Judge: William D. Claster, Case: 21-01233089, Date: 2022-12-02 Tentative Ruling
1. Defendants Zov's
Bistro, Inc., Zov's Bistro II, Inc., Zov's Enterprises, Inc., and Armen
Karamardian's Notice of Motion and Motion to Compel Arbitration and Dismiss
PAGA Representation ROA 44
2. Status Conference
The Court continued Defendants Zov’s Bistro, Inc.; Zov’s Bistro II, Inc.; Zov’s Enterprises, Inc. (collectively “Zov’s” unless their separate identity is relevant) and Armen Karamardian’s motion to compel arbitration to permit additional briefing on the issue of the alleged 2019 arbitration agreement between Zov’s Bistro II and Plaintiff Natalio Cervantes. Upon review of the supplemental briefing, the Court orders as follows:
GROUNDS FOR RULING
I. Prior Proceedings
The Court previously concluded that Zov’s had not proven a meeting of the minds with respect to an alleged 2018 arbitration agreement with Cervantes. The Court invited supplemental briefing regarding an alleged 2019 agreement. Zov’s produced a copy of the second page of this agreement in response to Cervantes’ statutory demand for his personnel file, but not the first. In prior briefing, Karamardian testified that the first page of the 2019 agreement was missing from Cervantes’ file, but he attached what he claimed to be the first page of the form of agreement used in 2019. The Court noted the footer of the purported form differed from the footer of Cervantes’ signature page, meaning that while Cervantes signed something, he hadn’t signed the form attached to Karamardian’s declaration. Notably, the portion of the agreement defining the scope of arbitrable claims was missing from the signature page.
II. Additional Evidence
Karamardian now testifies that he mistakenly attached the wrong form to his prior declaration. Attached to his supplemental declaration as Exhibit 1 is what he claims to be the entire form actually provided to Cervantes. From the Court’s review, this form matches the signature page actually signed by Cervantes. Cervantes doesn’t offer testimony or argument to the contrary, and he admits he signed the signature page (though he has no specific recollection of doing so). The Court therefore finds a valid arbitration agreement exists. Further, the terms of this agreement cover all claims at issue here, and the agreement includes a class/PAGA waiver.
III. Unconscionability
But the existence of an agreement is a separate question from its enforceability. Cervantes claims the agreement is unconscionable, and thus 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.)
A. Procedural Unconscionability
The Court previously noted a credibility issue with Karamardian’s testimony. The purported 2018 agreement was given to Cervantes in both English and Spanish. Karamardian testified this was pursuant to Zov’s practice of providing documents to employees in both English and their native language. (ROA 40, ¶ 10.) When confronted with the English-only 2019 signature page, Karamardian changed his tune, testifying that Cervantes was fluent in English, so he didn’t require Spanish documents. (ROA 58, ¶ 4.) This contradicted his previous testimony that Zov’s practice was to provide documents in the employee’s native language, as opposed to a language the employee is fluent in. Karamardian now offers yet another version of events. He testifies that Zov’s makes documents available in Spanish to anyone who asks, and that Cervantes never requested a Spanish version. (ROA 77, ¶ 5.)
It appears to the Court that Karamardian has repeatedly changed his description of Zov’s practices to suit whatever most favors Zov’s current line of argument. The Court therefore credits Karamardian’s original testimony, and not his subsequent testimony: Zov’s usual practice is to provide documents to employees in both English and their native language. By giving Cervantes the 2019 agreement only in English, Zov’s acted contrary to its own stated practices.
Given Karamardian’s credibility issues, the Court also credits Cervantes’ testimony about his English fluency (or lack thereof) over Karamardian’s. Specifically, Cervantes testifies, and the Court finds, that Cervantes only speaks rudimentary English (a vocabulary limited to restaurant kitchen terms and the like), and that his ability to read English is even more limited. (ROA 87, ¶ 3.) The Court also credits Cervantes’ testimony that Karamardian himself knew this, because Karamardian only ever spoke to Cervantes in Spanish. (Id., ¶ 5.) That is, not only did Zov’s provide the 2019 agreement in a language Cervantes couldn’t read, Zov’s (through Karamardian) knew Cervantes had only a rudimentary understanding of English. This indicates a “high degree of procedural unconscionability.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85 [high degree of unconscionability when employer knew employees required Spanish translations, but provided relevant terms of agreement in English only].)
The Court also credits Cervantes’ testimony about the circumstances of his execution of the agreement over Karamardian’s testimony to the contrary. That is, the Court finds it more believable that (1) Cervantes was told he had to sign the agreement; (2) Zov’s never told Cervantes he could ask questions about the content of the agreement, take a copy home to review before signing, etc.; and (3) the agreement was presented in a take-it-or-leave-it fashion as a condition of employment.
Taking all of this together, the Court finds a very high degree of procedural unconscionability.
B. Substantive Unconscionability
Because there are multiple areas of procedural unconscionability, “even a relatively low degree of substantive unconscionability may suffice to render the agreement unenforceable.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 130.) Here, Cervantes identifies three areas of perceived substantive unconscionability.
First, he contends the arbitration agreement, like the one in OTO, fails to provide a procedure equivalent to a Berman hearing under Labor Code §§ 98 et seq. Cervantes’ claims include claims for unpaid wages that could be brought in a Berman hearing. The 2019 arbitration agreement contains no carve-out for Berman proceedings before the DLSE. “[W]hile the waiver of Berman procedures does not in itself render an arbitration agreement unconscionable, the agreement must provide in exchange an accessible and affordable forum for resolving wage disputes.” (OTO, supra, 8 Cal.5th at pp. 133-134 [emphasis original].) Cervantes persuasively argues the 2019 agreement, like the one in OTO, lacks a suitable equivalent to Berman proceedings. For the reasons set forth in Cervantes’ papers, the Court agrees.
Second, he contends that the agreement requires him to bear costs not required if he were to litigate in court. (Cf. Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 110-111 [“[W]hen an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.”].) Cervantes is correct. The 2019 agreement does not require the employer to pay the arbitrator’s fee. Rather, it provides that CCP § 1280 et seq. governs the arbitration. As a result, CCP § 1284.2’s default rule that the parties split the arbitrator’s fee applies. In his original declaration, Karamardian states that Zov’s will cover the arbitrator’s fees, but “[n]o existing rule of contract law permits a party to resuscitate a legally defective contract merely by offering to change it.” (O’Hare v. Municipal Resource Consultants (2003) 107 Cal.App.4th 267, 180 [employer’s subsequent offer to bear costs unique to arbitration did not cure substantive unconscionability].)
Third, he contends the agreement for individual arbitration is illusory and one-sided. The agreement provides, “I and the Company agree to utilize binding individual arbitration as the sole and exclusive means to resolve all disputes that may arise out of or be related in any way to my employment.” But it goes on, “Both I and the Company agree that any claim, dispute, and/or controversy that I may have against the Company (or its owners, directors, officers, managers, employees, or agents), or the Company may have against me, shall be submitted to and determined exclusively by binding arbitration.” That is, under the arbitration agreement, Cervantes must pursue all relevant defendants in a single proceeding. Here, that means Zov’s Bistro, Zov’s Bistro II, and Zov’s Enterprises can pool their resources to arbitrate against Cervantes, but Cervantes cannot pool his resources with any other employee. The Court agrees. The agreement unconscionably allows Zov’s and its employees to band together in defense without allowing employees to band together in prosecution.
C. Severance
The 2019 agreement has both (1) a high degree of procedural unconscionability and (2) three substantively unconscionable terms. Two of these terms—the lack of a Berman proceeding equivalent and the requirement that the parties split the arbitrator’s fees—“can only be remedied by rewriting the parties’ agreement to arbitrate,” which the Court cannot do. (Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277, 292.) Furthermore, the presence of multiple unconscionable terms weighs against severance even if the terms were all severable. (Ibid.)
D. Conclusion on Enforceability
For these reasons, the Court finds the 2019 agreement unenforceable. Because the Court previously found Zov’s had failed to prove a meeting of the minds vis-à-vis the alleged 2018 agreement, the motion to compel arbitration is denied as to Cervantes.
IV. Further Proceedings
For the reasons set forth in the Court’s original tentative ruling, the motion to compel is granted with respect to Cruz, but the arbitration of his wage-and-hour, UCL, and PAGA claims will be stayed pending the completion of Cervantes’ proceedings in this Court. The stay does not extend to Cruz’s FEHA claims, which are unrelated to Cervantes’ claims.