Judge William D. Claster, Case 22-01292683 2023-08-25 Tentative Ruling

Judge: William D. Claster, Case: 22-01292683, Date: 2023-08-25 Tentative Ruling

1. Defendants Sage Apartment Communities and Investment Property Group UT, Inc.'s Notice of Motion and Motion to Compel Arbitration and Stay Proceedings ROA 26

2. Case Management Conference

The Court has reviewed the parties’ supplemental briefing filed in response to the prior minute order. Defendants’ motion to compel arbitration is GRANTED. Plaintiff Blanca I. Jauregui’s individual PAGA claim is compelled to arbitration, and the representative portion of that claim is stayed pending completion of arbitration.

Plaintiff’s evidentiary objections are OVERRULED. At the hearing, the parties should be prepared to discuss whether the companion class action, No. 22-01259919, must be stayed under CCP § 1281.4.

An arbitration review conference is scheduled for April 30, 2024 at 8:30 a.m. in Department CX-101.

GROUNDS FOR RULING

I. Prior Briefing

Defendants moved to compel individual arbitration in of Plaintiff’s claims. The Court tentatively concluded that based on the then-current record, Defendants had not met their burden of proving the existence of an agreement by the preponderance of the evidence. (Specifically, Defendants could not authenticate Plaintiff’s wet-ink signature, and Plaintiff testified she had no recollection of signing an agreement.) At Defendants’ request, the Court continued the motion to permit discovery regarding formation of the agreement.

II. New Evidence

As discussed in the prior minute order, Defendants met their step one burden under Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, and Plaintiff met her shifted step two burden. This shifts the burden back to Defendants to prove the existence of an arbitration agreement by preponderance of the evidence.

Defendants’ new evidence meets this burden. Laura Rivera, Defendants’ director of operations, testifies that she gave the onboarding paperwork to Plaintiff and was in the room when Plaintiff signed it. Were that not enough, Plaintiff admitted at deposition that the signature on the agreement is hers, though she maintained she had no recollection of signing it. (McClain-Sewer Decl., Ex. G-2, at pp. 31:9-13, 32:21-25.) The Court finds Defendants have proven the existence of an agreement to arbitrate by preponderance of the evidence, specifically the agreement attached to the Cervantes Declaration as Exhibit A.

III. Acknowledgment vs. Agreement

Plaintiff raises a separate argument against formation: even if she signed the document, it isn’t an agreement to arbitrate, but a mere acknowledgement that she received employer policies. Under California law cited by Plaintiff, a mere acknowledgment of receipt of policies is not enough to show an agreement to arbitrate.

This argument cannot be reconciled with the text of the agreement, which provides (emphasis original): “MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I HAVE READ, UNDERSTAND, AND AGREED TO BE LEGALLY BOUND TO ALL OF THE ABOVE TERMS.” (Cervantes Decl., Ex. A, at p. 3.) The agreement states in boldface capital letters that Plaintiff agrees to be legally bound by it. This is an agreement to arbitrate, not an acknowledgment of receipt of an arbitration policy.

IV. Unconscionability

Plaintiff contends the agreement is both procedurally and substantively unconscionable. “‘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.’” (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114.)

The agreement is procedurally unconscionable. On the first page, it provides the consideration for the agreement to arbitrate is Plaintiff’s employment with the company. (Cervantes Decl., Ex. A, at p. 1.) Mandatory arbitration as a condition of employment is procedurally unconscionable.

On the other hand, there is no substantive unconscionability. Plaintiff argues in her original opposition that non-mutuality is substantively unconscionable, that the extent of non-mutuality here “shocks the conscience,” and that severance of pervasive non-mutual terms is impossible. But she never identifies any term she contends is non-mutual. To the contrary, the agreement provides arbitration will be used “to resolve all disputes that may arise out of the employment context,” including claims “that either Employee may have against the Company . . . or the Company may have against Employee.” (Ibid.) Because there is no substantive unconscionability, unconscionability is not grounds to avoid enforcement of the agreement.

V. Scope of Agreement, Future Proceedings

The agreement covers “any claim . . . that Employee may have against the Company,” including “all disputes . . . based on . . . statute.” (Ibid.) This covers PAGA claims brought under the California Labor Code.

This leaves the question of how arbitration will proceed. The notice of motion is silent on whether Defendants seek individual-only arbitration, but the proposed orders (filed in both April and August) state that Defendants seek to compel individual arbitration of the PAGA claim. Likewise, Defendants’ supplemental brief concludes with the following statement: “Given the Court’s ruling in Adolph v. Uber Technologies, Inc. 2023 WL 4553702, Defendants are seeking to compel Plaintiff’s individual PAGA claim into arbitration. Defendants understand that California courts have ruled that Plaintiff maintains standing to bring a representative action in court. Thus, Defendants request that the PAGA claim be stayed pending the outcome of the arbitration.” (ROA 57, p. 5)

In her supplemental filing, Plaintiff notes the class/collective/representative waiver carves out PAGA entirely. It provides: “The Parties waive any right to pursue claims in arbitration (or any other forum) on a class basis, as a collective action, or as a representative action, with the exception of a claim brought under the California Private Attorney General Act of 2005 (Cal. Lab. Code Section 2698).” (Ibid.)

As the Court reads the waiver, it completely carves out PAGA claims. That is, Plaintiff does not agree to waive representative PAGA claims “to the extent permitted by applicable law” (in which case Viking River Cruises and Adolph might apply, with the individual PAGA claim sent to arbitration and the representative PAGA claim stayed). Because the arbitration waiver doesn’t apply to PAGA claims, Plaintiff argues that the entire case must be sent to the arbitrator, both individual and representative components.

Plaintiff’s argument runs headlong into the holdings in Iskanian v. CLS Transportation Los Angeles (2014) 59 Cal. 4^th 348, Tanguilig v. Bloomingdale’s, Inc. (2026) 5 Cal. App. 5^th 665, 677 and other cases to the effect that because the State (through the LWDA) is the real party in interest in a PAGA suit, a private agreement to arbitrate is not enforceable. While Viking River Cruises v. Mariana (2022) 142 S. Ct. 1906 modified this rule by allowing arbitration of the individual portion of the PAGA claim when the arbitration agreement is subject to the FAA, neither that case nor Adolph v. Uber Technologies allows for arbitration of the representative portion of a PAGA claim without the agreement of the LWDA.

Here, the above-quoted section of Defendants’ supplemental brief essentially makes this argument, although a detailed analysis is lacking. Nevertheless, given the LWDA’s status as the real party in interest, and because section 1 of the arbitration agreement provides that it is governed by the FAA, the Court applies the Viking River analysis and orders arbitration limited to Plaintiff’s individual PAGA claim, and stays the representative portion until the individual arbitration is completed.