Judge: Yolanda Orozco, Case: 22STCV20414, Date: 2022-08-17 Tentative Ruling
Case Number: 22STCV20414 Hearing Date: August 17, 2022 Dept: 31
MOTION TO COMPEL ARBITRATION IS GRANTED
Background
On July 22, 2022, Defendants moved to Compel Arbitration.
Plaintiff filed Opposition papers on August 04, 2022. Defendants filed a reply
on August 09, 2022.
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.)
Evidentiary Objections
1. Defendants’
Objections to the Declaration of David Forseth
Objection Nos. 1, 2, 7, and 8 are SUSTAINED.
Objection Nos. 3, 6, 9, and 10 are OVERRULED.
2. Defendants’ Objections to the Declaration of Chris Prell
Objection Nos. 11, 12, 14, 16, and 17 are SUSTAINED.
Objection Nos. 13, 15, 18, 19, and 20 are OVERRULED.
3. Defendants’ Objections to the Declaration of Michael Chang
Objection No. 21 is
OVERRULED
Discussion
1. Existence of a Valid Agreement
Defendants assert that a valid arbitration agreement (“Agreement”) exists between Defendants and Plaintiff that states that all of Plaintiff’s causes of action be arbitrated before JAMS. Defendants assert that Plaintiff first executed an Arbitration Agreement on or about May 27, 2015, whereby Plaintiff agreed to arbitrate all disputes between the Parties. (Mot. Ex. A.)
After Plaintiff was rehired after the COVID-19 shutdown, Plaintiff signed another agreement on July 11, 2020, and was given a copy of the referenced JAMS, Inc. arbitration rules. (Garcia Decl. ¶ 4, Ex. B.) Defendants assert that Plaintiff also signed an acknowledgment receipt per the Employee Handbook, which also referenced the Agreement, and an electronic portal that includes access to JAMS rules. (Kull Decl. ¶ 5, Ex. C.)
The preamble of the Agreement states the Parties “agree that any claim, dispute or controversy arising out of or relating to the employment or prospective employment by the Company of Employee which by law may be resolved by arbitration under the Federal Arbitration Act shall be resolved by final and binding arbitration before a neutral arbitrator[.]” (Mot. Ex. B.)
Paragraph 1 of the Agreement states:
“Without limitation of the
foregoing scope of arbitration and for elucidation purposes, claims subject to
arbitration shall include any and all claims for wages, overtime, bonuses, or
other compensation; claims for breach of an express or implied contract or
covenant, including the duty of good faith and fair dealing; tort claims,
including fraud, defamation, malicious prosecution, wrongful discharge,
wrongful arrest/wrongful imprisonment, and intentional/negligent infliction of
emotional distress; statutory or common law claims for unlawful employment discrimination
or harassment (including, without limitation, discrimination or harassment
based on race, color, sex, sexual orientation, religion, national origin,
ancestry, age, marital status, medical condition, handicap, disability,
uniformed service, genetic information, or other unlawful basis); claims for
sexual or other unlawful harassment; claims for violation of federal or state
constitutional rights; claims for benefits (except where the applicable benefit
plan has specified that its claim procedure shall culminate in an arbitration
procedure different from this one) and claims for violation of any federal,
state or other governmental law, statute, regulation, order, ordinance, or
provision, except claims expressly excluded under paragraph 2 of this Agreement.”
(Ex. B at ¶ 1.)
Lastly, Defendants have also presented evidence that “The Lobster”, Plaintiff’s place of employment, engages in interstate commerce such that the FAA governs the Agreement. (Garcia Decl. ¶ 9.)
Plaintiff does not dispute that he signed the 2015 and 2020 Agreements or that the Agreements cover all claims before this Court. Instead, Plaintiff argues that the Agreement is unenforceable because it was signed as a condition of employment and thus under duress and/or is unconscionable.
b. Enforceability of A.B. 51/Labor Code § 432.6
Plaintiff argues that the 2020 Agreement is unenforceable under California Labor Code Section 432.6. Under Labor Code Section 432.6, employers cannot require employees to agree to arbitration agreements for violations of FEHA or the labor code as a condition of employment. The provision applies to employment contracts entered into, modified, or extended on or after January 01, 2020. (Lab. Code. § 432.6(h).) However, under Chamber of Commerce of United States v. Bonta¿(9th Cir. 2021) 13 F.4th 766, Labor Codes Section 432.6 applies to pre-agreement behavior, and a plaintiff can seek remedies under the provision, but the court will not invalidate an arbitration agreement that is otherwise enforceable under the FAA. (Id. at 776 [Section¿432.6¿does not conflict with the FAA because it “does not make invalid or unenforceable any agreement to arbitration, even if such agreement is consummated in violation of the statute.”]; see also Lab. Code § 432.6(f).)
Accordingly, because the Agreements in question are governed by the FAA, they remain enforceable. Even if the 2020 Agreement was unenforceable under Section 432.6, Plaintiff has not presented evidence as to why the 2015 Agreement would not be enforceable.
c.
Arbitration as a Condition of Employment
Plaintiff is incorrect in assuming that because the Agreements were entered into as a condition of employment, they are invalid. 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.”].)
Therefore, Defendants have met their
burden of establishing the existence of a valid Agreement.
2.
Duress and Undue Influence
Plaintiff asserts the Agreement is invalid because it was a product of duress or undue influence.
As to the 2015 Agreement, Plaintiff asserts that Mr. De Nicola explicitly told Plaintiff that signing the document was a condition of employment. (Forseth Decl. ¶ 5 [“I asked Mr. De Nicola if I had to sign the arbitration agreement, and Mr. De Nicola remarked ‘yeah, unless you don't work here anymore. I gotta go.’”].) As to the 2020 Agreement, Plaintiff recalls employees were told they were required to sign the Agreement, return it to Defendants as soon as possible or employees would not get any more scheduled shifts (Forseth Decl. ¶ 8.)
As explained above, the fact that
consent to the Agreement was a condition of employment does not render the
Agreement illegal or invalid, absent a showing of fraud or unconscionability in
the provisions of the Agreement.
In other words, the fact the Agreement was an explicit condition for continued employment is not probative that the Agreement is the product of duress or undue influence. “[T]he compulsory nature of a predispute arbitration agreement does not render the agreement unenforceable on grounds of coercion or lack of voluntariness.” (Legaltree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1129.) Moreover, Plaintiff has not shown that he had no reasonable alternative, meaning that he could not obtain employment elsewhere as a bartender. (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 hence was no compelling necessity to submit to the coercive demands, economic duress cannot be established.].) Here, Plaintiff has failed to articulate sufficient facts to prove the Agreement was entered into under duress.
Undue influence has been described as “persuasion which tends to be coercive in nature, persuasion which overcomes the will without convincing the judgment. [Citation] The hallmark of such persuasion is high pressure, a pressure which works on mental, moral, or emotional weakness to such an extent that it approaches the boundaries of coercion. In this sense, undue influence has been called overpersuasion. [Citation].” (Odorizzi v. Bloomfield School Dist. (1966) 246 Cal.App.2d 123, 130.)
Even though Defendants made signing the Agreement a condition of employment, Plaintiff fails to show that he was a person who had “total weakness of mind which leaves a person entirely without understanding; or, a lessor weakness which destroys the capacity of a person to make a contract even though he is not totally incapacitated.” (Id. at 131.) The fact Plaintiff was a long-time employee is not evidence that he was “unduly susceptible” to Defendants’ domination. (Opp. at 8:1-4.)
The fact there may be some evidence of “overpersuasion” by Defendants does not amount to evidence of undue influence when Plaintiff’s will had not been “over-borne” and he remained free to seek employment elsewhere where arbitration was not a condition of employment. (Id. at 132-133.) Plaintiff admits that because he felt “uncomfortable” signing the 2020 Agreement and “he did not do so right away” until “[s]everal days later” when management reminded Plaintiff the Agreement needed to be signed or else Plaintiff “won’t be getting any more scheduled shifts next week.” (Forseth Decl. ¶ 9.) The fact Plaintiff waited to sign the Agreement, shows he had time to contemplate the Agreement and its implications. Moreover, the facts show that Plaintiff understood that signing the Agreement was a condition of employment. Furthermore, the fact that Defendants made signing the Agreement a condition of employment does not show that the Agreement was the product of undue influence.
Plaintiff’s argument that signing the Agreement is not
evidence of consent, has no merit.
[A] person with capacity of reading and understanding an instrument signs it, he may not, in the absence of fraud, imposition or excusable neglect, avoid its terms on the ground he failed to read it before signing it.” (Bauer v. Jackson (1971) 15 Cal.App.3d 358, 370.) Plaintiff had the capacity to enter into a contract and any failure to take the time to read or learn the terms of the Agreement are due to his own actions and not the Defendants.
Plaintiff does not present any facts to show he did not have the opportunity to take the Agreement home and familiarize himself with the terms. Moreover, the fact that Plaintiff felt “uncomfortable” signing the Agreement is evidence that without even reading the Agreement, he had an inkling of the legal implications of the Agreement. Moreover, there are no facts indicating Plaintiff was prevented from consulting an attorney before signing the Agreement.
Therefore, Plaintiff has failed to show the Agreement was a product of duress or undue influence.
3. Unconscionability
Plaintiff asserts the agreement is unconscionable and is thus invalid. A showing of unconscionability requires procedural and substantive unconscionability.¿¿Procedural unconscionability asks whether there is oppression from unequal bargaining power or surprise from buried terms.¿¿(Armendariz, supra, 24 Cal.4th at 114.) Substantive unconscionability asks whether there are overly harsh, one-sided terms.¿(Id.) Both are required to be proven in order 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
As explained above, the fact that signing the Agreement was a condition of employment does not by itself render the Agreement unconscionable.
An arbitration agreement offered on a “take it or leave it basis” does not render the agreement unenforceable. (See Legaltree, supra, Cal.App.4th at 1127.) “A contract of adhesion is not per se unenforceable. Only when its provisions are unfair does it become unenforceable.” (Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 981.) Plaintiff fails to point out the terms or provisions in the Agreements that render the Agreements unfair, other than the fact that signing the Agreements was a condition of employment.
Second, the fact Plaintiff was not provided with a physical
copy of the JAMS rules, is not sufficient evidence of procedural unconscionability. (See Peng
v. First Republic Bank (2013) 219 Cal. App. 4th 1462, 1472 (“[W]e find the failure to attach the
[arbitration] rules, standing alone, is insufficient grounds to support a
finding of procedural unconscionability.”) Plaintiff’s reliance
on Harper v. Ultimo (2003) 113 Cal.App.4th 1402 to support the
proposition that the failure to attach the arbitration rules is evidence of
procedural unconscionability is unavailing. In Harper, the arbitration
rules that were not attached to the contract precluded the consumer from
obtaining damages and forced the consumer to find the specific rule prohibiting
damages in another source in order for the consumer to fully understand what the
consumer was agreeing to. (Id. at 1405.) In Peng, the Appeal
Court explained that the difference was that the plaintiff in Peng did
not allege the arbitration rule in question had “any
corresponding substantive impact on her employment-related claims.”
Here, Plaintiff has not articulated how the Defendants’ failure to physically provide a copy of the JAMS rules had a substantive impact on Plaintiff’s employment-related claims. Moreover, the Agreements both directed Plaintiff to where he could find a copy of the JAMS rules, as well as to a link provided in the Employee Handbook. (Mot. Ex. B, C.) Furthermore, per the testimony of Mr. Garcia, when the employees were rehired after the COVID-19 shut down, he prepared and attached copies of the then current JAMS rules and instructed the rules be provided during the onboard process of the rehired employees, including Plaintiff. (Reply Decl. Garcia ¶ 5.)
Accordingly, Plaintiff has failed to show the Agreement is
procedurally unconscionable.
b. Substantive Unconscionability
Plaintiff asserts the Agreement is substantively unconscionable because there is a lack of mutuality, and the Agreement severely limits the relief available to Plaintiff in favor of Defendant. Plaintiff argues that there is a lack of mutuality because the 2015 and 2020 Agreements “do not include injunctive and/or other equitable relief, unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information” that Defendants are allowed to prosecute but employee claims for wrongful termination and discrimination are forced into arbitration. (Opp. at 12:13-18.)
Defendants point out that in the preamble of the Agreements, it explicitly states that “any claim, dispute, or controversy” that may be resolved by arbitration will be subject to arbitration, including the claims listed above by Plaintiff. (Mot. Ex A, B.) Also, Paragraph 3 of the Agreements delineate that arbitrator is entitled to “award all sums and forms of relief as could be awarded or granted in a judicial or administrative action predicated on the same claims for relief, including, as applicable, expedited and permanent injunctive relief, punitive damages, statutory penalties, and recovery of attorneys’ fees, costs and expenses [.]” (Mot. Ex. A, B.)
Moreover, a provision precluding class/representative actions in arbitration, is not unlawful. (See AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 350 [The U.S. Supreme Court invalidated a California judicial interpretation that deemed unconscionable any contract waiving the right to class actions]; see also Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1911.)
Accordingly, Plaintiff’s argument that the Agreements lack mutuality due to the limited relief it offers is without merit.
Furthermore, the fact the arbitrator has the ability to limit pre-arbitration discovery, does not support the finding the provision is unconscionable. California courts have upheld provisions that limit discovery even during the arbitration. (See Dotson v. Amgen, Inc., 181 Cal. App. 4th 975, 983 (2010) [upholding agreement limiting discovery to one fact witness deposition, expert witness depositions, and requests for production of documents.]; Mercuro v. Superior Ct., 96 Cal. App. 4th 167, 184 (2002) [upholding agreement limiting discovery to three depositions, 30 discovery requests of any kind, and limiting corporate representative deposition to four subjects.]; and Roman v. Superior Court, 172 Cal. App. 4th 1462, 1468-69 (2009) [upholding agreement limiting discovery to only such discovery that the arbitrator deems necessary.].) Defendants point out that under the JAMS rules, the arbitrator has the discretion to grant more discovery based on need. (Reply at 9: 17-23 [referencing JAMS Employment Arbitration Rule 17(b) and JAMS Fairness Policy, Standard No. 4.].)
In sum, Plaintiff has failed to show the Agreement is substantively unconscionable and has therefore failed to show the Agreement is unenforceable due to unconscionability.
Conclusion
Defendant’s Motion to Compel Arbitration is GRANTED.
The Court expects the parties to act expeditiously to schedule and complete the arbitration. The Court sets a Status Conference on February 23, 2023 at which time the parties must inform the Court on the progress of the arbitration.
Moving Party 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 masking
protocols will be observed at the Courthouse and in the courtrooms.