SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

TEVITA TUIFUA, on behalf of himself, and all others similarly situated,

Plaintiff,

vs.

FS PALO ALTO EMPLOYMENT, INC., DOES 1-50, inclusive,

Defendants.
Case No. 18CV322009

TENTATIVE RULING RE: MOTION TO COMPEL ARBITRATION

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. Plaintiff Tevita Tuifua (“Plaintiff”) alleges various wage and hour violations. The Complaint sets forth the following causes of action: (2) Violation of California Labor Code Section 226; (3) Unlawful, Unfair, and Fraudulent Business Practices Pursuant to Business & Professions Code Section 17200, et seq.; and (4) Private Attorneys General Act of 2004: Labor Code Section 2698. Defendant FS Palo Alto Employment, Inc. (“Defendant”) now moves for an order compelling Plaintiff to submit his claims to arbitration.

II. DISCUSSION

As an initial matter, the Court has reviewed Plaintiff’s objections to evidence and they are OVERRULED.

“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 argues Plaintiff voluntarily entered into an employment contract with Defendant, known as “EmPact,” that contained a mutual alternative dispute resolution process entitled Complaint, Arbitration & Review for Employees (“C.A.R.E.”). Defendant asserts Plaintiff was not required to sign EmPact and could have opted out of the C.A.R.E. provisions, but did not.

Plaintiff argues the arbitration provision cannot be enforced because: (1) Defendant is not a party to the agreement it seeks to enforce, (2) Plaintiff opted out of the agreement, and (3) the agreement is unconscionable. With regard to the first argument, Plaintiff contends the agreements presented by Defendant bear the names of either “Four Seasons Hotel Silicon Valley at East Palo Alto” or “The East Palo Alto Hotel Development, LLC,” but Defendant in this case is FS Palo Alto Employment, Inc. Generally, only a party to an arbitration agreement can enforce the agreement. (Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 763.) Defendant responds that there is no distinction here between FS Palo Alto Employment, Inc., the entity, and Four Seasons Hotel Silicon Valley at Palo Alto, the place. Defendant asserts Four Seasons Hotel Silicon Valley at East Palo Alto is merely an unincorporated dba of FS Palo Alto Employment, Inc.

Defendant argues further that Plaintiff should be equitably estopped from asserting Defendant cannot enforce the arbitration agreement. As stated in a case relied on by Defendant, “the equitable estoppel doctrine applies when a party has signed an agreement to arbitrate but attempts to avoid arbitration by suing nonsignatory defendants for claims that are ‘based on the same facts and are inherently inseparable’ from arbitrable claims against signatory defendants.” (Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1713, quotation marks and citations omitted.) In this case, there is no meaningful distinction between Four Seasons Hotel Silicon Valley at East Palo Alto and FS Palo Alto Employment, Inc. in relation to Plaintiff’s allegations of wage and hour violations. Therefore, the Court finds FS Palo Alto Employment, Inc. can move to enforce the arbitration agreement.

Plaintiff’s second argument is that he opted out of the arbitration agreement. Specifically, Plaintiff states he signed the opt-out verification form on December 15, 2017, when he was provided new agreements to sign. Defendant argues Plaintiff’s opt-out is ineffective because an employee cannot opt-out when there is a legal claim pending. The opt-out verification form states, in relevant part:

I understand that I may not opt out of the mediation/arbitration provisions of C.A.R.E. while I have any legal claim pending which arose prior to my execution of this form and which has been or could have been submitted to mediation/arbitration under C.A.R.E. at the time the claim arose.

(Declaration of Tran Dao in Support of Defendant FS Palo Alto Employment, Inc.’s Petition and Motion to Compel Arbitration, ¶¶ 12-13; Notice of Lodgment of Exhibits in Support of Defendant FS Palo Alto Employment, Inc.’s Petition and Motion to Compel Arbitration, Ex. E.)

Defendant contends Plaintiff had a legal claim pending at the time the opt-out form was signed in December 2017, as evidenced by a PAGA notice sent to Defendant in August 2017. Plaintiff responds that he did not have a legal claim pending until he filed this civil action in January 2018. Plaintiff argues the PAGA notice is a prerequisite to commencing a civil action and a party cannot have a legal claim pending prior to commencing the action. Plaintiff argues further that the term “legal claim pending” is ambiguous and should be construed against the drafter of the agreement – i.e. Defendant.

The problem with Plaintiff’s argument is that it focuses on the term “legal claim pending,” but ignores the rest of the paragraph. The language of the relevant paragraph refers to the time when a legal claim “arose,” not when it was filed, which implies a claim can exist even without a lawsuit. Moreover, the paragraph concerns legal claims that could have been submitted to mediation/arbitration at the time the claims arose. In other words, the claims could have been submitted prior to the filing of a lawsuit, which is an alternative procedure for arbitration.
Having found that a legal claim pending does not depend on the existence of a lawsuit, it follows that a PAGA notice signals the existence of such a legal claim. The very purpose of a PAGA notice is to provide notice of legal claims prior to the filing of a lawsuit regarding those claims. (See Labor Code, § 2699.3, subd. (a)(1)(A).) Consequently, Plaintiff’s opt-out in December 2017 was ineffective.

Plaintiff’s final argument is that the arbitration agreement is unconscionable. Plaintiff cites to Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102, for the proposition that an arbitration agreement is only lawful if it provides for more than minimal discovery. Plaintiff argues the arbitration agreement at issue here does not provide for a sufficient level of discovery.

The arbitration agreement states: “The parties will have such rights with respect to discovery and judicial review as may be required by statute or judicial decision as a condition of making this agreement to mediate and/or arbitrate fully enforceable by both parties.” (Notice of Lodgment of Exhibits in Support of Defendant FS Palo Alto Employment, Inc.’s Petition and Motion to Compel Arbitration, Ex. A, p. 65.) While this statement is somewhat vague, it does not restrict Plaintiff’s ability to conduct discovery. If the arbitration agreement denied all discovery, it would violate the requirements of Armendariz, supra, which is a judicial decision. But here, discovery consistent with the requirements of Armendariz is required.

Plaintiff also argues the arbitration agreement is procedurally unconscionable because it is a contract of adhesion and because the FAA rules, which govern the agreement, were not provided to Plaintiff. While these facts show some minimal unconscionability, they are not sufficient by themselves to warrant denial of the motion. (See Chavarria v. Ralphs Grocery Co. (9th Cir. 2013) 733 F.3d 916, 922 [“Under California law, a contract must be both procedurally and substantively unconscionable to be rendered invalid.”].)

In sum, Defendant has established the existence of an enforceable arbitration agreement. Defendant’s motion to compel arbitration is GRANTED. Plaintiff’s PAGA claim is stayed pending completion of the arbitration. (Code Civ. Proc., § 1281.4.)

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.