SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

DIETER SPICKER, ROSS CLARK, and BEN FRANCIA, on behalf of themselves and others similarly situated,

Plaintiffs,

vs.

AN SAN JOSE LUXURY IMPORTS, INC., dba MERCEDES-BENZ OF STEVENS CREEK and PARK AVENUE MOTORS, and DOES 1 through 10,

Defendants.
Case No. 2016-1-CV-300466

TENTATIVE RULING RE: MOTION TO COMPEL PLAINTIFFS’ INDIVIDUAL CLAIMS TO BINDING ARBITRATION AND STRIKE CLASS CLAIMS AND ALLEGATIONS

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on September 21, 2018, 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. Plaintiffs Dieter Spicker, Ross Clark, and Ben Francia (collectively, “Plaintiffs”) allege various Labor Code violations in the Complaint, filed on September 28, 2016. The Complaint sets forth the following causes of action: (1) Failure to Pay for Each Hour Worked at the Appropriate Rate; (2) Failure to Authorize and Permit Paid Rest Breaks; (3) Failure to Provide Accurate Itemized Wage Statements; (4) Failure to Provide All Wages Due at Separation; and (5) Violation of California’s Unfair Competition Law.
Defendant An San Jose Luxury Imports, Inc. dba Mercedes-Benz of Stevens Creek and Park Avenue Motors (“Defendant”) now moves for an order compelling Plaintiffs to submit their claims to binding arbitration.

II. PLAINTIFFS’ REQUEST FOR JUDICIAL NOTICE

Plaintiffs request judicial notice of the Department of Labor, Bureau of Labor Statistics’ Consumer Price Index Inflation Calculator and its calculation of the present value of what $37,000 was worth in February 2004. Plaintiffs also request judicial notice of the posted rates and fees of ADR Services, Judicate West, and JAMS. The request for judicial notice is GRANTED. (Evid. Code, § 452, subds. (c) and (h).)

III. OBJECTIONS TO EVIDENCE

Plaintiffs and Defendant have filed objections to evidence in connection with their papers. The Court has reviewed the objections and they are OVERRULED.

IV. 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 (“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 356.)

Defendant states Plaintiffs each signed binding and enforceable arbitration agreements and should be compelled to arbitrate their claims. Defendant provides as evidence the arbitration agreements signed by Spicker and Francia on January 27, 2016, and by Clark on July 20, 2015. (Declaration of Erika Hudson in Support of Defendant’s Motion to Compel Plaintiffs’ Individual Claims to Binding Arbitration and Strike Class Claims and Allegations (“Hudson Decl.”), ¶¶ 5-7 and Exs. A-C.)

Defendant contends the arbitration agreements are subject to the Federal Arbitration Act (“FAA”). Defendant argues further that Plaintiffs’ claims must be compelled to arbitration on an individual basis and they cannot pursue their putative class claims.

Plaintiffs argue they cannot be compelled to arbitration because: (1) the agreements at issue are pay plans, not contracts of employment; (2) Defendant has failed to establish when the pay plans were signed; (3) Defendant has not established the agreements involve interstate commerce and therefore the FAA does not apply; (4) since the FAA does not apply, California law applies and the agreements are unenforceable based on California Labor Code section 229; and (5) the agreements are unconscionable.

Plaintiffs’ first argument is that the agreements are pay plans, not contracts of employment. Plaintiffs rely on Sparks v. Vista Del Mar Child & Family Services (2012) 207 Cal.App.4th 1511, for the proposition that signing a personnel document that expressly states it is not an employment contract, while also containing an arbitration provision in that document, does not result in the waiver of the right to assert statutory employment rights in court. In Sparks, the court found a handbook, which contained many clauses including an arbitration clause that was not specifically highlighted, and did not provide a place for the employee to acknowledge it in writing, could not be relied on to compel arbitration. (Id. at pp. 1519-1523.) The court also noted the handbook could be unilaterally modified by the employer, rendering the agreement to arbitrate illusory. (Id. at p. 1523.)

In contrast, the agreements in this case are relatively short (six or seven pages), provide detailed information about the arbitration agreement, and state on a signature page (signed by Plaintiffs) that “I HAVE READ UNDERSTAND AND AGREE TO BE BOUND BY THE FOREGOING TERMS AND CONDITIONS OF THIS PAY PLAN AND THE ARBITRATION AGREEMENT.” (Hudson Decl., Exs. A-C.) It is apparent that the agreements are, in fact, agreements to arbitrate.

Plaintiffs next argue that Defendant has not established when the agreements were signed, so it cannot be determined for which time period they apply, rendering them unenforceable. Plaintiffs contend the agreements would only apply prospectively, based on the present tense language used. Defendant only has the burden to establish the existence of valid agreements to arbitrate, which it has done. (See Code Civ. Proc., § 1281.2.) Having done this, the burden shifts to Plaintiffs to demonstrate any defense to the agreements’ enforcement. (Ibid.; see also Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219.) Plaintiffs do not dispute they signed the agreements and they have provided no evidence regarding the dates the agreements were signed.
Moreover, the agreements do not apply only prospectively. The arbitration agreements apply to any claim, dispute, and/or controversy “arising from, related to, or having any relationship or connection whatsoever with Associate’s seeking employment with, employment by, termination of employment from, or other association with the Company. . . .” (Hudson Decl., Ex. A, § 7(a); Ex. B, § 7(a); and Ex. C, § 7(a).) This language does not restrict the arbitration agreements to any particular time period, but instead is very broad and applies to any association with Defendant.
Plaintiffs’ third argument is that the FAA does not apply because Defendant has not established the agreements involve interstate commerce. Generally, “[t]he party asserting FAA preemption bears the burden to present evidence establishing a contract with the arbitration provision affects one of these three categories of activity, and failure to do so renders the FAA inapplicable.” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238.)

The U.S. Supreme Court has held the FAA has an expansive reach. (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 274.) Use of out-of-state materials can demonstrate involvement of interstate commerce. (See id. at p. 282.) Plaintiffs are mechanics for Defendant. (See Complaint.) Defendant provides evidence Defendant obtains parts and supplies from vendors and suppliers located both within and outside California. (Declaration of Kevin Sitch in Support of Defendant’s Motion to Compel Plaintiffs’ Individual Claims to Binding Arbitration and Strike Class Claims and Allegations, ¶ 4.) This is sufficient to bring the case within the ambit of the FAA and preempt Labor Code section 229. (See Perry v. Thomas (1987) 482 U.S. 483, 492.)
Plaintiffs’ final argument is that the agreements are 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.)

Plaintiffs contend the agreements are procedurally unconscionable because they are adhesion contracts. It has been held that an adhesion contract in the employment context involves at least some degree of procedural unconscionability. (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 243.) However, the fact that a contract is one of adhesion, by itself, establishes only a modest degree of procedural unconscionability. (Id. at p. 244; see also Da Loc Nguyen v. Applied Medical Resources Corp. (2016) 2016 WL 6070989, at *6.) Further, the adhesive nature of an employment contract does not subject the contract to the same degree of scrutiny as contracts of adhesion that involve surprise or “other sharp practices.” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245.)

Plaintiffs argue the agreements are substantively unconscionable because they are silent on costs and arbitration would be prohibitively expensive. The ageements do not require Plaintiffs to pay the costs and Defendant has agreed to pay all costs associated with arbitration. Moreover, the absence of specific provisions on arbitration costs in an employment case is generally not grounds for denying the enforcement of an arbitration agreement. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.)

Plaintiffs have only demonstrated that the agreements have a small degree of procedural unconscionability. No substantive unconscionability has been shown. Therefore, unconscionability cannot be used as a defense in this instance to prevent enforcement of the agreements.

In sum, for the reasons discussed, Defendant’s motion is GRANTED.

The Court will prepare the final order if this tentative ruling is not contested. Further, if this tentative ruling is not contested, the case management conference set on September 21, 2018 at 10:00 a.m. will be ordered off calendar.