Judge Upinder S. Kalra, Case Number: 23STCV11001, Date: 2023-10-26 Tentative Ruling

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On May 16, 2023, Plaintiff Natalie Martinez filed a Complaint against Defendant Westlake Services, LLC (Defendant) alleging eight causes of action for:

According to the Complaint, Plaintiff worked for Defendant for over ten years. She alleges that before and after taking pregnancy leave in October 2021, Defendant’s supervisory level employees harassed her about her pregnancy, nursing, and her leave. She alleges that she began experiencing disabilities related to her pregnancy in April 2022 which worsened by July 2022 and she took a leave of absence in August 2022 as a result. She alleges that Defendant fired her on a purported “fraudulent act” excuse.

Defendant timely filed the instant motion on August 18, 2023. Plaintiff timely filed an opposition on October 13, 2023. Defendant timely filed a reply on October 19, 2023.

Although the court is unaware of any legal authority which requires a court to rule on evidentiary objections on a motion, except as to a motion for summary motion/adjudication, the Court nonetheless, overrules the objections. [Cal. Code Civ. Proc. (CCP) § 437c(q)] or a special motion to strike [CCP § 425.16 (b)(2); see also, Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 947-949.]

Under California law, the trial court has authority to compel arbitration pursuant to CCP §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¿(Guiliano).)¿“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, supra, at p. 1284.)¿

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).)¿¿¿

The moving party can meet its initial burden of proving the existence of an arbitration agreement by attaching a copy of the Agreement to this motion bearing the signature of the opposing party. (See Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 541-543 [“The party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the¿respondent's signature.”].) Alternatively, the moving party can meet its initial burden by setting forth the agreement’s provisions in the motion. (See Cal. Rules of Court, rule 3.1330; see also Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219.)

Here, Moving Defendant met its initial burden because it attached a copy of the Dispute Resolution Agreement (DRA) with Plaintiff’s electronic signature.. (Declaration of Megan Feldmeth ¶ 7.) Both California and Federal law provides that electronic signatures on arbitration agreements are valid.The California Uniform Electronic Transactions Act (“UETA”) indicates that an electronic signature has the same legal effect as handwritten signature. Thus, Defendant satisfied their initial burden to compel arbitration.

“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 v. Northeast Community Clinic (2021) 72 Cal. App. 5th 158,165 (Gamboa).) Plaintiff argues that Defendant has failed to establish a valid agreement and contests the validity of the electronic signature.. Specifically, Plaintiff contends that she does not recall receiving or signing the agreement.

Once Plaintiff challenges the validity of the signature, “defendants were then required to establish by a preponderance of the evidence that the signature was authentic.” (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060). Espejo dealt with an electronic signature. In Espejo, the supplemental declaration of the systems consultant provided the necessary information to establish the authenticity of the document, specifically how the unique username and password were only accessible to that specific individual. (Id. at 1062). In Gamboa, in contrast, the Court determined that the declaration provided by the director of human resources was insufficient, because the declarant failed to provide facts demonstrating how she had personal knowledge of what she stated. (Gamboa, supra, 72 Cal.App.5th at 169).

Here, unlike Gamboa, Defendant provided declarations from Feldmath, the Director of Human Resources, who is personally familiar and has oversight over the preparation and retention of business records pertaining to agreements between Defendant and its employees, including agreements to arbitrate, along with overseeing the preparation and/or or retention of personnel files. Just like in Espejo, where the Defendant provided a declaration that discussed the “steps an applicant would have to take to place his or her name on the signature line of the employment agreement,” (Espejo, supra, 246 Cal.App.4th at 1062), Feldmeth attested to the authenticity of the password protected electronic signature. In sum, Defendant provided credible evidence that Plaintiff was the only person able to access her login credentials to review and acknowledge receipt of the DRA. (Supplemental Feldmeth Decl. ¶¶ 5-6.) Further, Defendant produced business records that attest that Plaintiff’s employment file shows that on May 1, 2019, Plaintiff accepted the Dispute Resolution Policy which clearly notified Plaintiff that Plaintiff had until May 15, 2019, to opt out of the agreement. (Feldmeth Dec. ¶ 6, Exh. E.) Thereafter, the DRA was updated again on or about August 1, 2019. The employment records indicate that as of August 15, 2019, Plaintiff had not opted out. Thus, the evidence indicates that Plaintiff effectively accepted the DRA on August 15,2019. (Feldmeth Dec. ¶7, Ex. E.) Lastly, the court is not persuaded by Plaintiff’s lack of authentication argument. While Plaintiff herself does not recall electronically signing any arbitration agreement, she does not deny signing the agreement or deny knowledge of the DRA.[1]

Thus, notwithstanding Plaintiff’s claim denying remembering signing the Arbitration Agreement, the Court finds that Defendant has met its burden by a preponderance of the evidence establishing the existence of a valid agreement between the parties.

Therefore, the Defendant has established that the Arbitration Agreement exists.

Defendant contends the DRA covers the subject dispute because Plaintiff filed an employment action that is not otherwise excluded by the DRA. Plaintiff did not directly oppose this argument.

Here, the DRA applies to the instant dispute. First, the DRA states it covers “any and all disputes . . . related to employee’s employment or relationship with” Defendant. [Feldmeth Decl., Exhibit F.] Plaintiff’s claim against Defendant concerns her employment with them and is not otherwise carved out.

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.4th 82, 114 (Armendariz)).

Plaintiff argues significant oppression and surprise because there were several arbitration agreements, it is a contract of adhesion, the onboarding documents were confusing, she had no legal training to understand what she was giving up, and she did not have attorney-aided review.

Defendant contends two of the agreements Plaintiff cites are not operative, she had time to ask questions about the DRA, her legal knowledge is irrelevant, and it was not buried in paperwork that she could not find.

Courts determine whether an agreement is procedurally unconscionable 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 (Carmona).) Examples of contracts that are procedurally unconscionable are contracts of adhesion, 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, supra, at p. 113).

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). Here, the DRA was not a surprise; it was not the first arbitration agreement Defendant presented to Plaintiff over the course of her employment, it was a stand-alone document that stated in bold-caps “EMPLOYER-EMPLOYEE DISPUTE RESOLUTION AGREEMENT” followed by bold caps “ARBITRATION AND CLASS ACTION WAIVER” and bolded “There shall be no right to a jury trial.”[2] (Feldmeth Dec., Exhibit F.) Plaintiff has not otherwise provided evidence of surprise or oppression.

Plaintiff argues the DRA is substantively unconscionable because of its unfair terms and its lack of mutuality due to a provision in the Employee Handbook. Defendant argues that the DRA meets the Armendariz factors, the Employee Handbook provision does not apply to the DRA, and that the DRA is otherwise mutual.[3]

“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, supra, at p. 85). There are five minimum substantive requirements to an enforceable arbitration agreement: (1) neutral arbitrators, (2) more than minimal discovery, (3) written award sufficient for judicial review, (4) all types of relief otherwise available in court, and (5) no unreasonable costs or fees as a condition of access. (Armendariz, supra, at p.102.) When there is little procedural unconscionability, a party opposing arbitration must show substantial substantive unconscionability. (Id. at 114.)

Here, the court agrees with Defendant that the DRA is not substantively unconscionable. First, it meets the Armendariz factors by providing: (1) neutral arbitrator; (2) that “[d]iscovery will be more than minimal and will be adequate to permit you to prepare your case for hearing as determined by the arbitrator;” (3) the “arbitrator will be required to render his and/or her decision in writing;” (4) the “arbitrator will be employered to grant any type of relief which would be available to Employee or Company in a Superior Court action;” and (5) Defendant “will pay the Arbitrator’s fees and costs associated with the arbitration hearing as described below.”[4] (Feldmeth Decl., Exhibit F.)

The Court rejects Plaintiff’s attempt to show that the DRA is unconscionable because the arbitration statement and prior agreements have unconscionable factors. Those other documents are not probative in assessing whether the August 2019 DRA is unconscionable.[5] The Court also is not persuaded by Plaintiff’s suggestion that the August 2019 DRA is unconscionable because a Delegation Clause purportedly delegates authority to determine unconscionability solely to the arbitratrator. Plaintiff cites to language in the DRA that states “Any issue or dispute concerning the formation, applicability, interpretation or enforceability of this Arbitration provision, including any claim or contention that all or any part of this provision is void or voidable, shall be subject to arbitration as provided herein. The arbitrator, and not any federal, state or local court or agency, shall have authority to decide any such issue or dispute.” (Feldmeth Dec., Exhibit F.) Plaintiff ignores the fact that later in the same paragraph, the DRA states: “Either party may bring an action in any court of competent jurisdiction to compel arbitration under this provision and to enforce and/or confirm an arbitration award.” Clearly, the agreement contemplates that the Court will determine unconscionability in the first instance in assessing whether to enforce an arbitration agreement.[6]Moreover,

[1]Defendant also attached a copy of the 2011 employment application and 2011 arbitration agreement that has Plaintiff’s handwritten signature. Plaintiff’s employment application notified Plaintiff that Defendant utilized an alternative dispute resolution process that included giving up the right to a jury trial. The latter notification was in bold and capitalized. Although Defendant is not seeking to enforce the agreement contained in the application and prior arbitration agreement, this evidence is strong circumstantial evidence that Plaintiff was aware of the DRA policy when Defendant updated its arbitration agreement through a new, electronic process in 2019.

[2] Plaintiff’s argument that she lacked legal knowledge to understand the nature of the DRA is not well taken because “There shall be no right to a jury trial” clearly indicates an impact to substantive rights, even if Plaintiff skimmed it.

[3] As a threshold matter, the court agrees with Defendant that the Employee Handbook provision does not render the DRA illusory. First, when Defendant did modify its arbitration agreement, it provided it to its employees, including Plaintiff, for acceptance. (Feldmeth Dec. ¶¶ 5, 6, 7.) Second, the DRA applies to disputes that Plaintiff, or other employees, wish to bring against Defendant as well as any disputes Defendant wishes to bring against Plaintiff, or other employees. (Feldmeth Dec., Exhibit F.) Finally, Plaintiff’s argument that “the Company” is unclear as referring to Defendant is not well taken. Plaintiff alleges she worked for Defendant for 10 years. (Compl., ¶ 2.) The DRA is from August 2019. (Feldmeth Dec., Exhibit F.) The DRA has a big “W” logo at the top of the page. (Ibid.) Plaintiff seeks to create ambiguity where none exists.

[4] The DRA again states that Defendant will pay the Arbitrator’s fees under Section 3. Arbitration Procedure, and clarifies that the parties bear their own costs for “deposition, witness, expert and attorney’s fees . . . to the same extent as if the matter were heard in a court of law.” (Feldmeth Decl., Exhibit F.) Because Plaintiff would have to incur these costs if she were not in arbitration, the court does not see how this would be unfair under Armendariz.

[5]They are relevant to assess Plaintiff’s contention that she was surprised and unaware of the alternative resolution process.

[6]Moreover, Plaintiff ignores Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227 [“To be enforceable, a delegation clause must satisfy two prerequisites: (1) the language must be clear and unmistakable, and (2) the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.] There, the Court rejected the application of Delegation Clause because the clause clearly contemplated Court intervention for severability issues which was inconsistent with with the agreement’s delegation provision. (Id. at p. 240.) Similarly here, this qualifying language granting the court authority to enforce the arbitration clause is inconsistent the delegation clause. Stated otherwise, the court intervention language in the DRA indicates the parties did not “clearly and unmistakably” intend to delegate arbitrability issues to the arbitrator. As such, the purported delegation provision fails the threshold requirement of enforceability.