Judge: Walter P. Schwarm, Case: 30-2022-01274085, Date: 2022-12-20 Tentative Ruling
Defendants’ (NeoGenomics Laboratories, Inc. and Neogenomics, Inc.) Motion to Compel Arbitration (Motion), filed on 9-26-22 under ROA No. 98 is GRANTED in part and DENIED in part. The Amended Notice (Notice) of this Motion was filed on 11-14-22 under ROA No. 130.
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 rescission of the agreement. . . .”
Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 165 (Western Pizza), states, “Under California law, as under the FAA, an arbitration agreement may be invalidated upon the same grounds as any other contract. [Citation.] In other words, although arbitration agreements ordinarily are enforced according to their terms, their enforceability is limited by the same general contract law principles governing the enforceability of any contract. [Citation.] [¶] Under California law, the question whether an arbitration agreement is unenforceable, in whole or in part, based on general contract law principles is a question for the court to decide, rather than an arbitrator. [Citations.] This includes the determination whether an arbitration agreement is unconscionable or contrary to public policy. [Citation.] Discover Bank concluded that the FAA, and particularly the opinion by the United States Supreme Court in Green Tree Financial Corp. v. Bazzle (2003) 539 U.S. 444, 123 S.Ct. 2402, 123 S.Ct. 2402, did not conflict with California law on this point and that the California rule therefore governs. [¶] Some opinions by the Courts of Appeal have suggested, without holding, that the enforceability of an arbitration agreement is a question for the arbitrator to decide if the arbitration agreement ‘ “clearly and unmistakably” ’ so provides. [Citations.] We need not decide whether such a clear and unmistakable provision would be enforceable because the arbitration agreement here does not clearly state that the arbitrator will decide whether the arbitration agreement is enforceable. Rather, the provision that the arbitrator will resolve ‘any disputes over the interpretation or application of this Arbitration Agreement’ does not appear to encompass disputes concerning the enforceability of the arbitration agreement based on unconscionability, public policy, or other grounds.” (Footnote 3 omitted.)
Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1219 (Toal), 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.]” (Footnote. 8 omitted.) Ruiz v. Moss Bros. Auto Group, Inc. (Ruiz) (2014) 232 Cal.App.4th 836, 846 (Ruiz), 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.)
Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa), explains, “First, the moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’ [Citation.] The moving party ‘can meet its initial burden by attaching to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party's] signature.’ [Citation.] Alternatively, the moving party can meet its burden by setting forth the agreement's provisions in the motion. [Citations.] For this step, ‘it is not necessary to follow the normal procedures of document authentication.’ [Citation.] If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion. [¶] 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. [Citation.] The opposing party can do this in several ways. For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement. [Citations.] [¶] If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party. [Citation.]”
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.)
Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 (Serpa), 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. [Citation.] . . . [¶] Nonetheless, as we have explained, this adhesive aspect of an agreement is not dispositive. [Citation.] When, as here, there is no other indication of oppression or surprise, ‘the degree of procedural unconscionability of an adhesion agreement is low, and the agreement will be enforceable unless the degree of substantive unconscionability is high.’ [Citations.]” (Footnote 4 omitted.)
Hobby Lobby Stores, Inc. v. Cole, (Fla. Dist. Ct. App. 2020) 287 So.3d 1272, 1275–1276 (Hobby Lobby), provides, “When evaluating whether to compel arbitration pursuant to written agreement, a court must consider: ‘(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.’ [Citations.] Here, there is no dispute that Hobby Lobby met all three prongs of this test. The inquiry does not end here because general contract defenses also apply. [Citation.] In this case, the trial court found the Agreement unconscionable. [¶] To find an arbitration agreement unconscionable, a court must conclude it is both procedurally and substantively unconscionable. [Citation.] Although both types of unconscionability are necessary to invalidate an arbitration agreement, they need not be equally present, and courts should evaluate them independently. [Citation.] A sliding scale approach applies, meaning that the more procedurally oppressive the contract, the less evidence of substantive unconscionability is required, and vice versa. [Citation.] The party seeking to avoid arbitration bears the burden to establish unconscionability. [Citation.] [¶] Procedural unconscionability relates to the manner in which a contract is entered, and courts determine whether it exists based on a totality of the circumstances. [Citations.] The central question in determining whether a contract is procedurally unconscionable is ‘whether the complaining party lacked a meaningful choice when entering into the contract.’ [Citations.] In answering this question, courts consider: ‘(1) the manner in which the contract was entered into; (2) the relative bargaining power of the parties and whether the complaining party had a meaningful choice at the time the contract was entered into; (3) whether the terms were merely presented on a “take-it-or-leave-it” basis; and (4) the complaining party's ability and opportunity to understand the disputed terms of the contract.’ [Citations.] Courts should also consider whether each party, given their education, was given a reasonable opportunity to understand an arbitration agreement's terms, or whether important terms were ‘hidden in a maze of fine print and minimized.’ [Citation.] [¶] In predicating its finding of procedural unconscionability on the Agreement's take-it-or-leave-it nature, the trial court relied on California law. [Citation.] In Florida, however, the take-it-or-leave-it nature of arbitration agreements is not dispositive. [Citation.] Instead, courts should explore the circumstances surrounding the execution of an arbitration agreement before concluding it is procedurally unconscionable. [Citation.]”
Basulto v. Hialeah Auto., (Fla. 2014) 141 So.3d 1145, 1157–1158 (Basulto) provides, “Unconscionability is a common law doctrine that courts have used to prevent the enforcement of contractual provisions that are overreaches by one party to gain ‘an unjust and undeserved advantage which it would be inequitable to permit him to enforce.’ [Citations.] ‘Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.’ [Citation.] The absence of meaningful choice when entering into the contract is often referred to as procedural unconscionability, which ‘relates to the manner in which the contract was entered,’ and the unreasonableness of the terms is often referred to as substantive unconscionability, which ‘focuses on the agreement itself.’ [Citation.] (Footnotes 3 and 4 omitted; Italics in Basulto.)
Nelson v. Dual Diagnosis Treatment Ctr., Inc., (2022) 77 Cal. App. 5th 643, 664 (Nelson), provides, “We review the question of severance for abuse of discretion. [Citation.] ‘Civil Code section 1670.5, subdivision (a) gives the trial court discretion to either refuse to enforce a contract it finds to be unconscionable, or to strike the unconscionable provision and enforce the remainder of the contract. ....... The trial court has discretion under this statute to refuse to enforce an entire agreement if the agreement is “permeated” by unconscionability.’ [Citation.] An agreement may be ‘permeated with too high a degree of unconscionability for severance to rehabilitate.’ [Citation.] ‘ “The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in view of all relevant circumstances, that a court should withhold enforcement.’ ” [Citations.]
Defendants move to compel arbitration based on two arbitration agreements: (1) “CONFIDENTIALITY, NON-SOLICITATION AND NON-COMPETE AGREEMENT” (Non-Compete Agreement) signed by Plaintiff George Cardoza and Defendant NeoGenomics, Inc. on 11-4-09 and 11-3-09, respectively (Complaint, ¶ 2 and Exhibit 1); and (2) “Employment Agreement” entered into on 7-5-21. (Employment Agreement). (Complaint, ¶ 2 and Exhibit 2.) Plaintiffs’ (George Cardoza and Accuragen, Inc.) Opposition to Defendants’ Motion to Compel Arbitration does not appear to challenge the authenticity of these agreements.
Choice of Law:
“When a choice-of-law provision exists in a private contract, California courts will honor it unless either (a) there is no reasonable basis for the parties’ choice, or (b) application of the law of the chosen state would be contrary to the fundamental policy of a state that has a materially greater interest. [Citations.]” (Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.App.4th 1258, 1267.)
The Parties do not dispute that the Non-Compete Agreement and Employment Agreement provide that they “. . . shall be governed by, construed, and enforced in accordance with the laws of the State of Florida . . . .” (Complaint, ¶¶ 2 and Exhibits 1 and 2 (Non-Compete Agreement at ¶ 10; Employment Agreement at ¶ 19.)
Relying on Business and Professions Code section 16600, the Opposition states, “Here, Florida law is contrary to the fundamental public policy of California, and California has a materially greater interest in the determination of this issue, and therefore California law should be applied.” (Opposition; 13:7-9.)_ Plaintiff does not dispute the existence of a reasonable basis for applying Florida law.
The Motion provides, “. . . there is no dispute that the chosen state (Florida) has substantial relationship to the parties and the Agreements. NeoGenomics is incorporated in and maintains its principal place of business in Florida. (Complaint at ¶¶12-13.)” (Motion, 13:21-24.)
Regarding the second element, Defendants contend “. . . applying Florida’s laws governing arbitration agreements does not violate a fundamental policy of California. As NeoGenomics and Cardoza were engaged in interstate commerce, the arbitration agreements are subject to the Federal Arbitration Act. 9 U.S.C. § 2; Prima Paint Corp., 388 U.S. at 401, n.7. Arbitration agreements governed by the FAA are ‘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. Under both California and Florida state law, a procedurally and substantively unconscionable arbitration agreement will not be enforced. . . .” (Motion; 13:26-14:4.)
Plaintiffs assert, “. . . Florida has no code or statute governing unconscionable contracts similar or analogous to Cal. Civ. Code § 1670.5. [¶] California law on unconscionability differs from Florida law. In Hobby Lobby Stores, Inc. v. Cole . . . cited by NeoGenomics, the trial court denied the defendant employer's motion to compel arbitration in a suit filed by a former employee. . . . ‘In predicating its finding of procedural unconscionability on the Agreement's take-it-or-leaveit nature, the trial court relied on California law.’ Id. at 1275 (citing Martinez v. Master Prot. Corp., 118 Cal.App.4th 107, 12 Cal. Rptr. 3d 663, 669 (Cal. Ct. App. 2004) (for the proposition that ‘[a]n arbitration agreement that is an essential part of a `take it or leave it' employment condition, without more, is procedurally unconscionable’)). The Florida appellate court reversed the trial court's ruling, finding that ‘[i]n Florida, however, the take-it-or-leave-it nature of arbitration agreements is not dispositive.’ . . .” (Opposition, 15:8-19.)
Defendants’ Reply in Support of Defendants’ Motion to Compel Arbitration (Reply), filed on 12-13-22 under ROA No. 137, states, “In Hobby Lobby, the court explained that procedural unconscionability is evaluated based on the totality of the circumstances, and the inquiry focuses on whether there was a meaningful choice to enter into the agreement. . . . Among other factors, the court considers whether the contract was one of adhesion in determining if the agreement is procedurally unconscionable. . . . Similarly in California, courts consider whether an agreement is a contract of adhesion, but that factor alone will not automatically render an agreement unenforceable as unconscionable. . . .” (Reply; 6:9-16.)
The court finds that application of Florida law is not contrary to a fundamental policy of California because both state recognize unconscionability as a defense to the enforcement of an arbitration agreement. That is, both California and Florida share a fundamental policy that unconscionable agreements are unenforceable
Plaintiff also contends that California Business and Professions Code 16600 represents fundamental California public policy and is contrary to Florida law, but the court does not need to address this issue because it is not specific to enforcing arbitration agreements. Mastick v. TD Ameritrade, Inc., supra, 209 Cal.App.4th at p. 1267, states, “We are mindful of the desire to have a single forum, but TD Ameritrade’s relationship with Nebraska supplies a reasonable basis for the parties’ choice, and application of Nebraska law is not contrary to the fundamental policy of California, favoring enforcement of valid arbitration agreements.”
Here, the public policy at issue pertains to whether Florida has a fundamental policy that is contrary to California’s policy regarding the enforcement of arbitration agreements. The application of Business and Professions Code section 16600 relates to the merits of the dispute between the parties as to whether Business and Professions Code section 16600 prevents the enforcement of the Restrictive Covenants (Complaint, ¶ 2 and Exhibit 1 (Non-Compete Agreement at ¶ 8) contained in the Non-Compete Agreement.
Based on the above, the court finds that Florida law applies. Although Florida law may apply, it does not appear that the application of Florida law regarding unconscionability is significant because Florida law and California law are substantially similar on the issue unconscionability. Thus, the result would be the same regardless of which law the court applies.
Existence of an Agreement”
Plaintiff—George Cardoza and Defendant— NeoGenomics, Inc. signed the Non-Compete Agreement on 11-4-09 and 11-3-09, respectively. (Complaint, ¶ 2 and Exhibit 1.) Paragraph 11 of the Non-Compete Agreement states, “11. Arbitration Agreement. Employee agrees that all controversies, claims, disputes and matters in question arising out of, or related to this Agreement, the breach of this Agreement, the business relationship between signatories to this Agreement or any other matter or claim whatsoever shall be decided by binding arbitration before the American. Arbitration Association, utilizing its Commercial Rules by a panel of one arbitrator. Venue for any arbitration between the Parties shall be held in Fort Myers, Lee County, Florida.” (Complaint, ¶ 2 and Exhibit 1; Emphasis and underscore in Non-Compete Agreement.)
Plaintiff—George Cardoza and Defendant— NeoGenomics, Inc. signed the Employment Agreement. (Complaint, ¶ 2 and Exhibit 2.) Paragraph 6 of the Employment Agreement states, “6. Confidentiality, Non-Solicitation & Non-Compete Agreement. Executive agrees to the terms of the Confidentiality, Non-Solicitation and Non-Compete Agreement attached hereto as Addendum A and has signed that Agreement. Such Confidentiality, Non-Solicitation and Non-Compete Agreement is hereby incorporated into and made a part of this Agreement.”; “19. Governing Law, Venue and Jurisdiction. This Agreement and all transactions contemplated by this Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Florida without regard to any conflicts of laws, statutes, rules, regulations or ordinances. Executive consents to personal jurisdiction and venue in the Circuit Court in and for Lee County, Florida regarding any action arising under the terms of this Agreement and any and all other disputes between Executive and Employer.” .” (Complaint, ¶ 2 and Exhibit 2; Emphasis and underscore in Non-Compete Agreement.) Paragraph 20 of the Employment Agreement provides, “20. Arbitration. Any and all controversies and disputes between Executive and Company arising from this Agreement or regarding any other matter whatsoever shall be submitted to arbitration before a single unbiased arbitrator skilled in arbitrating such disputes under the American Arbitration Association, utilizing its Employment Arbitration Rules and Mediation Procedures. Any arbitration action brought pursuant to this section shall be heard in Fort Myers, Lee County, Florida. The Circuit Court in and for Lee County, Florida shall have concurrent jurisdiction with any arbitration panel for the purpose of entering temporary and permanent injunctive relief, but only with respect to any alleged breach of the Confidentiality, Non-Solicitation and Non-Compete Agreement.” (Complaint, ¶ 2 and Exhibit 2; Emphasis and underscore in Employment Agreement.)
As discussed above, Plaintiffs’ Opposition does not dispute the authenticity of the agreements. Therefore, the court finds that Defendants have established the existence of the agreements.
Arbitrability:
Paragraph 68 of the Complaint pleads, “Plaintiffs seek a declaratory judgment that restrictive covenants in the Non-Compete Agreement are void against the applicable public policy and that Cardoza’s activities on behalf of AccuraGen are not in breach of any valid restraint in the Non-Compete Agreement.” The Complaint seeks to invalidate the Restrictive Covenant contained in the Non-Compete Agreement. Under paragraph 11 of the Non-Compete Agreement, Plaintiff agreed, “. . . that all controversies, claims, disputes and matters in question arising out of, or related to this Agreement, the breach of this Agreement, the business relationship between signatories to this Agreement or any other matter or claim whatsoever shall be decided by binding arbitration before the American. Arbitration Association, utilizing its Commercial Rules by a panel of one arbitrator. . . .” (Complaint, ¶ 2 and Exhibit 1.)
Under paragraph 20 of the Employment Agreement, Plaintiff agreed that “Any and all controversies and disputes between Executive and Company arising from this Agreement or regarding any other matter whatsoever shall be submitted to arbitration . . . .” (Complaint, ¶ 2 and Exhibit 2.)
Thus, the court finds that Plaintiff’s claims fall within the scope of the arbitration provisions contained in the Non-Compete Agreement and the Employment Agreement.
Unconscionability:
As to procedural unconscionability, Plaintiff contends, “. . . NeoGenomics, the superior party with significantly more bargaining power than Cardoza, presented Cardoza with their ‘standard’ Agreements on a take-it-or-leave-it basis. . . . Cardoza had no opportunity to negotiate the Agreements or any of the terms therein. . . . Instead, Cardoza only had the opportunity to adhere to the Agreements or reject them. . . . When Cardoza was provided with the Agreements, NeoGenomics told Cardoza that he was required to execute and enter into the Agreements, or else NeoGenomics would rescind and/or terminate Cardoza's employment. . . . As such, Cardoza had no meaningful choice other than to accept the Non-Compete Agreement ‘as-is.’ . . . Additionally, NeoGenomics did not advise Cardoza that he could discuss the Non-Compete Agreement or the restrictive covenants or arbitration provisions with his own counsel, nor did NeoGenomics provide Cardoza with a copy of any applicable arbitration rules and procedures, or even provide a link to such rules and procedures. . . . Accordingly, the Non-Compete Agreement is a contract of adhesion and procedurally unconscionable.” (Opposition; 18:13-19:4.)
The Motion contends, “Cardoza is a sophisticated executive. He held some of the most senior ‘C-level’ positions at NeoGenomics, including Chief Financial Officer, President of the Pharma Service Division, and President and Chief Operating Officer of Laboratory Operations. His July 2021 Employment Agreement included extraordinarily lucrative compensation. To suggest that Cardoza had no bargaining power, no meaningful choice regarding that agreement, or that he was somehow not able to understand its terms, would be specious. The Florida Agreements clearly spell out the agreement to arbitrate all disputes with AAA in Florida. Cardoza understood what he was agreeing to by accepting and continuing his employment with NeoGenomics.” (Motion: 17;6-13.) Defendants do not provide any evidence to support this contention.
Based on the foregoing, the court finds a moderate level of procedural unconscionability because the Non-Compete Agreement and Employment Agreement were contracts of adhesion and Defendant—Neogenomics, Inc. did not provide the AAA to Plaintiff—Cardoza.
As to substantive unconscionability, paragraph 11 of the Non-Compete Agreement only applies to Plaintiff— Cardoza and Defendant—Neogenomics, Inc. Paragraph 11 of the Non-Compete Agreement states, “Employee agrees that all controversies, claims, disputes and matters in question arising out of, or related to this Agreement, the breach of this Agreement, the business relationship between signatories to this Agreement or any other matter or claim whatsoever shall be decided by binding arbitration before the American. Arbitration Association, utilizing its Commercial Rules by a panel of one arbitrator. Venue for any arbitration between the Parties shall be held in Fort Myers, Lee County, Florida.” (Complaint, ¶ 2 and Exhibit 1.) The court finds that paragraph 11 of the Non-Compete Agreement is unreasonably favorable to Defendant—Neogenomics, Inc. because it does not require Defendant—Neogenomics, Inc. to participate in arbitration as the forum for resolving disputes. Paragraph 11 of the Non-Compete Agreement only requires Plaintiff—Cardoza to arbitrate disputes between the parties. The court finds that paragraph 11 of the Non-Compete Agreement is unreasonably favors Defendant—NeoGenomics, Inc. and is substantively unconscionable because there is no mutuality with respect to arbitration as a forum to resolve disputes.
The Employment Agreement incorporates Non-Compete Agreement. Paragraph 20 of the Employment Agreement states, “Any and all controversies and disputes between Executive and Company arising from this Agreement or regarding any other matter whatsoever shall be submitted to arbitration before a single unbiased arbitrator skilled in arbitrating such disputes under the American Arbitration Association, utilizing its Employment Arbitration Rules and Mediation Procedures. Any arbitration action brought pursuant to this section shall be heard in Fort Myers, Lee County, Florida. The Circuit Court in and for Lee County, Florida shall have concurrent jurisdiction with any arbitration panel for the purpose of entering temporary and permanent injunctive relief, but only with respect to any alleged breach of the Confidentiality, Non-Solicitation and Non-Compete Agreement.” (Complaint, ¶ 2 and Exhibit 2.)
Although the Non-Compete Agreement is unconscionable because of lack of mutuality, the Employment Agreement provides the mutuality necessary to remove the substantive unconscionability contained in the Non-Compete Agreement. The Employment Agreement incorporates the non-compete into the Employment Agreement. (Complaint, ¶ 2 and Exhibit 2 (Employment Agreement at ¶ 6.).) The Employment Agreement then provides that, “Any and all controversies and disputes between Executive and Company arising from this Agreement or regarding any other matter whatsoever shall be submitted to arbitration . . . .” (Complaint, ¶ 2 and Exhibit 2 (Employment Agreement at ¶ 20.).) When the Employment Agreement refers to “this Agreement,” it includes that Defendant—Neogenomics, Inc. has agreed to arbitrate controversies arising from the incorporated Non-Compete Agreeement. Also, the phrase “any other matter whatsoever” includes disputes regarding the terms of the Non-Compete Agreement. Further, paragraph 20 of the Employment Agreement also states, “. . . The Circuit Court in and for Lee County, Florida shall have concurrent jurisdiction with any arbitration panel for the purpose of entering temporary and permanent injunctive relief, but only with respect to any alleged breach of the Confidentiality, Non-Solicitation and Non-Compete Agreement.” (Complaint, ¶ 2 and Exhibit 2 (Employment Agreement at ¶ 20.).) The reference to concurrent jurisdiction seems to indicate an exception to Defendant—Neogenomics Inc.’s and Plaintiff— Cardoza’s mutual agreement to arbitrate this dispute.
Although the initial arbitration clause in the Non-Compete Agreement lacks mutuality, the Employment Agreement, which contains a separate arbitration clause covering disputes in the Non-Compete Agreement, provides the mutuality necessary to remove the substantive unconscionability from the Non-Compete Agreement.
Regarding whether the unconscionable provisions are severable, paragraph 15 of the Non-Compete Agreement states, “In case any one or more provisions contained in this Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or enforceability shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal were unenforceable provision had not been contained herein.” (Complaint, ¶ 2 and Exhibit 1 (Non-Compete Agreement at ¶ 15.).) Paragraph 13 of the Employment Agreement provides, “The invalidity of any portion of this Agreement shall not affect the validity of any other provision. In the event that any provision of this Agreement is held to be invalid, the parties agree that the remaining provisions shall remain in full force and effect.” (Complaint, ¶ 2 and Exhibit 2 (Employment Agreement at ¶ 13.).)
The court finds that the arbitration provision in the Non-Compete Agreement can be severed in its entirety to allow enforcement of the remainder of the Employment Agreement. Further, the court severs the following sentence from paragraph 20 of the Employment Agreement because it refers to arbitration contained in the Non-Compete Agreement: “The Circuit Court in and for Lee County, Florida shall have concurrent jurisdiction with any arbitration panel for the purpose of entering temporary and permanent injunctive relief, but only with respect to any alleged breach of the Confidentiality, Non-Solicitation and Non-Compete Agreement.” (Complaint, ¶ 2 and Exhibit 2 (Employment Agreement at ¶ 20.).)
After severance, the court finds that there is a low degree, if any, of substantive unconscionability. On balance, the court find that the moderate level of procedural unconscionability does not outweigh the low level of substantive unconscionability.
Based on the above, the court GRANTS Defendants’ (NeoGenomics Laboratories, Inc. and Neogenomics, Inc.) Motion to Compel Arbitration, filed on 9-26-22 under ROA No. 98, to the extent it seeks to compel arbitration. The court DENIES the Motion to the extent it seeks a dismissal. The court stays all proceedings in this action pursuant to Code of Civil Procedure section 1281.4. The court sets and Arbitration Review hearing on 6-16-23 at 10:00 a.m. in Department C32.
Defendants are to give notice.