SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

MICHAEL TURNER, individually, and on behalf of members of the general public similarly situated,

Plaintiff,

vs.

AEMETIS, INC., an unknown entity; AEMETIS ADVANCED FUELS KEYES, INC., an unknown entity; and DOES 1 through 100, inclusive,

Defendants.
Case No. 2018-1-CV-333697

TENTATIVE RULING RE: MOTION TO DISMISS, OR, IN THE ALTERNATIVE, STAY PROCEEDINGS AND COMPEL ARBITRATION

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on February 8, 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. Plaintiff Michael Turner (“Plaintiff”) worked for defendants Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (collectively, “Defendants”) as an hourly-paid, non-exempt employee from approximately December 2014 to July 2015 in California. (Complaint, ¶ 18.) Plaintiff alleges he and other putative class members worked over eight hours in a day and/or forty hours in a week and worked seven consecutive days in a week. (Complaint, ¶¶ 25-26.) Defendants failed to pay Plaintiff and the putative class members for all hours worked. (Complaint, ¶ 27.)

The Complaint, filed on August 28, 2018, sets forth the following causes of action: (1) Collection of Due and Unpaid Wages; and (2) Violation of California Business & Professions Code § 17200, et seq. Defendants now bring a motion to dismiss, or, in the alternative, stay proceedings and compel arbitration.

II. MOTION TO COMPEL ARBITRATION

A. Objections to Evidence

Defendants submitted several objections to evidence in connection with their reply papers. Defendants object to paragraphs two and three through six of the Declaration of Michael Turner as irrelevant and an undue consumption of time. They also object to paragraphs two and three as argumentative and to paragraph three as inaccurate, confusing, and misleading. Defendants’ objections to the Declaration of Michael Turner are OVERRULED.

Defendants object to paragraph five of Exhibit three to the Declaration of Daniel J. Park as lacking foundation and irrelevant. Exhibit three is an incident report that shows Plaintiff unloaded a vendor delivery truck. The exhibit demonstrates Plaintiff’s interactions with delivery trucks as part of his job, which is relevant to a determination of whether Plaintiff is a “transportation worker,” as discussed below. Defendants’ objection to the Declaration of Daniel J. Park is OVERRULED.

B. Legal Standard

“A party who claims that there is a written agreement to arbitrate may petition the superior court for an order to compel arbitration.” (Banner Entertainment, Inc. v. Superior Court (Alchemy Filmworks, Inc.) (1998) 62 Cal.App.4th 348, 356 (“Banner”); see also Code Civ. Proc., § 1281.2) “[T]he petitioner bears the burden of establishing the existence of a valid agreement to arbitrate, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Banner, supra, 62 Cal.App.4th at p. 356.)

C. Parties’ Arguments

Defendants state Plaintiff agreed to arbitrate his claims, he should be compelled to do so, and this action should be dismissed. Defendants provide as evidence Plaintiff’s employment offer letter dated December 15, 2014 which was signed by Plaintiff on the same date. (Declaration of John F. McIntyre, Jr. in Support of Motion to Dismiss, or, in the Alternative, Stay Proceedings and Compel Arbitration (“McIntyre Decl.”), Ex. 2.) The letter includes a paragraph that states:

In the event of any dispute or claim relating to or arising out of our employment relationship, you, the Company and the Parent agree that (i) any and all disputes between you and the Company or the Parent shall be fully and finally resolved by binding arbitration, (ii) you are waiving any and all rights to a jury trial but all court remedies will be available in arbitration, (iii) all disputes shall be resolved by a neutral arbitrator who shall issue a written opinion, (iv) the arbitration shall provide for adequate discovery, and (v) the Company shall pay all but the first $125 of the arbitration fees.

(McIntyre Decl., Ex. 2.)

Defendants argue the letter demonstrates there is a valid agreement to arbitrate and the arbitration provision encompasses the claims at issue.

In opposition, Plaintiff argues: (1) the agreement is governed by the California Arbitration Act (“CAA”), not the Federal Arbitration Act (“FAA”), because Plaintiff is exempted from the FAA as a “transportation worker”; (2) under the CAA, Labor Code section 229 precludes claims involving wages from being sent to arbitration; (3) even under the FAA, the agreement is unconscionable; and (4) the parties did not agree to waive class arbitration.

D. Applicability of the FAA

Plaintiff argues the FAA does not apply here because section one of the FAA states that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” (9 U.S.C., § 1.) Plaintiff cites to several cases for the proposition that this refers to “transportation workers” who are workers “actually engaged in the movement of goods in interstate commerce.” (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 112; Cole v. Burns Intern. Sec. Services (D.C. Cir. 1997) 105 F.3d 1465, 1467.) Plaintiff contends he qualifies as a transportation worker because Defendants conduct operations in the stream of interstate commerce and because Plaintiff’s job duties included operating and inspecting equipment that processed products, moving raw materials and processed products, loading trucks with processed products, ensuring processed products were safely loaded and secured in trucks, and monitoring vendor truck drivers and training new truck drivers in loading procedures. (Declaration of Michael Turner in Support of Plaintiff’s Opposition to Defendants’ Motion to Dismiss, or, in the Alternative, Stay Proceedings and Compel Arbitration (“Turner Decl.”), ¶ 7.)

In reply, Defendants argue Plaintiff is not a transportation worker. Like Plaintiff, Defendants cite to Circuit City Stores, Inc. v. Adams, supra, 532 U.S. at p. 112 for the proposition that “transportation workers” are workers “actually engaged in the movement of goods in interstate commerce.” Defendants contend Plaintiff is a factory worker, not a “transportation worker.” Defendants state Plaintiff neither transported any goods or products outside of the factory where he worked nor supervised anybody who did.

As one court has explained:

Section 1 of the FAA does not exclude all contracts of employment from the coverage of the FAA. Every circuit court to squarely address this issue has held that section 1 excludes from the coverage of the FAA only the employment contracts of workers actually engaged in the movement of goods in interstate commerce. Additionally, the Supreme Court’s interpretation of section 2 of the FAA in Allied–Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995), strongly supports this narrow interpretation of section 1.

(Cole v. Burns Intern. Sec. Services (D.C. Cir. 1997) 105 F.3d 1465, 1467.)

In other words, whether a worker is “actually engaged in the movement of goods in interstate commerce” is interpreted narrowly. Another court has set forth certain factors that may be considered in determining whether an employee is a “transportation worker”:

[F]irst, whether the employee works in the transportation industry; second, whether the employee is directly responsible for transporting the goods in interstate commerce; third, whether the employee handles goods that travel interstate; fourth, whether the employee supervises employees who are themselves transportation workers, such as truck drivers; fifth, whether, like seamen or railroad employees, the employee is within a class of employees for which special arbitration already existed when Congress enacted the FAA; sixth, whether the vehicle itself is vital to the commercial enterprise of the employer; seventh, whether a strike by the employee would disrupt interstate commerce; and eighth, the nexus that exists between the employee’s job duties and the vehicle the employee uses in carrying out his duties (i.e., a truck driver whose only job is to deliver goods cannot perform his job without a truck).

(Lenz v. Yellow Transp., Inc. (8th Cir. 2005) 431 F.3d 348, 352.)

In a different case, it was emphasized that one must be a member of a class of workers in the transportation industry, not just a worker who incidentally transports goods interstate as part of his or her job in an industry that would otherwise be unregulated. (Hill v. Rent-A-Center, Inc. (11th Cir. 2005) 398 F.3d 1286, 1289.)

The evidence here demonstrates Plaintiff does not directly transport goods interstate; he is not a truck driver. He also does not supervise transportation workers or have any real connection to a vehicle used for the delivery of goods.

Further, Defendant provides evidence it is not in the transportation industry. (Supplemental Declaration of Andrew B. Foster in Support of Defendants’ Motion to Dismiss, or, in the Alternative, Stay Proceedings and Compel Arbitration, ¶ 2.) Defendant does not transport or deliver its products; they are picked up by a third-party sales organization that transports and delivers the products to customer facilities located elsewhere. (Id. at ¶ 3.)

Plaintiff presents evidence he loads trucks with processed products and monitors and trains truck drivers with regard to loading procedures. (Turner Decl., ¶ 7.) In light of the fact that these are only a portion of his job duties, however, and because he is not a member of a class of workers in the transportation industry, the Court finds he is not a transportation worker. Therefore, Plaintiff is not exempt from the FAA. Additionally, because the FAA applies, Labor Code section 229 is preempted. (See Perry v. Thomas (1987) 482 U.S. 483, 492.)

E. Unconscionability

Plaintiff argues that even if the FAA applies, the agreement is unenforceable because it is unconscionable. “Under California law, a contract must be both procedurally and substantively unconscionable to be rendered invalid.” (Chavarria v. Ralphs Grocery Co. (9th Cir. 2013) 733 F.3d 916, 922.)

The prevailing view is that procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. But they need not be present in the same degree. Essentially a sliding scale is invoked 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. In other words, 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.

(Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1282, internal citations and quotation marks omitted, emphasis in original.)

1. Procedural Unconscionability

Plaintiff contends the arbitration provision in the offer letter is procedurally unconscionable because it is a contract of adhesion. A contract of adhesion in the employment context contains some degree of procedural unconscionability, but it is only a modest amount unless the contract involves surprise or other sharp practices. (Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248.) Plaintiff does not assert any portion of the offer letter was hidden or that he was prevented from reading it before signing. Although he states he had to sign the agreement on the same day he received it and did not have a “meaningful opportunity” to negotiate any terms, he does not state he made any attempt to negotiate or ask any questions about the agreement. The fact that Plaintiff had the opportunity to review the letter and did not ask any questions or attempt to negotiate is consistent with the evidence presented by Defendants. (Declaration of Denise Gutierrez-Contreras in Support of Defendants’ Motion to Dismiss, or, in the Alternative, Stay Proceedings and Compel Arbitration, ¶¶ 3-6.)

Plaintiff also argues the agreement is procedurally unconscionable because it does not fall within the reasonable expectations of employees and because it failed to incorporate any applicable rules. Plaintiff’s argument concerning his expectations is similar to his argument regarding the adhesive nature of the agreement and provides no additional basis on which to conclude the agreement is unconscionable. As for the lack of incorporated rules, it is true that some cases have held the failure to provide a copy of the arbitration rules to which the employee would be bound supports a finding of procedural unconscionability. (See Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 244.) The California Supreme Court has held, however, that where the challenge to the enforcement of the agreement has nothing to do with the applicable rules, the failure to attach those rules does not affect a court’s consideration of unconscionability. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246.)

In sum, while there may be some procedural unconscionability present due to the adhesive nature of the offer letter, it is a small amount.

2. Substantive Unconscionability

Plaintiff argues the agreement is substantively unconscionable because: (1) it requires Plaintiff to arbitrate claims that are unarbitrable; (2) it contains a backdoor jury trial waiver; (3) it is vague and ambiguous on fees; (4) it is vague and ambiguous as to the arbitrator selection process; (5) it is vague and ambiguous as to discovery; and (6) it lacks mutuality.

a. Unarbitrable Claims

Plaintiff’s first argument concerns the fact that the agreement applies to any dispute or claim relating to or arising out of the employment relationship and does not exclude PAGA claims or claims relating to workers’ compensation or unemployment insurance. While it is true the agreement does not exclude these types of claims, Plaintiff does not assert any of these claims in this action, so Plaintiff is not impacted and any substantive unconscionability is minimal.

b. Jury Waiver

Plaintiff’s second argument is that the agreement requires an unlawful pre-dispute jury waiver. Although the agreement states Plaintiff is waiving his right to a jury trial, that is simply a natural consequence of agreeing to arbitrate a dispute rather than go to court. (See Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 714 [“When parties agree to submit their disputes to arbitration they select a forum that is alternative to, and independent of, the judicial [forum] – a forum in which, as they well know, disputes are not resolved by juries.”].) Consequently, the jury waiver is not unlawful.

c. Fees

Plaintiff contends the agreement is vague and ambiguous with regard to the allocation of expenses and fees. This contention lacks merit. The agreement specifically states Defendants will “pay all but the first $125 of the arbitration fees.” (McIntyre Decl., Ex. 2.) In other words, Plaintiff will need to pay $125 in arbitration fees and Defendants will pay the rest.
d. Selection of Arbitrator

Plaintiff argues the arbitration provision is vague as to how a “neutral arbitrator” will be selected. However, Plaintiff cites to no authority stating an arbitration agreement must specifically set forth the process for arbitrator selection.

e. Discovery

Plaintiff asserts the agreement states the arbitration will provide for adequate discovery, but does not explain what “adequate discovery” means. While the agreement could be more specific, it does not preclude discovery in the arbitration, but rather provides there will be discovery allowed as required. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 104.)

f. Mutuality

Plaintiff argues the arbitration provision lacks mutuality in that it only requires Plaintiff to waive his rights to a jury trial. Plaintiff is incorrect. The arbitration provision applies both to Plaintiff and to Defendants. (McIntyre Decl., Ex. 2.) Neither Plaintiff nor Defendants would have any right to a jury trial in arbitration because there would be no jury.

3. Conclusion

As discussed, there is a small amount of procedural unconscionability due to the adhesive nature of the agreement and little to no substantive unconscionability. Therefore, the agreement is not rendered invalid by unconscionability.

F. Class Arbitration

Plaintiff argues the parties did not agree to waive class arbitration and Plaintiff should be able to bring a class action in arbitration. Defendants assert the agreement does not permit class arbitration and Plaintiff’s claims must be arbitrated on an individual basis.

“[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” (Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. 662, 684.) Further, an implicit agreement to authorize class action arbitration cannot be inferred solely from the fact of the parties’ agreement to arbitrate. (Id. at p. 685.)

The agreement at issue here makes no mention of class arbitration. (McIntyre Decl., Ex. 2.) Consequently, class arbitration is not available. Plaintiff must arbitrate his claims on an individual basis.

G. Conclusion

Defendants’ motion to dismiss or, in the alternative, stay proceedings and compel arbitration is GRANTED IN PART. The parties shall go to arbitration. The case will be stayed pending completion of the arbitration. (Code Civ. Proc., § 1281.4.)

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