Judge: Upinder S. Kalra, Case: 20STCV43941, Date: 2022-09-22 Tentative Ruling

Case Number: 20STCV43941    Hearing Date: September 22, 2022    Dept: 51

Tentative Ruling

Judge Upinder S. Kalra, Department 51

HEARING DATE:   September 22, 2022                                       

CASE NAME:            Nicklos Watkins v. LKQ Corporation, et al.

CASE NO.:                20STCV43941

DEFENDANT’S MOTION TO COMPEL ARBITRATION

MOVING PARTY: Defendants LKQ Corporation, et al.

RESPONDING PARTY(S): Plaintiff Nicklos Watkins

REQUESTED RELIEF:

1.      An order compelling Plaintiff to arbitrate the claims

2.      An order staying the proceedings

TENTATIVE RULING:

1.      The Motion to Compel Arbitration is GRANTED, as to the individual PAGA claim. Plaintiff’s representative claim is STAYED

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On November 16, 2022, Plaintiff Nicklos Watkins (“Plaintiff”) filed a complaint against LKQ Corporation, LKQ Lakenor Auto & Truck Salvage, Inc. (“Defendants.”) The complaint was for civil penalties under Labor Code Private Attorney General Act. The complaint contains allegations that was not provide adequate rest breaks, not given adequate compensation, not provided rest breaks and meal periods.

On January 21, 2021, Defendants both filed an Answer.

On July 11, 2022, Defendants filed a Motion to Compel Arbitration. Plaintiff filed an Opposition on September 9, 2022. Defendant filed a reply on September 15, 2022.

LEGAL STANDARD

Under CCP §1285, “any party to an arbitration in which an award has been made may petition the court to confirm, correct or vacate the award.  The petition shall name as respondents all parties to the arbitration and may name as respondents any other persons bound by the arbitration award.”  Under CCP §1285.4, “A petition under this chapter shall: (a) Set forth the substance of or have attached a copy of the agreement to arbitrate unless the petitioner denies the existence of such an agreement. (b) Set forth names of the arbitrators. (c) Set forth or have attached a copy of the award and the written opinion of the arbitrators, if any.”   

“[T]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence . . . .”  Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.  “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.”  Weeks v. Crow (1980) 113 Cal.App.3d 350, 353.  “To determine whether a contractual arbitration clause requires arbitration of a particular controversy, the controversy is first identified and the issue is whether that controversy is within the scope of the contractual arbitration clause.”  Titolo v. Cano (2007) 157 Cal.App.4th 310, 316.  “Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.”  California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205.   

“[A] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination.”  Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284. 

ANALYSIS:

Defendant moves to compel Plaintiff to arbitration.

1.      Existence of Arbitration Agreement:

In determining the enforceability of an arbitration agreement, the court considers “two ‘gateway issues’ of arbitrability: (1) whether there was an agreement to arbitrate between the parties, and (2) whether the agreement covered the dispute at issue.”  (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961 (Omar).)   

A.    Agreement Between Parties:

“Arbitration is a product of contract.  Parties are not required to arbitrate their disagreements unless they have agreed to do so.  [Citation.]  A contract to arbitrate will not be inferred absent a ‘clear agreement.’  [Citation.]  When determining whether a valid contract to arbitrate exists, we apply ordinary state law principles that govern contract formation.  [Citation.]  In California, a ‘clear agreement’ to arbitrate may be either express or implied in fact.  [Citation.]”  (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1092-1093 (Davis).)   

            In support, the Declaration of Virginia Flores, the Human Resources Business Partner for LKQ Lakenor Auto & Truck Salvage, Inc., provides the arbitration agreement. (Dec. Virginia, Ex. A.) The agreement is signed by Plaintiff and Defendant.

            The agreement provides in pertinent part:

“Company and I will utilize binding arbitration as the sole and exclusive means to resolve all disputes that may arise out of or be related in any way to my employment with LKQ Corporation or one of its subsidiaries or affiliates (the "Company"), including, but not limited to, the termination of my employment and my compensation. (Dec. Flores, Ex. A.)

The Defendant’s initial burden to compel arbitration was satisfied. Under Rule of Court Rule 3.1330, a copy of the agreement must be attached and incorporated by reference. Here, Defendant has done so.

B.     Claims Fall Within Scope of Arbitration Clause

Defendant contends that the claims raised in the Plaintiff’s complaint fall within the scope of the arbitration agreement. The PAGA claims raised in Plaintiff’s complaint arise out of or relate to his employment with Defendant.

a.       Individual Claim and Representative Claim

Specifically, Defendant asserts that the recent decision from Viking River Cruises provides that the individual PAGA claims are to be compelled to arbitration and the non-individual PAGA claims are to be dismissed. Defendant argues that under Viking River, the individual claim must be arbitrated, and the non-individual claim should be dismissed because the plaintiff did not have statutory standing. The agreement provides that Plaintiff will agree to arbitrate employment claims against Defendants, like the PAGA claim and will not and cannot bring PAGA claims on behalf of other employees. (Motion 8: 15-17, Dec. Flores, Ex. A, ¶ 2.)

Viking River Cruises abrogated Iskanian, whereby a plaintiff can be compelled to arbitrate the individual PAGA claim that was agreed to in an arbitration agreement. However, Defendant’s contention that Viking River Cruises compels that Plaintiff’s representative PAGA claim be dismissed because once Plaintiff’s individual PAGA claim is sent to arbitration, he no longer has standing fails. As Plaintiff correctly argues, the California Supreme Court in Kim determined that a plaintiff still has standing to pursue a representative claim even after the individual claims are settled. (Kim, supra, 9 Cal.5th at 80.) According to Labor Code § 2699(a), an aggrieved employee can bring a civil action against a current or former employee. Under subsection (c), an aggrieved employee is a person who was “employed by the alleged violator” and against whom one or more of the alleged violations was committed.” (Id.) Kim added: “The Legislature defined PAGA standing in terms of violations, not injury. Kim became an aggrieved employee, and had PAGA standing, when one or more Labor Code violations were committed against him. (See § 2699(c).) Settlement did not nullify these violations.” (Kim, supra, 9 Cal.5that 84.) Further,

The statutory language reflects that the Legislature did not intend to link PAGA standing to the maintenance of individual claims when such claims have been alleged. An employee has PAGA standing if “one or more of the alleged violations was committed” against him. (§ 2699(c), italics added.) This language indicates that PAGA standing is not inextricably linked to the plaintiff's own injury. Employees who were subjected to at least one unlawful practice have standing to serve as PAGA representatives even if they did not personally experience each and every alleged violation. (§ 2699(c).) This expansive approach to standing serves the state's interest in vigorous enforcement.

(Id.)

As such, when the parties arbitrate Plaintiff’s individual PAGA claim, this would not nullify the Labor Code violations.

Based on above, the agreement is valid and the Plaintiff’s individual PAGA claims can be compelled to arbitration and, based on the Court’s ruling in Kim, the representative claim still survives.

2.      Defenses to Arbitration

Once it is determined that a valid arbitration agreement exists, the burden shifts to the opposing party to “prove by a preponderance of the evidence any defense to the petition.” (Lacayo v. Catalina Restaurant Group Inc. (2019) 38 Cal.App.5th 244, 257, review denied (Nov. 13, 2019)). In Armendariz, the California Supreme Court stated that when determining whether an arbitration agreement was unconscionable, there is both a procedural and a substantive element. (Armendariz v. Foundation Health Psychcare Service, Inc. (2000) 24 Cal.4^th 82, 114).

a.       Procedurally

Courts determine whether an agreement is unconscionable procedurally by looking at surprise and oppression. Oppression is an “inequality of bargaining power, when one party has no real power to negotiate or a meaningful choice. Surprise occurs when the allegedly unconscionable provision is hidden.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84). Examples of contracts that are procedural unconscionable are contracts of adhesions, which is 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.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113). Plaintiff argues that the agreement is procedurally unconscionable because it is a contract of adhesion.

Here, while this may have been a contract of adhesion, as most employment contracts are, this alone does not mean the whole agreement is procedurally unconscionable. “When arbitration is a condition of employment, there is inherently economic pressure on the employee to accept arbitration. This alone is a fairly low level of procedural unconscionability.” (Cisneros Alvarez v. Altamed Health Services Corporation (2021) 60 Cal.App.5th 572, 591). The agreement was not a surprise; the document is stand alone, with “MANDATORY ARBITRATION AGREEMENT” in bold letters at the top. This agreement also explains the procedure, including the waiver of a right to jury trial. Thus, the agreement is minimally procedurally unconscionable.

b.      Substantively

“Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85). Plaintiff contends that the agreement is substantively unconscionable because (1) fails to provide adequate discovery and (2) illegal shifts fees and costs.

First, Plaintiff argues that the agreement does permit adequate discovery. Plaintiff relies on Aixtron, Inc., arguing that the court there held that an arbitrator does not have power to order nonparty discovery prior to a hearing. (Aixtron, Inc. v. Veeco Instruments Inc. (2020) 52 Cal.App.5th 360, 395, 404.) However, the Court finds this argument unpersuasive because the agreement at issue in Aixtron did not contain a reference to CCP § 1283.05, which concerns taking depositions, or mentions the word “discovery.” Here, the agreement specifically states “in conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. Sec 1280 et seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights to discovery.)” (Dec. Flores, Ex. A, lines 11-13.) Additionally, the court in Mercuro stated, ““adequate” discovery does not mean unfettered discovery and Armendariz itself recognizes an arbitration agreement may require “something less than the full panoply of discovery provided in Code of Civil Procedure section 1283.05.” (Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 184.) Thus, the agreement allows for adequate discovery.

Second, Plaintiff argues that the agreement requires Plaintiff to pay an unknown amount of costs that he would not have to pay in court. Specifically, Plaintiff argues that because the agreement states that CCP §§ 1280 et seq. govern, Plaintiff will be forced to bear “his pro rata share of the expenses and fees of the neutral arbitrator, together with other expenses of the arbitration incurred or approved by the neutral arbitrator.” Plaintiff has the potential of having to pay his pro rata share. (Opp. 9: 23-28.) The Court finds this argument unpersuasive as well because the agreement is silent on costs. In Armendariz, the court determined that because the arbitration agreement was mandatory as it pertained to FEHA claims, the employer would bear the costs, not the employee. “The absence of specific provisions on arbitration costs would therefore not be grounds for denying the enforcement of an arbitration agreement.” (Armendariz, supra, 24 Cal.4th at p. 113.) Here, while the claims are not FEHA claims, the arbitration is mandatory and thus the employer will pay the costs. Because the agreement is silent but the agreement is mandatory, Plaintiff will not be required to pay costs and thus Plaintiff’s argument fails. Therefore, the agreement is not substantively unconscionable.

Even if the adhesive nature of the contract is sufficient to establish some procedurally unconscionability, the lack of substantive unconscionability is dispositive. Employing the sliding scale that this court must utilize, the minimal amount of procedural unconscionability coupled with the lack of substantive unconscionability, is not sufficient to render the arbitration agreement invalid. In other words, the arbitration agreement is valid and enforceable.

3.      Stay the Motion and/or Proceedings

Lastly, Plaintiff requests that the Court stay the instant matter because the California Supreme Court granted review in  Adolph v. Uber Technologies, Inc. on July 20, 2022, and on August 1, 2022, set the issue to be briefed as: “Whether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee…maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ in court or in any other forum the parties agree is arbitrable.” (Adolph v. Uber Technologies, Case No. S27467.)  Accordingly, the Court will only stay Plaintiff’s representative PAGA claim.

Conclusion:

            For the foregoing reasons, the Court decides the pending motion as follows:

The Motion to Compel Arbitration is GRANTED, as to the individual PAGA claim. Plaintiff’s representative claim is STAYED until March 28, 2023 or until further order of the Court.

Moving party is to give notice.

IT IS SO ORDERED.

Dated:             September 22, 2022                __________________________________                                                                                                                Upinder S. Kalra

                                                                                    Judge of the Superior Court