Case Number: 19STCV14988 Hearing Date: August 28, 2019 Dept: 34

SUBJECT: Petition to Compel Arbitration and Stay Proceedings

Moving Party: Defendants Service Corporation International, Rose Hills Company, and Specially Appearing Defendants John Short and Kathleen Cheung

Resp. Party: Plaintiff William Conlon

Defendants’ petition to compel arbitration is GRANTED with the change indicated below.

Defendants’ request to stay proceedings is GRANTED.

Plaintiff’s objections are OVERRULED.

BACKGROUND:

On April 30, 2019, Plaintiff William Conlon filed the instant action against Defendants Service Corporation International, Rose Hills Company, John Short, and Kathleen Cheung for (1) discrimination; (2) retaliation; (3) failure to prevent harassment, discrimination and/or retaliation; (4) defamation; (5) intentional interference with prospective economic relations; (6) Labor Code §1102.5; and (7) adverse action in violation of public policy.

Plaintiff alleges that Defendants manage a funeral home that caters to a large group of clients of Asian descent. Plaintiff alleges that when he was employed by Defendants, he was discriminated against because of his race and employment opportunities were taken away from him because he was not the same race of many of Defendants’ clients. (Complaint, pp. 1:23-2:8.)

On July 24, 2019, Defendants Service Corporation International and Rose Hills Company, and Specially Appearing Defendants John Short and Kathleen Cheung (“Defendants”) filed the instant petition to compel arbitration of the complaint and to stay further proceedings.

ANALYSIS:

A. Legal Standard

Valid arbitration agreements are typically enforceable and require the staying of a civil action at least until arbitration has taken place. “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).)

The petition to compel arbitration functions as a motion and is to be heard in the manner of a motion, i.e., the facts are to be proven by affidavit or declaration and documentary evidence with oral testimony taken only in the court’s discretion. (Cal. Code Civ. Proc., § 1290.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413 414.) The petition to compel must set forth the provisions of the written agreement and the arbitration clause verbatim, or such provisions must be attached and incorporated by reference. (Cal. Rules of Court, rule 3.1330; see Condee v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 218-19.) This rule does not require the petitioner to authenticate the agreement or do anything more than allege its existence and attach a copy. (Id.) Once this is done, the burden shifts to the opposing party to demonstrate the falsity of the purported agreement. (Condee, supra, 88 Cal.App.4th at 218-19.)

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. No jury trial is available for a petition to compel arbitration.” (Engalla v. Permanente Medical Group, Inc. (2007) 15 Cal.4th 951, 972 [citations omitted].)

B. Discussion

Defendants Service Corporation International, Rose Hills Company and Specially Appearing Defendants John Short and Kathleen Cheung (“Defendants”) “petition the court for an order compelling arbitration of all disputed alleged by Plaintiff William Conlon’s Complaint . . . and staying any further proceedings pending the completion of arbitration.” (Petition, p. 2:4-9.) “Defendants bring this petition pursuant to California Code of Civil Procedure §1281 et seq., on the grounds that Plaintiff is bound by a written agreement to arbitrate the subject matter of the Complaint.” (Id. at p. 2:10-12 [citing Code of Civ. Proc., §1281.2].)

1. Petition to Compel Arbitration

a. Existence of Agreement

Defendants argue that “on October 8, 2012, at the outset of his employment, Plaintiff entered into a written arbitration agreement with Defendant Rose Hills Company, where he has worked as a Family Service Counselor since that time.” (Petition, p. 4:2-4 [citing Gurnee Decl., Ex. A].) Defendant explains that the “written agreement is titled ‘Principles of Employment & Arbitration Procedures’ and it provides, inter alia, that:

Associate and the Company agree that, except for the matters identified in Section 2 below and except as otherwise provided by law, all disputes relating to any aspect of Associate’s employment with the Company shall be resolved by binding arbitration. This includes, but is not limited to, any claims against the Company, its affiliates or their respective officers, directors, associates, or agents for violation of state and federal statutory claims, and claims for breach of contract, wrongful discharge, discrimination, harassment, defamation, misrepresentation, and emotional distress, as well as any disputes pertaining to the meaning or effect of this Agreement. The arbitration shall be conducted in accordance with the procedures attached hereto as Exhibit “A.” This agreement to arbitrate shall cover disputes arising both before and after the execution of this document, except to the extent that any litigation has already been filed as of the date hereof.” (Id. at p. 4:4-16 [citing Gurnee Decl., Ex. A] [emphasis in original].)

Defendants assert that “the scope of that agreement is comprehensive, covering ‘all aspects relating to any aspect of [Plaintiff

S] employment with the company’ except as otherwise provided by law, or aby specific exclusion within that contract.” (Id. at p. 6:20-22.) Defendants explain that “the only disputes specifically excluded from this agreement are those claims related to (1) worker’s compensation, (2) employment benefits, or (3) claims brought to enforce any non-competition or confidentiality agreement between the parties.” (Id. at p. 6:22-25 [citing Gurnee Decl., Ex. A].) Defendants have provided a copy of the agreement, which bears Plaintiff’s name and a signature. (Gurnee Decl., Ex. A.)

In opposition, Plaintiff argues that “the document submitted by Defendants is inadmissible and should not be considered.” (Opp., p. 3:1-2.) Plaintiff argues that “Defendants only submitted a declaration by Defense Counsel making a conclusory statement that the arbitration submitted is ‘[a] true and correct copy of the fully executed agreement containing the arbitration provisions.’” (Id. at p. 3:15-17 [referencing Gurnee Decl., ¶ 3].) Plaintiff asserts that “at no point does Mr. Gurnee state that he is personally able to authenticate the document Defendants submit[] to the Court to compel Plaintiff to arbitration, nor is he able to.” (Id. at p. 3:18-19.) Plaintiff argues that “as the agreement is not admissible, Defendants are unable to demonstrate that an agreement to arbitrate has been reached between Defendants and Plaintiff.” (Id. at p. 3:21-22.)

In reply, Defendants state that “in an abundance of caution, Defendants submit the declaration of Gina Castro, the Director of Human Resources for Defendant Rose Hills Company, which authenticates the arbitration agreement at issue.” (Reply, p. 2:13-15.) Defendants attach the Castro declaration to the reply as Exhibit A. Defendants asserts that “the document submitted as Exhibit A with Defendant[s’] moving papers clearly contains Plaintiff’s signature” and “Plaintiff’s declaration submitted in support of his Opposition does not challenge the authenticity of his signature, the agreement itself, or anything related to the substance of the agreement.” (Id. at p. 2:22-25.) Defendant also argues that “Plaintiff’s declaration does challenge the procedural conscionability of the agreement, tacitly acknowledging that the document submitted by Defendants as Exhibit A is in fact the arbitration agreement which he signed.” (Id. at p. 2:25-27.)

As mentioned above, the moving party bringing a motion to compel arbitration does not have to authenticate the agreement or do anything more than allege its existence and attach a copy. (See Condee, supra, 88 Cal.App.4th at 218-19.) Once this is done, the burden shifts to the opposing party to demonstrate the falsity of the purported agreement. (Id.)

Plaintiff has not met his burden to demonstrate the falsity of the purported agreement, thus the Court OVERRULES his objections. Furthermore, the Court finds that Defendant has sufficiently demonstrated the existence of a written arbitration agreement.

b. Unconscionability

Defendants assert that there are no grounds to invalidate the arbitration agreement. (Petition, p. 7:15.) Defendants argue that “Plaintiff cannot meet this burden as the terms of the arbitration agreement are not substantively unconscionable, nor was its execution procedurally unconscionable.” (Id. at p. 8:4-5.) Defendants assert that “the terms and intention of the arbitration agreement were not hidden from Plaintiff” but rather it is “quite the opposite, [as] the three-page document is entitled ‘Principles of Employment & Arbitration Procedures.’” (Id. at p. 8:5-7.)

Plaintiff argues that the Court should deny Defendants’ request as the document provided is unconscionable. (Opp., p. 3:24-26.)

An arbitration agreement that exists may nevertheless be unenforceable because of either procedural or substantive unconscionability. “Procedural unconscionability focuses on the manner in which the disputed clause is presented to the party in the weaker bargaining position. 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.” (Szetla v. Discover Bank (2002) 97 Cal.App.4th 1094, 1100.) Arbitration agreements that are “imposed on employees as a condition of employment and [with] no opportunity to negotiate” are procedurally unconscionable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 115.) “[I]n the case of preemployment arbitration contracts, the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration requirement.” (Id.)

Substantive unconscionability in the context of arbitration deals with threshold requirements for fundamental fairness in arbitration. “[T]he arbitration must meet certain minimum requirements, including neutrality of the arbitrator, the provision of adequate discovery, a written decision that will permit a limited form of judicial review, and limitations on the costs of arbitration.” (Id. at 91.) Unconscionable terms do not necessarily mean the entire contract must be unenforceable. “If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.” (Id. at 123.) However, on other occasions there is “no single provision that the court can strike or restrict in order to remove the unconscionable taint from the agreement.” (Id. at 124-125.) If “the court would have to, in effect, reform the contract not through severance or restriction but by augmenting it with additional terms,” then the agreement as a whole in unconscionable, because such reformation is not within the Court’s authorized power. (Id. at 125.)

As explained in Armendariz:

“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. . . . 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.” (Id. at 114 [internal citations and quotations omitted].)

i. Procedural Unconscionability

Plaintiff argues that “the document in question here is a contract of adhesion and therefore procedurally unconscionable.” (Opp., p. 7:18-19.) Plaintiff asserts that he “was provided Defendants’ document immediately following an interview in a binder of various employment documents, asked to quickly sign the various documents, and then sent off to have a drug test conducted.” (Id. at p. 7:19-21 [citing Conlon Decl., ¶ 3].) Plaintiff argues that he “was not provided any time to consider the various documents presented to him, was not given time to consult with an attorney to determine the effects of the documents he was signing, or the opportunity to discuss and negotiate the terms of the documents.” (Id. at p. 7:22-24 [citing Conlon Decl., ¶¶ 3-5].)

In reply, Defendants argue that “Plaintiff was provided with a document that was a total of three pages in length” and “the document is captioned in bold print stating ‘Principles of Employment & Arbitration Procedures.’” (Reply, p. 5:1-3.) Defendants assert that “the terms to this agreement were conspicuous, there were not hidden.” (Id. at p. 5:6-7.) Defendants argue that “despite his representations to the contrary, Plaintiff was under no pressure to sign the agreement” and “Plaintiff fails to state any consequence for his failure to ‘quickly sign’ beyond that delay.” (Id. at p. 5:14-17.) Defendants maintain that “Plaintiff does not contend that his offer for employment would have been revoked, or that his position would have been impaired in any other way should he not ‘quickly sign.’” (Id. at p. 5:17-19.)

This agreement is clearly a take-it-or-leave-it agreement with no opportunity for meaningful negotiation because Plaintiff would only be employed by Defendant if he agreed to the terms of the arbitration provision. The circumstances surrounding the signing of this agreement are easily sufficient for the Court to find that the provision is procedurally unconscionable.

ii. Substantive Unconscionability

Plaintiff argues that the arbitration agreement substantively unconscionable because it does not satisfy the Armendariz requirements. (Opp., p. 8:1, 8:22.) Plaintiff argues that (1) the document does not address the remedies available to Plaintiff; (2) the document does not provide for the required written opinion; (3) the document imposes unreasonable costs on Plaintiff because it does not relieve Plaintiff of the costs of arbitration, an expense that is more than Plaintiff would bear in court; and (4) the document does not provides for the possibility that Plaintiff would be forced to use an arbitrator that might not be neutral. (Id. at pp. 9:10-10:28.)

In reply, Defendants argue that “the arbitration agreement explicitly satisfies each of these five [Armendariz] elements.” (Reply, p. 6:25.) First, Defendants argue that “on the third page of the three-page agreement, the first provision provides as follows: ‘1. Selection of Arbitrator. An arbitrator shall be selected by mutual agreement of the parties . . . .’” (Id. at pp. 6:25-7:1 [citing Gurnee Decl., Ex. A; Castro Decl., Ex. A.) Defendants assert that “the provision goes on to describe that should an agreement not be reached, each party will submit a list of three proposed Arbitrators” and “if the lists do not contain at least one matching Arbitrator, and an agreement is still not reached, ‘the parties will submit their initial lists of three Arbitrators to the Court, and the Court will select the Arbitrator from either of these lists.’” (Id. at p. 7:1-6 [citing Gurnee Decl., Ex. A; Castro Decl., Ex. A].)

The Court finds that the arbitration agreement provides for the process to select a neutral arbitrator, thus it is not substantially unconscionable as it relates to the neutrality of an arbitrator.

Defendants next argue that the arbitration agreement is intended to provide for a written award. (Id. at p. 7:20-24.) Defendants point to “the fifth provision on page three of the arbitration agreement [which] provides as follows: ‘5. The Arbitrator(s) shall issue a written award, which will contain, at a minimum, the names of the parties, a summary of the issues in controversy, and a description of the award.’” (Id. at p. 7:16-19 [citing Gurnee Decl., Ex. A; Castro Decl., Ex. A].) It is true that the arbitration agreement does not require the arbitrator to indicate “the essential findings and conclusions on which the award is based” as required by Armendariz (Armendariz, 24 Cal.4th at 107.)

The Court will amend the arbitration agreement to require the arbitrator to indicate his/her “essential findings and conclusions.” With that minor amendment, the Court finds that the arbitration agreement is not substantially unconscionable as it relates to the final written decision.

Defendants argue that “nothing in the arbitration agreement can be read to preclude Plaintiff from seeking, or limit Plaintiff from obtaining any relief that would be available to him in court.” (Id. at p. 7:25-27.) Defendants also note that “the fourth provision on page three of the arbitration agreement provides an example of such relief: ‘Provisional injunctive relief may be sought by either the Associate of the Company.’” (Id. at p. 8:5-8 [citing Gurnee Decl., Ex. A; Castro Decl., Ex. A].) The Court finds that the arbitration agreement does address that remedies are available to Plaintiff and the agreement does not limit Plaintiff from obtaining any specific relief. The arbitration agreement is not substantially unconscionable as it relates to remedies.

Lastly, Defendants argue that “nothing in [the legal counsel/costs] provision requires Plaintiff to carry any cost of arbitration, let alone an unreasonable cost.” (Id. at p. 8:14-15.) Defendants explain that “provision 4 on the second page of the agreement provides as follows: ‘4. Legal Counsel/Costs. Each party may retain legal counsel and shall pay its own costs and attorneys’ fees, regardless of the outcome of the arbitration; provided however, that the arbitrator may award attorneys’ fees to the prevailing party when expressly authorized by statute to do so. All other costs pertaining to the arbitration shall be paid by the Company.’” (Id. at p. 8:10-14 [citing Gurnee Decl., Ex. A; Castro Decl., Ex. A].) Defendants affirm that “‘all other costs pertaining to the arbitration,’ including any arbitrator’s fees, are to be paid by Plaintiff’s employer, and not by Plaintiff.” (Id. at p. 8:15-17.)

The Court finds that the arbitration agreement provides for limitations on costs of arbitration and does not provide for the imposition of unreasonable costs. The costs and attorney’s fees that can be awarded under the arbitration agreement track those that can be awarded in litigation.The arbitration agreement is not substantially unconscionable as it relates to arbitration costs.

With the above change concerning the arbitrator’s written decision, the Court GRANTS Defendants’ motion to compel arbitration.

2. Stay of Proceedings

If a party applies to a court “for an order to arbitrate a controversy which is an issue involved in an action or proceeding pending before a court of this State and such application is undetermined, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until the application for an order to arbitrate is determined and, if arbitration of such controversy is ordered, until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code of Civ. Proc., § 1281.4.)

As discussed above, the Court grants the motion to compel arbitration, thus the motion to stay is GRANTED.

The Court sets a Status Conference re arbitration for September ___, 2020. The parties are to file a Joint Status Conference Report 5 court days prior to the status conference hearing.