Judge: William D. Claster, Case: 21-01229203, Date: 2022-11-18 Tentative Ruling
Defendants Ace Parking and John Baumgardner’s Motion to Compel Arbitration
Defendants Ace Parking Management, Inc. and John Michael Baumgardner move for an order (1) compelling arbitration of the individual portion of Plaintiff Halimo Mkoma’s PAGA claim, and (2) dismissing the representative portion of Plaintiff’s PAGA claim. For the reasons set forth below:
3. The case is stayed pending completion of the arbitration. An arbitration review hearing will take place on July 26, 2023 at 8:30 a.m. in department CX-104.
Defendants’ unopposed request for judicial notice is GRANTED. Plaintiff’s evidentiary objections are OVERRULED.
I. Formation of Agreement
A. Michelle Dente’s Testimony
Dente is Ace Parking’s Executive Vice President, Member Services. In this capacity, she is familiar with Ace Parking’s online portal for applicants and employees. (Dente Decl. ¶ 2.) She is the administrator of the portal. (Dente Decl. ¶ 4.) Applicants begin the job application process by signing up for the portal. They do so by creating a username and password and supplying a preferred email address. Once the username and password are selected, the system sends an email to the preferred address with a link to finalize creation of an account on the portal. The username/password combination stays with the applicant through the application process, and later stays with a successful applicant through his or her entire employment with Ace Parking. (Dente Decl. ¶ 3.) The password is not viewable to anyone other than the user, and no one other than the user has the ability to change it. (Dente Decl. ¶ 6.)
When an applicant is offered and accepts a position, onboarding is done through the portal. The new employee logs in with his or her username/password combination, reviews the required onboarding documents, and digitally signs those documents that must be signed. To digitally sign a document, the employee must confirm he or she wants the document digitally signed, then reconfirm the same. After the reconfirmation, the document is digitally signed. (Dente Decl. ¶ 4.) The portal records when documents are modified. (Dente Decl. ¶ 6.)
Dente has reviewed Plaintiff’s records in the portal. They indicate that she worked for Ace Parking from August 2019 to April 2020, and then again beginning in March 2021. The records indicate that on March 25, 2021, someone using Plaintiff’s account name digitally signed the arbitration agreement. (Dente Decl. ¶ 7 & Ex. A.) The records also indicate that on September 4, 2019, someone using Plaintiff’s account name digitally signed a previous version of the arbitration agreement. (Dente Decl. ¶ 7 & Ex. B.)
B. Plaintiff’s Testimony
Plaintiff admits that in August 2019, she was required to digitally sign a number of documents through Ace Parking’s online portal, but their significance was never explained to her. (Mkoma Decl. ¶ 3.) For her March 2021 re-application and re-hire, she does not recall ever logging into the portal to digitally sign any documents. (Mkoma Decl. ¶ 4.)
Plaintiff testifies that she did not, and does not, agree to waive any PAGA rights. It was impossible for her to waive them at the time of the alleged agreements because she had no understanding of arbitration vs. court, or what a PAGA waiver is. (Mkoma Decl. ¶¶ 6-7.) Plaintiff states that she would not have signed any document that waives those rights. If she had been given an option to opt out, she would have opted out. (Mkoma Decl. ¶ 8.)
C. Discussion
Plaintiff contends Defendant has failed to prove the existence of an agreement to arbitrate. The Court disagrees, and finds by a preponderance of the evidence that an agreement exists.
Plaintiff relies principally on Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836 and Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158. Ruiz is an example of how an employer might fail to meet its burden to prove the existence of an agreement to arbitrate:
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.)
Here, Dente testifies:
· Applicants are required to create a username and password to sign up for the portal, and to provide their preferred email address.
· After the username and password are created, an email is sent to the preferred email address, and the applicant clicks a link in that email to finalize account creation.
· No one has access to the password except the account holder.
· Once hired, employees log in to the portal using their username/password combination to complete onboarding documents, including digital signatures if necessary.
· The portal reflects when onboarding documents are modified (e.g., by addition of a digital signature).
· Records show that someone logged into the portal under Plaintiff’s unique username and password digitally signed the agreement on March 25, 2021.
This is more than enough to meet Defendants’ burden. Dente’s testimony fills every hole identified by Ruiz. Furthermore, Plaintiff never denies signing the March 2021 agreement. She simply says she does not recall logging into the portal and digitally signing it, which admits the possibility that she did.
Nor does Gamboa help Plaintiff. There, the employer’s director of human resources attached the purported arbitration agreement to her declaration and testified it was signed by the plaintiff. The plaintiff, in opposition, said she had no recollection of the arbitration agreement and would not have signed it had she known what it meant. She also objected to the human resources director’s testimony. The trial court sustained her objections to the human resources director’s testimony and denied the employer’s motion to compel arbitration, finding the employer had not proven the existence of an agreement. The Court of Appeal affirmed. It noted that the director of human resources laid no foundation for her testimony that the plaintiff had signed the agreement. (See Gamboa, supra, 72 Cal.App.5th at pp. 168-71.)
In this case, Dente explains in detail the account creation process for Ace Parking’s online portal. She sufficiently establishes that someone using Plaintiff’s unique username and password digitally signed the agreement. Again, Plaintiff nowhere denies signing the agreement. Based on this record, the Court finds Plaintiff indeed signed the March 2021 agreement.
II. Relevant Terms of Agreement
Plaintiff and Ace Parking “agree to utilize binding individual arbitration to resolve all disputes that might arise out of or be related in any way to [her] employment.” (Dente Decl., Ex. A, § 1.) The agreement covers claims “against the Company’s . . . owners, directors, officers, managers, employees, [and] agents.” (Id., § 3.) Baumgardner is alleged to be “an officer, owner, director, agent or employee” of Ace Parking, so claims against him are covered. (Compl. ¶ 7.)
The agreement contains the following waiver: “I and the Company agree that any claims we might pursue against the other in arbitration under this agreement shall be brought in the individual capacity of myself or the Company.” (Dente Decl., Ex. A, § 4.) All PAGA claims are brought by an employee as representative of the State, so this provision waives Plaintiff’s right to bring a PAGA claim.
The agreement contains a severability clause: “If any term or provision or any portion of this agreement is deemed invalid or unenforceable, it shall be severed and the remainder of this agreement shall be enforceable.” (Id., § 9.)
III. Wholesale PAGA Waiver
Because the agreement provides that claims may only be brought in an individual capacity, Plaintiff is correct that it operates as a wholesale waiver of PAGA claims. Even under the new rule of Viking River Cruises, “the agreement [is] invalid insofar as it is interpreted in that manner.” (Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1925.) But the agreement here, like the one in Viking River Cruises, has a both a wholesale PAGA waiver and a severability clause that provides for enforcement of the agreement to the extent it is valid. Under Viking River Cruises, the severability clause and the Federal Arbitration Act (which no one disputes applies here) work together to require arbitration of the individual portion of Plaintiff’s PAGA claim (i.e., claims for civil penalties arising from Labor Code violations personally suffered by Plaintiff). So construed, there is no wholesale waiver.
IV. Unconscionability
Plaintiff contends the arbitration agreement is unconscionable, and therefore unenforceable. “‘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 Court finds the agreement is procedurally unconscionable. Dente testifies that the arbitration agreement is included in onboarding documents that new hires are “required to review before beginning employment” and “if indicated . . . digitally sign.” (Dente Decl. ¶ 5.) That is, the agreement was presented to Plaintiff as a take-it-or-leave-it condition of employment, which is procedurally unconscionable. (See Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484.)
As to substantive unconscionability, Plaintiff makes two arguments. First, she contends the agreement requires her to waive unwaivable statutory claims. This is untrue of the PAGA claim for the reasons discussed above. Plaintiff also appears to contend Labor Code §§ 510, 1194, and 2802 have been waived. Plaintiff never identifies the language in the agreement that waives these provisions. The Court has independently reviewed the agreement and finds no language waiving these provisions. The Court therefore finds the agreement does not waive any statutory claims.
Second, Plaintiff contends the agreement doesn’t guarantee attorney’s fees and costs to a prevailing employee. This is incorrect. The agreement provides that each side shall bear its own fees and costs “unless the arbitrator shifts one party’s costs and attorneys’ fees to the other party in accordance with applicable law.” Labor Code § 2699(g)(1) requires an award of fees and costs to a prevailing employee in a PAGA action. Unless the arbitrator disregards governing law, Plaintiff will recover fees and costs if she wins.
Because there is no substantive unconscionability, the agreement is enforceable.
V. Waiver
Plaintiff contends Defendants have, by their conduct, waived the right to compel litigation. Recent United States Supreme Court precedent explains that a party to an arbitration agreement governed by the FAA waives its right to compel arbitration if it (1) knows of an existing right to arbitration and (2) acts inconsistently with that right. (See Morgan v. Sundance (2022) 142 S.Ct. 1708, 1714.) Before Viking River Cruises was handed down, Defendants could not compel arbitration of Plaintiff’s PAGA claim. There was no existing right to arbitration for them to act inconsistently with in the first place. As a result, actions taken (or not taken) before Viking River Cruises was decided cannot be a basis for waiver. Plaintiff mentions no action or inaction after Viking River Cruises was decided, so she has not met her burden of proving waiver of the right to compel arbitration. (See St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195 [party arguing waiver bears burden of proof].)
VI. Further Proceedings
Under both the Federal Arbitration Act and the California Arbitration Act, this case must be stayed until the completion of Plaintiff’s arbitration. (9 U.S.C. § 3; CCP § 1281.4.)
In addition to the stay, Defendants ask the Court to dismiss the representative portion of Plaintiff’s 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 claims 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 Plaintiff hasn’t suffered any of the Labor Code violations complained of, meaning Plaintiff lacks 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 Plaintiff’s arbitration concludes.