Judge Upinder S. Kalra, Case 22STCV17164 2022-10-04 Tentative Ruling

Judge: Upinder S. Kalra, Case: 22STCV17164, Date: 2022-10-04 Tentative Ruling

Case Number: 22STCV17164 Hearing Date: October 4, 2022 Dept: 51

Tentative Ruling

Judge Upinder S. Kalra, Department 51

HEARING DATE: October 4, 2022

CASE NAME: Severino Dela Rosa v. Tutor-Saliba Corporation, et al.

CASE NO.: 22STCV17164

DEFENDANTS’ MOTION TO COMPEL ARBITRATION

MOVING PARTY: Defendants Tutor-Saliba Corporation, et al.

RESPONDING PARTY(S): Plaintiff Severino Dela Rosa

REQUESTED RELIEF:

1. An order compelling Plaintiff to arbitrate the claims

2. An order staying the proceedings

TENTATIVE RULING:

1. Motion to Compel Arbitration is DENIED.

2. Request for a stay in the proceedings is DENIED.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On May 24, 2022, Plaintiff Severino Dela Rosa (“Plaintiff”) filed a complaint against Defendants Tutor Perini Corporation, Tutor-Saliba Corporation, Tutor-Saliba Managed Joint Ventures (“Defendants”). The complaint alleged four causes of action based on age discrimination, retaliation, and wrongful discharge. Plaintiff alleges that he was discriminated against based on his age and eventually wrongfully terminated by Defendants.

Defendants’ current Motion to Compel Arbitration was filed on July 6, 2022. Plaintiff’s opposition was filed on September 20, 2022. Defendants’ reply was filed on September 27, 2022.

Service:

The proofs of service filed and attached to the documents indicate that the parties were served via email, mail, and FedEx.

LEGAL STANDARD

Motion to Compel Arbitration – Under California law, the trial court has authority to compel arbitration pursuant to Code Civ. Proc. §1281.2 where a written agreement for such arbitration exists and one of the parties refuses to arbitrate. Specifically, the statute provides that, “[o]n petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement arbitrate the controversy exists.” The statute further sets forth four grounds upon which the trial court may refuse to compel arbitration: (a) the right to compel arbitration was waived, (b) recission of the agreement, (c) there is a pending action or special proceeding with a third party, arising out of the same transaction; and (d) petitioner is a state or federally chartered depository institution.

“[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:

As the moving party, Defendant bears the initial burden of establishing the existence of a valid arbitration agreement. Id. Upon establishing the existence of such an agreement, the burden shifts to the Plaintiff to prove that there are valid grounds for contesting arbitration by a preponderance of the evidence. Id.

A. 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).)

1. 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 of the existence of an arbitration agreement, Defendant provides the agreement attached to the Declaration of Sylvia Corsini, the Director of Human Resources of Defendant. (Dec. Corsini, Ex. A.) Exhibit A contains the “Acknowledgement and Agreement.” It contains the following provision:

Any controversy, dispute, or claim between any employee and the Company, or its officers, agents or other employees, shall be settled by binding arbitration, at the request of either party. The Claims covered by this arbitration agreement include, but are not limited to, the determination of the scope or applicability of this agreement to arbitrate, claims for wages and other compensation, claims for breach of contract (express or implied), tort claims and claims for discrimination, (including, but not limited to, race, sex, sexual orientation, religion, national origin, age, martial status, medical condition, and disability), and claims for violation of any federal, state, or other government law, statute, regulation, or ordinance, except for claims not covered by this agreement for worker’s compensation or unemployment insurance benefits.

Here, Defendant has met its initial burden because it has attached the agreement. “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.”” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.) Moreover, under Rule of Court Rule 3.1330, a copy of the agreement must be attached and incorporated by reference. Here, Defendant has done so.

“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.” (Gamboa, supra, 72 Cal.App.5th at pg. 165.) In their Opposition, Plaintiff does not dispute the existence of the agreement or that he signed the agreement. Therefore, the Court finds that the Defendant has met its burden by a preponderance of the evidence establishing the existence of a valid agreement between the parties.

2. Covered by Agreement

Defendant contends that the claims raised in the Plaintiff’s complaint fall within the scope of the arbitration agreement. Plaintiff’s complaint is based on various FEHA violations, such as age discrimination and wrongful termination.

Plaintiff does not contest whether the claims stated in his complaint are covered by the Agreement. Even still, a review of the complaint and the agreement attached to the Corsini Declaration as Exhibit A and stated above, the agreement covers disputes that arise out of Plaintiff’s employment. Here, the claims directly arise out of the employment practices and alleged wrongs committed by Defendant while Plaintiff was working for Defendant. Therefore, because the agreement provides that disputes relating to employment and cessation of employment, the claims are covered and fall within the scope of the Agreement.

1. 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)). Plaintiff argues that the agreement is unconscionable.

A. Unconscionability

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 (1) it is a contract of adhesion and (2) the agreement was not a separate document.

First, there is an elements of adhesion, as this is an employment contract. 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 real issue is whether there is an element of surprise.

In Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1571, the court found that the agreement was not a surprise because it had 11 paragraphs, “each with a heading in bold typeface accurately describing the substance of the paragraph.” (Id.) Here, there is only one heading, which only states “Acknowledgment and Agreement,” the fact that this single page document is an arbitration agreement is obvious. The topic sentence of paragraph three unmistakably identifies the document as an arbitration agreement. “Any controversy, dispute or claim” between the parties “shall be settled by binding arbitration.” Paragraph four details that JAMS shall be the governing body and the procedures that must be followed. Paragraph five further describes the rules and procedural requirements including discovery. Finally, paragraph six clearly explains that the arbitration agreement results in a jury and court trial waiver. Despite being a contract of adhesion, because there is an absence of surprise, the agreement is not overwhelmingly procedurally unconscionable.

Still, courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.’” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915).

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) it increases Plaintiffs’ risk to pay for Defendants’ attorney’s fees greater than he would be at risk if litigated in court, (2) it alters Plaintiff’s entitlement to attorneys’ fees, and (3) it requires Plaintiff to pay arbitration fees in excess of what he would pay in court.

These provisions are problematic. First, by granting the arbitrator to assess attorney fees to the prevailing party at his or her discretion, the agreement increases Plaintiff’s risk to pay Defendants’ attorney fees if this matter was litigated in court just as in Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 393-395.) The Court rejects Plaintiff’s attempt to redraft the agreement by writing in language that Plaintiff can only be assessed attorney fees if allowed under California law i.e. for frivolous claims. No such limiting language is in the text of the agreement. Second, that same term may limit Plaintiff’s ability to recover attorney’s fees because once again, it is at the discretion of the arbitrator to award such fees. In contrast, in court, a prevailing plaintiff is entitled to reasonable attorney’s fees as a matter of right under the Labor Code. “Several courts have held an arbitration provision is substantively unconscionable when it purports to deprive an employee of his or her statutory right to recover attorney fees if the employee prevails on a Labor Code claim for unpaid wages and other benefits, or on a discrimination claim under the California Fair Employment and Housing Act.” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 251.) While Defendants argue that the agreement provides the arbitrator with discretion “within the bounds of the law,” the Court in Carbajal rejected a similar argument from the defendant. There, the defendant argued that a provision indicated that the arbitrator could award any relief available in a court proceeding. However, the Court stated that the intent of the parties was “expressed in the arbitration provision’s clear and ambiguous language.” (Id.)

Lastly, Plaintiff argues that the agreement provides that the parties must bear their own costs equally. Defendants admits that this is problematic, but seeks to remedy this provision by asserting, in its reply, that it does not intend to seek costs from Plaintiff and will pay for the costs.

In sums for the reasons stated above, the Court finds that the provisions in the arbitration agreement are substantively unconscionable.

“The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’ [Citation.] But they need not be present in the same degree. ‘Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.’ [Citations.] In other words, 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.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910.) Here, the agreement was one of adhesion, which are indicators of a procedurally unconscionable agreement. Moreover, the agreement had three provisions that were substantively unconscionable as they gave discretion to the arbitrator for awarded fees to the prevailing party, even if it was the defendant, and required the parties to bear the costs equally.

2. Severability

Defendant asserts that even if there are portions of the agreement that are unconscionable, they should be severed, pursuant to CCP § 1670.5.

“In Armendariz, the court identified three factors relevant to whether severance is appropriate. First, ‘[i]f the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced.’ (Armendariz, supra, 24 Cal.4th at p. 124 [99 Cal.Rptr.2d 745, 6 P.3d 669].) Second, the fact that an ‘arbitration agreement contains more than one unlawful provision’ may ‘indicate a systematic effort to impose arbitration on an employee ... as an inferior forum that works to the employer's advantage’ and may justify a conclusion ‘that the arbitration agreement is permeated by an unlawful purpose.’ (Ibid.) Third, if ‘there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement,’ the court would have to ‘reform the contract, not through severance or restriction, but by augmenting it with additional terms,’ which would exceed its power to cure a contract's illegality.” (Ali v. Daylight Transport, LLC (2020) 59 Cal.App.5th 462, 481, review denied (Apr. 14, 2021).)

Here, the second and factor are directly relevant. The first one does not pertain as the entire contract is not tainted with illegality. Here, there are three provisions that are unconscionable, even though Defendants indicate that they will pay the costs. As the second factor states, if there are more than one unlawful provision, this may indicate an effort to impose arbitrator “as an inferior forum that works to the employer’s advantage. (Id.) In Carbajal, the court determined that the trial court did not abuse its discretion by not severing three unconscionable provisions that were contained within the agreement. Here, there are three provisions. Additionally, the agreement is also procedurally unconscionable. Thus, the court declines to engage in severance.

Conclusion:

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

Motion to Compel Arbitration is DENIED.

Moving party is to give notice.

IT IS SO ORDERED.

Dated: October 4, 2022. _________________________________ Upinder S. Kalra

Judge of the Superior Court