Hernandez vs. ATI Restoration

Code Civ. Proc. sec 1280 et seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights to discovery). The FAA applies to this Agreement because the Company’s business involves interstate commerce. Included within the scope of this Agreement are all disputes, whether based on tort, contract, statute (including, but not limited to, any claims of discrimination, harassment and/or retaliation, whether they be based on the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, as amended, or any other state or federal law or regulation), equitable law, or otherwise.

The only exception to the requirement of binding arbitration shall be for claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, claims for medical and disability benefits under the California Workers’ Compensation Act, Employment Development Department claims, or other claims that are not subject to arbitration under current law. I and the Company acknowledge that by signing or refusing to sign this Agreement, I make no representation or demonstration of support or rejection of concerted activity.

However, nothing herein shall prevent me from filing and pursuing proceedings before the California Department of Fair Employment and Housing, or the United States Equal Employment Opportunity Commission (although if I choose to pursue a claim following the exhaustion of such administrative remedies, that claim would be subject to the provisions of this Agreement). By this binding arbitration provision, I acknowledge and agree that both the Company and I give up our respective rights to trial by jury of any claim I or the Company may have against the other.

“3. All claims brought under this binding arbitration Agreement shall be brought in the individual capacity of myself or the Company. This binding arbitration Agreement shall not be construed to allow or permit the consolidation or joinder of other claims or controversies involving any other employees or parties, or permit such claims or controversies to proceed as a class action, collective action or any similar representative action. No arbitrator shall have the authority under this agreement to order any such class, collective or representative action.

By signing this agreement, I am agreeing to waive any substantive or procedural rights that I may have to bring an action on a class, collective, representative, or other similar basis. However, due to the nature of this waiver, the Company has provided me with the ability to choose to retain these rights by affirmatively opting out of this paragraph. I may elect to opt out of this paragraph and retain any right I may have to bring an action on a class, collective, private attorney general, representative or other similar basis, by contacting the General Counsel, in writing via certified mail at 210 W.

Baywood Ave, Orange, California 92865, within thirty days of executing this Agreement.

“4. In addition to any other requirements imposed by law, the arbitrator selected to hear claims under this Agreement shall be a retired California Superior Court Judge, or an otherwise qualified individual to whom the parties mutually agree, and shall be subject to disqualification on the same grounds as would apply to a judge of such court. All rules of pleading (including the right of demurrer), all rules of evidence, all rights to resolution of the dispute by means of motions for summary judgment, judgment on the pleadings, and judgment under Code of Civil Procedure Section 631.8 shall apply and be observed.

The arbitrator shall have the immunity of a judicial officer from civil liability when acting in the capacity of an arbitrator, which immunity supplements any other existing immunity. Likewise, all communications during or in connection with the arbitration proceedings are privileged in accordance with Cal. Civil Code Section 47(b). As reasonably required to allow full use and benefit of this agreement’s modifications to the Act’s procedures, the arbitrator shall extend the times set by the Act for the giving of notices and setting of hearings.

Awards shall include the arbitrator’s written reasoned opinion. Resolution of all disputes shall be based solely upon the law governing the claims and defenses pleaded, and the arbitrator may not invoke any basis (including but not limited to, notions of “just cause”) other than such controlling law.”

(Declaration of Avisay Chinnis (“Chinnis Decl.”), ¶ 5, Ex. 1 [Arbitration Agreement].)

The Arbitration Agreement broadly covers all employment-related claims, including disputes based on tort, contract, or statute, such as claims for discrimination, harassment, and/or retaliation, and therefore encompasses the claims asserted in this action. (Id., Arbitration Agreement, ¶ 2.)

The Arbitration Agreement further provides that it is governed by the Federal Arbitration Act (“FAA”); accordingly, the FAA applies. (Id., Arbitration Agreement, ¶ 2.)

Plaintiff filed this action in court and declined Defendants’ request to submit his claims to arbitration. (Declaration of A.J. Sparagna (“Sparagna Decl.”), ¶¶ 2-4, Exs. A-B.)

B. Motion to Compel Arbitration

The FAA states that written arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) The United States Supreme Court has described this provision as reflecting both a “liberal federal policy favoring arbitration,” and the “fundamental principle that arbitration is a matter of contract.” (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 (“Concepcion”).)

The FAA permits agreements to arbitrate to be invalidated by “generally applicable contract defenses, such as fraud, duress, or unconscionability.” (Concepcion, supra, 563 U.S. at p. 339.) When deciding whether a valid arbitration agreement exists, courts generally apply “ordinary state-law principles that govern the formation of contracts.” (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944.) “[T]he party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” (Green Tree Fin. Corp. v. Randolph (2000) 531 U.S. 79, 91.)

On a motion to compel arbitration under the FAA, the court’s role is limited to deciding: “(1) whether there is an agreement to arbitrate between the parties; and (2) whether the agreement covers the dispute.” (Brennan v. Opus Bank (9th Cir. 2015) 796 F.3d 1125, 1130.) If these conditions are satisfied, the court is without discretion to deny the motion and must compel arbitration. (9 U.S.C. § 4; Dean Witter Reynolds, Inc. v. Byrd (1985) 470 U.S. 213, 218 [“By its terms, the [FAA] leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration.”].)

C. Agreement to Arbitrate

“The trial court determines whether an agreement to arbitrate exists ‘using a threestep burden-shifting process.’ [Citation.] First, the party petitioning to compel arbitration must state ‘the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.’ [Citations.] Signatures on the arbitration agreement need not be authenticated at this initial stage.” (West v. Solar Mosaic LLC (2024) 105 Cal.App.5th 985, 992.)

“If the petitioner meets their initial burden, the burden of production shifts to the party opposing the petition to compel arbitration, who must offer admissible evidence creating a factual dispute as to the agreement’s existence. [Citation]. When the dispute centers on the authenticity of signatures, ‘[t]he opponent need not prove that his or her purported signature is not authentic, but must submit sufficient evidence to create a factual dispute and shift the burden back to the arbitration proponent, who retains the ultimate burden of proving, by a preponderance of the evidence, the authenticity of the signature.’ ” (Id., at p. 992.)

Defendants satisfied their initial burden of establishing the existence of an arbitration agreement encompassing Plaintiff’s employment-related claims by submitting a copy of the Arbitration Agreement. (Chinnis Decl., ¶ 5, Ex. 1.) The burden therefore shifted to Plaintiff to produce admissible evidence creating a factual dispute regarding the agreement’s existence or authenticity.

Plaintiff argues the Arbitration Agreement is unenforceable because Defendants failed to establish the existence of a valid agreement, failed to properly authenticate Plaintiff’s electronic signature, and relied on declarations lacking sufficient foundation regarding the electronic onboarding and signature process. Plaintiff attests that he does not recall signing an arbitration agreement. (Declaration of Victor Hector Hernandez (“Hernandez Decl.”), ¶ 2.)

In response, Defendants submit evidence demonstrating Plaintiff electronically reviewed and signed the agreement through ATI’s secure, password-protected Sage HRMS platform using unique login credentials created by Plaintiff. (Supplemental Declaration of Avisay Chinnis, ¶¶ 3, 6-7.) Specifically, employees were required to create individualized Sage accounts using their social security number, date of birth, zip code, security questions, and self-selected passwords, which were accessible only to the employee. (Ibid.) The Sage audit history reflects that Plaintiff electronically accessed and signed the Arbitration Agreement on March 8, 2016 by entering his name, the date, and the last four digits of his social security number through his unique Sage login credentials. (Id., ¶ 11.)

On this record, Plaintiff’s inability to recall signing the Arbitration Agreement, without more, is insufficient to create a genuine factual dispute regarding the existence or authenticity of the agreement. (West v. Solar Mosaic LLC, supra, 105 Cal.App.5th at p. 992.)

Plaintiff also contends ATI lacks standing to enforce the agreement because the agreement identifies “American Technologies, Inc.” rather than ATI as the contracting entity. However, Defendants presented evidence establishing that American Technologies, Inc. converted into ATI without any change in ownership or control in 2020, thereby permitting Defendants to enforce the agreement as the successor entity. (Supplemental Declaration of A.J. Sparagna, ¶¶ 7-9, Exhs. A-B; Request for Judicial Notice, Exs. 1-2.)

Both California and federal courts recognize that successor entities may enforce arbitration agreements entered into by predecessor entities where a sufficient relationship exists between the entities following a corporate conversion, merger, or restructuring. (See Marenco v. DirecTV LLC (2015) 233 Cal.App.4th 1409, 1412; Contec Corp. v. Remote Solution Co., Ltd. (2d Cir. 2005) 398 F.3d 205, 209-211.)

D. Unconscionability

Plaintiff also contends that the Arbitration Agreement is unenforceable because it is 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 both 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.)

In order to be unenforceable due to unconscionability, “’[procedural and substantive unconscionability] must both be present.’” (Armendariz v. Found Health Psychcare Servs., Inc., supra, 24 Cal.4th at p. 114, quoting Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1533; see Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1246 [“To be voided on [unconscionability] ground[s], the agreement must be both procedurally and substantively unconscionable.”)

However, “they need not be present in the same degree.” (Armendariz v. Found Health Psychcare Servs., Inc., supra, 24 Cal.4th 83, 114; Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1570.)

“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 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.” (Armendariz v. Found Health Psychcare Servs., Inc., supra, 24 Cal.4th 83 at p. 114.)

“The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Ass’n v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 247.)

Procedural Unconscionability

Procedural unconscionability concerns the manner in which the contract was negotiated and the parties' circumstances at that time. It focuses on the factors of surprise and oppression. (Kinney v. United Healthcare Servs. (1999) 70 Cal.App.4th 1322, 1329.)

These factors “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.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126-127.)

Thus, the Supreme Court has instructed courts to first determine whether an arbitration agreement is adhesive. (See Armendariz v. Found. Health Psychcare Servs., Inc., supra, 24 Cal. 4th 83, 114–15.) “Oppression generally takes the form of a contract of adhesion, 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.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84, quotations and citations omitted.)

Plaintiff contends the Arbitration Agreement is procedurally unconscionable because it was presented as a non-negotiable condition of employment during onboarding, creating oppression and unequal bargaining power. However, Defendants presented evidence that execution of the Arbitration Agreement was voluntary and that employees are not required to sign the Arbitration Agreement. (Chinnis Decl., ¶¶ 3-4, Ex. 1 [Arbitration Agreement].) Further, Plaintiff submits no evidence that he was rushed, pressured, denied an opportunity to review the agreement, or prevented from asking questions before signing. Rather, Plaintiff merely attests that he does not recall signing the agreement. (See Hernandez Decl., ¶ 2.) Accordingly, while some degree of procedural unconscionability may exist because the agreement was presented in the employment context, any such unconscionability minimal.

Plaintiff also contends the agreement is procedurally unconscionable because Plaintiff’s first language is Spanish and Defendants failed to provide a Spanishlanguage version of the agreement or explain its terms in a language with which Plaintiff was most comfortable. (Hernandez Decl., ¶ 3.) However, Plaintiff merely attests that English is not his first language, without presenting evidence regarding the extent of his English-language proficiency or demonstrating that he was unable to understand the agreement. (Ibid.)

While the failure to provide a translated agreement may contribute to procedural unconscionability where an employee cannot read or understand English, courts have declined to assign significant weight to this factor absent evidence regarding the employee’s actual level of English comprehension. (See Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85; OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 128.) Thus, this factor demonstrates, at most, a minimal degree of procedural unconscionability.

Plaintiff further contends the agreement failed to attach or identify the governing arbitration rules, thereby preventing Plaintiff from understanding the nature and scope of the arbitration procedures. While the failure to attach incorporated arbitration rules may contribute to procedural unconscionability where material terms are “artfully hidden” from the employee, courts have declined to assign significant weight to this factor absent a showing that the omitted rules contain unfair or substantively unconscionable provisions. (Baltazar v.

Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246; Nelson v. Dual Diagnosis Treatment Ctr., Inc. (2022) 77 Cal.App.5th 643, 661-662.) Here, Plaintiff does not identify any specific arbitration rule that improperly limits Plaintiff’s claims, remedies, or statutory rights. Moreover, the Arbitration Agreement expressly incorporates the procedures of the California Arbitration Act, including statutory discovery rights, and does not contain conflicting or misleading procedural terms. Accordingly, this factor establishes, at most, a minimal degree of procedural unconscionability.

Overall, the record does not demonstrate a high degree of oppression or surprise. The Arbitration Agreement was presented as a standalone document, clearly identified its arbitration provisions, and expressly advised Plaintiff that both parties were waiving their right to a jury trial. (Chinnis Decl., Ex. 1.) Further, Defendants presented evidence that execution of the agreement was voluntary and employees were permitted to review the agreement at their own pace and contact human resources with questions. (Chinnis Decl., ¶¶ 3-4; Supp. Chinnis Decl., ¶ 10.) There is no evidence Plaintiff was rushed, pressured, misled, or prevented from reviewing the agreement before signing. Thus, while some degree of procedural unconscionability exists, any such unconscionability is minimal.

Substantive Unconscionability

In order to be invalid, the arbitration agreement must also be substantively unconscionable. “Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh.” (Carmona v. Lincoln Millennium Car Wash, Inc., supra, 226 Cal.App.4th at p. 85, quotations and citations omitted.) “A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be so onesided as to ‘shock the conscience.’” (Ibid.)

The “paramount consideration” is the mutuality of the obligation to arbitrate. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1287.) “Substantive unconscionability focuses on the onesidedness or overly harsh effect of the contract term or clause.” (Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1406-1407.) An arbitration agreement “lacks basic fairness and mutuality if it requires one contracting party, but not the other, to arbitrate all claims arising out of the same transaction or occurrence or series of transactions or occurrences.” (Armendariz v. Found Health Psychcare Servs., Inc., supra, 24 Cal.4th at p. 120.)

Plaintiff contends the Arbitration Agreement is substantively unconscionable because the requirement that disputes be heard by a retired California Superior Court judge allegedly imposes excessive arbitration costs. However, the Arbitration Agreement does not limit the arbitrator to a retired California Superior Court judge, but also permits the parties to mutually select another qualified arbitrator. (Chinnis Decl., Ex. 1, [Arbitration Agreement, ¶ 4].) Further, Plaintiff identifies no provision requiring Plaintiff to bear arbitration costs or fees beyond those that would otherwise be incurred in court. Nor does Plaintiff identify any provision rendering the agreement one-sided or lacking mutuality. To the contrary, the Arbitration Agreement mutually requires both Plaintiff and Defendants to arbitrate all employmentrelated disputes. (Id., Arbitration Agreement, ¶ 2.)

Plaintiff has failed to demonstrate substantive unconscionability. Because Plaintiff has failed to demonstrate substantive unconscionability, the minimal procedural unconscionability present is insufficient to render the Arbitration Agreement unenforceable.

Accordingly, the motion is GRANTED. The Court STAYS the action pending arbitration. (9 U.S.C.A. § 3; Code Civ. Proc. § 1281.4.)

Arbitration Status Review Hearing set for December 17, 2026 at 1:30 p.m.

The Case Management Conference is taken off-calendar.

Defendants to give notice. 112 BKC Entertainment LLC vs. K1 Speed Franchising, Inc., 23-01317103 Plaintiff BKC Entertainment LLC (“BKC” or “Plaintiff”) moves for summary adjudication of its first, second, and third causes of action against defendants K1 Speed Franchising, Inc. (“K1”), David Danglard, and Uli Perez (together, “Defendants”).

Plaintiff argues it is entitled to summary adjudication of its three causes of action under the California Franchise Investment Law (CFIL) because there is no material dispute that K1 failed to register its franchise