Judge Upinder S. Kalra, Case Number: 24STCV00333, Date: 2024-03-20 Tentative Ruling

1. An Order compelling arbitration and an Order staying the matter pending arbitration.

On January 5, 2024, Plaintiff Rodney White (Plaintiff) filed a Complaint against Defendant Universal Protection Service, LP (Defendant) with ten causes of action for: (1) Discrimination in Violation of FEHA; (2) Failure to Prevent Discrimination (FEHA); (3) Retaliation in Violation of FEHA; (4) Wrongful Discharge in Violation of Public Policy; (5) Harassment in Violation of FEHA; (6) Failure to Prevent Harassment in Violation of FEHA; (7) Labor Code § 98.6; (8) Labor Code §§ 1102.5, 1102.6; (9) Labor Code §§ 6310, 6311; and (10) Labor Code § 2802.

According to the Complaint, Defendant subjected Plaintiff to discrimination/harassment/retaliation on the basis of race/color/ancestry/national origin, opposition to discrimination/harassment/retaliation, opposition to violation of the law and an unsafe work environment, opposition to Labor Code violations and assertion of rights under the Labor Code. Plaintiff also alleges Defendant subjected Plaintiff to a hostile work environment, false accusations, increased scrutiny, pretextual or false warnings/discipline, inferior terms and conditions of employment, failed to investigate Plaintiff’s complaints, failed to follow internal policies, terminated him, and failed to reinstate him.

On January 31, 2024, Defendant filed the instant Motion to Compel Arbitration. On March 7, 2024, Plaintiff filed an opposition. On March 14, 2024, Defendant filed a reply.

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.)¿¿

Defendant contends there is a valid written arbitration agreement because Plaintiff signed the Arbitration Policy and Agreement (Agreement) when he began his employment and did not opt-out. Plaintiff argues the agreement is unconscionable and unconstitutional.

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, Defendant met their initial burden because they attached a copy of the Agreement with Plaintiff’s electronic signature. (Declaration of Peggy Grzywacz (Grzywacz Decl.) ¶ 15, Exhibit A.)

“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).) The evidence must be sufficient to create a factual dispute to shift the burden back to the arbitration proponent who retains the ultimate burden of proving, by a preponderance of the evidence, the authenticity of the signature. (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755 (Iyere).)

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

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

Here, the Agreement applies to the instant dispute. First, the Agreement states it covers “all claims or causes of action that the Employee may have against the Company, or the Company against the Employee, which could be brought in a court of law, unless otherwise set forth in this Agreement” including “claims for discrimination and/or harassment, claims for wrongful termination, claims related to any offers, promotions, or transfers made by the Company; claims for retaliation . . . claims for wages or other compensation, penalties or reimbursement of expenses; breaks and rest period claims . . . and claims for violations of any law, statute, regulation, ordinance or common law . . . .” [Grzywacz Decl., Exhibit A.] Plaintiff’s claim against Defendants concerns his employment with them and is not otherwise carved out.

Plaintiff argues that the court should not compel arbitration because it is procedurally and substantively unconscionable and unconstitutional. Defendant replies that the Agreement is not unconscionable and is not an unconstitutional jury waiver.[1]

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 there procedural unconscionability because it is a contract of adhesion and is confusing to a layperson due to legalese. Defendant contends there is no procedural unconscionability because the Agreement is clear on its face, it is a separate stand-alone agreement, included an opt-out procedure, and was presented to Plaintiff for consideration along with other new hire documents prior to beginning his employment.

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). “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. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126-27 (OTO).)

Here, there is minimal, if any, procedural unconscionability. “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 is not a condition of employment because there is a clear, easy to utilize, opt-put provision. (Grzywacz Decl., Exhibit A, Clause 3, “Opt-Out Rights; Acceptance”) Plaintiff’s argument that the Agreement is confusing due to legalese is not well take. The court has reviewed the Agreement and it is written in plain English. The only possible argument supporting procedural unconscionability is that Plaintiff did not negotiate any of its terms. However, that argument is unsupported by any authority or evidence by Plaintiff. Plaintiff has not otherwise provided evidence of surprise or oppression.

Plaintiff argues the Agreement is substantively unconscionable because it waives a right to jury trial and does not secure the right to issue third party subpoenas. Defendant contends the Agreement satisfies the Armendariz factors and is not substantively 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, 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 Agreement is not substantively unconscionable. First, it meets the Armendariz factors by providing: (1) “a neutral arbitrator, selected by the agreement of the Parties”; (2) “reasonable discovery . . . sufficient to ensure the adequate arbitration of any claims . . . mean[ing] up to three depositions per side, one set of requests for production of documents with up to 35 requests, and one set of interrogatories with up to 25 interrogatories” while permitting the Parties to meet and confer to conduct further discovery and provides the arbitrator authority to resolve disputes and to allow “reasonably necessary” discovery; (3) a “written opinion and award” that “generally set[s] forth the reasons for the arbitrator’s decision”; (4) the same remedies “that would apply to and be available in a claim in court will apply to and be available on the claim in arbitration”; and (5) the employee is responsible for their attorney’s fees and initial filing costs but Defendant pays the Arbitrator’s fee and arbitration fees. (Grzuwacz Decl., Exhibit A.) The Agreement mutually applies to both parties. (Ibid.) As to the issue of third party subpoenas, the court is persuaded by Defendant’s argument that the JAMS rules, which apply to the Agreement, allow the arbitrator to issue such subpoenas. Additionally, Plaintiff cited to no authority or evidence supporting this argument.

[1] The court is not persuaded by Plaintiff’s unconstitutional argument. Defendant is correct that arbitration agreements are regularly enforced because they bypass the judicial system altogether and are not unconstitutional jury waivers. (Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, 955.) As such, the court declines to further develop this argument and will instead focus on the unconscionability argument.