Judge: Virginia Keeny, Case: 24STCV20068, Date: 2025-05-13 Tentative Ruling

Case Number: 24STCV20068    Hearing Date: May 13, 2025    Dept: 45

GUADALUPE FERNANDEZ vs H MART, INC, et al.

MOTION TO COMPEL ARBITRATION

Date of Hearing:        May 13, 2025                         Trial Date:       None set

Department:              45                                            Case No.:        24STCV20068

Moving Party:            Defendant H Mart, Inc. H Mark Lakewood LLC and Jin Sook Park

Responding Party:     Plaintiff Guadalupe Fernandez  

BACKGROUND

This is a wrongful termination action. On August 9, 2024, Plaintiff Guadalupe Fernandez filed a complaint against Defendants H Mart, Inc., H Mart Lakewood LLC and Jin-Soo Park for 1. Race Discrimination; 2. Race Harassment; 3. Disability Discrimination; 4. Failure to Accommodate; 5. Failure to Engage in the Interactive Process; 6. Age Discrimination; 7. Age Harassment; 8. FEHA Retaliation; 9. Failure to Prevent; Discrimination or Harassment; 10. Violation of Lab. Code § 1102.5; 11. Failure to Pay Meal or Rest Breaks; 12. Failure to Provide Accurate Wage Statements; 13. Failure to Pay Wages Due at Time of Separation; 14. Wrongful Termination; 15. Violation of Business & Professions Code § 17200 et seq. On October 9, 2024, Plaintiff filed a First Amended Complaint.

[Tentative] Ruling

Defendant’s Motion to Compel Arbitration is DENIED

DISCUSSION

Defendant H Mart, Inc. H Mark Lakewood LLC and Jin Sook Park move this court for an order compelling arbitration on the grounds the instant action is subject to binding private arbitration pursuant to an Arbitration Agreement signed by Plaintiff on September 9th, 2020.

Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿ (CCP § 1281.2; Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.) Because the right to arbitration depends upon contract, the party seeking arbitration bears the initial burden of proving that the parties actually agreed to arbitrate the instant dispute.  (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 761.)  If the moving party does so, the burden shifts to the opposing party to show that the subject agreement is unenforceable.  (Id. at 761.)  The 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.”  (Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th 951, 972.)¿¿ 

Defendant argues as part of the hiring process with H Mart, Plaintiff received new hire paperwork, including the Arbitration Agreement, which Plaintiff physically signed during her onboarding process. The agreement provides, in pertinent part:

Any and all alleged legal disputes, claims injuries and/or other alleged wrongdoings of any kind arising out of or relating to, either directly or indirectly, the entire course of my employment relationship with the Employer, the termination of that relationship, and any and all subsequent events relating to such employment and termination, shall be submitted exclusively to final and binding arbitration under the rules and regulations of the American Arbitration Association (AAA) for the resolution of employment disputes, as the only means for resolving any and all such disputes between me and the Employer ... (Cha Decl. ¶14, Exh. A.)

Defendant argues Plaintiff acknowledged this provision by signing the Agreement that she fully understood the terms of the agreement. Moreover, the Arbitration Agreement encompasses all of her claims as they are indisputably related to her employment. Specifically, all of Plaintiff’s substantive claims derive exclusively from her employment relationship with H Mart, the alleged events arising from her employment, and the alleged wrongful termination of her employment. Defendant notes although Defendant Park is not a signatory to the Arbitration Agreement, she may enforce the Arbitration Agreement under any one of three different legal theories, (1) third party beneficiary; (2) agency and/or joint employment; and/or (3) equitable estoppel.

Plaintiff opposes the motion on the grounds the arbitration agreement is both procedurally and substantively unconscionable. Plaintiff argues the arbitration agreement was presented to Plaintiff Fernandez on a take-it-or-leave-it basis as a condition of employment, with no opportunity to negotiate its terms. Moreover, the agreement contains multiple substantively unconscionable provisions that unfairly benefit Defendants including failing to provide for adequate discovery, failing to specify who bears the costs of arbitration, and the agreement unfairly mandates multiple one-sided requirements for employees. Lastly, Plaintiff argues the Agreement is void under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”) as it includes claims of sexual harassment.

First, the court finds the broad scope of the arbitration agreement covers the scope of Plaintiff’s individual claims (including FEHA and individual Labor Code claims) as they all arise out of her employment relationship with Defendants. The court notes Plaintiff does dispute the existence of the arbitration agreement on the basis it was not signed by Defendants. However, mutuality exists even where the agreement to arbitrate is not signed by a company representative. (See Cruise v. Kroger Co., (2015) 233 Cal. App. 4th 390, 398 [mutuality existed where the employee signed an application with an arbitration provision printed on company letterhead]).

Plaintiff also disputes the enforceability of the agreement on the grounds they were forced to sign the agreement to start her employment with Defendant. 

However, in the absence of “surprise or other sharp practices, Courts do not recognize that “adhesive” arbitration agreements in the employment context establish a high degree of procedural unconscionability. (Baltazar v. Forever 21 Inc. (2016) 62 Cal.4th 1237, 1246; Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248; [the fact that an arbitration agreement is presented as a “take-it-or-leave-it” contract of adhesion in the employment context, alone only establishes a modest degree of procedural unconscionability].) In the instant matter, Plaintiff has not provided any evidence they were unaware of what they were signing or that the provision was hidden from Plaintiff. Instead, Defendants present the testimony of Sr. Executive Director, HR for H Mart Companies, Inc. who testifies during onboarding, employees review and sign various onboarding documents, including the Arbitration Agreement, and other policies. (Cha Decl. ¶6.) Cha testifies there is no time limit to complete these documents and the employees are provided with ample time to ask questions. (Cha Decl. ¶6.) As such, while the arbitration agreement may have been presented on a take it or leave it basis, this alone establishes only a modest degree of procedural unconscionability. Similarly, Defendant’s failure to attach the AAA rules does not affect the court’s consideration of Plaintiff’s argument because she is not challenging the AAA rules. (Baltazar v. 22 Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246.)

However, “a finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that 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.)

Turning to Plaintiff’s substantive unconscionability argument, the court finds Plaintiff has established the Arbitration Agreement is substantively unconscionable. First, Plaintiff argues the agreement lacks mutuality by forcing Plaintiff to bring her claims in arbitration but does not force Defendant to bring their claims in arbitration. As noted by Defendant, the agreement provides a “modicum of bilaterality,” stating that each party agrees to arbitration for claims that arise out of the employment relationship. While the court notes the examples listed in the Arbitration Agreement are examples of claims an employee may bring against Defendant, the provision provides “Such arbitration shall include, but is not limited to”.   

Next, Plaintiff argues the Agreement’s discovery provisions fail to ensure adequate discovery rights necessary for employees to vindicate their statutory claims. Plaintiff maintains while the agreement states the arbitrator “shall provide each party with a reasonable opportunity for prehearing discovery,” it provides no concrete standards for what constitutes “reasonable” discovery. Plaintiff claims this is problematic given the complex nature of Plaintiff’s employment discrimination claims. The court disagrees. The Arbitration Agreement provides that the arbitrator shall provide each party with a reasonable opportunity for prehearing discovery … all in accordance with the AAA’s rules and regulations for the arbitration of employment disputes. There is no limitation on the manner of discovery.

Plaintiff also argues the Arbitration Agreement is unenforceable because it lacks a cost provision. However, as noted by Defendant, the absence of a cost provision does not make the agreement unconscionable.

Next, Plaintiff argues the arbitration agreement’s one year statute of limitations unlawfully restricts Plaintiff’s ability to vindicate her civil and statutory rights. The Arbitration agreement states that Plaintiff “must deliver a written demand for arbitration to Employer at its corporate headquarters within one (1) year from the date of my termination of employment” and if Plaintiff does “not deliver such a written demand to Employer within this time limit that [Plaintiff is] forever barred from bringing to arbitration any claims against Employer relating to my employment. Consequently, [Plaintiff] will have absolutely no legal forum left available to [her] where [she] could bring any claim against Employer relating to [her] employment.” (Exh. A, p. 2.)

The court agrees the limits on when Plaintiff must bring their claim is substantively unconscionable. (See De Leon v. Pinnacle Property Management Services, LLC (2021) 72 Cal.App.5th 476, 487.)  Defendant argues if any provision of the agreement is found unconscionable, the court should sever it pursuant to Civil Code section 1670.5(a). (See also Bolter v. Superior Court (2001) 87 Cal.App.4th 4 900, 910-11.) However, the court in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, noted courts have refused to enforce an arbitration agreement based upon a single provision, which might otherwise appear severable, if it appears the term was drafted in bad faith. In De Leon, the court found the term shortening the applicable statute of limitations of all claims against the employer to one year was not only unconscionable but the court did not err in refusing to sever the term because at the time the agreement was signed in 2016, “other cases had concluded similar unilateral statute of limitations provisions were unconscionable when contained in an employment contract.” (De Leon, supra, 72 Cal.App.5th at p. 494.) Here, the agreement was signed in 2020. As such, the court cannot find that this provision was drafted in good faith.

As for Plaintiff’s contention her claims are excluded from arbitration under the EFAA, the court disagrees. No where in the complaint does Plaintiff allege a claim for sexual harassment. Plaintiff attempts to argue Park’s derisive comments about Plaintiff’s age and weight constitute sexual harassment. However, Plaintiff never made a claim for sexual harassment.

Accordingly, the court DENIES the motion to compel arbitration.