Judge Upinder S. Kalra, Case 22STCV38756 2023-05-03 Tentative Ruling

CASE NAME: Leticia Gonzalez v. United Medical Imaging Health Care, Inc., et al.

MOVING PARTY: Defendants United Medical Imaging Healthcare Inc., United Medical Imaging, Inc., Daniella Santoa, Flora Vasquez, Hamid Khales, Raul Olvera, and Lenna Samander

On December 13, 2022, Plaintiff Leticia Gonzalez (“Plaintiff”) filed a complaint against Defendants United Medical Imaging Healthcare Inc., United Medical Imaging, Inc., Daniella Santoa, Flora Vasquez, Hamid Khales, Raul Olvera, and Lenna Samander (“Defendants.”) the complaint alleged eight causes of action based on various FEHA violations and intentional infliction of emotional distress. Plaintiff alleges that while working for Defendants, she was subjected to harassment, discrimination, and hostile working conditions. These working conditions grew worse and was forced resign.

On February 14, 2023, Defendants filed a Motion to Compel Arbitration. Plaintiff’s Opposition was filed on April 20, 2023. Defendants’ Reply was filed on April 26, 2023.

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.

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.

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).)

“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 Lenna Samander, the Human Resources Director for Defendants United Medical Imaging, Inc., and United Medical Imaging Healthcare, Inc., provides both a copy of the employee handbook and the separate arbitration agreement, both signed by Plaintiff. (Dec. Samander, Ex. B and C.)

The parties agree that binding arbitration shall be the sole and exclusive remedy for resolving any disputes related to Employee's employment with the Company (including, but not limited to, any disputes related to the existence, interpretation; applicability, enforcement, or terms of this Agreement or this arbitration provision) instead of any court action, which is hereby expressly waived. Notwithstanding the foregoing, matters which are subject to review by writ of mandamus under California Code of Civil Procedure §1094.5 shall be resolved exclusively under that procedure.

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.

As stated above, 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).)

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 discrimination, harassment, retaliation, wrongful termination and intentional infliction of emotional distress, as well as other employment based causes of action.

Plaintiff’s motion does not contest whether the claims in the compliant are covered by the Agreement. Even still, a review of the complaint and the agreement attached to the Samander Declaration indicates that the agreement covers disputes that arise out of Plaintiff’s employment with Defendant. The specific language states, “any disputes related to Employee’s employment with the company.” (Dec. Samander, Ex. C, ¶ A.)

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.

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.

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).

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 this agreement is procedurally unconscionable because Plaintiff was unable to negotiate the terms, Plaintiff was not told whether she had to sign the arbitration agreement, the agreement was mandatory and was presented on a take or leave it basis, and was not allowed to take the agreement home or consult with an attorney.

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 clearly identified, the single document has a large heading with “Arbitration Agreement” in bold letters. (Dec. Samander, Ex. C.) Even if she felt rushed and signed it on her first day of the onboarding process, Plaintiff was provided an offer of employment on March 21, 2017 that does not condition employment on signing an arbitration agreement. (Reply Supp. Dec. Samander, Exhibit D.) Thus, the agreement is minimally procedurally unconscionable.

“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). Defendant, in anticipation, argues that there is one defect in the agreement, paragraph E. It states that “In any arbitration under this section, each side shall be required to bear his/her/its own costs and fees (including attorney’s fees), and neither shall be entitled to recover the same from the other upon being found to be the prevailing party as to any cause of action alleged.” Defendant acknowledges that this section of the agreement runs contrary to statutory rights, such as FEHA’s rights to attorneys’ fees. However, Defendant contends that this portions is severable, as stated in paragraph G of the agreement. As other Courts have determined that severable fee provisions do not negate the whole of the agreement, the remainder of the agreement is not substantively unconscionable. Plaintiff argues Defendant has admitted this provision is unconscionable and this provision is not severable. Under Armendariz, Plaintiff argues that the Court cannot sever the provision because it would require the court to reform the contract via augmentation of additional terms. (Opp. 7: 3-10, citing to Armendariz, supra, 24 Cal.4th at 124-125.) Lastly, Plaintiff argues that she never knowingly waived her right to pursue claims in court.

The Court finds that the agreement has a provision that is substantively unconscionable, as agreed upon by the parties. However, the Court finds Plaintiff’s arguments that the clause is inseverable unavailing. In Armendariz, the Court determined that because there were multiple unlawful provisions, the Court would have to “reform the contract, not through severance of restriction, but by augmenting it with additional terms.” (Armendariz, supra, 24 Cal.4th at 125.) However, the sole provision in this agreement that is unlawful is paragraph E, which concerns attorneys’ fees. Thus, under Armendariz, if “the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.” (Id. at 124.) Here, removing this clause would not detract from the main purpose of the agreement.

The Court will sever paragraph E from the Agreement. Once paragraph E is severed from the Agreement, the court finds that the agreement is not substantively unconscionable. Thus, even though 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 fact that the Court severed the sole unconscionable provision, is not sufficient to render the arbitration agreement invalid. In other words, the arbitration agreement is valid and enforceable.

As to Plaintiff’s request for an evidentiary hearing, Plaintiff has failed to provide a written statement stating the nature and extent of the evidence proposed and a reasonable time estimate. (California Rules of Court, Rule 3.1306(b).) Even in the absence of these procedural defects, the Court finds that finds there is no good cause for an evidentiary hearing.[1]

Defendant argues that under CCP § 1281.4, an action must be stayed to resolve whether the matter should be subject to arbitration. If the matter is subject to arbitration, then that proceedings must be stayed until the arbitration is complete.

Because the arbitration is valid and the motion to compel arbitration is GRANTED, the Motion to Stay the Proceedings is GRANTED.

Defendants argue that Lovret v. Seyfarth (1972) 22 Cal. App. 3d 841, 859, Unimart v. Superior Court (1969) 1 Cal. App. 3d 1039, 1049, and Kustom Kraft Homes v. Leivenstein (1971) 14 Cal. App. 3d 805, 809, allow for a party to voluntarily join in an arbitration. (“However, one who voluntarily joins an arbitration becomes a party to it.” Lovret v. Seyfarth (1972) 22 Cal.App.3d 841, 859.) Here, Defendants exercise their right to voluntarily join the arbitration.

Plaintiff provides no argument to this request. Therefore, the Court finds that because Plaintiff sued all Defendants together, the arbitration can be joined together.

[1] Plaintiff’s reliance on Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754 is unavailing. There, the existence of the arbitration clause was established by an unverified complaint. (Id. at 706.) Moreover, it was alleged that consent was obtained through fraud in the execution so an evidentiary hearing was necessary to evaluate the claim. (Ibid.) Here, the arbitration agreement was authenticated via a declaration. Moreover, Plaintiff is not alleging fraud in the execution, i.e. the parties had reached an agreement and that Defendant then unilaterally changed, modified or unlawfully altered the agreement. Rather, Plaintiff alleges that she knew what she was signing on March 22, 2017, but was rushed and, essentially, did not have enough time to review the agreement before signing the document clearly labeled “Arbitration Agreement.” (Opp. Dec. Gonzalez ¶ 2.) The factual dispute is how much time she had to review the Arbitration Agreement that she admittedly signed.