MCGHEE vs ADESA US AUCTION, LLC; AND DOES 1 THROUGH 10, INCLUSIVE

ADESA asserts that Plaintiff applied for work through First Step, completed the onboarding process through EMS’s electronic system, and executed an arbitration agreement as a required condition of employment. ADESA now moves to compel Plaintiff’s individual PAGA claims to arbitration. First Step and EMS join in ADESA’s motion to compel.

Legal Standard

25CV023297: MCGHEE vs ADESA US AUCTION, LLC; AND DOES 1 THROUGH 10, INCLUSIVE 07/31/2026 Hearing on Motion to Compel Arbitration in Department 8B

California law, like federal law, favors enforcement of valid arbitration agreements. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97 (Armendariz); accord, Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 889.) Under California law, a party to an arbitration agreement may seek a court order compelling the parties to arbitrate a dispute covered by the agreement. (Code Civ. Proc. (“CCP”), § 1281.2.) A written agreement to submit a controversy to arbitration is valid, enforceable, and irrevocable consistent with standard contract principles. There is a strong public policy favoring the enforcement of arbitration agreements. (CCP, §1281; Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 706.)

“The moving party bears the burden of proving the existence of an arbitration agreement by a preponderance of the evidence, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any defense, such as unconscionability.” (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 172-173 (Serafin), quoting Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1468; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 [internal citations and quotation omitted].) General principles of contract law govern arbitration agreements. (Serafin, supra, 235 Cal.App.4th at p. 173.)

The Court must grant a petition to compel arbitration if it determines that the parties agreed to arbitrate the controversy, unless it determines that: (a) the petitioner waived the right to compel arbitration; (b) grounds exist to revoke the agreement; or (c) a party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there may be conflicting rulings on a common issue of law or fact. (CCP, § 1281.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)

Discussion

ADESA contends that Plaintiff executed an arbitration agreement with EMS on February 13, 2025. (Miller Decl., ¶¶ 10-11, Exh. B (“Agreement”).) ADESA argues that it can enforce the Agreement, despite being a non-signatory; that the Agreement covers Plaintiff’s individual PAGA claims, and that all other issues are delegated to the arbitrator. (See generally, Mot.)

Cross-Defendants agree, arguing that the Agreement covers Plaintiff’s claims, ADESA and First Step may enforce the Agreement, and that this action should be dismissed, or at least stayed, pending arbitration. (See generally, Joinder.)

Plaintiff does not dispute that he entered into the Agreement with EMS, but disputes that ADESA can enforce the Agreement, that it covers his PAGA claims, and whether certain threshold issues are delegated to the arbitrator. (See generally, Opp.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV023297: MCGHEE vs ADESA US AUCTION, LLC; AND DOES 1 THROUGH 10, INCLUSIVE 07/31/2026 Hearing on Motion to Compel Arbitration in Department 8B

There is no dispute that the Agreement is governed by the FAA.

Whether Certain Issues Are Delegated to the Arbitrator

“[C]ourts presume that the parties intend courts, not arbitrators, to decide ... disputes about ‘arbitrability.’ These include questions such as ‘whether the parties are bound by a given arbitration clause,’ or ‘whether an arbitration clause in a concededly binding contract applies to a particular type of controversy.’” (BG Group plc v. Republic of Arg. (2014) 572 U.S. 25, 34 [quoting Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 84].) However, “parties can agree to arbitrate ‘gateway’ questions of ‘arbitrability,’ such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.” (Rent-A-Center, W., Inc. v.

Jackson (2010) 561 U.S. 63, 68-69.) Further, “[a]n arbitration provision’s reference to, or incorporation of, arbitration rules that give the arbitrator the power or responsibility to decide issues of arbitrability may constitute clear and unmistakable evidence that parties intended the arbitrator to decide those issues.” (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 892- 893.)

ADESA argues that the Court’s role is limited to determining (1) whether an agreement to arbitrate exists, and (2) whether that agreement covers the dispute at issue because all other issues have been “clearly and unmistakably” delegated to the arbitrator by the Agreement’s incorporation of the JAMS Employment Arbitration Rules. (Mot., pp. 14:11-4, 18:22-19:19.)

Here, the Agreement does not contain an express delegation clause. It simply states that “[a]ny and all claims and controversies arising out of Employee’s application or candidacy for employment, employment, or cessation of employment with the Company shall be resolved through final and binding arbitration using the JAMS Employment and Arbitration Rules & Procedures in existence as of the time the dispute arises.” (Agreement, ¶ 1.) Rule 11 of the JAMS rules provides as follows: “Jurisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought, and who are proper Parties to the Arbitration, shall be submitted to and ruled on by the Arbitrator.

Unless the relevant law requires otherwise, the Arbitrator has the authority to determine jurisdiction and arbitrability issues as a preliminary matter.” (JAMS, Rule 11.)

This is markedly different from the agreement at issue in Aanderud, where the arbitration provision stated that the parties “agree to arbitrate all disputes, claims and controversies arising out of or relating to [...] the interpretation, validity, or enforceability of this Agreement, including the determination of the scope or applicability of this Section 5 [the ‘Arbitration of Disputes’ section]. ...’” (Aanderud, supra, 13 Cal.App.5th at p. 892.) The court concluded that “[t]his language delegates to the arbitrator questions of arbitrability and is clear and unmistakable evidence that the parties intended to arbitrate arbitrability.” (Ibid.) The incorporation of the arbitration rules was further evidence of the parties’ intent to delegate. (Id., at p. 893.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV023297: MCGHEE vs ADESA US AUCTION, LLC; AND DOES 1 THROUGH 10, INCLUSIVE 07/31/2026 Hearing on Motion to Compel Arbitration in Department 8B

Moreover, other cases have held that incorporation by reference does not satisfy the clear and unmistakable test. (See Villalobos v. Maersk, Inc. (2025) 114 Cal.App.5th 1170, 1187 [collecting cases]; Wright v. WellQuest Elk Grove, LLC (2026) 119 Cal.App.5th 267, 274-278 [distinguishing Aanderud].)

Even assuming ADESA is correct that incorporation of the JAMS rules alone is sufficient, ADESA’s argument ignores that the Agreement specifically provides that “[n]otwithstanding any rules adopted by the arbitration company above that may provide otherwise, any dispute over the validity, effect, and enforceability of the provisions of this paragraph, including whether the arbitration may proceed as a class, collective, or representative action, shall be for a court of law and not an arbitrator to decide.” (Agreement, ¶ 6 [emphasis added].)

Despite Plaintiff raising this issue in opposition, ADESA fails to address it in reply. Thus, the key question of whether Plaintiff’s PAGA claims are covered claims is reserved for the Court. And ADESA specifically asks this Court to adjudicate the threshold questions of contract formation and its ability to enforce the Agreement as a non-signatory. (See generally, Mot. pp. 14-18.)

Therefore, the Court concludes that the pertinent issues presented in this motion regarding nonsignatory enforcement and the effect of the representative action waiver are properly left to the Court, not the arbitrator. Because the validity and enforceability of the representative action waiver provision may be dispositive, the Court begins its analysis there.

Whether the Agreement Covers Plaintiff’s PAGA Claims

While the “law favors contract for arbitration of disputes between parties” [citation], “there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate.” (DMS Servs., Inc. v. Superior Court (2012) 205 Cal.App.4th 1346, 1352.) “[P]arties cannot be coerced into arbitrating a claim, issue, or dispute absent an affirmative contractual basis for concluding that the party agreed to do so.” (Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1923 (Viking River).)

The Court employs the ordinary rules of contract interpretation to interpret the Agreement. (EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1321.) “The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the mutual intention of the parties. Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code, § 1636.)” (Id. at pp. 1320–1321, internal quotations omitted.)

The contractual language must be given its usual and ordinary meaning, the agreement must be interpreted as a whole, and the language must not be determined to be ambiguous in the abstract. (Ibid.)

California has a strong public policy favoring arbitration and, as a result, ambiguities or doubts about the scope of the arbitration provision should be resolved in favor of arbitration. (Gravillis v. Coldwell Banker Residential Brokerage Co. (2006) 143 Cal.App.4th 761, 771.) In accordance

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV023297: MCGHEE vs ADESA US AUCTION, LLC; AND DOES 1 THROUGH 10, INCLUSIVE 07/31/2026 Hearing on Motion to Compel Arbitration in Department 8B

with this policy, “an exclusionary clause in an arbitration provision should be narrowly construed.” (Ibid.) The policy favoring arbitration, however, does not apply when unambiguous language shows the parties did not agree to arbitrate all or a part of the dispute. (Gravillis, supra, 143 Cal.App.4th at p. 772.) Under California law, the first step in analyzing the meaning of a contract is to determine whether the language is ambiguous, meaning it is reasonably susceptible to more than one meaning. (Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 754-755 [court’s threshold question when interpreting a contract is whether the writing is ambiguous].) The Parties do not dispute the language of the Agreement and offer no extrinsic evidence regarding its interpretation; therefore, the Court resolves the question of ambiguity based solely on the contents of the Agreement.

ADESA argues that “whether the Agreement covers Plaintiff’s claims is straightforward” and “the claims asserted here fall squarely within – and are unambiguously governed by – the Arbitration Agreement.” (Mot., pp. 19:20-20:12.) ADESA is correct that the Agreement broadly covers “[a]ny and all claims or controversies arising out of Employee’s application or candidacy for employment, employment, or cessation of employment with the Company” and the “claims which are subject to arbitration shall include, but not be limited to, any and all employmentrelated claims or controversies, such as breach of employment agreement, breach of the covenant of good faith and fair dealing, negligent supervision or hiring, wrongful discharge in violation of public policy, unpaid wages or overtime under the state and federal wage payment laws, claims for minimum wages, meal and rest period violations, [and] inaccurate wage statement claims ” (Agreement, ¶¶ 1-2.)

The Agreement further provides that it also covers “any and all claims Employee may have under the California Labor Code ” (Id., ¶ 3.) This language, on its own, is broad enough to encompass Plaintiff’s PAGA claims, which are employment-related claims made under the California Labor Code.

But the Court must consider the entirety of the Agreement in context, which goes on to state that “[t]o the fullest extent permitted by law, the parties agree that they shall not join or consolidate claims submitted for arbitration under this Agreement with those of any other persons, and that no form of class, collective, or representative action shall be maintained without the mutual consent of the parties; provided, however, that nothing herein shall prohibit Employee from filing a claim for civil penalties on behalf of aggrieved employees under the California Private Attorneys’ [sic] General Act, California Labor Code section 2698, et. seq.” (Agreement, ¶ 6.)

Plaintiff argues that this provision excludes PAGA claims from arbitration because Plaintiff is an aggrieved employee acting as a representative of the State and forcing Plaintiff to arbitrate his individual claims would “prohibit” him from “filing a claim for civil penalties on behalf of aggrieved employees” under PAGA. (Opp., pp. 13:14-15:18.)

The Court agrees with Plaintiff that the final clause quoted above operates to exclude PAGA claims, both individual and non-individual, from the Agreement. Although the U.S. Supreme

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV023297: MCGHEE vs ADESA US AUCTION, LLC; AND DOES 1 THROUGH 10, INCLUSIVE 07/31/2026 Hearing on Motion to Compel Arbitration in Department 8B

Court in Viking River noted there are two components of a PAGA claim, i.e. those premised on violations experienced by others (non-individual claims) and those premised on violations actually experienced by the plaintiff (individual claims), the Court also recognized that all PAGA actions are “representative” actions since they are brought on behalf of the State. (Viking River, supra, 142 S.Ct. at p. 1916.) In both the individual and non-individual context, a claim for civil penalties under PAGA is always a claim brought on behalf of aggrieved employees – a named Plaintiff in a PAGA action must be an aggrieved employee to proceed. (See Labor Code, §§ 2699(a), (c)(1).)

Notably, while the first portion of the class and representative action waiver refers to joining or consolidating the claims of other persons, the later provision simply states that nothing “shall prohibit the Employee from filing a claim for civil penalties on behalf of aggrieved employees ” without differentiating between Plaintiff as an aggrieved employee or the other aggrieved employees Plaintiff seeks to represent. Moreover, the Agreement does not include any of the typical “individual basis only” language that can evidence an intent to separate individual and non-individual PAGA claims for different forums.

While ADESA argues that the Court must consider this provision in the context of the class and representative action waiver, ADESA’s argument on reply would require the Court to construe “on behalf of aggrieved employees” to actually mean “on behalf of other aggrieved employees.” (See Reply, p. 9:5-22.) The Agreement here was signed in 2025, well after Viking River and Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 transformed the landscape of arbitration and PAGA claims. If the Parties intended for this provision to refer only to the non-individual PAGA claims, they could have included language consistent with the guidance provided in Viking River, Adolph, and their progeny.

They chose not to do so. The Court is not inclined to insert terms into the Agreement where they were omitted by the drafter.

Finally, while not addressed by any Party, the Court notes that the Agreement’s use of the verb “filing” here supports the Court’s interpretation and indicates a preservation of Plaintiff’s ability to file a PAGA claim outside of the broader Agreement. That verb is used three times in the Agreement:

4. Notwithstanding the provisions of this Agreement, Employee shall have the right to file a claim for workers’ compensation and unemployment insurance benefits with the appropriate state agencies, unfair labor practice charges with the National Labor Relations Board, and administrative charges with the Equal Employment Opportunity Commission, California Department of Fair Employment and Housing, and any similar state agency. Unless otherwise required by applicable law, all other employment-related claims shall be resolved by final and binding arbitration and not by a jury in a court of law.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV023297: MCGHEE vs ADESA US AUCTION, LLC; AND DOES 1 THROUGH 10, INCLUSIVE 07/31/2026 Hearing on Motion to Compel Arbitration in Department 8B

5. Nothing in this Agreement shall prohibit Employee from filing a claim for unpaid wages with the California Labor Commissioner, or from participating in a “Berman hearing” held pursuant to California Labor Code section 98 [¶]

6. To the fullest extent permitted by law, the parties agree that they shall not join or consolidate claims submitted for arbitration under this Agreement with those of any other persons, and that no form of class, collective, or representative action shall be maintained without the mutual consent of the parties; provided, however, that nothing herein shall prohibit Employee from filing a claim for civil penalties on behalf of aggrieved employees under [PAGA]

(Agreement, ¶¶ 4-6 [emphasis added].) In the first two instances, filing a claim operates to preserve Plaintiff’s access to an alternative forum notwithstanding the Agreement or the arbitrable forum. The Court sees no persuasive basis to conclude that “filing” means something different in the third instance in the context of a PAGA claim, where Labor Code section 2699 allows an aggrieved employee to file a civil action in court.

Accordingly, the Court concludes that the Agreement does not apply to Plaintiff’s PAGA claim. Because the Agreement shall not prohibit Plaintiff from filing a claim for civil penalties on behalf of aggrieved employees under PAGA – which necessarily includes both the individual and non-individual components – and this is a PAGA only action, Defendant’s motion must be denied. Having so concluded, the Court need not reach the Parties’ arguments regarding whether ADESA may enforce the Agreement as a non-signatory.

Disposition

For the reasons stated above, Defendant’s motion to compel arbitration is DENIED in its entirety.

This minute order is effective immediately. No formal order or other notice is required. (CCP § 1019.5; CRC Rule 3.1312.)

[1] On the same day, Plaintiff filed a related class action in Riverside County (Case No.

CVRI2505545). (See 7-16-26 Joint Case Management Stmt, p. 4:12-14.) The Court, on its own motion, has taken judicial notice of the Register of Actions and is aware that the Parties have informed the court there of an agreement to dismiss the class action. (7-21-26 Minute Order.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV023297: MCGHEE vs ADESA US AUCTION, LLC; AND DOES 1 THROUGH 10, INCLUSIVE 07/31/2026 Hearing on Motion to Compel Arbitration in Department 8B

To request oral argument on this matter, you must call Department 8B at (916) 874-5762 by 4:00 p.m., the court day before this hearing and notification of oral argument must be made to the opposing party/counsel. If no call is made, the tentative ruling becomes the order of the court. (Local Rule 1.06.)

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