SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

CORINTHIAN INTERNATIONAL WAGE AND HOUR CASES

Coordinated Actions:

Turner v. Corinthian International Parking Services, Inc.,

Santa Clara County Superior Court Case No. 16CV292208

Rocquemore v. Corinthian International Parking Services, Inc.

Alameda County Superior Court Case No. RG16801065

Case No. JCCP 4886

TENTATIVE RULING RE: MOTION TO COMPEL ARBITRATION AND ENFORCE CLASS ACTION WAIVER

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on November 15, 2019, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION

These are two coordinated cases arising out of alleged Labor Code violations. The Turner case is a putative class action. Turner’s Second Amended Class Action Complaint for Damages (“Turner SAC”), filed on July 1, 2019, sets forth the following causes of action: (1) Violation of California Labor Code sections 510 and 1198 (Unpaid Overtime); (2) Violation of California Labor Code sections 226.7 and 512, subdivision (a) (Unpaid Meal Period Premiums); (3) Violation of California Labor Code section 226.7 (Unpaid Rest Period Premiums); (4) Violation of California Labor Code sections 1194, 1197, and 1197.1 (Unpaid Minimum Wages); (5) Violation of California Labor Code sections 201 and 202 (Final Wages Not Timely Paid; (6) Violation of California Labor Code section 2802 (Unreimbursed Business Expenses); (7) Violation of California Business & Professions Code section 17200, et seq. (Unfair Competition/Unfair Business Practices).

On March 22, 2019, Plaintiff Adrian Turner’s (“Plaintiff”) motion for class certification was argued before the Court. The Court found Plaintiff” s rounding claim and split shift premium claim were not alleged in Plaintiff’s First Amended Complaint, the operative pleading at the time. The Court permitted Plaintiff to file a renewed motion for certification of those claims and deferred ruling on the remainder of the original motion in the meantime. On July 1, 2019, Plaintiff filed the Turner SAC, which included allegations regarding the rounding claim. Plaintiff then abandoned the split shift premium claim, but filed a renewed motion on the rounding claim.

The Court granted the renewed motion and certified the following class:

All current and former hourly-paid or non-exempt individuals who were employed by Corinthian International Parking Services, Inc. (“Defendant”) within the State of California at any time during the period from June 11, 2011 up to the deadline, to be determined by the Court at a later date, by which class members may opt-out after being provided notice of certification (the “Class period”), and who are residents of California as of the opt-out deadline.

The Court also certified four subclasses connected to various claims in the Turner SAC:

Rounding Subclass: All current and former hourly-paid or non-exempt individuals who were employed by Corinthian International Parking Services, Inc. within the State of California at any time during the period from June 11, 2011 to February 13, 2017 who were subject to Defendant’s rounding policy and who are residents of California as of the opt-out deadline;

Meal Period Subclass: All members of the Class who worked at least one shift of more than five hours at any time during the Class Period;

Rest Period Subclass: All members of the Class who worked at least one shift of three and on-half hours or more at any time during the Class Period; and

Expense Reimbursement Subclass: All members of the Class who purchased shoes and/or apparel to comply with Defendant’s dress code policy at any time during the Class Period.

Defendant Corinthian International Parking Services, Inc. (“Defendant”) now moves to compel arbitration and enforce a class action waiver against class members who signed a New Hire Agreement or Current Employee Agreement with respect to claims arising after the date the arbitration agreements were signed by class members.

II. DEFENDANT’S REQUEST FOR JUDICIAL NOTICE

In connection with the reply papers, Defendant requests judicial notice of the following:

(1) The existence of a civil action, Williams v. Corinthian International Parking Services, Inc., et al., Case No. 18CV333741, filed in Santa Clara County;

(2) Order After Hearing dated March 29, 2019 [Demurrer; Motion to Compel Arbitration and Stay Proceedings], Case No. 18CV333741; and

(3) Stipulation and Order to Submit Plaintiff’s Claims to Binding Arbitration and to Stay Litigation Proceedings, filed in Williams v. Corinthian International Parking Services, Inc., et al., Case No. 18CV333741.

These documents from a non-citable, non-binding superior court case are not relevant and therefore not judicially noticeable. (See Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal. 4th 1057, 1063 [Although a court may judicially notice a variety of matters, only relevant material may be noticed.].) Accordingly, the request for judicial notice is DENIED.

III. DISCUSSION

“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; 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.” (Ibid.)

Defendant asserts nearly all current and new hire employees of Defendant entered into valid arbitration agreements with Defendant. Defendant argues therefore that the class period must end on April 24, 2016. This is the date on which arbitration agreements and a cover letter were provided to some of the class members at a meeting. (See Declaration of Douglas Knapp in Support of Motion to Compel Arbitration and Enforce Class Action Waiver (“Knapp Decl.”), ¶¶ 2-3.) Class members who did not attend the meeting were provided the agreement and cover letter over the next few days. (Id. at ¶ 4.) Most class members signed the agreements (“Current Employee Agreement”) within 15 days of April 15, 2016. (Id. at ¶ 7.)

Beginning on April 24, 2016, Defendant implemented a mandatory mediation and arbitration requirement (“New Hire Agreement”) for new hires. (Knapp Decl., ¶ 8.) Applicants following that date had to accept the New Hire Agreement as a condition of being hired. (Ibid.)

For covered claims, the Current Employee Agreement and the New Hire Agreement (collectively, the “Agreements”) both require nonbinding mediation followed by binding arbitration if the mediation is unsuccessful. (Knapp Decl., Ex. A, ¶¶ 4-5 and Ex. C, ¶¶ 4-5.)

Plaintiff argues the motion should be denied because: (1) Defendant failed to plead the Agreements as an affirmative defense; (2) Defendant failed to introduce sufficient evidence of the existence of any agreement to arbitrate or waive class claims; (3) the Agreements are unconscionable; and (4) Defendant failed to comply with the terms of the Agreements.

As an initial matter, the Court notes there is a fundamental problem with Defendant’s motion – it is directed at only part of the class. Defendant concedes not all class members (including the class representative) signed the Agreements. The Court cannot grant a motion to compel arbitration where not all class members are parties to a purported arbitration agreement. As there is no subclass of employees who signed the Agreements to which the motion can be directed, the motion cannot be granted as filed. Nevertheless, even if the motion were not defective in this manner, it would be denied because the Agreements are unconscionable, for reasons discussed below.

“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.)
Plaintiff argues the Agreements are both procedurally and substantively unconscionable.

a. Procedural Unconscionability

Plaintiff contends the Agreements are procedurally unconscionable because Defendant unilaterally drafted pre-dispute arbitration agreements that were required to be signed as a condition of employment. Plaintiff is correct that imposing an arbitration agreement as a condition of employment and with no opportunity to negotiate is procedurally unconscionable. (Subcontracting Concepts (CT), LLC v. De Melo (2019) 34 Cal.App.5th 201, 211; see also Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248 [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.].)

The Current Employment Agreement states, in part, that the “Agreement is given in exchange for your current employment. . . .” (Knapp Decl., Ex. A, p. 1.) Defendant asserts this is only part of the sentence and the remainder of the sentence refers to the more expeditious resolution of employment disputes. While this is true, it does not nullify the first part of the sentence that refers to an “exchange for current employment.” Moreover, where a “written agreement has been prepared entirely by the employer, it is a ‘well-established rule of construction’ that any ambiguities must be construed against the drafting employer and in favor of the nondrafting employee.” (Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 248.)

Similarly, the New Hire Agreement conditions employment on agreement to the mediation and arbitration procedure. (Knapp Decl., Ex. C, p. 1.) As stated previously, such a contract of adhesion contains a degree of procedural unconscionability. Therefore, both the Current Employee Agreement and the New Hire Agreement have some procedural unconscionability.

b. Substantive Unconscionability

Plaintiff argues the Agreements are substantively unconscionable because they are unilateral rather than bilateral. In other words, the Agreements only require the arbitration of claims employees have against Defendant, and do not require Defendant to arbitrate claims it has against employees. Defendant disputes this characterization, contending it is also bound by the same requirement to arbitrate in the Agreements.

The Agreements define covered claims as including, in relevant part, “[a]ny claim that could be asserted in any court, and for which Employee has an alleged cause of action” and “[a]ll claims whether made against Corinthian, any of its subsidiary or affiliated entities or its individual officers, directors, owners or managers (in an official or personal capacity).” (Knapp Decl., Ex. A, p. 2 and Ex. C, p. 2.) These covered claims only include claims by an employee against Defendant; the Agreements do not require Defendant to arbitrate claims it has against an employee.

As stated by the California supreme court: “Given the disadvantages that may exist for plaintiffs arbitrating disputes, it is unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee. . . .” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 117.) “[I]n the context of an arbitration agreement imposed by the employer on the employee, such a one-sided term is unconscionable.” (Id. at p. 118.) Consequently, the Agreements are substantively unconscionable.

IV. CONCLUSION

The Court cannot grant a motion to compel arbitration directed at a class where not all class members are parties to a purported arbitration agreement. Further, the Agreements cannot be enforced because they are both procedurally and substantively unconscionable. Accordingly, Defendant’s motion to compel arbitration and enforce class action waiver is DENIED.

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