Ramirez v. Biscomerica Corp

Under Code of Civil Procedure section 1281.2, a party to an arbitration agreement may move to compel arbitration if another party to the agreement refuses to arbitrate, and the court shall order the parties to arbitrate if it determines an agreement to arbitrate exists, unless it determines (a) the right to compel has been waived by the petitioner; (b) grounds exist for revocation of the agreement; or (c) a party to the agreement is also a party to a pending court action or special proceeding, arising out of the same transaction or related transaction, and there is a possibility of conflicting rulings on common issues of law or fact. (Code Civ. Proc., § 1281.4.)

The Court must determine when a petition to compel arbitration is filed and accompanied by prima facie evidence of a written arbitration agreement whether the agreement exists, if any defense to its enforcement is raised, and whether the agreement is enforceable. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th394, 413.) The moving party bears the burden of proving the existence of the arbitration agreement by preponderance of the evidence. (Ibid.) If the party opposing the petition raises a defense to enforcement, then he bears the burden of producing evidence and proving by preponderance of the evidence any fact necessary to the defense. (Ibid.)

The Federal Arbitration Act (FAA), at 9 U.S.C. §1, et seq., also authorizes enforcement of arbitration clauses unless grounds exist in law or equity for the revocation of any contract. (9 U.S.C. § 2). The enforcement language of the FAA is almost identical to Code of Civil Procedure section 1281. In situations governed by the FAA, conflicting state law is preempted in either state or federal courts. (Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 477 [“The FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration . . . . But even when Congress has not completely displaced state regulation in an area, state law may nonetheless be pre-empted to the extent that it actually conflicts with federal law . . . .”].)

Analysis

FAA Applicability: As a preliminary matter, the purported Arbitration Agreement specially states: “Employee and Company agree to submit any Covered Claim to binding arbitration pursuant to the provisions of the Federal Arbitration Act (‘FAA’), 9 U.S.C. section 1, et seq. . . . Both parties agree that the FAA applies to this agreement because the Employer’s business involves interstate commerce.” (Luna Decl., ¶10, Exh. C at p. 1.) A Defendant declaration also declares that Defendant is an established vendor providing high-quality cookies and candy at a competitive price, and its products are distributed and sold to customers across state lines. (Soltan Decl., ¶¶2, 4.) Thus, it appears clear that the FAA applies both because of the party agreement and because the business involves interstate commerce.

The Agreement: Arbitration is ordered if an agreement to arbitrate the controversy exists; an agreement only needs to be found to exist, not an evidentiary determination of its validity. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-19.) The defendant providing an executed copy of the arbitration agreement satisfies the initial burden. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1058-60.) Here, Defendant meets the initial burden by providing the purported arbitration agreement. According to Plaintiff’s employment records, on November 28, 2022, Defendant hired him, and Plaintiff physically hand-signed the document entitled “Arbitration Agreement.” (Luna Decl., ¶6, Exh. A.)

Defendant’s Human Resources person further declared that it is Defendant’s policy and practice that, whenever onboarding documents such as the arbitration agreement are amended, the updated documents are presented to current employees or in small groups, with an explanation of any modifications. (Id., at ¶ 8.) She also declares that employees are not required to sign the amended documents and are encouraged to ask questions if they do not understand any aspect of the documents. (Ibid.) Thus, on or around April 7, 2025, Plaintiff was presented with an amended voluntary arbitration agreement, which he physically hand-signed and was entitled “Voluntary Mutual Arbitration Agreement.” (Luna Decl., ¶10, Exh. C.) Defendant thus shows the agreement’s existence because it bears Plaintiff’s handwritten signature.

Plaintiff, in turn, fails to sufficiently challenge the arbitration agreement. Notably, the signed agreement states: Employee and Company agree that arbitration shall be the exclusive forum for resolving Covered Claims provided, however, that either party may request provision relief from a court of competent jurisdiction, as provided in California Code of Civil Procedure section 1281.8. Employee and Company agree to submit any Covered Claim to binding arbitration pursuant to the provisions of the [FAA.] (Luna Decl., ¶10, Exh.

C at p. 1.) It further states that: Except as provided herein, it covers all claims (“Covered Claims”) arising out of Employee’s application or candidacy for employment, employment with Company and/or the termination thereof, including, but not limited to, . . . claims for violation of any of the federal, state, or other government law, statute, regulation, or ordinance, . . . .” (Ibid.) Plaintiff thus agreed to arbitrate his claims against Defendant, arising out of employment. generally.)

Unconscionability: If the Court finds there is unconscionability at the time of the execution of the arbitration agreement, then the FAA permits declaring it as unenforceable. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339-340; 9 U.S.C. § 2; Civ. Code, § 1670.5.) “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” (Civ. Code, § 1670.5(a).)

To establish unconscionability, the plaintiff needs to show the arbitration agreement has both a procedural and substantive element rendering it unenforceable. “[T]he former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, [and] the latter on ‘overly harsh’ or ‘one-sided’ results.” 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.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 124.) “[T]hey need not be present in the same degree.” (Ibid.) Thus, the two kinds of unconscionability are weighed on a sliding scale.

Procedural Unconscionability – Plaintiff argues that the agreement is a contract of adhesion and that signing the paperwork felt like a “take-it or leave-it” situation. (Ramirez Decl., ¶9.) Certainly, it appears obvious that the agreement is on a pre-printed form and offered by the party with the superior bargaining power, though the agreement is couched as “voluntary” by Defendant. Thus, while not classically a contract of adhesion, he Court would find a modicum of procedural unconscionability. However, this is not the end of the analysis.

Substantive Unconscionability – First, Plaintiff argues substantive unconscionability in that the agreement only coverage the kinds of claims an employee would bring; thus, demonstrating a lack of mutuality. The arbitration agreement simply “covers all claims . . . arising out of Employee’s application or candidacy for employment, employment with Company and/or the termination thereof,” and then proceeds to list numerous examples. The agreement is, as written, more consistent with the terms in Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1249, finding similar language as simply covering “employment-related claims”.

Second, Plaintiff argues that the one-year statute of limitations is unconscionable. However, the provision has an exception: “Covered Claims must be filed within one year of the date the dispute first arose, or within one year of the termination of employment, whichever occurs first, provided, however that if the Employee’s or Company’s Covered Claim arises under a statute providing for a longer time to file a claim, that statue shall govern.” (Luna Decl., ¶10, Exh. C at p. 1 [emphasis].) Plaintiff’s argument that the exception creates a direct conflict within the same provision is unpersuasive because exceptions are normal.

And, Plaintiff reliance on 5 Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 254, to argue a similar “saving clause” was found to constitute substantive unconscionability because a court or arbitrator applying a shorter private statute of limitations “would be illegal or unconscionable under applicable law” is misguided. The provision therein left the decision to the arbitrator. (Id., at pp. 253-254.) The arbitration agreement in this case provides that the statute will govern. And as argued by Defendant in the reply, the provision does not shorten any statutorily provided limitations period.

Third, Plaintiff argues that claims for unlawful discrimination and harassment based on sex are expressly non-arbitrable under federal law. However, the provision has an exception. “Except as provided herein, it covers all claims (‘Covered Claims’) arising out of Employee’s application or candidacy for employment, employment with Company and/or the termination thereof, including, but not limited to, . . . claims for unlawful discrimination and/or harassment (including, but not limited to, race, religious creed, color, national origin, ancestry, physical disability, mental disability, gender identity or expression, genetic information, medical condition, marital status, age, pregnancy, sex or sexual orientation) to the extent allowed by law[.]” (Luna Decl., ¶10, Exh. C at p. 1 [emphasis].) Because of this carve-out, Plaintiff’s argument is not persuasive.

Fourth, Plaintiff argues that the agreement includes an indefinite term. Plaintiff relies on Cook v. University of Southern California (2024) 102 Cal.App.5th 312, 325-326, which found the trial court did not err in holding the duration of the arbitration agreement was substantively unconscionable because the agreement stated: “it ‘shall survive the termination of Employee’s employment, and may only be revoked or modified in a written document that expressly refers to the “Agreement to Arbitrate Claims” and is signed by the President of the University.’” However, here, Plaintiff highlights no similar provision in the arbitration agreement.

It does state that “this Agreement shall survive the termination of Employee’s employment.” (Luna Decl., ¶10, Exh. C at p. 2.) However, it also states that “Covered Claims must be filed within one year of the date the dispute first arose, or within one year of the termination of employment, whichever occurs first, provided, however that if the Employee’s or Company’s Covered Claim arises under a statute providing for a longer time to file a claim, that statute shall govern.” (Id., Exh. C at p. 1.)

Thus, there is no indefinite term.

In totality, Plaintiff fails to establish any substantive unconscionability. In light of the very modest procedural unconscionability, the Court declines to hold the agreement unenforceable.

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