Judge: William D. Claster, Case: 22-01252797, Date: 2022-09-16 Tentative Ruling
1. Defendant Fitness 19
CA 274, LLC's Notice of Motion and Motion to Compel Individual Arbitration,
Strike Putative Class Claims and Stay or Dismiss the Action Pending
Individual Arbitration ROA 19
2. Defendants FITNESS 19 Entities' Notice of Joinder in Defendant Fitness 19
CA 274, LLC's Motion to Compel Arbitration ROA 164
3. Status Conference
Defendant Fitness 19 CA 274, LLC moves for an order (1) requiring Plaintiffs Patrick Geibe and Teddy De Carlo to submit their claims to binding individual arbitration; (2) dismissing Plaintiffs’ class claims without prejudice; (3) dismissing Plaintiffs’ PAGA claim, and (4) staying proceedings pending the outcome of arbitration. Numerous related defendants have filed a joinder in the motion. (The Court refers to all defendants as “Fitness 19” unless their separate corporate identities are relevant.)
The Court rules as follows:
EVIDENTIARY MATTERS
Fitness 19 has filed numerous evidentiary objections. (ROA 173.)
As to the Geibe Declaration, objection No. 5 is SUSTAINED on grounds of foundation. Objection No. 7 is SUSTAINED on grounds of speculation. All other objections are OVERRULED.
As to the Whitehead Declaration, objection No. 8 is SUSTAINED on grounds of hearsay. Objections No. 10 and 15 are SUSTAINED on the grounds that the rough transcript is inadmissible. (The Court notes that page two of the rough transcript specifically states it can’t be cited in court.) All other objections are OVERRULED.
Separately from these formal objections, Plaintiffs argue in their opposition papers that Fitness 19 manager Monica Ramirez’s testimony is hearsay insofar as Ramirez relates the statements of Fitness 19 employee Samantha Valdez. The Court agrees that Ramirez’s testimony about what Valdez supposedly saw and said is hearsay not within any exception. The Court has not considered Ramirez’s testimony about what Valdez told her.
GROUNDS FOR RULING
I. Procedural Background
This matter involves employees of the Fitness 19 chain of health clubs. Plaintiffs, who worked at Fitness 19’s Huntington Beach location, originally filed class and PAGA claims against Fitness 19 CA 274, LLC. Rather than answer the complaint, Fitness 19 CA 274 moved to compel arbitration. Plaintiffs did not oppose the motion. Instead, they filed a FAC, which added over 50 new defendants. The FAC alleges that the parent of the Fitness 19 chain is new defendant F-19 Holdings, LLC, and that each location of Fitness 19 is separately organized. Fitness 19 CA 274 is the LLC that owns and operates the Huntington Beach location; the other new defendants are the other Fitness 19 locations in California.
The Court originally indicated an intent to grant Fitness 19 CA 274’s motion, which was unopposed. At the hearing, counsel for Plaintiffs explained that he had mistakenly believed the filing of the FAC would moot the motion to compel arbitration. He asked for the opportunity to take discovery on the issue of contract formation and to submit supplemental briefing. The Court granted this request and continued the hearing. The parties took discovery, and both sides have filed supplemental briefing. In addition, as noted above, the new Fitness 19 defendants have filed a joinder in Fitness 19 CA 274’s motion.
II. Contract Formation
“Because the existence of the [arbitration] agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) Plaintiffs contend Fitness 19 has failed to prove the existence of a valid arbitration agreement.
A. Plaintiff De Carlo’s Agreement
As an initial matter, page 7, lines 27-28 of Plaintiffs’ opposition references the “declarations [sic] of Ms. Ramirez and the countervailing declarations of Mr. De Carlo [and] Mr. Whitehead.” The record contains no declaration from De Carlo, who confirmed at his deposition that he did not include a declaration with Plaintiffs’ opposition. (See Brody Decl. (included in ROA 174), Ex. I, at p. 32.)
1. Ramirez’s Testimony
Monica Ramirez is the manager of Fitness 19’s Huntington Beach location, where De Carlo worked. (Supp. Ramirez Decl. (included in ROA 174), ¶ 2.) She is responsible for overseeing the onboarding process. (Ibid.) She meets with each new hire to go over onboarding documents. (Id., ¶ 3.) Every new hire at Fitness 19 is required to review and physically sign onboarding documents. A new hire cannot begin employment unless the onboarding documents are physically signed. (Ibid.)
Ramirez testified as follows: she met with De Carlo in person in her office to onboard him. (Id., ¶ 5.) She was physically present with him at the time he reviewed the onboarding documents. She observed him sign all of the onboarding documents by hand. (Id., ¶ 6.) She personally countersigned the documents that had to be signed by Fitness 19 management. (Ibid.) She specifically observed De Carlo review and sign the arbitration agreement. (Id., ¶ 10.) A copy of De Carlo’s entire personnel file, as maintained in Fitness 19’s records, is attached to her declaration as Exhibit A. Exhibits B-D are several documents excerpted from the personnel file that she observed De Carlo sign. Exhibit E, also excerpted from the personnel file, is the arbitration agreement signed by De Carlo.
Defendants argue in their supplemental brief that the signature on Exhibits B-D looks substantially identical to the signature on Exhibit E, the purported arbitration agreement.
2. Whitehead’s Testimony
Attorney Jacob Whitehead is Plaintiffs’ counsel. He testifies as follows: On or about February 19, 2021, De Carlo retained Whitehead to represent him. (Whitehead Decl. (ROA 153), ¶ 5.) De Carlo signed an engagement letter about that date, along with an authorization for the release of personnel records. These documents are attached to Whitehead’s declaration as Exhibit 1. Whitehead sent Defendants a copy of the authorization along with a demand for production of De Carlo’s personnel file. A copy of that letter is attached to Whitehead’s declaration as Exhibit 3.
Plaintiffs argue De Carlo’s signature on the retention letter and records authorization looks nothing like his alleged signature on the arbitration agreement or the other paper documents. They take the position that De Carlo signed none of the onboarding documents.
The Court notes that Exhibit 1 to Whitehead’s declaration includes an “Audit Trail” for what appears to be an electronic signature program. It states that De Carlo submitted an e-signature on February 20, 2021, a day after someone with the email address mhigday@jnwpc.com, a domain address that matches Whitehead’s firm, sent the letter to both De Carlo (at his gmail.com address) and Whitehead (at his jnwpc.com address).
3. De Carlo’s Testimony
While De Carlo never submitted a declaration, Defendants were able to take his deposition. Certified transcript excerpts are attached to the Brody Declaration as Exhibit I. De Carlo testified that at the time he worked for Fitness 19, he lived at 3099 West Chapman in Orange. (De Carlo Depo., pp. 15-16.) This matches the address listed on De Carlo’s W-4 and criminal background check form. (Supp. Ramirez Decl., Exs. B, C.) De Carlo also testified, however, that he was given no documents at onboarding, and that although his signature is allegedly on the arbitration agreement, he didn’t sign it. (De Carlo Depo., pp. 25-26.) When asked if anyone could have signed the arbitration agreement in his place, he replied, “It could have been anyone.” (Id., p. 35.) Finally, with regard to his signature on the engagement letter, De Carlo testified that he indeed signed the document electronically. More specifically, he signed it with his finger. (Id., p. 39.)
4. Discussion
Considering all of the above, the Court finds by a preponderance of the evidence that De Carlo signed the arbitration agreement, a signed copy of which is attached to the Supplemental Ramirez Declaration.
Ramirez, the manager, testified that Fitness 19, as a matter of policy, requires all employees to fill out onboarding documents before they begin work, and she stated that she personally saw him sign the arbitration agreement. De Carlo doesn’t simply contradict this and testify that he didn’t sign the arbitration agreement. He claims he signed nothing at onboarding. This blanket testimony raises more questions then it answers. For example, if De Carlo didn’t sign anything, then he didn’t sign a W-4. How would Fitness 19 know how to process his withholding on his first paycheck without one?
Plaintiffs’ signature comparison argument falls apart with De Carlo’s admission that he e-signed the engagement letter with his finger. A signature made with a pen in hand cannot be compared to a signature made with a finger, particularly when the former is a wet-ink signature and the latter is an e-signature.
In addition, the way the argument was presented implicates counsel’s duty of candor to the Court. The “Audit Trail” shows that someone from Whitehead’s firm emailed both Whitehead and De Carlo, asking them both to e-sign the engagement letter. This strongly suggests Whitehead knew all along that De Carlo was e-signing the agreement rather than signing it in wet ink. Because Plaintiffs’ argument depends on a comparison between the engagement letter and the arbitration agreement, Whitehead’s should have informed the Court that De Carlo used an e-signature instead of a wet-ink signature on the engagement letter.
B. Plaintiff Geibe’s Agreement
1. Ramirez’s Testimony
Ramirez’s original declaration (ROA 22) discusses the Geibe agreement. Ramirez stated that she met with Geibe in person in her office to onboard him. (Id., ¶ 10.) She personally observed Geibe sign the arbitration agreement. A copy of the form of arbitration agreement Geibe signed is attached to the original Ramirez Declaration as Ex. D. As to why Fitness 19 can’t provide a signed copy of Geibe’s agreement, Ramirez has a further explanation.
Ramirez is also the custodian of records for the Huntington Beach location. She maintains current and former employees’ personnel files in the regular course of business. They are kept in her office in a locked drawer. (Id., ¶ 14.) Roughly a week and four days after Geibe’s resignation, Ramirez left her office to run a brief errand. Contrary to her usual practice, she left the drawer unlocked. Upon returning to work, she observed Geibe in the parking lot, holding a folded stack of papers. Upon entering her office, Ramirez saw an empty manila folder on her desk labeled “Patrick Geibe.” Since that day, Ramirez has been unable to locate Geibe’s personnel file or his signed arbitration agreement. (Id., ¶ 16. Again, the Court has not considered the hearsay statements of Samantha Valdez.)
Ramirez was deposed by Plaintiffs. While Plaintiffs’ use of a rough transcript was improper, Fitness 19 has included certified excerpts of Ramirez’s deposition, attached to the Brody Declaration as Ex. G. Ramirez testifies that “Patrick’s hiring package” was missing from her desk when she got back to her office. (Ramirez Depo., at p. 30.) Ramirez immediately called her district manager; Fitness 19 does not refer matters like this to the police. (Id., at p. 31.) Ramirez also testified that when she was in the parking lot returning from her errand, she crossed paths with Geibe. As she pulled into the parking lot, he was walking outside the gym. She saw him holding a stack of white sheets of paper folded in half in his hand. (Id., at pp. 31-32.)
2. Whitehead’s Testimony
Whitehead’s declaration addresses a claim from Ramirez’s original declaration: that Geibe’s attorney was present with him when he allegedly stole the file. This claim was based on the hearsay statements of Valdez, so the Court has not considered it in ruling on this motion. In any event, Whitehead specifically denies ever visiting the Huntington Beach location of Fitness 19, or of accompanying Geibe anywhere at any time. (Whitehead Decl., ¶ 9.)
3. Geibe’s Testimony
In a declaration, Geibe testifies as follows: He never saw, let alone signed, an arbitration agreement. (Geibe Decl. (ROA 151), ¶ 3.) He never returned to the Huntington Beach location with his lawyer, entered Ramirez’s office, or stole anything from her office. (Id., ¶ 5.) The only time he ever returned to the Huntington Beach location was to get a copy of his 2020 W-2 for tax purposes. (Id., ¶ 5.)
Geibe was deposed by Defendants. Certified deposition excerpts are attached to the Brody Declaration as Ex. H. Geibe testified that on his first day, he met with Ramirez “to go over and review . . . new hire paperwork.” (Geibe Depo., p. 27.) He specifically denies signing documents. (Id., at p. 28.) Geibe admits being disciplined for making fake accounts to sign up new members, but denies he actually made fake accounts. (Id., at p. 39.) Geibe admits that he went to the Huntington Beach Fitness 19 location and attempted to access a company computer, but was unable to log in. He testifies he was attempting to get a copy of his W-2. (Id., at pp. 43-44.) He says that “Samantha” kicked him out.
Later in his deposition testimony, Geibe contradicts his earlier statement that “As far as I remember, I do not remember signing anything.” (Id., at p. 28.) He admits he signed “the W-2 [sic, the Court assumes Geibe means a W-4],” along with unspecified other documents, and gave them to Ramirez. (Id., at pp. 57-58.)
4. Discussion
Considering all of the above, the Court finds by a preponderance of the evidence that Geibe signed the arbitration agreement, that the form of arbitration agreement he signed is attached to Ramirez’s original declaration, and that the reason Fitness 19 cannot produce a signed copy is because Geibe took his personnel file from Ramirez’s office.
Ramirez testifies to the following: (1) she saw Geibe sign the agreement; (2) roughly a week and four days after Geibe’s employment ended, she saw Geibe in the parking lot with a folded stack of white papers; and (3) when she entered her office immediately thereafter, Geibe’s personnel file was missing from her drawer. Geibe’s testimony confirms he was on the premises, though he denies taking the documents. But Geibe’s credibility is lacking. His testimony about the documents he signed shifted throughout his deposition: first it was no documents, then it was a “W-2” and other unspecified documents, but not an arbitration agreement. The Court credits Ramirez’s testimony and disregards Geibe’s to the extent it is inconsistent with Ramirez’s.
III. Terms of Agreement
Because valid, enforceable arbitration agreements exist, the Court will summarize their terms.
The two agreements at issue are identical. (That is, De Carlo signed the same form agreement as Geibe signed.) At the top is a blank for the number of the specific Fitness 19 branch. De Carlo’s executed copy is filled in with “274.” The agreement defines the specific Fitness 19 branch (here, Fitness 19 CA 274) as “the Company.” It provides: “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.”
The agreement also contains a class/representative action waiver, which provides: “This Binding Arbitration Agreement shall not be construed to allow or permit the consolidation or joinder of other claims or controversies involving any other employees or parties, or permit such claims or controversies to proceed as a class action, collective action or any similar representative action. . . . By signing this Binding Arbitration Agreement, I am agreeing to waive any substantive or procedural rights that I may have to bring an action on a class, collective, representative, or other similar basis.”
IV. Enforceability
Plaintiffs’ sole argument against enforcing the agreements is the alleged lack of contract formation. They do not raise any other arguments against enforcement, such as unconscionability. The agreements are therefore enforceable as to Fitness 19 274.
After this motion was filed, Plaintiffs amended the complaint to add the Fitness 19 parent company and each separate Fitness 19 location in California. Per ¶ 67 of the FAC, “each Defendant[] . . . acted in all respects pertinent to this action as the agent of the other Defendants.” All the new defendants are allegedly agents of Fitness 19 CA 274.
Again, the agreement provides: “Both I and [Fitness 19 CA 274] agree that any claim, dispute, and/or controversy that I may have against [Fitness 19 CA 274] (or its . . . agents) . . . shall be submitted to and determined exclusively by binding arbitration.” Under California law, nonsignatory agents are entitled to the benefit of their principals’ arbitration agreements. (See Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406, 418 [“If, as the complaint alleges, the individual defendants, though not signatories, were acting as agents for the Rams, then they are entitled to the benefit of the arbitration provisions.”].)
Because the arbitration agreement is enforceable as to Fitness 19 CA 274, it is also enforceable as to all of Fitness 19 CA 274’s alleged agents, i.e., all new defendants named in the FAC. Plaintiffs must arbitrate their claims against the new defendants.
V. Further Proceedings
Under CCP § 1281.4, this matter must be stayed until the completion of Plaintiffs’ arbitrations. The arbitration agreement contains a class and representative action waiver. Plaintiffs must arbitrate their non-PAGA claims on an individual basis. The class portion of their claims is dismissed without prejudice.
This motion was filed before the United States Supreme Court decided Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906. Under that case, the representative action waiver is enforceable insofar as the individual portion of Plaintiffs’ PAGA claim can be compelled to arbitration.
This leaves the question of what to do with the representative portion of Plaintiffs’ PAGA claim. Fitness 19 asks the Court to dismiss the PAGA claim wholesale, which Viking River Cruises recognizes would be improper. (See id., at pp. 1924-1925 [citing Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348].) Instead, the Supreme Court chose to send the individual portion of the Plaintiffs’ PAGA claim to arbitration and dismiss the representative portion, reasoning she no longer had statutory standing to pursue the representative portion. (142 S.Ct. 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 Plaintiffs haven’t suffered any of the Labor Code violations complained of, meaning they 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 Fitness 19 raising the issue again when Plaintiffs’ individual arbitrations conclude.