitration.

Plaintiff also argues that the Arbitration Agreement does not include Plaintiff’s UCL claims. (Opposition at p. 12.) Plaintiff’s UCL claim is based on Defendant’s failure to pay overtime wages, provide meal and rest breaks, pay wages due at the time of separation, furnish timely and accurate wage statements, remit gratuities, and reimburse business expenses in violation of California law. (Complaint ¶ 74.) This is within the scope of the Arbitration Agreement’s application to “all claims pertaining to [Plaintiff]’s employment or other relationship with [Defendant],” and it is not an expressly excluded claim. (Arbitration Agreement, ¶¶ 1-2.)

Finally, Plaintiff argues that Defendant is a repeat player with AAA. (Opposition at pp. 12-13.) “Various studies show that arbitration is advantageous to employers not only because it reduces the costs of litigation, but also because it reduces the size of the award that an employee is likely to get, particularly if the employer is a ‘repeat player’ in the arbitration system.” (Armendariz, supra, 24 Cal.4th 83, 115.) However, Armendariz dealt with this concern when concluding that when there is mandatory arbitration, the employer cannot generally require the employee to bear any type of expense that the employee would not be required to bear in court. (Id. at pp. 110-111.) As discussed above, the Arbitration Agreement here satisfies this and all other Armendariz factors. There are also “sufficient institutional safeguards, such as scrutiny by the plaintiff’s bar and appointing agencies like the AAA, to protect against corrupt arbitrators.” (Id. at p. 111.)

In sum, Plaintiff has not shown any procedural or substantive unconscionability, and the Arbitration Agreement should not be invalidated.

A court must grant a motion to compel arbitration unless a party to the arbitration agreement is also a party to a pending court action with a third party arising out of the same transaction and there is a possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2, subd. (c).) If the court does determine that subdivision (c) applies, the court may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding, or may stay arbitration pending the outcome of the court action. (Code Civ. Proc., § 1281.2.)

Plaintiff’s causes of action are brought against Defendant and the other non-moving defendants, alleging the same collective wrongful conduct and harm to Plaintiff. Plaintiff’s and Defendant’s arbitration of these issues therefore creates a possibility of conflicting rulings on a common issue of law or fact.

On July 23, 2023, Patton Sales Corp. also filed a motion to compel arbitration, which is set to be heard on April 23, 2024. The Court will therefore stay the action except as to this pending motion.

Express Services Inc.’s motion to compel arbitration is GRANTED. The entire action is STAYED pending the conclusion of the arbitration, except for Patton Sales Corp.’s pending motion to compel arbitration, currently scheduled for April 23, 2024 at 8:30 a.m.

A Status Conference re: Arbitration is scheduled for 08/30/2024 at 8:30 AM in Department 48 at Stanley Mosk Courthouse (August 30, 2024). 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. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court