Motion to Compel Arbitration (Judge Lon Hurwitz)


A party moving to compel arbitration under Code Civil Procedure Section 1281.2 must prove by a preponderance of the evidence that: (1) The parties entered into a written agreement to arbitrate; (2) One or more of the claims at issue are covered by that agreement; and (3) The responding party refused a prior demand for arbitration under the agreement of the claims at issue. (Code Civ. Proc., § 1281.2; Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230.) If the moving party meets this burden, the burden shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud or unconscionability). (Villacreses, 132 Cal.App.4th at 1230.)

Application of the FAA

The party asserting the FAA applies to an agreement has “the burden to demonstrate FAA coverage by declarations and other evidence.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1208.) Here, both Agreements contain a contractual provision for application of the FAA. “[S]ince arbitration is a matter of contract, the FAA also applies if it is so stated in the agreement.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 963.)

The Contract states that the Arbitration Dispute Resolution Program should be governed under the FAA. (ROA 103, Acosta Smith Decl. Ex. A [translated at ROA 102, Batiste Decl. Ex. C].) Therefore, the analysis proceeds under the FAA.

Merits

Defendant has its initial burden under CRC 3.1330 to prove the existence of an agreement to arbitrate. Defendant presents evidence that Plaintiff signed a “Programa de Arbitraje y Resolucion de Disputas de Partners Personnel,” referred to as the “Partners Personnel Dispute Resolution and Arbitration Program.” (ROA 103, Acosta-Smith Decl. ¶ 4, hereinafter “Agreement.” The version signed by Plaintiff is in Spanish, but Defendant presents evidence it was translated into English by a certified translator, Mr. Manuel Duran. (ROA 102, Batiste Decl. ¶ 4, Ex. C “Certification of Translation.”) Plaintiff does not object to the translation or its authenticity.

The Agreement states that Plaintiff agreed that “any and all legally known disputes, claims or controversies arising out of or relating to this Agreement, the employment relationship between the parties, or the termination of the employment relationship…”  would be determined by arbitration. (ROA 102, Batiste Decl. Ex. C.) Plaintiff further agreed that the “Agreement shall be enforceable under and subject to the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq…. “ (Id.)

Plaintiff does not dispute the authenticity of the Agreement provided by Defendant, nor does she contend she did not sign the Agreement. Plaintiff does not contend that she was denied access to the Agreement.

Further, the Arbitration Agreement includes the following relevant terms:

“BY SIGNING THIS AGREEMENT, THE SIGNATORY PARTIES HERE WAIVE THEIR RIGH TTO HAVE ANY DISPUTE, CLAIM OR CONTROVERSY THEY HAVE DECIDED BY A JUDGE OR JURY IN A COURT.” (Id. [emphasis in original).

Defenses to Enforcement

Plaintiff argues the Agreement is unenforceable because it is procedurally and substantively unconscionable. Plaintiff bears the burden of proof on this challenge to enforcement.

“Both procedural and substantive unconscionability must be shown for the defense to be established, but ‘they need not be present in the same degree.’” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125). “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to’ conclude that the term is unenforceable.” (Id. at 125-126). “Conversely, the more deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required.” (Id.)

Procedural Unconscionability

Plaintiff contends that the Agreement is procedurally unconscionable because it is a contract of cohesion. While it is true that virtually all “take it or leave it” contracts carry some degree of procedural unconscionability, that degree is presumptively low absent evidence the defendant actively interfered with plaintiff’s ability to review and understand the arbitration clause. (Samaniego v. Empire Today, LLC (2012) 205 Cal.App.4th 1138, 1145; Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1156).

Here, Plaintiff has set forth no evidence that she was prevented from reviewing the Agreements or asking questions before signing them. (See Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394 [no fraud where there was opportunity to review agreement before signing].) Plaintiff has set forth no evidence that she was rushed or did not have ample time to read and review the document prior to signing. The title has “Arbitration” in it, and the sentence indicating the parties are waiving their right to have a dispute decided “by a judge or jury in a court” has been both separated and bolded. Finally, the Agreement contains an “opt out” provision that allows the employee to opt out of the Arbitration Agreement within 30 days. The procedural unconscionability here is therefore very low.

Substantive Unconscionability

Plaintiff asserts that the Acknowledgment is substantively unconscionable because it does not contain the minimum fairness requirements set forth in Armendariz v. Found. Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. Further, the Agreement is substantively unconscionable because it does not address PAGA.

First, Plaintiff argues the agreement is unconscionable because it requires that she pay fees. Armendariz does not stand for the proposition that an arbitration agreement is unconscionable because an employee must pay some fees. “[W]e conclude that when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 110-111.)

Notably, Plaintiff does not point to any portion of the agreement that requires her to pay any fees. The agreement does require the use of the AAA Employment Arbitration Rules and Fee Schedule, which requires a filing fee capped at $300. (ROA 102, Batiste Decl. Ex. E.) This is well below the current initial filing fee of $435 for an unlimited civil case in Orange County Superior Court. The fee requirement is not unconscionable under Armendariz as the agreement does not require Plaintiff to pay fees beyond what she would have to pay in the Superior Court.

Applicability of Viking River

The parties contracted for the applicability of the FAA. Therefore, Viking River applies.

In Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, the United States Supreme Court overruled Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 to the extent its holding was preempted by the FAA and concluded that (1) a PAGA claim could be split into “individual” and “representative” portions, and (2) the individual portion could be compelled to arbitration. However, Viking River Cruises did not overrule Iskanian to the extent it precludes “a wholesale waiver of PAGA claims.” (Id. at 1924-25.)

Therefore, pursuant to Viking River, Plaintiff’s “individual” claim may be compelled to arbitration.

Plaintiff argues nothing in the arbitration agreement makes any reference to PAGA claims or expressly provides that representative PAGA claims are subjected to individual arbitration. However, the parties specifically contracted that “any and all legally known disputes, claims or controversies arising out of or relating to . . . the employment relationship between the parties . . . shall be resolved by binding arbitration . . . .” (Batiste Decl. Ex. C.) To have standing for a PAGA claim, Plaintiff must have experienced one alleged violation personally. (Labor Code § 2699(c).) Therefore, the PAGA claim arises out of the employment relationship between the parties and is subject to the arbitration agreement.

Stay

The California Supreme Court recently granted review in Adolph v. Uber Technologies, S274671, to answer the question “[w]hether 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.”

Accordingly, were the Court to dismiss the representative PAGA claims only for the California Supreme Court to reach a different conclusion in Adolph than the Supreme Court reached in Viking River Cruises, both the Court’s and the parties’ resources would be needlessly taxed. Additionally, the arbitrator may decide that Plaintiff did not suffer any of the Labor Code violations alleged and therefore would lack PAGA standing, irrespective of the outcome in Adolph. For these reasons, the Court will stay the non-individual portion of the PAGA claim without prejudice to Defendant renewing the issue when the California Supreme Court issues an opinion on Adolph and/or the individual arbitration concludes.

Joinder by 33 Degrees

Defendant 33 Degrees cites no authority for joining a motion to compel arbitration, except for stating it does so “in the interests of judicial economy.” Presumably, it moves under CCP § 128(a)(8).

“There are exceptions to the general rule that a nonsignatory to an agreement cannot be compelled to arbitrate and cannot invoke an agreement to arbitrate, without being a party to the arbitration agreement. [Citation.] A nonsignatory to an agreement to arbitrate may be required to arbitrate, and may invoke arbitration against a party, if a preexisting confidential relationship, such as an agency relationship between the nonsignatory and one of the parties to the arbitration, makes it equitable to impose the duty to arbitrate upon the nonsignatory.” (Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 765.)

Further, “[i]f the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party … the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues….” (CCP § 1281.2(d).)

In the interests of judicial economy, the Court shall grant the Motion for Joinder, as the same arguments apply to 33 Degrees and due to the relationship between 33 Degrees and Defendant.

RULING:

Defendant 33 Degrees’ Motion for Joinder is GRANTED. Defendant Partners Personnel-Management Services, LLC’s’s Motion to Compel Arbitration and Stay the Action is GRANTED. Plaintiff’s individual PAGA claim is compelled to arbitration. The remaining representative PAGA claim is stayed pending the outcome of arbitration.

The court concludes that there exists a valid agreement to arbitrate the individual claims asserted by Plaintiff and that no grounds exist to bar enforcement of the agreement. (CCP § 1281.2.) Plaintiff’s claims of unconscionability are unsupported by the language of the arbitration agreement. Plaintiff has failed to meet her burden of proving the facts of any defense to enforceability.

Defendant has provided the original Spanish and translated English versions of the Partners Personnel Dispute Arbitration and Resolution Program (“Agreement”), which includes an arbitration provision governing “any and all legally known disputes, claims or controversies arising out of or relating to this Agreement, the employment relationship between the parties, or the termination of the employment relationship.” (Batiste Decl. Ex. C, Acosta-Smith Decl., Ex. A.) Plaintiff does not dispute she signed the agreement. Plaintiff does not argue she lacked capacity to read or understand the Agreement. Thus, Defendant has carried its burden to show the existence of an arbitration agreement.

Further, the defense of unconscionability requires that the arbitration agreement be both procedurally and substantively unconscionable. (De La Torre v. CashCall, Inc. (2018) 5 Cal. 5th 966, 982.) Plaintiff fails to show any procedural unconscionability as the arbitration provision is clearly provided. As for substantive unconscionability regarding Plaintiff’s payment of fees, the agreement requires the use of the AAA Employment Arbitration Rules and Fee Schedule, which requires a filing fee capped at $300. (ROA 102, Batiste Decl. Ex. E.) This is well below the current initial filing fee of $435 for an unlimited civil case in Orange County Superior Court. The fee requirement is not unconscionable under Armendariz as the agreement does not require Plaintiff to pay fees beyond what she would have to pay in the Superior Court. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 110-111.)

Plaintiff argues nothing in the arbitration agreement makes any reference to PAGA claims or expressly provides that representative PAGA claims are subjected to individual arbitration. Therefore, Viking River Cruises is inapplicable. However, the parties specifically contracted that “any and all legally known disputes, claims or controversies arising out of or relating to . . . the employment relationship between the parties . . . shall be resolved by binding arbitration . . . .” (Batiste Decl. Ex. C.) To have standing for a PAGA claim, Plaintiff must have experienced one alleged violation personally. (Labor Code § 2699(c).) Therefore, the PAGA claim arises out of the employment relationship between the parties and is subject to the arbitration agreement. Further, the parties contracted for the applicability of the FAA. Therefore, Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 applies.

The remaining representative claims are stayed pending the outcome of arbitration of Plaintiff’s individual PAGA claims against both Defendants.

Moving party to give notice.