Judge Yolanda Orozco, Case 22STCV08126 2022-10-10 Tentative Ruling

Judge: Yolanda Orozco, Case: 22STCV08126, Date: 2022-10-10 Tentative Ruling

Case Number: 22STCV08126 Hearing Date: October 10, 2022 Dept: 31

MOTION TO COMPEL ARBITRATION IS GRANTED

Background

on March 07, 2022, Plaintiff Sheila Atanos filed a Complaint against Zenith Insurance Company; Lori Granato (collectively Defendants), and Does 1 to 50. The Complaint alleges:

1) FAILURE TO PROVIDE MEAL BREAKS;

2) FAILURE TO PROVIDE REST BREAKS;

3) FAILURE TO PAY WAGES;

4) FAILURE TO PAY OVERTIME;

5) FAILURE TO PROVIDE ACCURATE ITEMIZED WAGE STATEMENTS;

6) VIOLATION OF BUSINESS & PROFESSIONS CODE §17200-17208;

7) MEDICAL DISCRIMINATION IN VIOLATION OF THE FAIR EMPLOYMENT AND HOUSING ACT;

8) AGE DISCRIMINATION IN VIOLATION OF THE FAIR EMPLOYMENT AND HOUSING ACT;

9) RETALIATION IN VIOLATION OF THE FAIR EMPLOYMENT AND HOUSING ACT;

10) FAILURE TO PREVENT DISCRIMINATION AND HARASSMENT;

11) FAILURE TO ACCOMMODATE;

12) FAILURE TO ENGAGE IN THE INTERACTIVE PROCESS OF ACCOMMODATION;

13) HOSTILE WORK ENVIRONMENT IN VIOLATION OF THE FAIR EMPLOYMENT AND HOUSING ACT;

14) INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS;

15) RETALIATION IN VIOLATION OF LABOR CODE § 1102.5;

16) WRONGFUL TERMINATION IN VIOLATION OF FAIR EMPLOYMENT AND HOUSING ACT AND PUBLIC POLICY.

On May 23, 2022, Defendants moved to compel arbitration.

On June 21, 2022, Plaintiff filed opposing papers.

On June 28, 2022, Defendants filed a Reply.

Legal Standard

Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿ (CCP § 1281.2; see also Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.)

A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-57.)¿

“If a court of competent jurisdiction . . . has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (CCP § 1281.4.)

Discussion

Defendants request an Order (1) compelling Plaintiff to submit her claims to arbitration, (2) staying the action, or (3) dismissing the action without prejudice or in the alternative, the action in its entirety pending arbitration.

Existence of an Agreement

Defendants assert that a valid arbitration agreement exists between the Parties that encompasses all of Plaintiff’s claims against Defendants.

On or about April 07, 2021, Zenith mailed Plaintiff an arbitration agreement (“Agreement”) with a pre-labeled, postage-paid, U.S. Mail return envelope. (Campbell Decl. ¶ 4.) Plaintiff signed and returned the Agreement on April 12, 2021. (Lloyd Decl. Ex. B [“MUTUAL ARBITRATION AGREEMENT”].)

It is undisputed that the Agreement covers all of Plaintiff’s claims against Defendants. Under the sections “CLAIMS COVERED” claims for discrimination, harassment, retaliation, unfair competition, wage claims, and meal and rest period violations are covered under the Agreement. (Lloyd Decl. Ex. B.) The Agreement states that the American Arbitration Association (“AAA”) rules govern the Agreement, and it specifies where the AAA rules may be found and accessed.

Defendants assert that Federal Arbitration Act (“FAA”) governs the agreement because Zenith interacts in interstate commerce by transacting business with insurance policyholders and beneficiaries across the United States and has offices in other States as well. (Park Decl. ¶ 3.) More importantly, the Agreement itself states that the FAA governs the Agreement. (Lloyd Decl. Ex. B.)

Moreover, the Agreement covers disputes not just with Defendant as an entity, but to any disputes with Zenith’s officers, directors, members, owners, shareholders, or employees, including Defendant Lori Granato. (Lloyd Decl. ¶ 5, Ex. B.)

Therefore, the Court finds that the Defendants have met their burden of proving the existence of an Arbitration Agreement. Next, the Court assesses the validity of the Agreement.

Validity of the Agreement

Plaintiff does not dispute that the Agreement exits or that she signed the Agreement but asserts it was procured as a condition of Plaintiff’s employment and through economic duress and is thus, invalid. Plaintiff also argues the agreement is unconscionable.

Plaintiff asserts that she began working for Defendants on or about January 20, 2020. After having made complaints to Zenith’s Employee Assistance Program regarding her mistreatment by other Zenith employees, Plaintiff was asked to sign the Agreement. (Atanos Decl. ¶¶ 1, 5.)

Plaintiff asserts that on or about April 01, 2021, Zenith’s legal department emailed Plaintiff the Agreement and required Plaintiff to sign the Agreement to continue working with Zenith. (Id. ¶ 6.) On April 7, 2021, Zenith’s Senior Vice President and Deputy General Counsel, David C. Park, again contacted Plaintiff by sending her a letter demanding she sign the Agreement. (Id. ¶ 7, Ex. A.) The letter stated, in the relevant part, states:

“This past week, I sent you an email regarding the need for you to sign an Arbitration Agreement. . . This important agreement is a condition of employment and applies to all employees so please give it your immediate attention.”

(Id.)

Given that the letter was mailed by Zenith Senior Vice President and General Counsel, Plaintiff asserts she felt she had no choice but to sign the Agreement to keep her job. (Atanos Decl. ¶ 8.) Plaintiff asserts that no other employees or the Human Resource Department ever reached out to Plaintiff regarding the Agreement apart from Zenith’s legal department. (Id. ¶ 9.) Moreover, Plaintiff asserts that no one at Zenith ever explained the Agreement or its contents to Plaintiff. (Id. ¶ 10.)

Defendants assert that from January 20202 through March 2021, Zenith did not implement arbitration agreements for its employees in California, and started doing so in or about April 07, 2021. (Park Decl. ¶ 7, Campbell Decl. ¶ 4.) Zenith asserts there is no record of Plaintiff ever asking questions about or making comments regarding the Agreement (Park Decl. ¶ 20, Lloyd Decl. ¶ 4, Campbell Decl. ¶ 4.)

Validity of the Agreement

a. Economic Duress

Arbitration agreements are not invalid merely because they are imposed as a condition of employment.¿ (See Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1122.) Numerous California courts have found that arbitration agreements offered as a condition of employment, even while technically considered contracts of adhesion, are an “inevitable fact of life” and are still enforceable unless the degree of substantive unconscionability is high. (Graham v. Scissor-Tail, Inc. (1981) 28 Cal. 3d 807, 817–19; Serpa v. Cal. Surety Investigations, Inc. (2013) 215 Cal. App. 4th 695, 704 (even contracts offered to employees on a wholly “take it or leave it” basis will be enforced “unless the degree of substantive unconscionability is high.”)

Secondly, Plaintiff bears the burden of proving economic duress by a preponderance of the evidence. (See In re Marriage of Balcof (2006) 141 Cal.App.4th 1509, 1523.) Plaintiff has not shown that she had no reasonable alternative such as not being able to obtain employment elsewhere as an accountant. (See Crosstalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 644 [“When a party pleads economic duress, that party must have had no “reasonable alternative” to the action it now seeks to avoid (generally, agreeing to a contract). If a reasonable alternative was available, and there was no compelling necessity to submit to the coercive demands, economic duress cannot be established.].) Therefore, the fact that signing the Agreement was a condition of employment is not sufficient evidence to prove economic duress or that she had no meaningful choice. (See San Diego Hospice v. County of San Diego (1995) 31 Cal.App.4th 1048, 1058 [“the courts, in desiring to protect the freedom of contracts and to accord finality to a privately negotiated dispute resolution, are reluctant to set aside settlements and will apply “economic duress” only in limited circumstances and as a ‘last resort.’”].)

b. Lack of Contract Formation

There are no facts before the Court to show that Plaintiff lacked sufficient time to read or understand the Agreement or that Plaintiff was prevented from asking questions about the Agreement. Moreover, Plaintiff does not allege that she did not understand what she was signing. Therefore, the fact that Plaintiff felt obligated to sign the Agreement does not evidence that there was a lack of contract formation.

c. Preemption of Labor Code Section 432.6

Since Plaintiff has not rebutted the presumption that the FAA governs the agreement, Labor Code section 432.6 is preempted. (See Chamber of Com. of U.S. v. Bonta (9th Cir. 2021). 13 F.4th 766, 779 [“[n]othing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act,” and therefore that statute “in no way affects the validity and enforceability” of agreements, even if they include arbitration provisions as a condition of employment.].)

Unconscionability

Plaintiff also argues the Agreement is invalid due to unconscionability. Plaintiff asserts the agreement is unconscionable and is thus invalid. A showing of unconscionability requires Aa showing of procedural and substantive unconscionability.¿¿Procedural unconscionability asks whether there is oppression from unequal bargaining power or surprise from buried terms.¿¿(Armendariz v. Foundation Health¿(2000) 24 Cal.4th 83, 114.) Substantive unconscionability asks whether there are overly harsh, one-sided terms.¿(Id.) Both are required to be proven to find unconscionability.¿However, there is a sliding scale; if an agreement is particularly substantively unconscionable, the petitioner need not show a large amount of procedural unconscionability, and vice versa. (Id.) “The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC¿(2012) 55 Cal.4th 223, 236.

a. Procedural Unconscionability

Plaintiff argues that because she was never given the opportunity to negotiate the terms of the Agreement and because signing the Agreement was a condition of employment, the Agreement is procedurally unconscionable.

Although agreeing to arbitration as a condition of employment may be evidence of some procedural unconscionability, it is not so procedurally unconscionable as to make the Agreement void. Arbitration agreements as a condition of employment are a “fact of life.” First, Plaintiff did not lack meaningful choice because she could have found employment elsewhere. Moreover, the Agreement was mailed to Plaintiff, and she was given the opportunity to read and sign the Agreement in her home, rather than in her place of employment where she may have felt additional pressure to sign it. Plaintiff was also not precluded from asking questions about the Agreement nor from asking for confirmation that she would indeed be fired if she did not sign the Agreement.

Accordingly, there is only a minimal showing of procedural unconscionability.

b. Substantive Unconscionability

Plaintiff argues that the Agreement is substantively unconscionable because it limits discovery and bars representative and collective enforcement actions.

The Agreement provides, in the section titled “DISCOVERY AND SUBPOENAS”, that the parties may take the deposition of two individual fact witnesses and any expert witness designated by another party and may propound request for production of documents and (5) interrogatory requests from the other party. (Lloyd Decl. Ex. B.) Each party may also subpoena witnesses and documents for discovery, or the arbitration hearing, and the parties may mutually agree to additional discovery. (Id.) Lastly, the arbitrator will have exclusive authority to entertain requests for additional discovery and to grant or deny such requests. (Id.)

The parties to an arbitration agreement are permitted to agree to something less than the full panoply of discovery.¿ (Armendariz, supra, (2000) 24 Cal.4th 83, 104-105.) Arbitration is designed to be streamlined and “limitations on discovery, including the number of depositions, is one of the ways streamlining is achieved.” (Dotson v. Amgen, Inc., 181 Cal. App. 4th 975, 983). The Armendariz Court held that the parties are entitled to “adequate” discovery to vindicate their claims but acknowledged that discovery limitations are an essential and permissible part of the streamlined arbitration process. (Id. (citing Armendariz, 24 Cal. 4th at 105-06). Indeed, “adequate” discovery does not mean “unfettered” discovery, and the parties’ agreement may choose to require “something less than the full panoply of discovery provided in [California Code of Civil Procedure] section 1283.05.” (Mercuro v. Superior Ct. (2002) 96 Cal. App. 4th 167, 984 (citing Armendariz, 24 Cal. 4th at 105-06). Further, a provision that delegates broad discretion and control to the arbitrator to permit or deny discovery is permissible and not unconscionable. (Id., see also Roman v. Superior Court, 172 Cal. App. 4th 1462, 1476.)

Lastly, Plaintiff’s assertion that representative and class action waivers are evidence of unconscionability is meritless given Plaintiff’s reliance on Iskanian v. CLS Transportation (2014) 59 Cal. 4th 348 which has for the most part been abrogated by Viking River Cruises, Inc. v. Moriana 596 U.S. ___(2022).

Thus, Plaintiff has failed to show that the Agreement is substantively unconscionable.

Defendants have proven that a valid and enforceable Agreement exists.

Arbitrability Clause

The Agreement contains an Arbitrability Clause that states:

“The Arbitrator, and not any federal, state, or local or agency shall have exclusive authority to resolve any dispute relating to the validity, applicability, enforceability, or waiver of the Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable.”

(Lloyd Decl. Ex. B.)

“Parties to an arbitration agreement may agree to delegate to the arbitrator, instead of a court, questions regarding the enforceability of the agreement. [Citation.] They ‘can agree to arbitrate almost any dispute—even a dispute over whether the underlying dispute is subject to arbitration.’ [Citation.]” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 241.) “There are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. [Citation.] Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.” (Id. at p. 242.)

The Court finds the Arbitrability Clause in the Agreement to be clear and unmistakable. For this reason, any questions regarding the applicability of the Agreement post-signing, retroactivity, and applicability to UCL, IIED, and Labor Code § 1102.5 claims are for the arbitrator to decide.

For all the stated reasons, the Motion is GRANTED.

Conclusion

Defendants’ Motion to Compel Arbitration and Stay the Action is GRANTED.

The Court expects the parties to expeditiously schedule and complete the arbitration. The Court sets a Status Conference on June 1, 2023, at 9 a.m. at which time the parties are to report on their progress.

Defendants to give notice.

The parties are strongly encouraged to attend all scheduled hearings virtually or by audio. Effective July 20, 2020, all matters will be scheduled virtually and/or with audio through the Court’s LACourtConnect technology. The parties are strongly encouraged to use LACourtConnect for all their matters. All social distancing protocols will be observed at the Courthouse and in the courtrooms.