SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

CRYSTAL FREGOSO, ADRIANNA RODRIGUEZ, and TRUC BUI, on behalf of themselves and all others similarly situated,

Plaintiffs,

vs.

EAT CLUB, INC., a Delaware corporation, and DOES 1-100, inclusive,

Defendants.
Case No. 18CV330433

TENTATIVE RULING RE: MOTION TO STAY; MOTION FOR CURATIVE ACTION

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on February 1, 2019, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:
I. INTRODUCTION
This is a putative class action arising out of various alleged wage and hour violations. On September 21, 2018, plaintiffs Crystal Fregoso, Adrianna Rodriguez, and Truc Bui (collectively, “Plaintiffs”) filed the First Amended Complaint (“FAC”), which sets forth the following causes of action: (1) Failure to Pay Overtime Wages; (2) Failure to Pay Minimum Wage; (3) Failure to Provide Mandated Meal Periods; (4) Failure to Provide Mandated Rest Periods; (5) Failure to Provide Timely and Accurate Wage Statements; (6) Failure to Pay All Wages Due at Termination; (7) Unfair Practice Under the Unfair Competition Act; and (8) Violation of the Private Attorney General Act.
There are now two motions before the Court: (1) defendant Eat Club, Inc.’s (“Defendant”) motion to stay; and (2) Plaintiffs’ motion for curative action.
II. MOTION TO STAY
On September 26, 2018, Defendant moved to disqualify Plaintiffs’ counsel. On November 26, 2018, the Court denied the motion. Defendant has appealed the ruling. Defendant now moves to stay this action pending resolution of the appeal.
Defendant asserts it advanced two grounds in the motion for disqualification: (1) Plaintiffs’ counsel’s conflict of interest between represented parties in separate pending actions; and (2) Plaintiffs’ counsel’s misappropriation, excessive review, retention, and misuse of Defendant privileged communications. Defendant argues the Court agreed there was a potential conflict, but concluded Plaintiffs had supplied adequate proof of informed, written consent. Defendant argues further that on the privilege issue the Court agreed Plaintiffs’ counsel possessed privileged information, but found Defendant had not proven Plaintiffs’ counsel impermissibly misused the privileged information.
Defendant contends a stay is necessary to prevent Defendant from being prejudiced and to stop further misuse of Defendant’s privileged material. Defendant acknowledges an appeal from an order denying a motion to disqualify counsel does not automatically stay the action, but argues a stay is warranted so long as the disqualification claim is not “insubstantial” or “frivolous.”
Defendant cites to Reed v. Superior Court (2001) 92 Cal.App.4th 448 for its suggested legal standard. In Reed, the court described the procedure for requesting a stay following the denial of a motion for disqualification as follows:
If the trial court denies a motion to disqualify counsel, the unsuccessful moving party can seek immediate appellate review, either by petitioning the reviewing court for a writ of mandamus, asserting that the remedy by appeal is not adequate (Chambers v. Superior Court (1981) 121 Cal.App.3d 893 [175 Cal.Rptr. 575]) or by filing a notice of appeal from the order denying disqualification. (Meehan v. Hopps, supra, 45 Cal.2d 213.) If the moving party desires that the trial be stayed pending appeal, the party may first ask the trial court in its discretion to continue or stay the underlying proceedings until the appeal is decided. (See MaJor v. Miraverde Homeowners Assn., supra, 7 Cal.App.4th 618, 623.)

If the trial court denies a request to stay the underlying proceedings, the moving party may request the appellate court to stay them. The party could request the stay by a petition for a writ of supersedeas ancillary to an appeal from the order denying disqualification. (Truck Ins. Exchange v. Fireman’s Fund Ins. Co., supra, 6 Cal.App.4th 1050, 1055, fn. 4; § 923.) Or the party could request the stay from the appellate court ancillary to a petition for extraordinary relief on the merits. (Dill v. Superior Court (1984) 158 Cal.App.3d 301, 304; Cho v. Superior Court (1995) 39 Cal.App.4th 113, 118.) A petition for extraordinary relief on the merits accompanied by a request for an immediate stay is preferable, because generally extraordinary writs are determined more speedily than appeals. The specter of disqualification of counsel should not be allowed to hover over the proceedings for an extended period of time for an appeal.

Whichever method is used for seeking appellate relief, a reasonably persuasive showing that the claim of disqualification likely has merit will probably persuade the appellate court to stay the underlying proceedings pending resolution of the disqualification issue. (See People v. Hull (1991) 1 Cal.4th 266, 275.) Courts of Appeal understand that prejudice occurs if the trial is not stayed pending an appeal of an arguably meritorious claim of disqualification. (Meehan v. Hopps, supra, 45 Cal.2d at p. 218.)

In some cases, however, the claim of disqualification will be insubstantial or even frivolous. To hold that an appeal from an order denying disqualification automatically stays the trial proceedings would encourage the use of such motions and appeals merely to delay the trial.

(Reed v. Superior Court, supra, 92 Cal.App.4th at pp. 455-456.)
As pointed out by Plaintiffs, the “insubstantial” or “frivolous” language relied on by Defendant is related to the standard relied on by courts of appeal. It is not the standard for the trial court; rather, the trial court must simply exercise its discretion in determining whether to stay the action. (See Reed v. Superior Court, supra, 92 Cal.App.4th at p. 455 [“If the moving party desires that the trial be stayed pending appeal, the party may first ask the trial court in its discretion to continue or stay the underlying proceedings until the appeal is decided.”]; see also URS Corp. v. Atkinson/Walsh Joint Venture (2017) 15 Cal.App.5th 872, 883 [outcome of motion for stay during appeal of denial of disqualification motion is “firmly within judicial discretion.”].)
In this case, the Court exercises its discretion to deny the motion for stay. The Court decided the underlying motion to disqualify following an analysis of all papers and evidence presented as well as oral argument at the hearing. The Court finds no basis to reach the conclusion Defendant is likely to prevail on its appeal. Moreover, as stated by Reed, following the denial of this motion, Defendant can request a stay from the court of appeal. Accordingly, Defendant’s motion to stay is DENIED.
III. MOTION FOR CURATIVE ACTION
A. Request for Judicial Notice
In opposing Plaintiffs’ motion for curative action, Defendant requests judicial notice of: Order Re: Motion for Final Approval of Class Action Settlement in Laufer, et al. v. Eat Club, Inc., Santa Clara Superior Court, Case No. 2017-1-CV-310764.
The Court can take judicial notice of the order as a court record. (Evid. Code, § 452, subd. (d).) Accordingly, the request for judicial notice is GRANTED.
B. Objections
Defendant objects to and moves to strike statements from the declarations of Mikhael Songco, Jessica Frutos, David Casilao, Steven Wong, and Tia McFarlane, submitted by Plaintiffs in support of the motion for curative action. These individuals are employees of Defendant who make statements in their declarations about what they were told by an HR employee of Defendant at a meeting concerning new arbitration agreements for employees.
Defendant argues the statements are hearsay and are conclusory and lack foundation. Defendant asserts many of the declarations use identical language. The Court will consider the statements. First, the statements are not hearsay because they are not made to prove the truth of what the HR representative said, only that statements were made that impacted the state of mind of the employees. Second, while it is true that the language is the same in some of the declarations, that does not mean the declarations should be disregarded. The Court will consider the similar language, however, when deciding how much weight to give the declarations.
In sum, Defendant’s objections are OVERRULED and the motion to strike is DENIED.
C. Discussion
Plaintiffs assert that in November 2018, Defendant rolled out a mandatory arbitration program to approximately 360 current employee delivery drivers/putative class members. Plaintiffs state HR representatives visited Defendant’s hubs statewide, held group meetings, and presented the drivers with mandatory arbitration agreements. The arbitration agreements included two options – option 1 would preclude the employee from participating in this lawsuit, but would give certain compensation incentives, and option 2 would allow the employee to participate in the lawsuit, but the employee would not receive the compensation incentives. (See Declaration of Crystal Kent (“Kent Decl.”), Ex. 1.) Plaintiffs contend that at one of the meetings where the arbitration agreements were presented, on November 6, 2018, at the San Francisco Armstrong Hub, an HR employee made derogatory comments about the class action litigation, including that “the lawsuit is ridiculous,” “the allegations in it are not true,” “Eat Club is going to fight it,” “there is no way the case is going to win,” “you would be better off choosing Option 1 and get the raise than choosing Option 2,” “you will be waiting a long time for the lawsuit and probably get nothing,” and “choosing Option 1 is better for your future at the company.” (Declaration of Steven Wong, ¶ 3; Declaration of Tia McFarlane, ¶ 3.)
Plaintiffs argue the options provided in the arbitration agreements are misleading and leave out important information. Plaintiffs request the Court exercise its authority to regulate pre-certification communications and invalidate the arbitration agreements to the extent they waive the class members’ right to participate in this action. Plaintiffs also request the Court order a corrective notice to be sent to putative class members at Defendant’s expense and enter a preliminary injunction and/or protective order requiring Defendant to notify Plaintiffs’ counsel prior to obtaining any future releases or opt-outs, and enjoining retaliatory terminations of employees.
In opposition, Defendant argues the motion is procedurally defective and non-justiciable in part because Plaintiffs lack standing to challenge an agreement they never signed and a determination on the enforceability of the agreements is not ripe until there is a motion to compel arbitration or to certify the class. Defendant contends it has the right to enter into arbitration agreements with putative class members and that the validity of the agreements must be decided by the arbitrator. Defendant argues the Court has only limited authority to regulate Defendant’s right to communicate with the putative class and that requiring judicial approval for precertification communications would constitute an impermissible prior restraint of protected speech.
The Court agrees with Defendant that a general determination of the enforceability of the agreements, such as whether the agreements are unconscionable, is premature because there is not yet a motion to compel arbitration before the Court. (See O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2013) 2013 WL 6407583 at *2.) However, the Court has “both a duty and broad authority to control communications to putative class members even before class certification and to enter appropriate orders governing the conduct of counsel and the parties.” (See id. at *4.) Therefore, the Court’s authority with regard to the instant motion is not limited by whether Plaintiffs themselves have standing to challenge the enforceability of the arbitration agreements.
The arbitration agreements at issue have two parts. The first two pages are the “arbitration agreement.” The third and fourth pages contain a “disclosure re existing class action litigation.” With regard to the lawsuit, this portion of the agreements states:
Please be advised that there is an existing proposed class action lawsuit filed against the Company that asserts a variety of wage-related claims. The case is entitled Fregoso v. Eat Club Inc., Santa Clara County Superior Court, Case. No [sic] 18CF330433 [sic] (the “Lawsuit”). No findings of liability have been made and the Company disputes the allegations contained in the Lawsuit.

(Kent Decl., Ex. 1.)
The remainder of the “disclosure” provides information regarding the two options discussed previously. No additional specific information is given about the lawsuit.
In addition to the agreements, there is evidence that HR personnel for Defendant presented the agreements at meetings with employees and used a script in conducting the meetings. (See, e.g., Declaration of Sue Liu in Support of Defendant’s Opposition to Plaintiff’s Motion for Curative Action, ¶¶ 3-4.) The script explains the effect of the arbitration agreements and the two options. (Id., Ex. B.) It also states that failure to return a signed copy of the agreement by November 2, 2018, will result in termination of employment with Defendant. (Ibid.)
A portion of the script contains questions and answers. One of the questions states: “What are the details on the existing legal class-action matter[?]” (Declaration of Sue Liu in Support of Defendant’s Opposition to Plaintiff’s Motion for Curative Action, Ex. B.) The scripted answer states: “There is a legal case that has been filed against the company assert [sic] a variety of wage-related matters. The matter is in its early stages and there is no conclusions [sic] as to liability or findings.” (Ibid.)
“Courts routinely hold that releases are misleading where they do not permit a putative class member to fully evaluate his likelihood of recovering through the class action.” (Cheverez v. Plains all American Pipeline, LP (C.D. Cal. 2016) 2016 WL 861107 at *4.) “Examples of communications that may warrant restraint include efforts by a defendant to encourage potential class members not to participate in the class action, thereby reducing potential liability. [Citation.] Courts also have limited communications to putative class members when those communications are shown to contain misleading information.” (County of Santa Clara v. Astra USA, Inc. (N.D. Cal. 2010) 2010 WL 2724512 at *3.) “[P]utative class members can be misled though omissions and failure to provide enough information, which can include the failure to append the plaintiffs’ complaint to a settlement offer.” (Ibid.)
For example, it has been found that a letter that failed to provide a summary of the plaintiffs’ complaint, an explanation of the claims of the plaintiffs, the plaintiffs’ counsel’s contact information, or the current status of the case did not give putative class members enough information to decide whether to accept settlement checks and that the letter essentially concealed material information. (County of Santa Clara v. Astra USA, Inc., supra, 2010 WL 2724512 at *4.) Likewise, a letter in a different case that omitted “key information, such as plaintiffs’ counsel’s contact information and a full description of the claims or the complaint” “discourage[d] participation in the collective action” and merited a curative notice. (Camp v. Alexander (N.D. Cal. 2014) 300 F.R.D. 617, 625.) “Courts routinely exercise their discretion to invalidate or refuse to enforce arbitration agreements implemented while a putative class action is pending if the agreement might interfere with members’ rights.” (Jimenez v. Menzies Aviation Inc. (N.D. Cal. 2015) 2015 WL 4914727 at *6.)
While Defendant in this case had a First Amendment right to communicate with its employees, that “right was limited by considerations for protecting the putative plaintiff class.” (County of Santa Clara v. Astra USA, Inc., supra, 2010 WL 2724512 at *5.) Defendant’s communications with the putative class members, both in the arbitration agreements and at the meetings based on the scripts, failed to provide the putative class members with sufficient information about the lawsuit. There was no description of the claims and there was no contact information for Plaintiffs’ counsel. The only information given was the name of the lawsuit and the fact that the lawsuit concerns “a variety of wage-related matters.” Coupled with this sparse information was a very short window of time to decide to sign the arbitration agreements or be terminated from employment.
Under these circumstances, the Court will invalidate the arbitration agreements signed by putative class members. Accordingly, Plaintiffs’ motion is GRANTED IN PART AND DENIED IN PART. The parties shall meet and confer regarding a curative notice to be sent to all putative class members notifying them that the arbitration agreements are invalid because of a failure to provide sufficient information about this lawsuit. The notice shall include contact information for Plaintiffs’ counsel. The proposed notice shall be provided to the Court for approval by 4:00 p.m. on February 22, 2019. The cost of sending the notice will be borne by Defendant. The Court will not issue a preliminary injunction or protective order at this time.

The Court will prepare the final order if this tentative ruling is not contested.

NOTICE: The Court does not provide court reporters for proceedings in the complex civil litigation departments. Parties may arrange for a private court reporter to provide services, but those arrangements must be consistent with the local rules and policies posted on the Court’s website.