Case Number: BC697580 Hearing Date: May 22, 2018 Dept: 40

MOVING PARTY: Defendant G2 Secure Staff, LLC

OPPOSITION: Plaintiff Muriel Stephenson

Plaintiff Muriel Stephenson sues defendant G2 Secure Staff, LLC for damages based on allegations that defendant discriminated against her based on her race and violated certain provisions of the Labor Code.

On March 9, 2018, plaintiff filed the complaint, and on April 12 a second amended complaint, for (1) discrimination on account of race/color in violation of FEHA; (2) harassment on account of race/color in violation of FEHA; (3) retaliation on account of race/color in violation of FEHA; (4) failure to prevent discrimination, harassment and retaliation; (5) violation of rights under Article I, Section 8 of the California Constitution; (6) wrongful termination in violation of public policy; (7) failure to pay overtime wages; (8) failure to provide meal periods; (9) failure to provide rest periods; (10) failure to provide accurate itemized wage statements; and (11) UCL violations.

On April 23, 2018, defendant filed this opposed motion to compel arbitration and stay proceedings.

The parties should avoid revealing social security numbers in their filings. CRC, rule 1.201.

The parties dispute whether the original complaint or the SAC is the operative complaint; however, under either complaint, the Court’s analysis remains the same.

Motion to Compel Arbitration Standard: Civil Code section 1281.2 permits a party to file a petition to request that the Court order the parties to arbitrate a controversy. Under section 1281.2, a party is permitted to file a motion to request that the Court order the parties to arbitrate a controversy. Section 1281.2 also states that the Court may grant the motion if the Court determines that an agreement to arbitrate the controversy exists.

When a motion to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, and whether it is enforceable. Rosenthal v. Great Western Financial Sec. Corp. (1996) 14 Cal.4th 394, 413. Because the existence of the agreement is a statutory prerequisite to granting the petition, the moving party bears the burden of proving its existence by a preponderance of the evidence. Ibid.

If the party opposing the motion raises a defense to enforcement, such as fraud in the execution voiding the agreement, that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense. Ibid. The facts are to be proven by affidavit or declaration and documentary evidence, with oral testimony taken only in the court’s discretion. Id. at 413-14. The trial court’s role is to resolve these factual issues, not merely to determine whether evidence opposing the petition has sufficient substantiality. Id. at 414.

Since binding arbitration is a matter of contract, the parties may freely delineate the area of its application, and a proceeding to compel arbitration is in essence a suit in equity to compel specific performance of a contract. Freeman v. State Farm Mutual Auto Insurance Co. (1975) 14 Cal.3d 473, 479; Morris v. Zuckerman (1967) 257 Cal.App.2d 91, 96. Arbitration, as a general rule, should be upheld by the court, unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute. Bos Material Handling, Inc. v. Crown Controls Corp. (1982) 137 Cal.App.3d 99, 105; O’Malley v. Wilshire Oil Co. (1963) 59 Cal.2d 482, 490-491. The court should, nonetheless, give effect to the parties’ intentions in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made. Victoria v. Superior Court (1985) 40 Cal.3d 734, 744.

There is a strong policy in favor of enforcing agreements to arbitrate, but there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate. State Farm Mut. Auto. Ins. Co. v. Superior Court (1994) 23 Cal.App.4th 1297, 1301-1302.

Analysis

1. Whether Plaintiff Signed an Arbitration Agreement

Here, plaintiff argues that she never signed an arbitration agreement. Defendant, perhaps anticipating that plaintiff would make such an argument, states that when plaintiff applied for the position in November 2016, the online application process would have required her to electronically sign an arbitration agreement (or at the very least type the words “opt out” where her name would otherwise go). Dupont Decl. ¶ 8.

In opposition, plaintiff argues that she originally was hired through a temp agency in June 2016 and that when she was offered a permanent position in November 2016, she “did not complete an online application.” Stephenson Decl. ¶¶ 5, 7. Plaintiff also proffers the declaration of Darlisa Asher, defendant’s Regional Human Resources Director, who stated that at some point after plaintiff was hired for the permanent position, her personnel file was discovered to be incomplete. Asher Decl. ¶ 14. Asher also states that “[d]uring this period, the company was in the process of new start-ups and high volume recruiting, which meant that completing the personnel file was not high priority, and could be done at a later date.” Asher Decl. ¶ 17.

Where, as noted above, the parties dispute the existence of a valid arbitration agreement, the party asserting its existence “bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence” and the opposing party “bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” Engalla v. Permanent Medical Group, Inc. (1997) 15 Cal.4th 951, 972. “[T]he 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.” Ibid.

Defendant has the better of this argument. The online employment application requires applicants to sign the arbitration agreement before being able to complete the rest of the application, including providing current contact information; employment, educational, and residential histories; as well as the applicant’s social security number. See Schoeberl Decl., Exh. 1; Dupont Decl. ¶ 9. Although plaintiff had already been working for defendant for a few months by November 2016, which makes it conceivable that someone else at defendant could have fraudulently completed the application in her name and without her authorization or consent, it is more likely that plaintiff was “the only person that could have accurately provide such information.” MOT 1:23-24.

Plaintiff’s arguments that she never signed an arbitration agreement are unavailing.

First, Asher states that at some point after plaintiff was hired for the permanent position, someone noticed that “an application and some mandatory documents were not in Plaintiff’s file.” Asher Decl. ¶ 15. This does not mean that an application was never completed; it may have simply meant that a copy of the completed application never found its way into plaintiff’s file. Moreover, in its moving papers, defendant offers a “true and correct” copy of her online employment application, dated November 11, 2016. Schoeberl Decl., Exh. 1.

Second, plaintiff’s argument that defendant did not satisfy what the Court of Appeal stated was sufficient in Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, mischaracterizes the case, as the Ruiz court merely articulated an example of establishing an electronic signature, not the requirements necessary in every case.

Third, various mistakes in the application (such as an apparent typo in plaintiff’s address, a wrong starting date, and plaintiff’s incorrect ethnic designation as “White” in the voluntary, confidential affirmative action survey) do not make it more likely than not that someone else filled out the application without her knowledge.

Finally, plaintiff’s insistence that she must not have signed an arbitration agreement because if she did, she “would have been well aware of it” because she is “well-trained in that field,” lacks foundation establishing that she had significant experience in human resources prior to working at defendant. Stephenson Decl. ¶ 13.

Although it is possible that plaintiff did not complete an online application, “the burden of authenticating an electronic signature is not great.” Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 844. Accordingly, the Court concludes that plaintiff signed the arbitration agreement.

2. Whether the Arbitration Agreement Covers Plaintiff’s Claims

The arbitration agreement states that plaintiff “and the Company agree that in the event a dispute arises between you and the Company . . . regarding your employment[,] such disputes shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act.” Schoeberl Decl., Exh. 1, p. 2-3 (Arbitration Agreement), ¶ 2.

A review of the complaint (whether the original complaint or the SAC) reveals that the plaintiff has brought claims arising from his employment or the termination of her employment. Since these claims are covered by the arbitration agreement, the plaintiff’s claims fall within its provisions.

3. Whether the Arbitration Agreement is Unconscionable

Plaintiff argues that the arbitration agreement is both procedurally and substantively unconscionable.

a. Unconscionability Standard

Unconscionability is a valid reason for refusing to enforce an arbitration agreement under Code of Civil Procedure section 1281 because it is a reason for refusing to enforce contracts generally. Armendariz v. Found. Health Psychcare Servs. (2000) 24 Cal. 4th 83, 113-127. Parties opposing arbitration have the burden to prove any fact necessary to a defense to enforcement. Gatton v. T-Mobile USA, Inc. (2007) 152 Cal. App.4th 571, 579. A contract will be found to be unconscionable when: (1) it is adhesive, in that all or part of the contract falls outside the reasonable expectations of the weaker party; and (2) equitably, the terms unreasonably favor the other party. Stirlen v. Supercuts (1997) 51 Cal.App.4th 1519, 1530-1533. Unconscionability has both a “procedural” and a “substantive” element.

Procedural unconscionability has to do with matters relating to freedom of assent. Ibid. The procedural element focuses on two factors: oppression and surprise. Ibid. “Oppression” arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice. Ibid. “Surprise” involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the printed form drafted by the party seeking to enforce the disputed terms. Ibid.

Substantive unconscionability considers whether the agreement reallocates the risks of the bargain in an objectively unreasonable or unexpected manner. Ibid. Substantive unconscionability involves the imposition of harsh or oppressive terms on one who has assented freely to them. Ibid.

Both procedural and substantive elements must be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. Ibid. They need not be present in the same degree. Ibid. Courts invoke a sliding scale which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves: the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa. Armendariz, supra, 24 Cal. 4th at 114.

b. Procedural Unconscionability Analysis

The arbitration agreement states that defendant “has instituted a mandatory binding arbitration program.” Arbitration Agreement, ¶ 1. This term shows that there was no real negotiation about the arbitration agreement. However, the arbitration agreement also states that plaintiff signed the arbitration agreement in consideration of employment.

There are no facts showing that plaintiff was compelled into the agreement or that defendant took advantage of any circumstances. Since plaintiff was provided with employment in consideration for her assent to the agreement, the provision that she was required to sign the agreement in order to be hired is slight evidence of procedural unconscionability.

Neither the fact that the arbitration agreement was titled “Pre-Dispute Resolution Agreement” (instead of explicitly being called an arbitration agreement) nor the typos plaintiff points out in the agreement demonstrate any procedural unconscionability. The agreement is replete with references to arbitration, and the mistakes do not introduce meaningful ambiguity (for example, “yo and the Company” can only be read as “you and the Company.”)

Plaintiff states that she never received a copy of the FAA or any rules regarding arbitration. A failure to attach rules, however, does not demonstrate procedural unconscionability unless it shows that the defendant was trying to “surprise” plaintiff by hiding unconscionable terms in a separate document. See, e.g., Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246 (no procedural unconscionability from the failure to attach AAA where challenge did not concern an element of those rules of which the plaintiff had been unaware when she signed the agreement). Here, plaintiff does not identify any rule that was unconscionable and that was hidden from her by the expedient of incorporating them by reference in the arbitration agreement. No rules were provided, moreover, for the likely reason that the arbitration agreement itself does not mandate what arbitral rules (e.g., AAA, CPR, JAMS) apply.

In sum, plaintiff has demonstrate slight evidence of procedural unconscionability by showing that arbitration was mandatory.

c. Substantive Unconscionability Analysis

Regarding substantive unconscionability, contrary to plaintiff’s assertion that “[t]here is no language attesting that [defendant] is also bound to arbitrate,” OPP 13:14-15, the arbitration agreement expressly states that the obligation to arbitrate “binds the Company as well as the employees.” Arbitration Agreement, ¶ 2.

Plaintiff argues that the arbitration agreement prohibits a prevailing party’s attorneys’ fees and costs pursuant to her FEHA claims. See Arbitration Agreement, ¶ 3 (“You and the Company shall each pay for your own costs and attorneys fees incurred, including costs of discovery if any.”) Our Supreme Court in Armendariz held that an arbitration agreement may not limit punitive damages and attorney fees under FEHA. Armendariz, supra, 24 Cal.4th at 103-104; see also Serafin v. Balco Properties Ltd., LLC, (2015) 235 Cal. App. 4th 165, 183 (“By requiring both parties to bear their own attorney fees and costs, the provision before us also runs counter to FEHA which allows a successful plaintiff to recover attorney fees and costs from the employer (but does not similarly allow an employer to recover fees and costs from an employee in most cases). [Citation.] Such a modification of California law is inappropriate under Armendariz as it has the effect of denying a plaintiff the rights and remedies he or she would have if he or she were litigating his or her claims in court.”) The provision is accordingly unenforceable under Armendariz.

The arbitration agreement also requires plaintiff to pay defendant’s costs and attorneys’ fees if a court orders a matter to arbitration upon plaintiff’s refusal to arbitrate; however, defendant is not liable for costs and attorneys’ fees if the reverse applies. Arbitration Agreement, ¶ 5 (“If you refuse to arbitrate a matter covered by this agreement, and if a court orders the matter to binding arbitration, you agree to pay the Company’s legal costs, including attorney’s fees, incurred in enforcing this agreement.”)

Defendant does not argue why this is allowable under Armendariz, where our Supreme Court also concluded 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.” Id. at 110-111. This rule was designed to “ensure that employees bringing FEHA claims will not be deterred by costs greater than the usual costs incurred during litigation, costs that are essentially imposed on an employee by the employer.” Id. at 111. Accordingly, this provision is unenforceable as well.

Despite the unenforceability of these two provisions, the Court declines to find the entire arbitration agreement unconscionable. See id. at 122 (court has discretion to refuse to enforce the entire agreement when agreement is “permeated” by unconscionability, such as where agreement contains more than one unlawful provision.) These provisions improperly restrict what plaintiff may be entitled to under FEHA; they do not, however, make enforcement of the entire agreement harsh or oppressive.

Plaintiff argues that a provision stating that an agreed-upon arbitrator is only subject to disqualification on the same grounds as would a judge sitting in court fails to ensure that the arbitrator will be neutral. Arbitration Agreement, ¶ 3. The concern is unfounded. Code of Civil Procedure section 1281.91, subdivision (d) requires a neutral arbitrator to disqualify himself or herself on any ground specified in Code of Civil Procedure section 170.1, which address when a judge would be disqualified. Plaintiff does not demonstrate why something more than this statutory requirement would be needed to ensure that an arbitrator is neutral.

Accordingly, the provisions regarding costs and attorneys’ fees discussed above are ordered severed from the arbitration agreement, but plaintiff otherwise fails to demonstrate that the arbitration agreement is procedurally or substantively unconscionable.

Conclusion: The motion is GRANTED.

The Court SEVERS the provisions that (1) each party shall pay for its own costs and attorneys’ fees and that (2) plaintiff is liable for costs and attorneys’ fees on a motion to compel arbitration.

Defendant to give notice.