2013-00152749-CU-WT

Waverly Alexander vs. Apple American Group, LLC

Nature of Proceeding:      Petition to Compel Arbitration

Filed By:    Griffin, Melissa L.

Defendant’s Motion to Compel Arbitration is granted.

This case is stayed pending the outcome of the arbitration.

Plaintiff alleges age discrimination arising out of her termination as a manager at
Applebees. Plaintiff alleges that she was told to train another person to be manager
under the auspices of assigning him to another store, however plaintiff was terminated
after she refused to take a lower position.  When Applebees was purchased by
defendant, Plaintiff initialed and signed a document stating that she had read the terms
of the arbitration agreement requiring the parties to arbitrate all disputes arising out of
employment, including discrimination suits.

Strong public policy favors arbitration.(CCP §1281; Coon v. Nicola (1993) 17 Cal. App.
4th 1225, 1232; Madden v. Kaiser Foundation Hospitals  (1976) 17 Cal.3d 699, 706.) A
written agreement to submit a controversy to arbitration is valid, enforceable, and
irrevocable consistent with standard contract principles

Plaintiff does not dispute signing the Terms of Employment Acknowledgement and the
AAG New Hire Orientation Booklet.  Plaintiff contends that the arbitration agreement is
both procedurally and substantively unconscionable.

Unconsionability has both a procedural and substantive element, and both elements
must be present before the contract provision will be rendered unenforceable.  Kinney
th
v United Healthcare Services, Inc. (1999) 70 Cal.App.4   1322, 1329. Procedural
unconscionability focuses on oppression, surprise and the manner in which the
agreement was negotiated. Martinez v. Master Protection Corp. (2004) 118
Cal.App.4th 107, 113. To show “oppression” for procedural unconscionability, plaintiffs
must show that as the weaker party they lacked not only the opportunity to bargain but
also any realistic opportunity to look elsewhere for a more favorable contract; they
must either adhere to the standardized agreement or forego the needed service.
Gatton v. T-Mobile USA, Inc., supra, at p. 595. Substantive unconscionability focuses
on “the actual terms of the agreement and evaluates whether they create such “overly
harsh” or “one-sided” results as to “shock the conscience.” Suh v. Superior Court
(2010) 181 Cal. App. 4th 1504, 1515; Ingle v. Circuit City Stores, Inc. (9th Cir. 2003)
328 F.3d 1165, 1173, quoting Kinney v. United HealthCare Servs., Inc. (1999) 70
Cal.App.4th 1322, 1330. 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. Armendariz v.
Foundation Health Psychcare Servs. (2000) 24 Cal. 4th 83, 114.

As to procedural unconscionability, Plaintiff states she was not given time to read the
document.  However, plaintiff initialed the document indicating that she had read it.
Plaintiff initialed a document entitled “Terms of Employment Acknowledgement,” where
she indicated, “I acknowledge that I am covered by the Dispute Resolution Program,
and it was reviewed with me in orientation.” (Griffin Dec, ¶4, Ex B). “[A] pre-dispute
arbitration agreement is not invalid merely because it is imposed as a condition of
employment.” Lagalree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th
1105,1122. Even were the Court to conclude that it was procedurally unconscionable,
this merely “heralds the beginning, not the end, of [the court’s] inquiry into its
enforceability.”  Mayers v. Volt Management Corp. (2012) 203 Cal.App.4th 1194, 1207.
There are degrees of procedural unconscionability. The showing here does not compel
the conclusion that procedural unconscionability exists. “Reasonable diligence requires
the reading of a contract before signing it. A party cannot use his [her] own lack of
diligence to avoid an arbitration agreement.” Brookwood v. Bank of America (1996) 45
Cal. App. 4th 1667, 1674.

Plaintiff also contends that the agreement is substantively unconscionable because it
provides that a plaintiff who loses a claim for employment discrimination will be liable
for attorneys fees even if her case was not frivolous.  Plaintiff contends that the
provisions of the arbitration agreement do not meet the requirements of Armendariz v
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83.  In that case the
Supreme Court held in part that the arbitration agreement cannot impose more burden
on or restrict remedies available to a FEHA plaintiff than would a case brought in
Superior Court.  The FEHA statutes provide for attorneys fees to a prevailing
defendant only if they can show that the plaintiff’s claim or the continued prosecution of
the claim was frivolous.   Plaintiff contends that under the arbitration agreement she
could be liable for fees if the defendant prevails even if her case is not found to be
frivolous.  However, the plain language of the agreement provide for fees as provided
by statute, therefore incorporating the FEHA statute.  The fee provision does not
conflict with FEHA and is not unconscionable.

Plaintiff also contends that the Agreement is unconsionable because it does not set
forth the AAA rules.  However, it is sufficient that the Agreement provides, “The [AAA]
rules can be obtained from the AAA’s website at ADR.org or from the Company upon
request.”   The AAA rules may be incorporated by reference, particularly when the
dispute over the right to arbitrate does not concern the content of the rules.  Under
California law, parties to an agreement may incorporate by reference into their contract
the terms of some other document.  Wolschleger v Fid.Nat. Title Ins. Co . (2003) 111
Cal.App.4th 784, 790.  Here, plaintiff suffered no prejudice from not having read the
AAA rules at the time she signed the agreement. The failure to attach AAA rules that
are incorporated by reference in an arbitration agreement “adds a bit to the procedural
unconscionability,” not substantive unconscionability.  (Zullo v. Superior Court (2011)
197 Cal.App.4th 477, 485)  While it may be somewhat “oppressive to require the party
to make an independent inquiry to find the applicable rules in order to fully understand
what she was about to sign,” here there is no evidence that the rules contained in the
arbitration agreement were inconsistent with the AAA rules.  (Id. at 486)  The AAA
rules are “rules which have been carefully drafted by the AAA to ensure they are fair to
all parties. Lucas v Gund, Inc. (C.D. Cal 2006) 450 F.Supp.2d 1125, 1134.            Plaintiff challenges that provision that states the arbitrator has the ability to determine
arbitrability, including whether the contract is void.  A provision in an arbitration
agreement that requires the arbitrator to decide its own jurisdiction and whether the
arbitration agreement is unconscionable is substantively unconscionable and
unenforceable.  Murphy v Check ‘N Go of California, Inc. (2007) 156 Cal.App.4th 138,
145.  Defendant does not distinguish Murphy or object to its application, and actually
concedes the court shall decide arbitrability [“Defendant Has Plainly Waived the Right
To Have An Arbitrator Determine Arbitrability.” p. 11, Reply] The Court determines that
the provision in the contract at page 5, under PROGRAM
PROVISIONS/ENFORCEMENT is to be severed from the contract. (CC § 1670.5.)

“The arbitrators, and not any federal, state, or local court or agency, shall have
exclusive authority to resolve any dispute relating to the interpretation, arbitrability,
applicability, enforceability or formation of the agreement to arbitrate including, but not
limited to, any claim that all or any part of the agreement to arbitrate is void and
voidable.”

The Court rejects plaintiff’s argument that the agreement lacks mutuality.  Both parties
are required to raise all claims against each other in arbitration.  The provision for
injunctive relief is consistent with CCP 1281.8 and does not create a lack of mutuality
in the arbitration agreement.

The prevailing party shall prepare a formal order for the Court’s signature pursuant to
C.R.C. 3.1312.