Jacelyn Bristow v. Sierra Vista Hospital, Inc. et al.

Here, both the Dispute Resolution Procedure portion of the Handbook and the Arbitration Agreement include nearly identical integration clauses that state “This Arbitration Agreement sets forth the entire agreement between the parties hereto and fully supersedes any and all prior agreements and understandings, written or oral, between the parties hereto pertaining to the subject matter hereof.” Both also state, “there are no representations, agreements, arrangements or understandings, oral or written relating to the subject matter of this Arbitration Agreement that are not fully expressed in this Arbitration Agreement.” (Declaration of David Phillips (Phillips Dec.), Exs. B, C.) The court in Silva held that the inclusion of an integration clause does not preclude application of Civil Code section 1642. (Silva, supra, 111 Cal.App.5th at p. 1326.)

Thus, to the extent Plaintiff identifies unconscionable clauses in either the Handbook or Arbitration Agreement or by comparing the terms of the agreements, those clauses may be considered in determining whether there is unconscionability.

I.

Legal Standard

Both the Federal Arbitration Act (FAA) and California law favor arbitration. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339; OTO, L.L.C. v. Kho (2019) Cal.5th 111, 125.) The Court considers two factors in determining a motion to compel arbitration: (1) whether the parties agreed to arbitrate; and (2) if so, whether the agreement encompasses the asserted claims. (Code Civ. Proc., § 1281.2; Chiron Corp. v. Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130; Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1283.)

There is no public policy that favors arbitrating issues the parties did not agree to arbitrate, and a foundational principle of the FAA is that arbitration is a matter of consent. (Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 1331.) “Although there is a general policy favoring arbitration, a party cannot be compelled to accept arbitration of a controversy which they have not agreed to arbitrate. (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59, 159 Cal.Rptr.3d 444.) Without a clear agreement to arbitrate a controversy, courts will not infer that the right to a jury trial has been waived. (Ibid.)” (Garcia v. Expert Staffing West (2021) 73 Cal.App.5th 408, 413.)

A party seeking to compel arbitration bears the burden of proving the existence of an arbitration agreement between the parties. (Juen v. Alain Pinel Realtors, Inc. (2019) 32 Cal.App.5th 972, 978.)

II. Applicability of the FAA

“In accordance with choice-of-law principles, the parties may limit the trial court’s authority to stay or deny arbitration under the CAA by adopting the more restrictive procedural provisions of the FAA.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345 [citing, Valencia v. Smyth (2010) 185 Cal.App.4th 153].) Where the parties expressly agree that the FAA governs their arbitration agreement, the California Arbitration Act (CAA) does not apply. (Barrera v. Apple American Group LLC (2023) 95 Cal.App.5th 63, 76.)

“To ensure that arbitration agreements are enforced according to their terms, the FAA preempts all state laws that apply of their own force to limit those agreements against the parties’ will or to withdraw the power to enforce them.” (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 385.)

Here, both the Handbook and Arbitration Agreement state as follows: “As Adventist Health Central Coast (AHSL & AHTC) is engaged in interstate commerce, this Arbitration Agreement and the rights of the parties—except as specifically provided for herein—shall be governed by the substantive provisions of the Federal Arbitration Act.” (Phillips Dec.,

Exs. B, C.) This language establishes that the FAA applies.

III. Unconscionability

An arbitration agreement is not enforceable if it is unconscionable. Both procedural and substantive unconscionability must be present for a court to exercise its discretion to refuse to enforce an arbitration agreement. Procedural and substantive unconscionability need not be present in the same degree. The more substantively oppressive the contract term, the less evidence of procedural unconscionability is required for the court to come to conclude that the term is unenforceable, and vice versa. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).)

A. Procedural Unconscionability

Procedural unconscionability begins with an inquiry as to whether the arbitration agreement is a contract of adhesion. (Armendariz, supra, at p. 113.) A contract of adhesion is a standardized agreement drafted by the party with superior bargaining strength which the other party must sign or reject. (Id.). In the employment context, “ ‘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.’ ” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84 [citations omitted].)

Unconscionability occurs where the circumstances of the contract’s formation created such oppression or surprise that overall fairness must be scrutinized. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126.) “The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.” (Id. at pp. 126-127 [citation omitted].)

Plaintiff presents no evidence as to how she was told to review and sign the Handbook and Arbitration Agreement; whether the circumstances allowed her to review and understand what she was signing; or if she could negotiate or amend the terms of the agreements. Her procedural unconscionability argument relies solely on the fact that Defendants prepared the agreements, sent them electronically, and required employees to sign them. Plaintiff has shown the Handbook and Arbitration Agreement are contracts of adhesion with a “low level of procedural unconscionability contained in any employment agreement for an employee not in a ‘position to refuse a job because of an arbitration agreement.’ ” (Lange v. Monster Energy Co. (2020) 46 Cal.App.5th 436, 447.)

B. Substantive Unconscionability

Plaintiff argues that the Agreement is substantively unconscionable because it has an illegal representative PAGA waiver and lacks mutuality.

1. Representative PAGA Wavier

Plaintiff argues that the following language in the Handbook constitutes a waiver of representative PAGA rights:

Waiver of Representative Claims Unless prohibited by applicable law, the parties mutually agree that any dispute covered by this Arbitration Agreement will only be brought in the party’s individual capacity, and the parties mutually waive their right to bring, maintain, and participate in any representative action against the other. Individual claims under the Private Attorneys General Act based on alleged individual Labor Code violations shall be resolved and arbitrated on an individual basis only, and unless prohibited by applicable law, there will be no right or authority to pursue non-individual claims as a private attorney representative involving Labor Code violations affecting other individuals.

(Opposition, p. 11, ln. 23-p. 12, ln. 6.)

Plaintiff does not address the validity of the agreement clause of the Handbook which states in relevant part as follows:

If any provision of this Arbitration Agreement is held to be invalid or unenforceable, in whole or in part, the remaining provisions shall continue to be valid, and any unenforceable or conflicting provision shall be automatically severed. However, if the Waiver of Class and Collective Claims or the Waiver of Representative Claims is found to be unenforceable, then any claim brought on a class or collective basis (if the Waiver of Class and Collective Claims is found to be unenforceable) or on a representative basis (if the Waiver of Representative Claims is found to be unenforceable) must be filed in a court of competent jurisdiction, and such court shall be the exclusive forum for such claims.

(Phillips Dec., Ex. B., p. 31.)

Where, as here, there is an illegal waiver of representative PAGA rights and there is a severability clause, the waiver of PAGA rights can be severed from the arbitration agreement and tried by a court. (Galarsa v. Dolgen California, LLC (2023) 88 Cal.App.5th 639, 649-650.) Individual PAGA claims are compelled to arbitration, and the Plaintiff remains an aggrieved employee authorized to pursue the representative PAGA claim. (Id. at p. 653.)

The Court finds that the waiver of representative PAGA claims is severed and stricken from the Handbook and the provision requiring arbitration of Plaintiff’s individual PAGA claims is enforceable.

2. Mutuality

Plaintiff argues that the Agreement lacks mutuality due to the following language in the “Scope of Arbitrator’s Authority” section of the Handbook:

All arbitration proceedings, and the results, are confidential, unless applicable law provides otherwise. The arbitrator shall maintain the confidentiality of the arbitration to the extent the law permits and shall have the authority to make appropriate rulings to safeguard that confidentiality.

(Opposition, p. 12, lns. 7-21; Phillips Dec., Ex. B, p. 29.)

Plaintiff contends this prevents her from conducting informal discovery by speaking with other employees and possible witnesses. Such a confidentiality clause has been found to be unconscionable because it benefits only the employer. The qualifying language, i.e., “to the extent the law permits,” does not make the provision valid because the employee has no way of knowing what is or is not confidential under the provision. (Hasty v. American Automobile Association, etc. (2023) 98 Cal.App.5th 1041, 1062.)

The Court disagrees with Defendants’ contention that this case is distinguishable because Plaintiff asserts wage and hour, rather than discrimination and harassment, claims. Third party witnesses are necessary for denial of meal and rest break claims which often result from supervisor conduct in violation of employment policies. Defendants’ citations to federal cases is unpersuasive. The decisions of the state courts of appeal are binding on all superior courts of this state (see e.g., Cuccia v. Superior Court (2007) 153 Cal.App.4th 347, 353), while federal opinions interpreting state law are not binding. (McCann v. Lucky Money, Inc. (2005) 129 Cal.App.4th 1382, 1396.)

The confidentiality language does not, however, expressly preclude discovery and both the Handbook and Arbitration Agreement provide for discovery including the arbitrator’s authority to “issue subpoenas to compel the testimony of third-party witnesses or the production of documents.” (Phillips Dec., Ex. B, p. 30, Ex. C, pp. 3-4.) The confidentiality language does not prevent Plaintiff from conducting third party discovery or presenting third party testimony.

Plaintiff also contends the Arbitration Agreement lacks mutuality because Defendants have the right to modify the Handbook. (Opposition, p. 13, lns. 11-15.) The employee acknowledgment page states “I agree that, except as set forth below, AHSL & AHTC may, consistent with applicable law and with reasonable advance-notice, change a Policy or Procedure from time to time.” (Phillips Dec., Ex. A.)

Applicable law provides that an employer’s unilateral right to modify an employee manual

that includes an arbitration agreement “indisputably carries with it the duty to exercise that right fairly and in good faith.” (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1214; Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1473 [unilateral modification provision is not substantively unconscionable].) The employer’s right to modify does not create a lack of mutuality.

Plaintiff argues the Arbitration Agreement imposes federal class action requirements on Plaintiff’s representative PAGA claims. (Opposition, p. 13, ln. 16-p. 14, ln. 4.) It does not. The Arbitration Agreement provides that the arbitrator will not “arbitrate or preside over any form of a class, collective, or non-individual representative proceeding” and “if the Waiver of Class and Collective Claims is found to be unenforceable despite this severability provision, then any claim brought on a class or collective basis must be filed in a court of competent jurisdiction, and such court shall be the exclusive forum for such claims, but the portion of the Waiver of Class and Collective Claims that is enforceable shall be enforced in arbitration.” (Phillips Dec., Ex. C.)

Finally, Plaintiff cites to Cook v. University of Southern California (2024) 102 Cal.App.5th 312 (Cook) in support of her opposition. In Cook, the court found a lack of mutuality in an arbitration agreement that expressly required arbitration of claims against certain classes of third parties, while the employee would have to show the third party actually accepted a benefit under the agreement in order to compel arbitration. (Id. at p. 328.) However, the agreement in Cook made all claims, whether or not arising out of employment, subject to arbitration.

“The agreement in Cook was unconscionable in part because of the multifarious ways in which a claim against USC ‘completely unrelated to [Cook’s] employment’ could arise.” (Ayala-Ventura v. Superior Court (2026) 119 Cal.App.5th 241, 257.) As a result, the plaintiff in Cook might have been compelled to arbitrate a vast range of claims that had nothing to do with her employment against defendants uninvolved in her employment.

Plaintiff complains the third parties expressly made subject to the arbitration procedures of the Handbook are as follows:

The term AHSL & AHTC includes all its related entities, employees, representatives, agents, physicians, members and shareholders, as well as their successors and assigns. The term ‘employee’ includes current and former employees, as well as applicants for employment who have signed the Adventist Health Central Coast Employee Handbook Acknowledgment.

(Phillips Dec., Ex. B, p. 25 [emphasis added].) 1 Here, all people and entities included in the definition of AHSL & AHTC and Plaintiff must arbitrate any claim “that arises out of or is related to Employee’s employment with Adventist Health Central Coast (AHSL & AHTC).” (Phillips Dec., Ex. B, p. 27, Ex. C, p. 1 [emphasis added].)

1 There is no definition of “Adventist Health” and “employee” in the Arbitration Agreement.

3. Does Unconscionability Render Agreement Unenforceable?

The California Supreme Court gives courts the following guidance in determining whether an arbitration agreement with procedural and substantive unconscionability can be enforced:

Here, we clarify that no bright line rule requires a court to refuse enforcement if a contract has more than one unconscionable term. Likewise, a court is not required to sever or restrict an unconscionable term if an agreement has only a single such term. Instead, the appropriate inquiry is qualitative and accounts for each factor Armendariz identified. At the outset, a court should ask whether ‘the central purpose of the contract is tainted with illegality.’ (Armendariz, supra, 24 Cal.4th at p. 124, 99 Cal.Rptr.2d 745, 6 P.3d 669.)

If so, the contract cannot be cured, and the court should refuse to enforce it. If that is not the case, the court should go on to ask first, whether the contract’s unconscionability can be cured purely through severance or restriction of its terms, or whether reformation by augmentation is necessary. (See, Armendariz, supra, 24 Cal.4th at pp. 124−125, 99 Cal.Rptr.2d 745, 6 P.3d 669.) If no ‘reformation is required,’ the offending provision can be severed or limited, and ‘the rest of the arbitration agreement left intact,’ then severance or restriction is the preferred course for provisions that are collateral to the agreement’s main purpose. (Little v.

Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1075, 130 Cal.Rptr.2d 892, 63 P.3d 979; see also Armendariz, at p. 124, 99 Cal.Rptr.2d 745, 6 P.3d 669; Farrar, supra, 9 Cal.App.5th at p. 1275, 215 Cal.Rptr.3d 785.) If the unconscionability cannot be cured by extirpating or limiting the offending provisions, but instead requires augmentation to cure the unconscionability, then the court should refuse to enforce the contract. (Mercuro, supra, 96 Cal.App.4th at p. 185, 116 Cal.Rptr.2d 671; see id. at pp 185−186, 116 Cal.Rptr.2d 671.)

Courts cannot ‘rewrite agreements and impose terms to which neither party has agreed.’ (Sonic, supra, 57 Cal.4th at p. 1143, 163 Cal.Rptr.3d 269, 311 P.3d 184.)

(Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478, 516–17.)

The Court finds that the central purpose of the Arbitration Agreement is not tainted with illegality. There is minor procedural unconscionability, but no substantive unconscionability because the waiver of representative PAGA claims is stricken and the confidentiality clause does not lack mutuality. The Arbitration Agreement is therefore enforceable as to Plaintiff’s individual claims.

IV. Request for Stay of Representative PAGA Claims

The California Supreme Court held in Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, “where a plaintiff has filed a PAGA action comprised of individual and nonindividual claims, an order compelling arbitration of individual claims does not strip the

plaintiff of standing to litigate non-individual claims in court.” (Id. at p. 1123.) Where, as here, only the non-individual PAGA claim must be arbitrated, the Court has discretion to determine whether to stay the non-individual PAGA claims. (Code. Civ. Proc., § 1281.4; Jarboe v. Hanlees Auto Group (2020) 53 Cal.App.5th 539, 556 [citations omitted].) The Court finds that staying the non-individual PAGA claims pending the outcome of arbitration is appropriate.

V. Ruling

The Motion to Compel Arbitration is granted. The motion to stay proceedings on the representative PAGA claims is granted pending resolution of the arbitration.

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