Judge: Virginia Keeny, Case: 24STCV22555, Date: 2025-02-25 Tentative Ruling
Case Number: 24STCV22555 Hearing Date: February 25, 2025 Dept: 45
McNeill v. BSD Capital LLC., et al.
Motion to compel arbitration and to
stay proceedings
Date of Hearing: February 25, 2025 Trial Date: None
set.
Department: 45 Case
No.: 24STCV22555
Moving
Party: Defendant B.S.D.
Capital LLC dba Lendistry
Responding
Party: Plaintiff Jordan McNeill
BACKGROUND
Plaintiff alleges she was employed by Defendant as a
non-exempt worker from January 2022 to November 13, 2023. During her
employment, she alleges that she endured numerous wage-and-hour violations.
Plaintiff filed her complaint on September 4, 2024,
asserting several causes of action for various violations of the Labor Code and
for unfair competition.
Defendant seeks to compel arbitration and stay the
proceedings on the grounds a signed employment letter between the parties
contains an agreement to arbitrate any claim or dispute between the parties
related to the agreement.
[Tentative] Ruling
1.
Defendant’s Motion to Compel
Arbitration and to Stay Proceedings is GRANTED.
ANALYSIS
Request for Judicial Notice
Defendant requests the court to take judicial notice of the
following documents: (1) American Arbitration Association (“AAA”) Employment Arbitration
Rules and
Mediation Procedures (Eff. Jan. 1, 2023); and (2) American
Arbitration Association (“AAA”) Employment/Workplace Fee Schedule. The request
is granted. (See De Leon v. Pinnacle Prop. Mgmt. Servs., LLC (2021) 72
Cal. App. 5th 476, 493 n.3.)
Existence of Arbitration Agreement
CCP § 1281.2 permits a party to file a petition to request
that the court order the parties to arbitrate a controversy. The trial court first determines whether an
enforceable arbitration agreement exists between the parties and then whether
the plaintiff’s claims are covered by the agreement. (Omar
v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) “California has a strong public policy in
favor of arbitration and any doubts regarding the arbitrability of a dispute
are resolved in favor of arbitration.” (Coast Plaza Doctors Hosp. v. Blue Cross of
Cal. (2000) 83 Cal.App.4th 677, 686.)
The party seeking to enforce the arbitration agreement 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.) The
party opposing the petition to compel arbitration bears the burden of proving
by a preponderance of the evidence any fact necessary to its defense. (Id.)
Here, Defendant presents an offer letter for employment
dated September 20, 2021 that was signed by both parties. (Wojcik Decl. ¶ 2;
Sands Decl. ¶¶ 21-22; Exh. 1-2.) Within this letter, it contains the following arbitration
provision:
You and the Company shall submit to
mandatory and exclusive binding arbitration of any controversy or claim arising
out of, or relating to, this Agreement or any breach hereof. Such arbitration
shall be conducted through the American Arbitration Association in the State of
California in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association in effect at that
time.
(Sands Decl. 21; Exh. 1.)
The claims here are related to the agreement because they
arise from Plaintiff’s employment with Defendant. Additionally, Plaintiff does
not contest having signed the offer letter.
Accordingly, the court finds Defendant met its burden of
proving the existence of a valid arbitration agreement by the preponderance of
the evidence. Now, because Plaintiff contends that the arbitration agreement is
unconscionable, the court shall discuss below whether the agreement is
enforceable.
Unconscionability
Now the question turns to whether the arbitration agreement
is unconscionable as articulated in Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal.4th 83. Effectively, the doctrine
has both a procedural and a substantive element, the former focusing on
oppression or surprise due to unequal bargaining power, whereas the latter on
overly harsh or one-sided results. The procedural element of an unconscionable
contract generally takes the form of a contract of adhesion, 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.
(Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071, citing Armendariz,
supra, at pp. 113-114.)
While both procedural and substantive unconscionability must
be present in order to declare a contract term unconscionable, they need not be
present in the same degree. (Sanchez v. Valencia Holding Co. LLC (2015)
61 Cal.4th 899, 910.) “‘[T]he more substantively oppressive the contract term,
the less evidence of procedural unconscionability is required to come to the
conclusion that the term is unenforceable, and vice versa.’” (Id.,
quoting Armendariz at 114.)
1.
Procedural Unconscionability
“Procedural unconscionability pertains to the making of the
agreement; it focuses on the oppression that arises from unequal bargaining
power and the surprise to the weaker party that results from hidden terms or
the lack of informed choice.”¿ (Ajamian¿v. CantorCO2e, L.P.¿(2012) 203
Cal.App.4th 771, 795.)¿¿Arbitration clauses are often found in adhesion
contracts (standardized contracts drafted by a party of superior bargaining
power and presented to the weaker party on a take-it-or-leave-it basis.¿ (See,
e.g.,¿Armendariz, supra, 24 Cal.4th at 113-114.)¿
Plaintiff raises two arguments as to why the agreement
should be found to be procedurally unconscionable, but neither argument is
persuasive. First, Plaintiff contends that she was unable to ascertain the
rules for arbitration because Defendant failed to provide a copy of AAA’s
rules. (Opposition at pg. 5.) While the applicable rules were not provided, the
failure to attach a copy of the arbitration rules is not itself an indication
of procedural unconscionability. (Lane v. Francis Cap. Mgmt, LLC (2014)
224 Cal.App.4th 676, 692.) Also, Plaintiff fails to point out which specific
rules require further scrutiny by the court. (See Baltazar v. Forever 21,
Inc. (2016) 62 Cal.4th 1237, 1246.) Moreover, even though Plaintiff attests
that she was unaware that she was waiving her right to a jury trial (McNeill
Decl. ¶ 5), the arbitration agreement is not buried within the offer letter or
otherwise obscured to suggest this is a circumstance of surprise.
Notwithstanding the above, AAA’s procedures and rules have been found to be
presumptively valid and abide by the Armendariz requirements. (Lucas
v. Gund, Inc. (C.D. Cal. 2006) 450 F.Supp.2d 1125, 1132-1134.)
Second, Plaintiff argues that she lacked any meaningful
opportunity for negotiation and asserts that the arbitration agreement amounted
to an adhesion contract. (Opposition at pg. 5.) The mere fact an adhesion
contract is involved does not per se render the arbitration provision
unenforceable because such contracts are¿“an inevitable fact of life for all
citizens—businessman and consumer alike.”¿ (Graham v. Scissor-Tail, Inc.¿(1981)
28 Cal.3d 807, 817.)¿ Furthermore, “[t]he 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.” (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232
Cal.App.4th 1332, 1348.) Here, Plaintiff’s declaration contains no information
regarding the circumstances surrounding her signing the offer letter, but based
on Defendant’s evidence, it suggests that Plaintiff had an opportunity to review
the offer letter and was not under any pressure to sign the document
immediately considering that the letter was signed on September 20, 2021 but
the position did not commence until September 27, 2021. (Sands Decl. ¶¶ 21-27;
Exhs. 1-2.) Thus, any surprise or oppression is minimal.
Accordingly, there is only a minimal showing of procedural
unconscionability.
2.
Substantive Unconscionability
Substantive unconscionability focuses on the actual terms of
the agreement and evaluates whether¿the terms¿create overly harsh or one-sided
results as to shock the conscience.¿ (Suh v. Superior Court¿(2010) 181
Cal.App.4th 1504, 1515;¿Sanchez, supra,¿61 Cal.4th at 910-911¿[an
“old-fashioned bad bargain” or a contract term which “merely gives one side a
greater benefit” insufficient].)¿
Plaintiff first argues that the arbitration agreement is
substantively unconscionable because she would not be afforded adequate
discovery if she is forced to arbitration her claims through AAA. (Opposition
at pg. 5.) Also, Plaintiff asserts that the arbitration agreement is silent on
costs, fees and the recovery of full statutory remedies, and as a result, it
imposes a “chilling effect.” (Id. at pg. 6.) However, these arguments are not persuasive
because any arbitration would be conducted through AAA, and its procedures and
rules have been found to abide by the Armendariz requirements. (Lucas,
supra, 450 F.Supp.2d at 1132-1134.)
Lastly, Plaintiff contends that the arbitration agreement
presumptively includes a potential class or PAGA waiver, which is unlawful.
(Opposition at pp. 5-6.) Considering Plaintiff has only asserted individual
Labor Code violation claims, this argument is not applicable.
Accordingly, because Plaintiff has failed to establish a
high showing of substantive unconscionability, the court does not find that the
arbitration is unconscionable.
Illusory Agreement
Lastly, Plaintiff contends that the arbitration agreement is
illusory because the offer letter includes a provision that permits Defendant
to unilaterally revise its policies and procedures. (Opposition at pg. 7,
relying on Moua v. Optum Servs., Inc. (C.D. Cal. 2018) 320 F. Supp. 3d
1109.) Upon closer inspection of this provision, it applies to Defendant’s
ability to modify its personnel handbook, not the arbitration agreement. (Sands
Decl., Exh. 1.) Nevertheless, an employer may reserve the unilateral right to
modify an arbitration agreement. (24 Hour Fitness, Inc. v. Superior Court
(1998) 66 Cal.App.4th 1199, 1212.)
However, these modification to an arbitration agreement may not apply
retroactively to “accrued or known claims because it would unreasonably
interfere with an employee’s expectations on how the agreement applied to those
claims. (Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425,
1465.) The reason why the arbitration agreement in Mousa was found to be
illusory is because it permitted the employer to “alter or terminate the [arbitration
agreement], without any employee's consent, and the alteration or termination
would apply to a claim that has already accrued but for which a Demand for
Arbitration has not yet been served.” (Moua, supra, 320 F. Supp.
3d at 1113.) Such language is not present here, and as a result, the
arbitration agreement is enforceable.
Accordingly, the court finds that the arbitration agreement
is not illusory.
CONCLUSION
Defendant’s motion to compel arbitration and to stay
proceedings is granted.