Judge: William D. Claster, Case: 21-01216978, Date: 2022-09-16 Tentative Ruling
Defendants Maps Services Inc. and Rick Vivik's Notice of Motion and Motion to Compel Individual Arbitration, Dismiss Representative PAGA Claims, and Stay Proceedings ROA 58
Defendants MAPS Services, Inc. and Rick Vivik move for an order (1) compelling arbitration of all claims, including the individual portions of Plaintiffs Adriana Gallegos and Crystal Valdez’s PAGA claim; (2) dismissing the representative portion of Plaintiffs’ PAGA claim; and (3) staying the action pending completion of arbitration. The Court rules as follows:
EVIDENTIARY MATTERS
Plaintiffs’ objection to the entire declaration of Prateek Khanna is OVERRULED. Plaintiffs’ objection to Exhibit 1 to Khanna’s declaration is SUSTAINED on foundation grounds. Plaintiffs’ objections to the declaration of Atul Raj are all OVERRULED.
GROUNDS FOR RULING
I. Factual Background
A. Allegations of Complaint
Plaintiffs allege as follows: they are former non-exempt employees of MAPS, a courier and delivery company. (Compl., ¶¶ 19, 30.) Vivik was a supervisor for MAPS. (Id., ¶ 8.) In July 2020, Vivik invited Gallegos and Valdez to his apartment for drinks on three separate occasions. Each time, he propositioned Gallegos, and each time, Gallegos refused his advances. After the third incident, Gallegos complained to Raj, the owner of MAPS. Shortly after Gallegos’ complaint, MAPS terminated both Gallegos and Valdez. (Id., ¶¶ 23-29, 34-37.) Plaintiffs bring statutory and common law claims sounding in discrimination, wrongful termination, etc. as the first through sixth causes of action.
In addition, Plaintiffs allege they suffered a number of wage-and-hour violations during their employment. Their seventh through tenth causes of action are Labor Code claims brought on an individual basis, and their eleventh cause of action is a PAGA claim based on the wage-and-hour claims. Plaintiffs’ twelfth cause of action is a UCL claim derivative of the wage-and-hour claims.
B. MAPS’ Onboarding Process
Raj, the owner of MAPS, explained the company’s onboarding process. MAPS onboards its employees electronically. When MAPS hires a new employee, it creates a profile on its system using the employee’s name and personal email address. This causes the system to email the new employee. The email provides instructions for how to access onboarding documents. It contains a link asking the employee to sign in. (Raj Decl., ¶ 7.) Clicking the sign-in link directs the employee to a website where he or she will be asked to create an account. To create the account, the employee has to verify his or her email with a one-time password sent to their email on file, at which point the employee sets his or her own password. (Id., ¶¶ 8-9.)
Once the employee creates an account, he or she receives an invitation to continue the onboarding process. Clicking the link to accept the invitation directs the employee to download an app on a personal mobile device and continue the onboarding process. After downloading the app, the employee enters his or her account information (the email and password mentioned above) to sign in. After signing in, the employee clicks “Continue” to access onboarding documents. The app contains links to things like background check information, required training, driver’s license verification, and the arbitration agreement. (Id., ¶¶ 10-14.) If the employee clicks the link to the arbitration agreement, the agreement displays on his or her mobile device, and the employee can scroll through the entire agreement. (Id., ¶ 15. Raj’s declaration includes screenshots of the agreement as it would appear on a phone; the text of the agreement is reprinted in full at Raj Decl., Ex. 1.)
Once the employee scrolls all the way through the agreement, he or she reaches a checkbox that says “I Agree and Accept.” After clicking to check the box, the employee can click “Continue” to move on to other onboarding documents. On the app’s home screen, the arbitration agreement will show as “Complete” with a green checkmark. (Id., ¶¶ 16-17.) The use of a mobile app gives employees as much time as they wish to review the arbitration agreement on their own personal mobile devices. (Id., ¶ 17.)
Raj attaches internal records from MAPS’ systems that show the exact date and time persons logged in as Adriana Gallegos and Crystal Valdez accepted the arbitration agreement. (Id., Exs. 2, 4.) He also attaches Plaintiffs’ internal personnel profiles from MAPS’ systems, which show each Plaintiff as having completed the arbitration agreement. (Id., Exs. 3, 5.) Neither Plaintiff denies accepting the arbitration agreement in their testimony. Rather, they admit they were sent onboarding documents via MAPS’ online portal, but they say they only just learned that one of those documents was an arbitration agreement. (See Gallegos Decl., ¶ 3; Valdez Decl., ¶ 3.)
C. Terms of Agreement
With certain exceptions discussed below, the arbitration agreement “covers all past, current, and future grievances, disputes, claims, issues, or causes of action (collectively, ‘claims’) under applicable federal, state or local laws, arising out of or relating to . . . Employee’s application, hiring, hours worked, services provided, and/or employment with the Company or the termination thereof.” (Raj Decl., Ex. 1, at p. 1.)
The agreement includes a representative action waiver. It provides that if the waiver is unenforceable in whole or in part, the portion of the claim as to which the waiver is unenforceable will be heard in court, but will be stayed until the arbitration of arbitrable claims is concluded. (Id., at p. 2.) The agreement includes a severability clause. (Id., at p. 3.)
The agreement defines “Claims Not Covered” that are outside its scope. These include “sexual harassment or sexual assault claims, except if the Employee chooses to submit them to arbitration under the terms of this agreement.” (Id., at pp. 1-2.)
II. Discussion
A. Existence of Agreement
Plaintiffs offer three reasons they believe Defendants have not shown the existence of a valid agreement to arbitrate. The Court disagrees with all three and concludes that Defendants have proven the existence of a valid agreement to arbitrate by preponderance of the evidence.
1. Consent to Electronic Signatures
Plaintiffs contend their purported electronic acceptance of the arbitration agreement is invalid because they never consented to the use of electronic signatures. While an electronic signature has the same legal effect as a wet-ink signature (Civ. Code § 1633.7(d)), the parties must first agree to conduct the transaction by electronic means, or else the electronic signature is ineffective. (Civ. Code § 1633.5(b).) “Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.” (Ibid.) “The absence of an explicit agreement to conduct the transaction by electronic means is not determinative; however, it is a relevant factor to consider.” (J.B.B. Investment Partners, Ltd. v. Fair (2014) 232 Cal.App.4th 974, 989.)
Both Plaintiffs testify, “No agent or representative of Defendant ever advised me that I would be signing an arbitration agreement by electronic means, or ever obtained my consent to do so.” (Gallegos Decl., ¶ 4; Valdez Decl., ¶ 4.) Per J.B.B. Investment Partners, this is a relevant factor, but not dispositive. The Court must look at the entire course of the parties’ conduct. In this regard, Defendants identify persuasive federal authority (interpreting California law) that holds clicking “Accept” on an arbitration agreement is enough to demonstrate intent to conduct a transaction by electronic means, creating a valid electronic signature. (See Mikhak v. University of Phoenix (N.D.Cal. 2016) 2016 WL 3401763 at *6-*7.)
Based on the factual background set forth above, the Court finds Plaintiffs consented to conduct this transaction by electronic means. MAPS’ entire onboarding process is electronic. It begins with an email, then continues with an app downloaded to the employee’s mobile device that gives access to all the required documents. While Plaintiffs never signed a document saying “I consent to the use of electronic signatures,” their entire course of dealing with MAPS regarding onboarding was electronic. In this context, and following Mikhak, their checking a box accepting the arbitration agreement is a valid electronic signature.
2. Authentication of Electronic Signatures
Relying on Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, Plaintiffs argue Defendants have failed to authenticate their alleged electronic acceptance of the arbitration agreement. Ruiz is an example of how an employer might fail to meet its burden:
Indeed, Main did not explain that an electronic signature in the name of “Ernesto Zamora Ruiz” could only have been placed on the 2011 agreement (i.e., on the employee acknowledgement form) by a person using Ruiz's “unique login ID and password”; that the date and time printed next to the electronic signature indicated the date and time the electronic signature was made; that all Moss Bros. employees were required to use their unique login ID and password when they logged into the HR system and signed electronic forms and agreements; and the electronic signature on the 2011 agreement was, therefore, apparently made by Ruiz on September 21, 2011, at 11:47 a.m. Rather than offer this or any other explanation of how she inferred the electronic signature on the 2011 agreement was the act of Ruiz, Main only offered her unsupported assertion that Ruiz was the person who electronically signed the 2011 agreement. (Id., at p. 844.)
In contrast, here, as set forth above, Raj testified as follows:
Unlike in Ruiz, record testimony shows that employees must use personal user IDs and passwords to log into the onboarding app. Moreover, the app must be accessed from employees’ own personal mobile devices, not a shared company computer. And MAPS’ records show that persons logged in under Plaintiffs’ accounts (that is, using Plaintiffs’ unique logins on Plaintiffs’ own personal mobile devices) accepted the arbitration agreement at certain dates and times. Furthermore, the Court notes that neither Plaintiff denies accepting the arbitration agreement in their declarations (as opposed to citation-free assertions in the opposition brief). They simply say they only recently learned that the onboarding documents included an arbitration agreement. This is enough for Defendants to meet their burden under Ruiz.
3. Mutual Assent
Finally, Plaintiffs argue Defendants have not established mutual assent to enter into an arbitration agreement. This argument simply rehashes the two arguments discussed above and fails for the same reasons.
B. Unconscionability
“‘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.’ (Citation.)” (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114.)
The arbitration agreement is procedurally unconscionable. There is no dispute that it was a contract of adhesion presented to Plaintiffs as a condition of employment, that no one from MAPS explained its import to Plaintiffs, and that Plaintiffs were never given a copy of the AAA Employment Arbitration Rules, which govern any arbitration.
The only substantively unconscionable term identified by Plaintiffs is the discovery provisions of the AAA Employment Arbitration Rules. Specifically, AAA Rule 9 provides: “The arbitrator shall have the authority to order such discovery, by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary to a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration.” (Supp. Johnson Decl. (ROA 83), Ex. 1, at p. 14.) Plaintiffs contend that without the arbitrator’s approval, they are entitled to entitled to no discovery at all. Rule 9 therefore does not provide for adequate discovery, in violation of Armendariz.
In reply, Defendants point out that under Armendariz, the agreement to arbitrate statutory claims (here, FEHA and the Labor Code) necessarily includes an agreement to sufficient discovery, unless the arbitration agreement specifically says otherwise. (See Armendariz, supra, 24 Cal.4th at p. 106.) The AAA Rules do not specifically say otherwise. To the contrary, they give the arbitrator authority to order discovery “necessary to a full and fair exploration of the issues in dispute.” Following Armendariz, the parties have agreed to give Plaintiffs all the discovery necessary to vindicate their statutory claims. The agreement is not substantively unconscionable, so Plaintiffs cannot avoid enforcement on grounds of unconscionability.
C. Scope of Claims to Be Arbitrated
Plaintiffs’ wage-and-hour claims fall within the broad scope of the arbitration agreement. Furthermore, because MAPS’ employment relationship with Plaintiffs was largely based on Plaintiffs delivering packages to customers who placed orders on Amazon (Raj Decl., ¶ 2), interstate commerce is implicated, and the Federal Arbitration Act governs the arbitration agreement. Under Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, the representative waiver is enforceable insofar as the individual portion of Plaintiffs’ PAGA claim can be compelled to arbitration.
As Plaintiffs point out, however, the arbitration agreement expressly excludes sexual harassment claims from its scope. These claims cannot be arbitrated without Plaintiff’s consent (which hasn’t been given), so the Court denies the motion insofar as it seeks to compel arbitration of sexual harassment claims. From the Court’s review of the complaint, the individual wage-and-hour claims, the PAGA claim, and the UCL claim have no connection to alleged sexual harassment. The second cause of action (Gallegos’ claim for sexual harassment in violation of FEHA) is unambiguously excluded from arbitration. But the Court is unclear as to the extent to which the remaining discrimination/wrongful termination/etc. claims are properly considered sexual harassment claims. The parties should be prepared to discuss this at the hearing.
D. Further Proceedings
Under both the Federal Arbitration Act and the California Arbitration Act, the non-sexual harassment portions of the case must be stayed until the completion of Plaintiffs’ individual arbitrations. (9 U.S.C. § 3; CCP § 1281.4.) As to the sexual harassment portion of the case, it is severable from the PAGA claims and is not subject to the stay. (See CCP § 1281.4—“If the issue which is the controversy subject to arbitration is severable, the stay may be with respect to that issue only.”)
In addition to the stay, Defendants ask the Court to dismiss the representative portion of Plaintiffs’ PAGA claim. This request follows the conclusion of Viking River Cruises, where the majority explained that under its view of California law, plaintiffs ordered to arbitrate their individual PAGA claims lose standing to prosecute representative PAGA claims: “But as we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA’s standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action.” (Viking River Cruises, supra, 142 S.Ct. at p. 1925.)
But “construction of a state statute by a federal court does not preclude a state court from later rejecting the federal court’s conclusion.” (16 Cal.Jur.3d (2022) Courts, § 324.) As two concurrences in Viking River Cruises pointed out, the majority may well be incorrect about PAGA standing. Justice Sotomayor wrote, “Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.” (Viking River Cruises, supra, 142 S.Ct. at p. 1926 [conc. opn. of Sotomayor, J.].) And three justices noted the majority’s conclusion “addresses disputed state-law questions” and “is unnecessary to the result.” (Ibid. [conc. opn. of Barrett, J.].)
In fact, the California Supreme Court recently granted review in Adolph v. Uber Technologies, S274671, to answer this exact question. Per an order dated August 1, 2022, “The issue to be briefed and argued is limited to the following: Whether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee [citation] maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ [citation] in court or in any other forum the parties agree is suitable.”
Were the Court to dismiss the representative PAGA claim only for Adolph to reach a different conclusion than Viking River Cruises, both judicial economy and the parties’ resources would be taxed by attempts to unwind the dismissal. Furthermore, the arbitrator may decide that Plaintiffs haven’t suffered any of the Labor Code violations complained of, meaning Plaintiffs lack PAGA standing regardless of what happens in Adolph. For these reasons, the Court denies the request to dismiss the representative claim without prejudice to Defendants raising the issue again when Plaintiffs’ individual arbitrations conclude.