Defendants’ Motion to Compel Arbitration
Moving Party: Defendants Ralph’s Grocery Company, Food 4 Less of California, Inc., Food 4 Less of Southern California, Inc, and The Kroger Co.
Responding Party: Plaintiff Christina Cruz
Ruling: Defendants’ motion to compel arbitration is granted. This action is stayed pending resolution of arbitration.
Even where the FAA governs the interpretation of arbitration clauses, California law governs whether an arbitration agreement has been formed in the first instance. (Baker v. Osborne Development Corp. (2008) 159 Cal.App.4th 884, 893.)
Code of Civil Procedure section 1281.2 states, in relevant part: [o]n petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists . . .”
“California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967, citations omitted.)
“There is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate.” (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653.) Nevertheless, the strong public policy promoting private arbitration of civil disputes gives rise to a presumption in favor of arbitrability and compels the Court to construe liberally the terms of the arbitration agreement. (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189).
“The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.)
“The party opposing arbitration has the burden of demonstrating that an arbitration clause cannot be interpreted to require arbitration of the dispute. Nonetheless, this policy does not override ordinary principles of contract interpretation. The contractual terms themselves must be carefully examined before the parties to the contract can be ordered to arbitration: Although [t]he law favors contracts for arbitration of disputes between parties, there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate.” (Rice v. Downs (2016) 247 Cal.App.4th 1213, 1223, citations and quotations omitted.)
Here, Defendant submits a copy of the relevant arbitration agreement (the “Agreement”) as Exhibit A to the declaration of Annabelle Capulong, Division Total Rewards Specialist for Defendant Ralphs Grocery Company. (Capulong Decl. ¶¶ 1, 4, Exh. A.) The Agreement, entitled “Ralph’s Grocery Company Dispute Resolution Agreement,” was digitally signed by Plaintiff Christina Marie Cruz on November 25, 2017. The Agreement provides in its first line that it “is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq.” (Id.)
Plaintiff does not oppose the existence of the Agreement. Rather, Plaintiff’s opposition focuses on non-enforceability because of the Agreement’s PAGA waiver, and because the Agreement is unconscionable.
Effect of the PAGA Waiver
Contrary to Plaintiff’s argument, the inclusion of a PAGA waiver within an arbitration agreement does not invalidate the entire agreement. While Iskanian stands for the principle that where “an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law,” “[w]here, as here, only one provision of the agreement is found to be unconscionable and that provision can easily be severed without affecting the remainder of the agreement, the proper course is to do so.” (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 349, 383-384; Dotson v. Amgen, Inc. (2010) 181 Cal. App. 4th 975, 985.)
Plaintiff contends that the PAGA waiver clause of the Agreement cannot be severed, and cites to the relevant clause, which reads as follows: “[a] court may sever from this agreement any clause that is invalid or unenforceable; however, the clause in paragraph 3, above, relating to class or collective actions may not be severed in any case brought as a class or collective action, and if a court finds such clause to be unenforceable in a case brought as a class or collective action, this Agreement shall not be enforced.” (Capulong Decl. 4:19-23.) However, this language clearly only applies to class or collective actions. Here, the waiver can and shall be severed from the Agreement.
Plaintiff contends that the Agreement is unconscionable.
It is Plaintiff’s position that the Agreement cannot be enforced because it is procedurally unconscionable and is so because the Agreement is admittedly adhesive. However, the adhesive nature of the agreement does not, in and of itself, render the arbitration agreement unconscionable. (Dotson, supra at 981; McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 89.) The adhesive nature of an agreement is just the beginning, not the end, of the inquiry into its enforceability. (Pinela v. Neiman Marcus Group., Inc. (2015) 238 Cal.App.4th 227, 242.) Similarly, the lack of an opt-out clause, while potentially increasing the level of procedural unconscionability, does not automatically render an arbitration agreement unenforceable.
Additionally, the fact that Plaintiff was never given an opportunity to consult with an attorney or ask questions about the agreement before signing, and that she was given approximately fifteen (15) minutes to review various documents is not dispositive, while it may evidence some surprise for purposes of procedural unconscionability.
Plaintiff also declares that during her interview, she was told that she needed to fill out paperwork and that her interview could continue thereafter, and that Plaintiff believed that such paperwork was part of the application process and did not understand that she was hired at the time of signing.. (Pl. Decl. ¶¶ 8-9.) However, this apparent misunderstanding does not evidence that Defendants made “misleading statements.” (Opp.7:25.) As a general rule under California law, arguments that arbitration provisions are unenforceable because the party did not carefully read the agreements, did not understand the significance of the arbitration provisions, and did not knowingly waive their right to a jury trial may not be used to invalidate a written arbitration provision. (Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102, 1109.) Here, the Agreement provides in a distinct paragraph that “[t]his Agreement shall be binding on the Company and Employee 30 days after Employee’s receipt.” (Capulong Decl. Exh. A, ¶ 7.)
The prevailing view is that procedural and substantive unconscionability must both be present for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.) But they need not be present in the same degree; the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa. (Id.)
Because plaintiff has demonstrated only a small degree of procedural unconscionability, she is tasked with showing a relatively high degree of substantive unconscionability. Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create an overly-harsh or one-sided result. (Id.)
Plaintiff contends that the Agreement does not provide for adequate discovery because “the agreement does not incorporate Code of Civil Procedure Section 1283.05 nor does it incorporate the California Civil Discovery Act.” (Opp. 9:13-14.) However, arbitration agreements are not required to do so.
Plaintiff appears to be raising an argument that she may be denied adequate discovery because the Agreement provides that “the parties will have the right to conduct adequate civil discovery, bring dispositive motions, and present witnesses and evidences as needed to present their cases and defenses, and any disputes in this regard shall be resolved by the Arbitrator.” (Capulong Decl., Ex. A at ¶ 3.) The standard as provided by Armendariz provides that adequate discovery is where the parties are “at least entitled to discovery sufficient to adequately arbitrate their statutory claim, including access to essential documents and witnesses, as determined by the arbitrator(s).” (Armendariz v. Foundation Health Psychcare Services, Inc (2000) 24 Cal. 4th 83, 106.) Here, Plaintiff fails to make a showing that the Arbitration Agreement deprives her of lawful discovery rights.
Finally, Plaintiff does not articulate grounds for her contention that the Agreement is so permeated with unconscionability that it cannot be remedied. As discussed above, the PAGA waiver clause, although inapplicable, shall be severed from the Agreement. As Plaintiff has failed to demonstrate that the Agreement is substantively unconscionable, her argument of unconscionability fails.
Based on the foregoing, Defendants’ Motion to Compel Arbitration is granted. This matter shall be stayed pending resolution of arbitration with a return date to be set at the hearing on the motion.
|Date: November 20, 2020
|Honorable Stuart M. Rice
Judge of the Superior Court