Judge: Walter P. Schwarm, Case: 30-2022-01243593, Date: 2022-10-25 Tentative Ruling
Defendants’ (United Rentals, Inc., United Rentals (North America), Inc., Jose Jimenez, and Dustin Russell) Petition to Compel Arbitration and Stay Proceedings (Petition), filed on 5-31-22 under ROA No. 68, is GRANTED.
Code of Civil Procedure section 1281.2, states, in part, “On 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 to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for the revocation of the agreement.”
Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1219, provides, “In Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 58 Cal.Rptr.2d 875, 926 P.2d 1061 (Rosenthal ), our Supreme Court set forth the procedure to be followed when a petitioner seeks to compel arbitration: ‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation [citation]—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ [Citation.]” (Fn. 8 omitted.) Ruiz v. Moss Bros. Auto Group, Inc. (Ruiz) (2014) 232 Cal.App.4th 836, 846, states, “Properly understood, Condee holds that a petitioner is not required to authenticate an opposing party’s signature on an arbitration agreement as a preliminary matter or in the event the authenticity of the signature is not challenged. [Citations.]” (Italics in Ruiz.) Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060 (Espejo), provides, “In context, the brief discussion of Condee by the court in Toal regarding a petitioner's ultimate burden has no bearing on the question before us—whether defendants may meet their initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party's signature. We conclude they may, in compliance with the requirements of section 1281.2 and California Rules of Court, rule 3.1330.” (Italics in Espejo.)
Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910 (Sanchez), explains, “ ‘ “The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” [Citation.] But they need not be present in the same degree. “Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.” [Citations.] In other words, the 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.’ [Citation.]” (Italics in Sanchez.) Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 243 (Carbajal), provides, “Procedural unconscionability ‘addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power.’ [Citation.]” “ ‘The substantive element of unconscionability “pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided.” [Citation.] This includes consideration of the extent to which the disputed term is outside the reasonable expectation of the nondrafting party or is unduly oppressive.’ [Citations.]” (Id., at p. 247.)
Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz), states, “In 1979, the Legislature enacted Civil Code section 1670.5, which codified the principle that a court can refuse to enforce an unconscionable provision in a contract. [Citation.] As section 1670.5, subdivision (a) states: ‘If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.’ Because unconscionability is a reason for refusing to enforce contracts generally, it is also a valid reason for refusing to enforce an arbitration agreement under Code of Civil Procedure section 1281, which, as noted, provides that arbitration agreements are ‘valid, enforceable and irrevocable, save upon such grounds as exist [at law or in equity] for the revocation of any contract.’ The United States Supreme Court, in interpreting the same language found in section 2 of the FAA (19 U.S.C. § 2), recognized that ‘generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements. . . .” [Citation.] (Italics in Armendariz.) “Based on Gilmer, supra, 500 U.S. 20, and on the basic principle of nonwaivability of statutory civil rights in the workplace, the Cole court formulated five minimum requirements for the lawful arbitration of such rights pursuant to a mandatory employment arbitration agreement. Such an arbitration agreement is lawful if it ‘(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum. Thus, an employee who is made to use arbitration as a condition of employment “effectively may vindicate [his or her] statutory cause of action in the arbitral forum.” ’ [Citation.]” (Id., at p. 102.)
Initially, Defendants have carried their burden of demonstrating that an arbitration agreement (Agreement) exists between Defendant—United Rentals and Plaintiff (Henry Nunez) under Ruiz. (Williams Decl., ¶¶ 6 and 7, and Exhibit A.) Although Plaintiff’s Opposition to Defendants’ Motion to Compel Arbitration and Stay or Dismiss the Proceedings (Opposition), filed on 10-12-22 under ROA No. 95, states, “Petitioner does not recall signing that document” (Opposition; 2:14), Plaintiff does not provide evidence challenging the authenticity of the Plaintiff’s signature. Specifically, Plaintiff’s declaration does not state that Plaintiff did not recall signing the arbitration agreement Agreement. (Nunez Decl., ¶ 2.) Therefore, the court finds that Defendants have demonstrated an existing arbitration agreement between Plaintiff and Defendant—United Rentals.
The Opposition contends that the arbitration agreement between the parties is procedurally and substantively unconscionable. (Opposition; 2:19-22.)
Procedural Unconscionability:
Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 722 (Fitz), states, “ ‘The procedural element of an unconscionable contract generally takes the form of a contract of adhesion. . . .’ [Citation.] Even if a party is aware of some of the contractual terms, procedural unconscionability may still be found. When a contract is oppressive, awareness of its terms does not preclude a finding that the arbitration agreement is unenforceable. [Citation.] [¶] ‘ “[I]n the case of preemployment arbitration contracts, the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration requirement.” ’ [Citation.]” Carbajal, supra, 245 Cal.App.4th at p. 243, states, “It is well-settled that adhesion contracts in the employment context, that is, those contracts offered to employees on a take-it-or-leave-it basis, typically contain some aspects of procedural unconscionability.”
Defendants’ evidence shows, “. . . The Arbitration Agreement is part of the first document that an applicant must sign before even being given an initial telephone screening. . . .” (Williams Decl., ¶ 7.) The Agreement states, “. . . The Company will not consider your application unless this Agreement is accepted. . . .” (Williams Decl., ¶ 6 and Exhibit A.) Since applicants cannot proceed further in the employment process without signing the Agreement, the court finds that there is some degree of procedural unconscionability because of the Agreement is an adhesive contract.
Next, the Opposition contends that the Agreement is procedurally unconscionable because “. . . Defendants failed to give Plaintiff reasonable and proper notice of the procedural rules governing the arbitration.” (Opposition; 5:7-8.) Carbajal states, “Before requiring Carbajal to sign the Agreement, CW Painting did not provide Carbajal a copy of the rules it thought would govern, tell her where she could find a copy of the rules, offer to explain the arbitration provision, or give her an opportunity to review any rules. Moreover, when Carbajal deposed CW Painting's person most knowledgeable about the Agreement and its arbitration provision, the designated person could not identify which set of AAA rules applied even when he was provided with a list of AAA's active and archived rules. [¶] ‘ “Numerous cases have held that the failure to provide a copy of the arbitration rules to which the employee would be bound, supported a finding of procedural unconscionability.” ’ [Citations.]” (Id., at pp. 244-245; Footnote 3 omitted.) The Agreement states in part, “A copy of the AAA Employment Arbitration Rules and Mediation Procedures Employment Disputes is available for you to review from you Company recruiter or the Company’s Human Resources Department. You may also access the AAA’s Employment Arbitration Rules at https://www.adr.org.” (Williams Decl., ¶ 6 and Exhibit A.) Unlike Carbajal, the Agreement informed Plaintiff how Plaintiff could access the arbitration rules. Defendant—United Rentals, however, did not directly provide a copy of the arbitration rules to Plaintiff and provide directions to Plaintiff as to how to navigate the website to access the rules. The court finds that there is some degree of procedural unconscionability because Defendant—United Rentals failed to provide the arbitration rules directly to Plaintiff.
Based on the above, the court finds that there is a moderate level of procedural unconscionability due to the adhesive nature of the Agreement, and the failure to provide directly to Plaintiff a copy of the arbitration rules.
Substantive Unconscionability:
First, relying on Code of Civil Procedure section 631, Plaintiff asserts, “The arbitration agreement purports to deprive Plaintiff of his fundamental right to a jury tr and therefore is not enforceable.” (Opposition; 6:8-7:19.) The Agreement states, “. . . By entering into this Agreement, you are giving up certain rights, including the right to file a lawsuit in a court of law or have a jury trial. . . .” (Williams Decl., ¶ 6 and Exhibit A.)
Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, 955 (Grafton), “The analogy to arbitration agreements is not persuasive. Unlike predispute jury waivers, predispute arbitration agreements are specifically authorized by statute. (§ 1281 [‘A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract’], italics added.) Moreover, as is demonstrated by the language quoted from our Madden decision, arbitration agreements are distinguishable from waivers of the right to jury trial in that they represent an agreement to avoid the judicial forum altogether. Specifically distinguishing arbitration from the waiver of jury trial authorized by section 631 (and refusing to apply that statute), we observed in Madden that a principal feature of an arbitration agreement is that the contracting parties agree they will ‘not submit[ ] their controversy to a court of law in the first instance.’ [Citation.]
Under Grafton, the court finds that the Agreement is substantively unconscionable based on Code of Civil Procedure section 631 because the purpose of the Agreement is to avoid submitting any dispute between the parties to a judicial forum.
Second, the Opposition states, “The Mutual Agreement to Arbitrate is further unconscionable as it does not provide for adequate judicial review of the arbitration award.” (Opposition; 7:21-22.) The Agreement states, “All orders of the arbitrator (except evidentiary rulings at the arbitration) shall be in writing and subject to review pursuant to the Federal Arbitration Act. Any authorized decision or award of the arbitrator shall be final and binding upon the parties. The arbitrator may award relief only on an individual basis. The arbitrator shall have the power to award any type of legal or equitable relief available in a court of competent jurisdiction including, but not limited to, attorney's fees, to the extent such damages are available under law.” (Williams Decl. ¶ 6 and Exhibit A.)
Armendariz states, “The employees argue that lack of judicial review of arbitration awards makes the vindication of FEHA rights in arbitration illusory. They point to Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 Cal.Rptr.2d 183, 832 P.2d 899 (Moncharsh ), in which we held that an arbitration award may not be vacated for errors of law on the face of the decision, even if these errors would cause substantial injustice. [Citation.] Arbitration, they argue, cannot be an adequate means of resolving a FEHA claim if the arbitrator is essentially free to disregard the law. [¶] As the United States Supreme Court has stated: ‘[A]lthough judicial scrutiny of arbitration awards necessarily is limited, such review is sufficient to ensure that arbitrators comply with the requirements of the statute’ at issue. [Citation.] In Moncharsh, we acknowledged that judicial review may be appropriate when ‘granting finality to an arbitrator's decision would be inconsistent with the protection of a party's statutory rights.’ [Citations.] [¶] We are not faced in this case with a petition to confirm an arbitration award, and therefore have no occasion to articulate precisely what standard of judicial review is ‘sufficient to ensure that arbitrators comply with the requirements of [a] statute.’ [Citation.] All we hold today is that in order for such judicial review to be successfully accomplished, an arbitrator in an FEHA case must issue a written arbitration decision that will reveal, however briefly, the essential findings and conclusions on which the award is based.” (Armendariz, supra, 24 Cal.4th 83, 106-107.) Amendariz did not hold that limited judicial review was a factor relevant to substantive unconscionability. Thus, the provision in the Agreement as to the final and binding effect of an arbitrator’s decision or award is not substantively unconscionable.
Third, the Opposition states, “The discovery limitations imposed by the Agreement through the Application of the Federal Rules of Civil Procedure would be impossible to adhere to in this case and thus are substantively unconscionable.” (Opposition; 9:25-27.) Plaintiff states, “According to the FRCP . . . 30(a)(2)(A) Plaintiff is allowed to take only a total of 10 depositions . . . unless stipulated otherwise to exceed this limitation.” (Opposition; 9:10-12.) The Agreement states, “The arbitrator shall apply the Federal Rules of Civil Procedure (except for Rule 23) and the Federal Rules of Evidence as interpreted in the jurisdiction where the arbitration is held.” (Williams Decl. ¶ 6 and Exhibit A.) Federal Rule of Civil Procedure (FRCP), rule 30, subdivision (a)(2)(A)(i), states, “A party must obtain leave of court, and the court must grant leave to the extent consistent with Rule 26(b)(1) and (2): [¶] (A) if the parties have not stipulated to the deposition and: [¶] (i) the deposition would result in more than 10 depositions being taken under this rule or Rule 31 by the plaintiffs, or by the defendants, or by the third-party defendants . . . .” FRCP, rule 33, subdivision (a)(1), provides, “. . . (1) Number. Unless otherwise stipulated or ordered by the court, a party may serve on any other party no more than 25 written interrogatories, including all discrete subparts. Leave to serve additional interrogatories may be granted to the extent consistent with Rule 26(b)(1) and (2). . . .” Here, the FRCP does not limit Plaintiff’s ability to obtain discovery. Although the FRCP limits discovery to 10 depositions and 25 interrogatories without a stipulation or permission from the court, the FRCP allows a party to seek permission to conduct additional depositions and serve additional interrogatories with permission from the court. Under Armendariz, the court finds that the Agreement provides for more than minimal discovery. Thus, the Agreement is not substantively unconscionable based on the application of the FRCP.
Fourth, the Opposition states, “This provision is inherently unconscionable because it forces Plaintiff to pursue all his rights related to issues of interpretation and enforcement of the agreement and possibly of the arbitrator’s decision in the state of Connecticut.” (Opposition; 10:9-11.) The Agreement states, “The interpretation and enforcement of the terms contained herein, and, if necessary, any request to enforce the decision of the arbitrator, shall be resolved and determined exclusively by the state court sitting in Fairfield County, Connecticut or the federal courts in the District of Connecticut and you hereby consent that such courts be granted exclusive jurisdiction for such purpose.”(Williams Decl. ¶ 6 and Exhibit A.)
Labor Code section 925 states in part, “(a) An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following: [¶] (1) Require the employee to adjudicate outside of California a claim arising in California. . . [¶] (f) This section shall apply to a contract entered into, modified, or extended on or after January 1, 2017.” Defendants’ evidence shows that Plaintiff signed the Agreement on 7-19-17. (Williams Decl., ¶ 6.) Since Defendants cannot require Plaintiff to adjudicate disputes outside of California under Labor Code section 925, subdivision (a)(1), the court finds that the provision requiring adjudication of the terms of the Agreement in Connecticut are substantively unconscionable. The court finds that this term is overly harsh for violating the policy set forth in Labor Code section 925.
Carbajal states, “Under Civil Code section 1670.5, subdivision (a), a trial court has discretion to ‘ “refuse to enforce the contract as a whole if it is permeated by the unconscionability, or it may strike any single clause or group of clauses which are so tainted or which are contrary to the essential purpose of the agreement, or it may simply limit unconscionable clauses so as to avoid unconscionable results.” ’ [Citations.] [¶] ‘ “An employment arbitration agreement can be considered permeated by unconscionability if it ‘contains more than one unlawful provision. . . . Such multiple defects indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage.’ ” ’ [Citations.] ‘ “ ‘The overarching inquiry is whether “ ‘the interests of justice . . . would be furthered’ ” by severance.’ ” ’ [Citations.]” (Carbajal, supra, 245 Cal.App.4th at p. 254.)
The court finds that the Agreement is not permeated with unconscionability because it contains only one term that is substantively unconscionable. The court further finds that severance of the forum selection provision is appropriate. Therefore, the court exercises its discretion and severs the forum selection provision from the Agreement. Severance of the of the forum selectin provision will avoid the unconscionable result from the enforcement of that provision.
In summary, the court finds that the Agreement is not substantive unconscionable after severance of the forum selection provision. Although there is procedural unconscionability, there is no substantive unconscionability. Since there is no substantive unconscionability, the court does not have the authority to refuse to enforce the Agreement. Therefore, the court GRANTS Defendants’ (United Rentals, Inc., United Rentals (North America), Inc., Jose Jimenez, and Dustin Russell) Petition to Compel Arbitration and Stay Proceedings filed on 5-31-22 under ROA No. 68. The court stays proceedings in this action pursuant to Code of Civil Procedure section 1281.4. The court sets a status conference regarding arbitration on 4-28-23 at 10:00 a.m. in Department C32.
Defendants are to give notice.