30-2013-00691403

Motion by Defendants for Order Compelling Arbitration:

The Case Management Conference of 9:00 a.m. is hereby moved to 10:00 a.m. for the convenience of counsel.

Defendants Steven Sorenson, Todd Lempert, and Coast Radiology Imaging and Intervention, Inc.’s motion for order (i) compelling plaintiff Molly Mathes to arbitration her claims against them pursuant to an arbitration agreement and (ii) staying this action pending completion of arbitration is granted.

(a) The Law:

(i) Code Civ. Proc. § 1281.2 provides, inter alia:

“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.

(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. …”

(Emphasis supplied.)

(ii) CRC 3.1330 requires that a petition to compel arbitration or to stay proceedings pursuant to Code Civ. Proc. §1281.2 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 attached to the petition and incorporated by reference

“‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement–either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see § 1281.2, subds. (a), (b))–that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’” Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal. App. 4th 754, 761, quoting Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal. 4th 394, 413.

(b) There Was an Agreement to Arbitrate the Claims in Plaintiff’s Complaint

(i) There is no real dispute presented concerning the existence of the agreement or that Plaintiff signed it. Further, there can be no real dispute that the breadth of the arbitration provision encompasses the claims set forth in Plaintiff’s complaint.

(ii) Plaintiff has asserted something akin to fraud in the execution or fraudulent inducement, saying that Sorenson told her the agreement was no different than a prior agreement that did not contain an arbitration provision. Plaintiff has not established all the elements of fraud in the execution or fraudulent inducement, such as reasonable reliance, however. Rosenthal v. Great Western Fin. Sec. Corp. (1996) 14 Cal. 4th 394, 413-14; Riverisland Cold Storage v. Fresno-Madera Production Credit Ass’n (2013) 55 Cal. 4th 1169, 1183. The purported statements by Sorenson are therefore discussed below in the context of unconscionability.

(c) Is the Arbitration Agreement Unenforceable for Unconscionability?

(i) Unconscionability is one ground on which a court may refuse to enforce a contract, including an arbitration agreement. Civ. Code §1670.5. Whether a provision is unconscionable is a question of law. Civ. Code §1670.5(a); Flores v. Transamerica (2001) 93 Cal. App. 4th 846, 851.

“If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” Civ. Code §1670.5(a); Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 122. The absence of severability clause is irrelevant to the determination whether the offensive provisions are “severable” for purposes of unconscionability analysis. Severability is decided as a matter of state law. Terminix Int’l Co., LP v. Palmer Ranch Ltd. Partnership (11th Cir. 2005) 532 F.3d 1327, 1331.

(ii) Unconscionability has a procedural and a substantive element: the procedural element focuses on the existence of oppression or surprise and the substantive element focuses on overly harsh or one-sided results. Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 114.

(iii) To be unenforceable, a contract must be both procedurally and substantively unconscionable, but the elements need not be present in the same degree. The analysis employs a sliding scale: “…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; Mercuro v. Superior Court (2002) 96 Cal. App. 4th 167, 174-75.

(d) Procedural Unconscionability

(i) Procedural unconscionability concerns the manner in which the contract was negotiated and the parties’ circumstances at that time. It focuses on the factors of oppression or surprise. Kinney v. United HealthCare Services, Inc. (1999) 70 Cal. App. 4th 1322, 1329.

Procedural unconscionability is often found in contracts of adhesion – i.e. standardized contracts which, imposed and drafted by the party of superior bargaining strength, relegate to the subscribing party only the opportunity to adhere to the contract or to reject it. Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 113. “When the weaker party is presented the clause and told to take it or leave it without the opportunity for meaningful negotiation, oppress, and therefore procedural unconscionability, are present.” Szetela v. Discover Bank (2002) 97 Cal. App. 4th 107, 114. See also Lhotka v. Geographic Expeditions, Inc. (2010) 181 Cal. App. 4th 816, 821-24 (finding take it or leave it contract for recreational activity procedurally unconscionable even though activity not a “necessity”). A “meaningful opportunity to negotiate or reject the terms of a contract requires, at a minimum, that a party have reasonable notice of the opportunity to negotiate or reject the terms of the contract and an actual, meaningful, and reasonable choice to exercise that discretion. Circuit City Stores, Inc. v. Mantor (9th Cir. 2003) 335 F. 3d 1101, 1106.

“Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice.” Crippen v. Central Valley RV Outlet (2004) 124 Cal. App. 4th 1159, 1165 (citation omitted). “When the weaker party is presented the clause and told to ‘take it or leave it’ without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present.” Szetela v. Discover Bank (2002) 97 Cal. App. 4th 1094, 1100 (citation omitted). Surprise usually involves supposedly agreed-upon terms buried in complex documentation. Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 114.

(ii) Here, as with all cases involving pre-employment arbitration agreements, some degree of procedural unconscionability is present. Ajamian v. CantorCO2e, LP (2012) 203 Cal. App. 4th at 796:

“The finding that the arbitration provision was part of a nonnegotiated employment agreement establishes, by itself, some degree of procedural unconscionability. It was an adhesion contract, because it was based on a standardized form, drafted and imposed by a party of superior bargaining strength … [however] where there is no other indication of oppression or surprise, the degree of procedural unconscionability of an adhesion agreement is low.”

In accord, Wisdom v. AccentCare, Inc. (2012) 202 Cal.App.4th 591, 597; Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 980-981; Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1471; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 175.

(iii) The other aspect of procedural unconscionability asserted by Plaintiff, which ties in with her description of the agreement as take-it-or-leave-her-job, is Plaintiff’s contention that Sorenson rushed her and did not permit her to review the relatively brief document with care. Plaintiff essentially contends that she did not read the documents, both because she was told the contract was the same has her prior contract with a different employer and because Sorenson was pushing her to sign and was “clearly” unwilling to talk about or negotiate the provisions. Finally, Plaintiff also points to Defendants’ failure to provide her with JAMS rules at the time of the agreement.

(iv) Under these facts Plaintiff has shown a limited degree of procedural unconscionability.

(e) Substantive Unconscionability

(i) In assessing substantive unconscionability, the “paramount consideration” is mutuality of the obligation to arbitrate. Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal. App. 4th 1267, 1287. Where a clause provides for the arbitration of claims most likely to be brought by the weaker party, but exempts the claims most likely to be filed by the stronger party, the clause is unconscionable. Samaniego v. Empire Today (2012) 205 Cal. App. 4th 1138, 1147-48. See also Stirlen v. Supercuts, Inc. (1997) 51 Cal. App. 4th 1519, 1543 (finding unconscionable arbitration agreement that required employee to arbitrate all his claims (and limited remedies to compensatory damages) while allowing employer to litigate certain claims). An arbitration agreement is substantively unconscionable where it compels arbitration of claims one side is most likely to bring against the other and exempts from arbitration claims the other is most likely to bring against the first party. Mercuro v. Superior Court, supra, 96 Cal. App. 4th at 175-76.

(ii) In Armendariz v. Foundation Heath Psychcare Services, Inc. (2000) 24 Cal. 4th 83, the California Supreme Court specified minimum requirements that a mandatory employment arbitration agreement must meet to avoid being found substantively unconscionable: (1) provides for neutral arbitrators; (2) provides for more than minimal discovery; (3) requires a written award; (4) provides for all types of relief that would be available in court; (5) does not require employees to pay the unique expenses of arbitration; and (6) a modicum of bilaterality. Id. at 102-103. An agreement may lack the requisite bilaterality if (a) only the employee is bound to arbitrate, (b) the employer is provided limited judicial remedies not sufficiently tailored to a legitimate business reality, (c) the agreement prohibits class actions, or (d) the employer retains unilateral power to modify or terminate the agreement. Id. at 115-121.

(iii) The arbitration provision here does not lack mutuality. It applies equally to both sides. This complete bilaterally in fact raises the only real issue with the provision: Plaintiff is required to split the upfront costs of arbitration with Defendants when Armendariz requires otherwise. This is an element of the provision that can be, and hereby is, severed by the court, leaving the parties with Code Civ. Proc. § 1284.2 (allocation of costs) as applied per Armendariz (that is, employer to bear costs). Armendariz v. Foundation Heath Psychcare Services, Inc. (2000) 24 Cal. 4th at 113.

(iv) Plaintiff also argues that the arbitration agreement prohibits recovery of prevailing party attorneys’ fees, which are authorized pursuant to Govt. Code §12965(b). The agreement provides that “the arbitrator may grant all remedies that would be available in a California court proceeding” – which means that the arbitrator can award Plaintiff her attorneys’ fees if she prevails on her FEHA claims. The provision for attorneys’ fees to the prevailing party, too, can be read to include the FEHA burdens of proof as between successful plaintiffs and successful defendants (that is, that defendants get fees only if the plaintiff’s case is found to be frivolous). The arbitration agreement could have been written more accurately, but there does not appear to be any intent to strip statutory rights.

(f) Based on the totality of the circumstances, the minimal degrees of procedural and substantive unconscionability do not rise to such a level that enforcement is inequitable.

Moving Parties shall give Notice and prepare the appropriate order.