Case Number: 19STCV33919 Hearing Date: February 10, 2020 Dept: 31

PETITION TO COMPEL ARBITRATION IS GRANTED.

Background

On September 24, 2019, Plaintiff Ana Mandujano filed the instant action against Defendants Macy’s West Stores, Inc.; Macy’s, Inc.; Theresa Leon; and Does 1 through 100. The Complaint asserts causes of action for:

Pregnancy Discrimination in Violation of FEHA;

Pregnancy Harassment in Violation of FEHA;

Discrimination on the Basis of Disability in Violation of FEHA;

Harassment on the Basis of Disability in Violation of FEHA;

Discrimination on the Basis of Gender in Violation of FEHA;

Harassment on the Basis of Gender in Violation of FEHA;

Failure to Provide Reasonable Accommodations in Violation of FEHA;

Failure to Engage in the Interactive Process;

Retaliation for Engaging in a Protected Activity in Violation of FEHA;

Retaliation for Taking FMLA/CRFA;

Failure to Prevent Discrimination, Harassment, and Retaliation in Violation of FEHA;

Wrongful Termination of Employment in Violation of Public Policy;

Violation of Labor Code § 1102.5;

Intentional Infliction of Emotional Distress; and

Violation of Business & Professions Code § 17200, et seq.

Defendants Macy’s West Stores, Inc. and Macy’s, Inc. (hereinafter “Defendants”) move for an order compelling Plaintiff to arbitrate her disputes with Defendants and staying this action pending the outcome of arbitration.

Legal Standard

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, the party opposing the petition then bears the burden of proving by a preponderance of the evidence any fact necessary to demonstrate that there should be no enforcement of the agreement, and the trial court sits as a trier of fact to reach a final determination on the issue. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) The Court is empowered by CCP Section 1281.2 to compel parties to arbitrate disputes pursuant to an agreement to do so.

CCP Section 1281.2 states that:

The court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(a) The right to compel arbitration has been waived by the petitioner; or

(b) Grounds exist for the revocation of the agreement.

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.

(CCP § 1281.2.)

Discussion

Existence of an Arbitration Agreement

Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ. Proc. § 1281.2.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.)

Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement, and no evidence or authentication is required to find the arbitration agreement exists. (See Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219.) However, if the existence of the agreement is challenged, “petitioner bears the burden of proving [the arbitration agreement’s] existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413. See also Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1058-1060.)

“With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court. (See Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218, 105 Cal.Rptr.2d 597 (Condee ); see also Cal. Rules of Court, rule 3.1330 [“A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference”].) Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges. [Citation]” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Defendants argue that Plaintiff was required to complete certain paperwork to begin working for them. (Sherrick Decl., ¶ 4.) Defendants assert that included with the new hire paperwork were forms that Plaintiff completed and signed under penalty of perjury. (Sherrick Decl. ¶ 4, 15.) Among these documents was the Solutions InSTORE New Hire Acknowledgment form (the “Arbitration Agreement). (Sherrick Decl., Exh. G; Ripak Decl., Exh. E.) Defendants present evidence that Plaintiff electronically signed the Arbitration Agreement on April 25, 2015. (Sherrick Decl., Exh. G; Ripak Decl., Exh. E.) The Arbitration Agreement provides, in relevant part:

I understand that if I do not opt out of this program, any disputes or claims relating to my employment, other than those expressly excluded from arbitration in the Plan document, will be resolved using the Solutions InSTORE process described in the brochure and Plan document. The process continues to apply to such employment-related disputes even after my employment ends.

(Sherrick Decl., Exh. G; Ripak Decl., Exh. E.)

Defendants argue that the Arbitration Agreement is voluntary and that employees can opt out of the Solutions InSTORE Program’s Step 4-Arbitration by submitting an Election Form within thirty (30) days of hire. (Ripak Decl., Exh. C.) Defendants assert that Plaintiff never returned an Election Form. (Ripak Decl. ¶ 29.)

In opposition, Plaintiff does not dispute the existence of the Arbitration Agreement, instead arguing why it should not be enforced.

The Court finds that Defendants have met their burden of proving the existence of an arbitration agreement between the parties.

Enforceability – Promissory Fraud

“Fraud is one of the grounds on which a contract can be rescinded. [Citation.] In order to defeat a petition to compel arbitration, the parties opposing a petition to compel must show that the asserted fraud claim goes specifically “to the ‘making’ of the agreement to arbitrate,” rather than to the making of the contract in general. [Citation.] . . . “‘Promissory fraud’ is a subspecies of fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud. [Citations.] [¶] An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract.” [Citation.] The elements of fraud that will give rise to a tort action for deceit are: “ ‘(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e. to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” [Citation.]” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 973–974.)

Plaintiff argues that Defendants engaged in promissory fraud when presenting the Arbitration Agreement to Plaintiff such that the Arbitration Agreement cannot be enforced. Plaintiff asserts that the Solutions InSTORE Early Dispute Resolution Rules and Procedures claim that they are held before a neutral, third-party Arbitrator and administered solely by AAA. (Ripak Decl., Exh. A, p. 21.) Plaintiff asserts that Defendants’ statements are actual fraud or constructive fraud as there is no way for a plaintiff to receive a neutral arbitration at AAA.

Plaintiff contends that from 2013 through 2018, AAA has administered a total of 3,944 arbitrations in employment disputes, and of those 1,713 cases involved Macy’s as a defendant. (Keigler Decl. ¶ 9; Exh. 2; p. 5.) Plaintiff argues that 92.7% of all cases involving Macy’s as a defendant were dismissed, including many without a hearing. (Keigler Decl. ¶ 9; Exh. 2; p. 5.) Plaintiff asserts that conversely, ADR only dismissed 4.9% of employment cases and JAMS only dismissed 1.5% of cases. Plaintiff contends that even among AAA cases, non-Macy’s employers only obtained a “dismissed” result 7.5% of the time. Plaintiff argues that in contrast with Defendants’ 92.7% “dismissed” rate, it is undeniable that the numbers show a pattern and practice of bias in favor of Defendants. Plaintiff contends that Defendants’ statement claiming the arbitration will be neutral is false and fraudulent. Plaintiff argues that she was misled and as a result, the Arbitration Agreement cannot be enforced.

In reply, Defendants argue that Plaintiff’s argument is meritless. Defendants assert that Plaintiff provides the elements of promissory fraud without providing any evidence to establish each element. Defendants contend that Plaintiff’s entire argument for promissory fraud is that she was “misled” about the neutrality of the Arbitration Agreement based on statistics about the rate of dismissals of arbitrations involving Macy’s. Defendants argue that Plaintiff fails to present any evidence showing the underlying reasons for those dismissals or what those dismissals actually represent. Defendants assert that Plaintiff does not present any evidence that AAA interfered with or dictated the outcome of any arbitration in which Macy’s was a party. Defendants contend that Plaintiff’s argument fails in every way.

The Court finds that Plaintiff has failed to substantiate her argument that Defendants engaged in promissory fraud when presenting the Arbitration Agreement to Plaintiff. As noted by Defendants, although Plaintiff presents statistics about the rate of dismissals of arbitrations involving Defendants, Plaintiff fails to present any evidence showing the underlying reasons for those dismissals or what those dismissal actually represent. Nothing before the Court indicates that arbitration will not be held before a neutral, third-party Arbitrator. Accordingly, Plaintiff’s argument that the Arbitration Agreement cannot be enforced because Defendants engaged in promissory fraud fails.

Enforceability – Unconscionability

“‘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.’ [Citation] 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.” [Citation] 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.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)

Plaintiff argues that the Arbitration Agreement is both procedurally and substantively unconscionable and therefore unenforceable.

Procedural Unconscionability

“‘Procedural unconscionability’ concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. It focuses on factors of oppression and surprise. The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party. The component of surprise arises when the challenged terms are ‘hidden in a prolix printed form drafted by the party seeking to enforce them.’” (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1281.)

Where a contract of adhesion includes the unequal bargaining power of contracting parties, with the weaker party’s inability to negotiate, this may indicate procedural unconscionability in the form of oppression. (See Thompson v. Toll Dublin, LLC (2008) 165 Cal.App.4th 1360, 1372.) “The term ‘adhesion contract’ refers to standardized contract forms offered to consumers of goods and services on essentially a ‘take it or leave it’ basis without affording the consumer a realistic opportunity to bargain and under such conditions that the consumer cannot obtain the desired product or services except by acquiescing in the form contract. [Citations.] The distinctive feature of a contract of adhesion is that the weaker party has no realistic choice as to its terms. [Citations.]” (Wheeler v. St. Joseph Hospital (1976) 63 Cal.App.3d 345, 356.)

“[A] compulsory pre-dispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis.” (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal. App. 4th 1105, 1127.) However, the fact that an arbitration agreement is mandatory for employment may be a factor in determining that it is procedurally unconscionable. (See, e.g., Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 393; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114-115.) Where a contract of adhesion includes the unequal bargaining power of contracting parties, with the weaker party’s inability to negotiate, this may indicate procedural unconscionability in the form of oppression. (See Thompson v. Toll Dublin, LLC (2008) 165 Cal.App.4th 1360, 1372.)

“‘Ordinarily when a person with capacity of reading and understanding an instrument signs it, he may not, in the absence of fraud, imposition or excusable neglect, avoid its terms on the ground he failed to read it before signing it.’” (Ramirez v. Superior Court (1980) 103 Cal.App.3d 746, 754, 163 Cal.Rptr. 223 (Ramirez).)

Ramirez held, however, that a party could invalidate a medical malpractice arbitration agreement by “show[ing] that he or she was coerced into signing or did not read the many waiver notices provided and did not realize that the agreement was an agreement to arbitrate.” (Id. at p. 756, 163 Cal.Rptr. 223.) The Ramirez court warned that such a showing would be difficult: A plaintiff would “have to explain how her eyes avoided the 10-point red type above the signature line; she will have to explain why she did not ask questions about what she was signing; she will have to show that no one explained the document to her or asked her to read it before signing it; and she will have to explain why she did not rescind the agreement within 30 days after it was signed,” as permitted under section 1295, subdivision (c). (Ramirez, supra, 103 Cal.App.3d at pp. 756-757, 163 Cal.Rptr. 223.)” (Cox v. Bonni (2018) 30 Cal.App.5th 287, 301–302.)

“No law requires that parties dealing at arm’s length have a duty to explain to each other the terms of a written contract . . . Reliance on an alleged misrepresentation is not reasonable when plaintiff could have ascertained the truth through the exercise of reasonable diligence. [Citation.] Reasonable diligence requires the reading of a contract before signing it. A party cannot use his own lack of diligence to avoid an arbitration agreement. [Citation.]” (Rowland v. PaineWebber Inc. (1992) 4 Cal.App.4th 279, 286.)

“[T]he absence of the AAA rules is of minor significance to [an] analysis [of procedural unconscionability].” (Bigler v. Harker School (2013) 213 Cal.App.4th 727, 737.) “[T]he failure to attach the arbitration rules could be a factor in support of a finding of procedural unconscionability, but disagree that the failure, by itself, is sufficient to sustain a finding of procedural unconscionability. [Citation.]” (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 690.)

Plaintiff first argues that the Arbitration Agreement is procedurally unconscionable because under Defendants’ Code of Conduct, in a section informing employees of their FMLA responsibilities and rights, Defendants state that “an employee may file a complaint with the U.S. Department of Labor or may bring a private lawsuit against an employer.” (Sherrick Decl., Exh. H, p. 29.) Plaintiff asserts that the Arbitration Agreement states that “certain claims, including but not limited to claims for state unemployment insurance, workers compensation and/or claims under the National Labor Relations Act, are not subject to Step 4-Arbitration.” (Sherrick Decl., Exh. G.) Plaintiff contends that the Arbitration Agreement is so vague that FMLA claims being subject to arbitration is in another document. Plaintiff argues that due to surprise, there is procedural unconscionability.

Plaintiff asserts that the Arbitration Agreement is also procedurally unconscionable because Plaintiff was never provided a copy of the rules that would govern the Agreement. (Mandujano Decl. ¶ 5.) Plaintiff contends that Defendants not only did not provide her with the AAA rules, but effectively asked Mandujano to perform conflict of law analysis by stating AAA rules apply except where they conflict with Solutions InSTORE. (Ripak Decl., Exh. A.)

In reply, Defendants argue that Plaintiff’s argument that she was surprised to learn that she agreed to arbitrate her FMLA retaliation claim is nonsensical and, in fact, Article 2 of the Solutions InSTORE Program Plan Document explicitly states that FMLA claims are included within the scope of the parties’ Arbitration Agreement. (Ripak Decl., Exh. A, Art. 2, p. 6.)

Defendants assert that the fact that Plaintiff is entitled to bring a private lawsuit under a particular statute and that she also waived her right to pursue said lawsuit in court in favor of arbitration are not inconsistent positions. Defendants contend that this is precisely why Plaintiff was advised, through numerous documents and training, that by agreeing to arbitration, Plaintiff was waiving her right to bring her claims in court before a judge and jury. Defendant argue that the choice between court and arbitration was detailed to Plaintiff explicitly in the brochure and Plan Document for which she acknowledged receipt. (Ripak Decl. ¶ 23; Exh. B, p. 10.) Defendants assert that it cannot be said that Plaintiff was surprised by the Arbitration Agreement because she knew that by agreeing to arbitrate, she was waiving her right to pursue a private lawsuit in court.

As to Plaintiff’s argument regarding the AAA rules, Defendants contend that the Plan Document, which was provided to Plaintiff, makes clear that the rules and procedures in the Plan Document govern the arbitration. (Ripak Decl., Exh. A, p. 6.) Defendants argue that the AAA Rules merely act to supplement, if necessary, the rule sand procedures in the Plan Document, and in the event of a conflict between the Plan Document and the AAA Rules, the Plan Document controls. (Ripak Decl., Exh. A, p. 6.) Defendants assert that moreover, any employee who wants to review the AAA Rules has 30 days to obtain and review a copy before having to make a decision about opting out of arbitration. Defendants contend that there is no procedural unconscionability when an arbitration agreement is in a separate document, the agreement makes clear what rules will govern the arbitration, and the rules are easy to locate in an online search.

The Court finds that the Arbitration Agreement is not procedurally unconscionable. The Arbitration Agreement itself contains an opt-out provision which clearly and unambiguously informed Plaintiff that she had the ability to opt-out of the agreement. Moreover, the Arbitration Agreement clearly provides that “any disputes or claims relating to my employment, other than those expressly excluded from arbitration in the Plan document, will be resolved using the Solutions InSTORE process described in the brochure and Plan document.” Plaintiff’s failure to read the Plan document, which clearly provides that FMLA claims are included within the scope of the parties’ Arbitration Agreement does not render the Arbitration Agreement procedurally unconscionable. Defendants were not required to explain the Arbitration Agreement to Plaintiff. Plaintiff was, however, required to act diligently and ask questions if she didn’t understand any provisions of the Agreement she was signing.

Finally, as noted above, a failure to attach the AAA rules, by itself, is insufficient to sustain a finding of procedural unconscionability, especially given that the Arbitration Agreement indicated where the rules could be found online.

Because a finding of procedural unconscionability is a prerequisite to this Court refusing to enforce the Agreement under the doctrine of unconscionability, the Court need not consider whether the Agreement is substantively unconscionable.

Conclusion

Defendants’ petition to compel arbitration is GRANTED. Pursuant to CCP section 1281.4, all proceedings are STAYED pending the outcome of arbitration. The Court expects the parties to act expeditiously in scheduling and concluding the arbitration. The Court sets an OSC on April 10, 2020 at 8:30 a.m. at which time the parties are to report on their progress.

Moving party to give notice.