Case Number: BC548229    Hearing Date: September 15, 2014    Dept: 34

Moving Party: Defendants Sonic Automotive Inc. and Sebaastian Valente (“defendants”)

Resp. Party: Plaintiffs Mary Ramirez and Ali Mohandesi (“plaintiffs”)

Defendants’ motion is GRANTED. The instant action is stayed pending the resolution of the arbitration proceedings.

BACKGROUND:

Plaintiffs commenced this action on 6/9/14 against defendants for: (1) wrongful termination; (2) violation of Labor Code § 1102.5; (3) negligent / intentional interference with contract / prospective economic advantage; (4) unlawful business practices; and (5) wrongful termination. Plaintiffs allege that they were subject to adverse employment actions and forced to resign after expressing concerns over defendants’ unlawful sales and exports.

ANALYSIS:
“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Cal. Code of Civ. Proc, §1281.) Section 1281.2 of the Code of Civil Procedure states in pertinent part:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, 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.

(Cal. Code Civ. Proc., §. 1281.2.)

A proceeding to compel arbitration is in essence a suit in equity to compel specific performance of a contract. (Freeman v. State Farm Mutual Auto Insurance Co. (1975) 14 Cal.3d 473, 479.) Such enforcement may be sought by a party to the arbitration agreement. (Cal. Code Civ. Proc., § 1280, subd. (e)(1).)

In deciding a petition to compel arbitration, trial courts must first decide whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue of whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocer Co. (2004) 118 Cal.App.4th 955, 961.) “The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.” (Engalla v. Permanente Medical Group, Inc.(2007) 15 Cal.4th 951, 972 [citations omitted].)

1. There Is No Dispute That an Arbitration Agreement Exists

Defendant provides a copy of a mutual agreement to arbitrate which was signed by each plaintiff. (See Pet., Exh. A.) Plaintiffs do not dispute that they signed these agreements. (See Ramirez Decl., ¶ 2; Mohandesi Decl., ¶ 2.)

2. There Is No Dispute That Plaintiffs’ Claims Are Within the Scope of the Agreement

The arbitration agreement expressly states:

I and the Company both agree that any claim, dispute, and/or controversy that either party may have against one another (including, but not limited to, any claims of discrimination and harassment, whether they be based on the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, as amended, as well as all other applicable local, state or federal laws or regulations) which would otherwise require or allow resort to any court or other governmental dispute resolution forum between myself and the Company (or its owners, directors, officers, managers, associates, agents, and parties affiliated with its associate benefit and health plans) arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company, whether based on tort, contract, statutory, or equitable law, or otherwise, (with the sole exception of claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, claims for medical and disability benefits under the California Workers’ Compensation Act, and Employment Development Department claims) shall be submitted to and determined exclusively by binding arbitration.

(Pet., Exh. A, ¶ 2.) Plaintiffs do not dispute that their claims are within the scope of this agreement.

3. The Arbitration Agreement is Enforceable

Defendant has not sufficiently shown that the Federal Arbitration Act (FAA) applies to the agreement at issue here. Federal law applies to arbitration provisions in contracts involving interstate commerce. (Higgins v. Sup. Ct. (2006) 140 Cal.App.4th 1238, 1247.) Preemption under the Federal Arbitration Act can be shown by a contract evidencing a transaction involving the channels of interstate commerce, the instrumentalities of interstate commerce, persons or things in interstate commerce, or an activity having a substantial but not incidental relation to interstate commerce. (Shepard v. Edward Mackay Ent., Inc. (2007) 148 Cal.App.4th 1092, 1100.) ” ‘[I]t is the burden of the party claiming that Congress intended to preempt state law to prove it.’ ” (Woolls v. Sup. Ct. (2005) 127 Cal.App.4th 197, 211.) Defendant provides no evidence suggesting that the agreement with plaintiff involved interstate commerce. The conclusory statements in the agreement itself are not sufficient. Therefore, state law applies to the determination of the enforceability of the agreement.

“[P]rocedural 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.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.) Plaintiff bears the burden of proving that the provision at issue is both procedurally and substantively unconscionable.

A. Although not Argued by Plaintiff, the Court Finds the Agreements Procedurally Unconscionable

Plaintiffs do not clearly argue in their opposition that the agreement is procedurally unconscionable. In the declarations, plaintiffs state that the agreement was a non-negotiable document that they required to sign as a condition of employment. (See Ramirez Decl., ¶ 2; Mohandesi Decl., ¶ 2.) Procedural unconscionability includes oppression arising from unequal bargaining power causing an absence of meaningful choice and real negotiating, and surprise due to hidden terms drafted by the party seeking to enforce the provisions. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 581.) “[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; Nelsen v. Legacy Partners Residential, Inc. (2012) 2012 WL 2913809; Armendariz, 24 Cal.App.4th at 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.)

The court finds the arbitrations agreements to be contracts of adhesion and hence procedurally unconscionable.

B. Although the Arbitration Agreements are Favor the Employer, they are still Enforceable

For an arbitration agreement to be unenforceable as unconscionable, both procedural and substantive unconscionability must be present. (Armendariz, 24 Cal.4th at p. 114.) Procedural and substantive unconscionability need not be present to the same degree. (Ibid.) “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.” (Ibid.)

Plaintiffs argue that the agreement is substantively unconscionable because it lacks mutuality since it includes the following language:

[A]n arbitrator will hear only my individual claims and does not have the authority to fashion a proceeding as a class or collective action or to award relief to a group of employees in one proceeding, to the maximum extent permitted by law. Thus, the Company has the right to defeat any attempt by me to file or join other employees in a class, collective or joint action lawsuit or arbitration (collectively “class claims”).

(Pet. Exh. A, ¶ 2.)

An agreement may lack mutuality where it permits one party to seek relief through the courts, but does not allow the same relief for the other party. (See, e.g., Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 115.) Plaintiff provides no authority which holds that a provision prohibiting joint actions renders an arbitration agreement substantively unconscionable. Instead, plaintiff discusses cases pertaining to class action complaints; but the instant action is not a class action. Moreover, even if such a clause is unconscionable and unenforceable, it can be severed from the agreement and the joint claims submitted to arbitration. (See Fittante v. Palm Springs Motors, Inc. (2003) 105 Cal. App. 4th 708, 726 [an unconscionable provision may be severed and the remainder of the arbitration agreement may be given effect]; Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 92 [severance is discretionary where the provision to be severed is collateral to the main purpose of the contract].)

Further, the arbitrator who hears this case might decide that s/he is not bound by such a provision, and decide to allow other employees to join the arbitration.

Plaintiffs – in their relatively sparse opposition – do not raise any arguments as to whether the agreement complies with the requirements of Armendariz. In Armendariz, the California Supreme Court held that an employee arbitration agreement is lawful if it: (1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum. (Armendariz, 24 Cal.4th at p. 102.) Armendariz requirements apply to claims based on FEHA legislation, or another fundamental public policy associated with a constitution or statute. (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1288.)

The agreement provides that the arbitrator shall be a retired Superior Court judge and shall be subject to disqualification on the same grounds as would apply to a Superior Court judge. (See Pet., Exh. A, ¶ 2.) The agreement requires a written award. (See ibid.) The agreement provides that all rules of pleadings, evidence, and rights to resolve the dispute by means of motions apply. (See ibid.) The arbitrator is vested with the authority to determine any and all issues pertaining to the dispute, based solely upon the law governing the claims and defenses pleaded and not for bases other than the controlling law. (See ibid.) The agreement provides that the allocation of costs and arbitrator fees shall be governed by statutory authorities and controlling case law where they differ from CCP section 1284.2. (See ibid.) Though the agreement is silent as to discovery and the types of relief, there is no provision expressly restricting or limiting available discovery methods or relief. (See ibid.)

Plaintiffs’ main argument seems to be that the situation presented here is that of

“ . . . a small group of identically or similarly situation [sic] employees is precluded from pursuaing a claim that would be joined under the ordinary joinder rules of virtually any court in the world.

The only conceivable reason for barring plaintiff’s proceedings in this matter is to make it more difficult and expensive for them. Sonic is well aware that it has groups of similarly[-]situated employees such as finance employees, sales people, mechanics, etc. who may be subjected to illegal conduct searches harassment, or being forced to break criminal laws, as in this case. To say that such claims may never be pursued except through entirely separate arbitrations could only benefit the employer.” (Opposition, p. 5:15-23.)

The problem for plaintiffs is three-fold. First, as indicated above, this is a two-plaintiff action, not a large multi-plaintiff or class action. Second, plaintiffs have presented no evidence of other employees who are affected by this action. Third, while plaintiffs may well be correct that such arbitration agreements “could only benefit the employer,” the Supreme Court has indicated repeatedly that it finds such pro-employer agreements to be enforceable. Those rulings are binding on this court.

Plaintiffs fail to establish that the arbitration agreement is both substantively and procedurally unconscionable. Therefore, defendants’ motion is GRANTED. The instant action is stayed pending the resolution of the arbitration proceedings.