Case Number: BC695397 Hearing Date: July 23, 2018 Dept: 37

CASE NAME: Barnett, et al. v. Avalon Health Care, Inc., et al.

CASE NO.: BC695397

HEARING DATE: 7/23/18

DEPARTMENT: 37

CALENDAR NO.: 9

FILING DATE: 11/9/17

FSC/TRIAL DATE: 11/12/19 (FSC), 11/19/19 (trial)

NOTICE: OK

SUBJECT: Motion to Compel Plaintiff Jacqueline Barnett to Arbitration

MOVING PARTY: Defendants Avalon Villa Health Care, Inc. and Avrohom Tress.

OPPOSING PARTY: Plaintiffs Jacqueline Barnett and Celene Myles
COURT’S TENTATIVE RULING

The court GRANTS Defendant’s motion and compels Plaintiff Jacqueline Barnett’s claims to arbitration. The court STAYS Plaintiff Barnett’s claims until the completion of the arbitration.
STATEMENT OF THE CASE

This employment action arises from allegations that Defendants Avalon Health Care, Inc. (“Avalon”) and Avrohom Tress (“Tress”) (collectively “Defendants”) wrongfully discriminated against and harassed Plaintiffs Jacqueline Barnett (“Barnett”) and Celene Myles (“Myles”). Plaintiffs allege that they are African American and over the age of 40, that they were terminated within a very short time frame of several other African-American employees over the age of forty and that they were replaced by individuals under the age of 40 who were of a different race.

In the First Amended Complaint (“FAC”), Plaintiffs allege seven causes of action for: (1) wrongful termination in violation of public policy; (2) employment discrimination (disparate treatment) on the basis of race; (3) employment discrimination (disparate impact) on the basis of race; (4) harassment on the basis of race; (5) harassment on the basis of age; (6) employment discrimination (disparate treatment) on the basis of age and (7) violation of Labor Code, section 1102.5, et seq. Plaintiff filed a notice of designation of Doe Defendants 1 and 2 on April 18, 2018, naming Alexis Washington (“Washington”) and Cesar Laria (“Laria”) as Doe Defendants in this matter. No proofs of service of the Summons and FAC have been filed in this matter.

Defendants now move to compel Plaintiff Barnett’s claims to arbitration and request to have this Plaintiff dismissed from this matter or to stay this case until the completion of an arbitration. Plaintiffs oppose the motion.

DISCUSSION
I. Legal Standard

Under California and federal law, public policy favors arbitration as an efficient and less expensive means of resolving private disputes. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 8-9; AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 (Concepcion).) Accordingly, whether an agreement is governed by the California Arbitration Act (“CAA”) or the Federal Arbitration Act (“FAA”), courts resolve doubts about an arbitration agreement’s scope in favor of arbitration. (Moncharsh, at p. 9; Comedy Club, Inc. v. Improv West Assocs. (9th Cir. 2009) 553 F.3d 1277, 1284; see also Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th 951, 971-972 [“California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability [citation] and a requirement that an arbitration agreement must be enforced on the basis of state law standards that apply to contracts in general [citation]”].) “[U]nder both the FAA and California law, ‘arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ ” (Higgins v. Sup. Ct. (2006) 140 Cal.App.4th 1238, 1247.)

“Code of Civil Procedure section 1281.2 requires a trial court to grant a petition to compel arbitration ‘if the court determines that an agreement to arbitrate the controversy exists.’ ” (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59, quoting Code Civ. Proc., § 1281.2.) Accordingly, “when presented with a petition to compel arbitration, the court’s first task is to determine whether the parties have in fact agreed to arbitrate the dispute.” (Avery, ibid.) A petition to compel arbitration is in essence a suit in equity to compel specific performance of a contract. (Id., 218 Cal.App.4th at p. 71.) As with any other specific performance claim, “a party seeking to enforce an arbitration agreement must show the agreement’s terms are sufficiently definite to enable the court to know what it is to enforce.” (Ibid., internal citations omitted) “Only the valid and binding agreement of the parties, including all material terms well-defined and clearly expressed, may be ordered specifically performed.” (Ibid.) An arbitration agreement “must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” (Civ. Code, § 1636.) The language of the contract governs its interpretation if it is clear and explicit. (Civ. Code, § 1368.) If uncertainty exists, “the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.” (Civ. Code, § 1654.)

As the party seeking to compel arbitration, Defendants bear the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 (Engalla).) It would then be Plaintiffs’ burden, in opposing the motion, to prove by a preponderance of the evidence any fact necessary to his opposition. (See ibid.) “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.” (Ibid.)
II. Existence of a Valid Arbitration Agreement

As with any contract, mutual assent or consent is necessary for the formation of a valid arbitration agreement. (Civ. Code, §§ 1550, 1565.) “Consent is not mutual, unless the parties all agree upon the same thing in the same sense.” (Civ. Code, § 1580.) The moving party bears the initial burden of showing the existence of an agreement to arbitrate by a preponderance of the evidence. (Mitri v. Arnel Mgmt. Co. (2007) 157 Cal.App.4th 1164, 1169 (Mitri) [“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.”].)

Defendants contend that Avalon provided Plaintiff with its employee handbook and a copy of the Mutual Arbitration Policy (the “Arbitration Agreement”) on September 4, 2015. The acknowledgement page of the Arbitration Agreement states in relevant part:

I acknowledge that I have received and reviewed a copy of the Company’s Mutual Arbitration Policy (“MAP”), and I understand that it is a condition of my employment. I agree that it is my obligation to make use of the MAP and to submit to final and binding arbitration any and all claims and disputes that are related in any way to my employment or the termination of my employment with the Company, except as otherwise set forth in the MAP. I understand that final and binding arbitration will be the sole and exclusive remedy for any such claim or dispute against The Company, and any of its programs or affiliates, or its parent, subsidiary, sister or affiliated companies or entities, and each of its and/or their employees, officers, directors or agents (“the Company”) and that, by agreeing to use arbitration to resolve my dispute, both the Company and I agree to forego any right we each may have to a jury trial on issues covered by the MAP . . . .

(Declaration of Alexis Washington (“Washington Decl.”) Ex. 1 at p. 4.)

The Mutual Arbitration Policy states that it covers “all disputes relating to or arising out of an employee’s employment with the Company or the termination of that employment” except for workers’ compensation claims, unemployment insurance claims, any claims that could be made to the National Labor Relations Board, or administrative claims filed with appropriate state agencies under applicable State wage and hour laws or regulations, such as claims filed with the California Department of Labor Standards Enforcement. (Id. Ex. 1 at p. 1.) The Arbitration Agreement further states that it does not prohibit either the Company or any company employee from filing a claim in small claims court, as long as the claim is properly within the jurisdiction of the small claims court. (Ibid.)

Defendants’ submitted evidence is sufficient to demonstrate the existence of an arbitration agreement between Avalon and Plaintiff Barnett.

Defendants next argue that Defendant Tress has the right to invoke arbitration as a third party beneficiary of the agreement. (Mot. 5, citing Harris v. Super Ct. (1986) 188 Cal.App.3d 475, 478-479.) [1] Plaintiffs do not address this argument or legal authority in its opposition. (See Opp. 2 [only stating “there is nothing to suggest that the individual Defendant (Mr. Tross) [sic] is a party to any such ‘agreement’ ”].) Accordingly, the court finds that Defendants have demonstrated that Plaintiff Barnett’s claims against Tress may also be compelled to arbitration.

Plaintiffs contend that the Arbitration Agreement is unenforceable because there was no meeting of the minds. (Opp. 5.) According to Plaintiffs, the document in question is a “policy” which is clearly not contractual in nature. (Ibid.) The court disagrees. Page 4 of the Arbitration Agreement is titled “Employee Agreement to Arbitrate” and expressly states that the employee agrees “to submit to final and binding arbitration any and all claims and disputes that are related in any way to my employment or the termination of my employment with the Company, except as otherwise set forth in the MAP.” (Washington Decl. Ex. 1, at p. 4.) This page appears to have been signed by Defendant Barnett on September 4, 2015. This is sufficient to demonstrate that there was a meeting of the minds and an agreement between the parties.

Plaintiffs next argue that Defendants have made conflicting representations of whether the agreement was mandatory or discretionary, demonstrating a lack of assent between the parties on a key issue. (Opp. 6.) Plaintiff, however, does not cite any legal authority for the proposition that an arbitration agreement can be held to be unenforceable because there was confusion as to whether it was or was not a required condition for employment. The California Supreme Court has held that employers may require employees to sign an arbitration agreement as a condition of employment. (See Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245-1246, 1251 (Baltazar) [enforcing an arbitration agreement that was presented as a condition of employment and affirming the Court of Appeal’s judgment].) As such, regardless of whether Plaintiff Barnett believed that the Arbitration Agreement was mandatory or discretionary, her agreement to arbitrate her claims constitutes a valid agreement. Plaintiffs’ argument regarding uncertainty over the mandatory or discretionary nature of the agreement more properly goes to the question of procedural unconscionability and will be addressed below.

For these reasons, the court finds that Defendants have met their initial burden to demonstrate the existence of a valid arbitration agreement that covers Plaintiff Barnett’s claims. (See Engalla, supra, 15 Cal.4th at p. 972.)
III. The Separate Arbitrability of Barnett’s Claims and Joinder

As Defendants have met their initial burden on the subject petition, Plaintiff bears the burden to prove by a preponderance of the evidence any fact necessary to his opposition. (Engalla, supra, 15 Cal.4th at p. 972.)

Plaintiffs contend that the motion must be denied because Plaintiff Myles is not a party to an arbitration agreement. (Opp. 2.) Plaintiffs argue that the action should not be severed because the joinder of the two Plaintiffs’ claims was proper under Code of Civil Procedure, section 378. (Ibid., citing e.g., Joerger v. Pacific Gas & Electric Co. (1929) 207 Cal. 8, 19.) Plaintiff’s cited authority, however, does not speak to whether it is improper to compel one of multiple Plaintiffs to arbitration where there has been a proper joinder. Accordingly, Plaintiffs fail to demonstrate the motion should be denied on this basis. (See Engalla, supra, 15 Cal.4th at p. 972.)

IV. Unconscionability

Plaintiffs next contend that the Arbitration Agreement is procedurally and substantively unconscionable.

The doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Ibid.) Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) “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. [Citations.] In other words, the more substantively unconscionable 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.) “The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 247.)
A. Procedural Unconscionability

First, Plaintiffs contend that the Arbitration Agreement is procedurally unconscionable because there is uncertainty over whether it was required as a condition of Plaintiffs’ employment. (Opp. 8-9, citing Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807 (Graham).)

A “contract of adhesion” is “a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” (Neal v. State Farm Ins. Cos. (1961) 188 Cal.App.2d 690, 694.) In Baltazar, the Supreme Court recognized that the adhesive nature of an arbitration agreement in the employment context does not establish a high degree of procedural unconscionability absent “surprise or other sharp practices.” (Baltazar, supra, 62 Cal.4th at pp. 1245-1246; see also Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248 (Nguyen) [the fact that an arbitration agreement is presented as a “take-it-or-leave-it” contract of adhesion in the employment context, alone only establishes a modest degree of procedural unconscionability].) As such, even if the Arbitration Agreement were a mandatory requirement for Plaintiff Barnett’s employment, the adhesive nature of the agreement, alone, would only establish a modest degree of procedural unconscionability.

Plaintiffs next contend that Defendants’ failure to provide Plaintiff Barnett with the rules of arbitration and/or any definitive information about the “agreement” is procedurally unconscionable. (Opp. 9.) The court disagrees. The Mutual Arbitration Policy states that the arbitration will be governed by the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“AAA”) in place at the time of the dispute unless the parties agree otherwise in writing. (Washington Decl. Ex. 1, at p. 2.) The Arbitration Agreement further states that the AAA rules are available at www.adr.org or that Plaintiff could alternatively obtain a copy of the rules from Human Resources. (Id. at p. 3.) [2]

California Courts have recognized, however, that an employer’s failure to attach the AAA rules to an arbitration agreement requires courts to more closely scrutinize the substantive unconscionability of terms that were “artfully hidden” but does not otherwise add to the procedural unconscionability of the agreement. (E.g., Baltazar, 62 Cal.4th at p. 1246; Nguyen, 4 Cal.App.5th at pp. 248-249.) Thus, Defendants’ failure to attach the AAA Rules does not add to the procedural unconscionability of the Agreement absent a finding of substantive unconscionability in “artfully hidden” terms.

For these reasons, the court finds that the Arbitration Agreement contained only a modest degree of procedural unconscionability based on the fact that it states that it is a mandatory condition of employment. The court now turns to the parties’ arguments regarding substantive unconscionability.

B. Substantive Unconscionability

An agreement is substantively unconscionable if it imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably favorable,” or “so one-sided as to ‘shock the conscience.’ ” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910-911.) “All of these formulations point to the central idea that unconscionability doctrine is concerned not with ‘a simple old-fashioned bad bargain’ [citation], but with terms that are ‘unreasonably favorable to the more powerful party.’ [Citation.]” (Id. at p. 911.) “These include ‘terms that impair the integrity of the bargaining process or otherwise contravene the public interest or public policy; terms (usually of an adhesion or boilerplate nature) that attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law, fine-print terms, or provisions that seek to negate the reasonable expectations of the nondrafting party, or unreasonably and unexpectedly harsh terms having to do with price or other central aspects of the transaction.’ ” (Id. at p. 911.)

Plaintiffs contend that the Arbitration Agreement is substantively unconscionable because the FAA rules were not attached to the agreement. (Opp. 10.) To the extent Plaintiffs refer to the Federal Arbitration Act, Plaintiffs have not presented any legal authority for the proposition that a copy of the applicable federal statutes must be attached to an arbitration agreement. Accordingly, Plaintiffs’ argument fails.

To the extent Plaintiffs intend to speak to the AAA Rules, the court notes that, as addressed above, an employer’s failure to attach a copy of the AAA rules is an issue of procedural unconscionability—not substantive unconscionability. Although this leads the court to more closely scrutinize the substantive unconscionability of identified terms, it does not provide a basis for the court to find the agreement was substantively unconscionable.

Plaintiff next argues that the FAA rules are not as liberal or exhaustive as California’s Code of Civil Procedure and Discovery Act. To the extent Plaintiff intends to speak of the Federal Arbitration Act, Plaintiff does not provide any legal authority for the proposition that an arbitration agreement can be held to be substantively unconscionable when conducted in compliance with the FAA. Thus, this argument fails.

To the extent Plaintiff speaks of the AAA Rules, Plaintiff does not identify any legal authority for the argument that more limited discovery under the AAA is sufficient to establish substantive unconscionability. To the contrary, the Supreme Court held in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 105-106 (Armendariz) that parties can agree to less discovery than the full panoply of discovery provided by the Code of Civil Procedure. The Armendariz Court further held that the employer, by agreeing to arbitrate FEHA claims, implicitly agreed to such procedures as are necessary to vindicate that claim, including sufficient discovery—absent express language to the contrary. (Id. at p. 106.) Plaintiffs do not identify any unconscionable express limitations on discovery within the Arbitration Agreement or AAA rules. Accordingly, Plaintiffs fail to meet their burden to demonstrate substantive unconscionability.
C. Unconscionability

In sum, Plaintiffs demonstrate that the agreement contains a modest degree of procedural unconscionability based on the adhesive nature of the agreement, but fail to demonstrate that the agreement is substantively unconscionable. Accordingly, Plaintiffs fail to meet their burden to demonstrate that the agreement is unconscionable.
V. Conclusion

In sum, Defendant meets its burden to demonstrate the existence of an arbitration agreement between the parties that covers Plaintiff Barnett’s claims. Plaintiffs, in turn, fail to demonstrate that the Arbitration Agreement is unconscionable of that the motion should be denied because of Plaintiffs’ joinder of their claims in this action. The court therefore GRANTS the motion and ORDERS Plaintiff Barnett’s claims to arbitration.

Defendants contend that the FAA does not limit the court’s authority to dismiss a case when all claims are barred by an arbitration clause. (Mot. 10.) Defendants’ cited legal authority all relates to federal courts, which are governed by the Rules of Federal Procedure. Defendants’ cases are inapposite to the procedures applicable to California state courts.

Code of Civil Procedure, section 1281.4 provides:

If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, 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 an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.

(Code Civ. Proc., § 1281.4.) Defendants alternately request the court stay the entire proceeding until the arbitration is completed. Plaintiffs did not address this portion of the motion in their opposition and do not appear to challenge this request.

For these reasons, the court GRANTS the motion in-part and STAYS the entire action, pending the completion of the arbitration.

[1] Defendants contend that Doe Defendants Washington and Larios may also invoke arbitration as third-party beneficiaries of the Arbitration Agreement. Plaintiffs have not filed proofs of service as to these Defendants and neither Washington nor Larios have yet appeared in this case.

[2] Plaintiffs argue that the Arbitrator’s authority is limited by the terms of Defendants’ arbitration policy, which is subject to change. The court disagrees. The signed acknowledgement page demonstrates that states that the arbitration is to be conducted under the FAA and the applicable procedural rules of the AAA unless the parties otherwise specifically agree in writing. (Washington Decl. Ex. 1, at p. 4.) As such, the applicable rules of the arbitration are fixed by the terms of the Arbitration Agreement.