Judge Upinder S. Kalra, Case Number: 24STCV01167, Date: 2024-09-10 Tentative Ruling

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On January 16, 2024, Plaintiff Mark Cislo (Plaintiff) filed a Complaint against Defendants Banc of California and Pacific Western Bank (Defendants) with three causes of action for: (1) Discrimination Based on Age (Gov. Code § 12940(a)); (2) Wrongful Termination in Violation of Public Policy; and (3) Breach of Covenant of Good Faith and Fair Dealing.

According to the Complaint, Defendants discriminated against Plaintiff due to his age and wrongfully terminated him because of it.

On April 5, 2024, Defendants filed the instant Petition to Compel Arbitration. On June 25, 2024, Plaintiff filed an opposition. On July 1, 2024, Defendants 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.)¿¿

However, when an arbitration agreement states that the Federal Arbitration Act (FAA) governs enforcement, the FAA governs a motion to compel arbitration. (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345-346 (Victrola 89).) “A written provision … to settle by arbitration a controversy thereafter arising … or … to submit to arbitration an existing controversy … shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” [9 U.S.C. § 2 (emphasis added)] A party to an arbitration agreement may seek a court order compelling the parties to arbitrate a dispute covered by the agreement. (9 U.S.C. § 4.)

Here, the Mutual Agreement to Arbitrate Claims (MAA) provides for “any arbitration” to be governed by the FAA. (Kortz Decl., Exhibit A, p. 2.) It does not state that the FAA “governs enforcement” and there is no other clause that indicates the parties agreed to enforce the MAA via the FAA. Accordingly, the court will apply California law in its analysis.

The court grants Defendants’ request for judicial notice as to Exhibits A and B. (Evid. Code § 452(h); See Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23,37.) However, the court only takes judicial notice of the foregoing documents only as to “the existence, content and authenticity of public records and other specified documents”; it does not take judicial notice of the truth of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.)¿¿

This 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 (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.) As such, this court respectfully declines to rule on any of these objections. This court is well aware of the rules of evidence, and to how much weight, if any, should be given to any of the proposed evidence.

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, Defendants met their initial burden because they attached a copy of the MAA with Plaintiff’s physical signature to the Petition. (Kortz Decl., 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).)¿

Here, Plaintiff does not challenge his signature on the MAA. Instead, Plaintiff challenges Defendants’ ability to enforce the MAA as a non-signatory.

Defendants contend that Banc can properly compel Plaintiff to arbitration because it is the rightful successor to Plaintiff’s former employer who is a signatory to the Agreement.[1] Plaintiff argues that Defendants lack standing because he had no further employment with them after the merger.

“Nonsignatory defendants may enforce arbitration agreements ‘where there is sufficient identity of parties.’ [Citation.]” (Marenco v. DirecTV LLC (2015) 233 Cal.App.4th 1409, 1417 (Marenco).) Such a relationship exists where after a merger, “the disappearing corporation [] no longer exists” and “the surviving corporation [] succeeded to all rights and liabilities of the disappearing corporation.” (Id. at p. 1419.) In Marenco, the Court found that “Marenco acknowledged the existence of an employment relationship with the entity that survived the merger” because he sued it for violating the terms of his employment. (Marenco, supra, at p. 1419.) The Marenco Court also found “there is no doubt that the [arbitration] agreement formed one of the terms of Marenco’s employment.” (Ibid.) The Court concluded: “Marenco offers no persuasive authority to refute the general contract law principle that his continued employment provided implied consent to maintaining the existing terms of employment, including the arbitration agreement.” (Id. at p. 1420.)

This court is bound by the Marenco. Thus, here, as in Marenco, since Defendant Banc is the surviving corporation that succeeded to all the debts and liabilities of the signatory, by suing Defendant Banc, Plaintiff impliedly “acknowledged the existence of the employment relationship,” including the MAA, with Defendant Banc by suing it for employment violations. Indeed, the MAA explicitly covers claims Plaintiff may have with “all successors” of the Company. (Kortz Decl., Exhibit A, p. 1.)

Accordingly, Defendants have established that an agreement to arbitrate exists.

Defendants contend that the MAA covers the subject dispute because Plaintiff filed an employment action that is not otherwise excluded by the MAA. Plaintiff did not directly oppose this argument.

“[T]he decision as to whether a contractual arbitration clause covers a particular dispute rests substantially on whether the clause in question is ‘broad’ or ‘narrow.’” (Bono v. David (2007) 147 Cal.App.4th 1055, 1067.) “‘A “broad” clause includes those using language such as “any claim arising from or related to this agreement”‘ [Citation] or ‘arising in connection with the [a]greement’ [Citation.]” (Rice v. Downs (2016) 248 Cal.App.4th 175, 186 [italics omitted].) “But clauses requiring arbitration of a claim, dispute, or controversy ‘arising from’ or ‘arising out of’ an agreement, i.e., excluding language such as ‘relating to this agreement’ or ‘in connection with this agreement,’ are ‘generally considered to be more limited in scope than would be, for example, a clause agreeing to arbitrate “‘any controversy … arising out of or relating to this agreement[.]’” [Citations.]” (Id. at p. 186-87 [italics omitted].) “Several Ninth Circuit cases have held that agreements requiring arbitration of ‘any dispute,’ ‘controversy,’ or ‘claim’ ‘arising under’ or ‘arising out of’ the agreement are intended to encompass only disputes relating to the interpretation and performance of the agreement.” (Id. at p. 187.)

Here, the MAA applies to the instant dispute. The MAA covers “all claims or causes of action” including “claims for breach of any contract or covenant; tort claims; disputes with respect to compensation and benefits; claims for discrimination or harassment (including, but not limited to, . . . age, . . .); claims for retaliation; claims for violation of public policy; and claims for violation of any federal, state, or other law, statute, regulation or ordinance including, but not limited to, all claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, . . . the California Labor Code, . . . and all similar federal and state statutes or local ordinances.” (Kortz Decl., Exhibit A, p.1.) Plaintiff’s claims against Defendants concern his employment with them and are not otherwise carved out.

Plaintiff contends that the court should not enforce the MAA because it has significant procedural unconscionability and is substantively unconscionable without the ability to sever the unconscionable terms. Defendants argue the MAA is not so procedurally unconscionable to render it unenforceable, it meets the Armendariz factors, and is capable of severance.

Under California law and the FAA, an arbitration agreement may be invalid based upon grounds applicable to any contract, including unconscionability, fraud, duress, and public policy. (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 165-166.) 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)).¿¿¿

Defendants contend there is no procedural unconscionability because there is no “surprise” or “unduly oppressive” aspects in the MAA and its “take-it-or-leave-it” basis alone is insufficient to render it unenforceable. Plaintiff argues substantial procedural unconscionability because the MAA does not attach the JAMS rules and it was a contract of adhesion.

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).)¿

“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 only evidence Plaintiff offers for procedural unconscionability is that California United Bank would not continue his employment after they acquired 1st Enterprise Bank in 2014 unless he signed the MAA. (Cislo Decl. ¶¶ 4-6.) This, alone, is not enough to find more than minimal procedural unconscionability.

The California Supreme Court has explicitly held that failure to attach arbitration rules is only significant when a party alleges those unattached rules are substantively unconscionable. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246.) Mere failure to attach the applicable rules does not establish procedural unconscionability. (Ibid.) This is because where the failure to attach JAMS rules to an agreement “… has nothing to do … with the rules themselves …” such failure does not establish procedural unconscionability. (Baltazar, supra, at p. 1246, discussed in Lange v. Monster Energy Company (2020) 46 Cal.App.5th 436, 447 (Lange).) Here, Plaintiff did not argue or provide evidence that the JAMS rules are substantively unconscionable.

Plaintiff contends the MAA is substantively unconscionable because it illegally bans representative actions. Plaintiff further contends that the MAA cannot be salvaged by severing the prohibited terms. Defendants argue the MAA meets the Armendariz factors (which Plaintiff did not address) and is severable as needed.

“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 MAA is not substantially unconscionable. To start, Plaintiff’s argument that the MAA prohibits class actions is not persuasive because Plaintiff is not bringing such a claim. (See generally, Complaint.) Next, the MAA satisfies the Armendariz factors. First, it provides that the arbitrator “shall be neutral” and “will have experience in arbitrating employment disputes” and “will be selected by the mutual agreement of the parties” or a strike list if the parties cannot agree on an arbitrator. (Kortz Decl., Exhibit A, p. 2.) The MAA provides for “written discovery and depositions as provided in California Code of Civil Procedure Section 1283.05.” (Ibid.) It also provides for a written award “that includes the essential findings and conclusions upon which the decision is based.” (Ibid.) The arbitrator has “authority to grant any party all remedies otherwise available by law.” (Ibid.) Finally, the Company shall pay for the fees charged by the arbitrator and JAMS “to the extent such costs would not otherwise be incurred in a court proceeding.” (Ibid.)

2.This matter is STAYED pending arbitration. OSC re: status of arbitration on November 6, 2025 at 8:30 a.m.

[1] According to Defendants, Banc of California, N.A. merged into Pacific Western Bank. Pacific Western Bank was renamed and is now known as Banc of California, a California corporation. (RJN, Exhibits A & B.) As far as the court can tell, Plaintiff does not dispute the merger and renaming dates.