Santiago v. Children's Institute, Inc.

(Stanley Mosk Courthouse: Dept. 224) August 28, 2026 DEPARTMENT 224 LAW AND MOTION RULINGS

There is a valid, enforceable arbitration agreement. The dispute is covered by the agreement. The FAA governs the agreement. The Agreement bears at most a low degree of procedural unconscionability and a single substantively unconscionable provision (the representative-action/PAGA waiver), which the Court severs. The motion is GRANTED. Plaintiff and Defendant are ordered to arbitration of Plaintiff's cause of action under Labor Code section 1102.5.

ANALYSIS

Introduction

On October 18, 2024, Plaintiff Claudia Santiago filed her Complaint against Defendant Children's Institute, Inc., alleging a single cause of action for violation of Labor Code section 1102.5.

On May 1, 2025, Defendant filed the instant Motion to Compel Arbitration and to Stay the action.

On April 21, 2026, Plaintiff filed her Opposition.

On April 28, 2026, Defendant filed its Reply.

Evidentiary Objections

Defendant submitted evidentiary objections to the Declaration of Claudia Santiago. The objections are OVERRULED.

Motion to Compel Arbitration

Defendant Children's Institute, Inc. ("Defendant" or "CII") moves the Court for an order: (i) compelling Plaintiff Claudia Santiago to submit her sole cause of action for violation of Labor Code section 1102.5, as set forth in her Complaint, to binding arbitration in lieu of court proceedings; and (ii) staying the instant lawsuit pending completion of such arbitration.

Legal Standard

In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Code Civ. Proc., Sec. 1281.2; Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)

"California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration." (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)

"This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute." (Ibid. [internal quotations omitted].)

This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act ("FAA"), which governs all agreements to arbitrate in contracts "involving interstate commerce." (9 U.S.C. Sec. 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

The Existence of an Agreement

A party to an arbitration agreement may seek a court order compelling the parties to arbitrate a dispute covered by the agreement. (CCP Sec. 1281.2)

The party seeking arbitration has the initial "burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense." (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.4th 836, 842.)

A moving party meets its initial burden by showing the agreement at issue exists, and need only establish its validity on challenge by opponent. (HM DG, Inc. v. Amini (2013) 219 Cal.App.4th 1100, 1114; Espejo v. Southern Calif. Permanente Med. Group (2016) 246 Cal.App.4th 1047, 1060.)

Defendant submits the Arbitration Agreement in question through the Declaration of Lynda Sinatra, CII's Chief Human Resources Officer. The Agreement consists of the "Acknowledgement of Policies, Rules, and Agreement for At-Will Employment and Arbitration" (the "Acknowledgement") signed by Plaintiff on October 11, 2023 (Sinatra Decl. P. 4, Exh. A), and the arbitration provisions set forth at pages in CII's Employee Handbook.(Sinatra Decl. P. 5, Exh. B.)

The Acknowledgement contains a separately headed "Agreement for Binding Arbitration" appearing directly above Plaintiff's printed name and signature, which provides in relevant part that Plaintiff "KNOWINGLY AND VOLUNTARILY AGREE[S] TO SUBMIT AND SETTLE ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO MY EMPLOYMENT RELATIONSHIP WITH CII . . . TO ARBITRATION," and expressly states, "I REALIZE BY AGREEING TO ARBITRATION, I WILL HAVE WAIVED MY RIGHT TO TRIAL BY JURY." (Sinatra Decl., Exh. A.)

The incorporated Handbook provisions confirm that "[a]ny dispute, controversy or claim between us may be arbitrated, including . . . wrongful termination claims, wage claims, claims of discrimination or harassment . . . and all other common law and statutory claims," and that "[a]ny claims, at the request of either the employee or employer, shall be submitted to and settled by binding arbitration under the requirements and mandate of the Federal Arbitration Act." (Sinatra Decl., Exh. B, p. 12.)

"With respect to the moving party's burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court." (Baker v. Italian Maple Holdings, LLC, 13 Cal. App. 5th 1152, 1160 (2017).)

Plaintiff does not dispute that she signed the Acknowledgement, that she received the Employee Handbook, or that the arbitration provisions appear at pages 12-14 of that Handbook.

There is an existing and enforceable Agreement. Further, the dispute is covered by the Agreement. The Complaint arises out of Plaintiff's employment with Defendant. An agreement to arbitrate exists. The dispute is covered by the Agreement.

The Federal Arbitration Act

Federal law applies to arbitration provisions in contracts involving interstate commerce. (Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

Where the FAA applies, state procedural rules nonetheless govern the determination of a motion to compel arbitration. (Vivid Video, Inc. v. Playboy Ent. Group, Inc. (2007) 147 Cal.App.4th 434, 440.)

"Even when the Federal Arbitration Act applies, state law governs such matters as who is bound by and who may enforce an arbitration agreement." (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614, fn. 7.)

The Agreement expressly provides that claims "shall be submitted to and settled by binding arbitration under the requirements and mandate of the Federal Arbitration Act," and that arbitration shall be "governed by the Federal Arbitration Act (9 U.S.C. Sections 1-16)." (Sinatra Decl., Exh. B, pp. 12-13.)

Defendant has further shown that CII's operations involve interstate commerce, including the receipt of substantial federal funding and the use of supplies and equipment sourced from outside California. (Sinatra Decl. P. 9.) The FAA applies.

Unconscionability

Plaintiff further argues that the Arbitration Agreement is unenforceable as it is unconscionable.

For an arbitration agreement to be unenforceable as unconscionable, both procedural and substantive unconscionability must be present. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)

Procedural unconscionability includes oppression arising from unequal bargaining power causing an absence of meaningful choice and real negotiating, and surprise due to hidden terms drafted by the party seeking to enforce the provisions. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 581.)

An arbitration provision is substantively unconscionable where it applies to one side, but not the other. (Higgins v. Sup. Ct. (2006) 140 Cal.App.4th 1238, 1254.)

Procedural Unconscionability

Plaintiff asserts the Agreement is procedurally unconscionable because it was a contract of adhesion presented on a take-it-or-leave-it basis, and because the arbitration terms were buried and not called to her attention.

"Adhesion contracts are form contracts a party with superior bargaining power offers on a take-it-or-leave-it basis." (Torrecillas, supra, 52 Cal.App.5th at p.493.)

Arbitration provisions imposed on a take-it-or-leave-it basis indicate procedural unconscionability. (Thompson v. Toll Dublin, LLC (2008) 165 Cal.App.4th 1360, 1372.)

But "a compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition ... or offered on a 'take it or leave it' basis." (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal. App. 4th 1105, 1127, Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1292.)

That the Agreement was presented as a condition of employment therefore establishes, at most, a modest or minimal degree of oppression.

In the absence of "surprise or other sharp practices", Courts do not recognize that "adhesive" arbitration agreements establish a high degree of procedural unconscionability. (Baltazar v. Forever 21 Inc. (2016) 62 Cal.4th 1237, 1246.)

Plaintiff has not established that she could not negotiate the terms of the agreement or opt out of the agreement, as she did not ask any questions or indicate that she sought further explanation of the agreement. She has not established any surprise or sharp practices that establish a high degree of procedural unconscionability.

Regardless, the fact that the arbitration agreement may have been presented on a take it or leave it basis or that there is unequal bargaining power only establishes at most a modest degree of procedural unconscionability. (Torrecillas, supra, 52 Cal.App.5th at p.493; Baltazar v. Forever 21 Inc., supra, 62 Cal.4th at p.1246.)

Procedural unconscionability includes oppression arising from unequal bargaining power causing an absence of meaningful choice and real negotiating, and surprise due to hidden terms drafted by the party seeking to enforce the provisions. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 581.)

The absence of "authentic informed choice," due to the lack of straightforward, unbiased explanations of an agreement, may constitute procedural unconscionability. (Gentry v. Sup. Ct. (2007) 42 Cal.4th 443, 470.)

Surprise caused by provisions buried in a long contract, language not fully explained, or misleading captions, indicates procedural unconscionability. (Thompson v. Toll Dublin, LLC (2008) 165 Cal.App.4th 1360, 1373.)

However, it is well settled law that failure to read or understand an arbitration clause is no defense to enforcement or grounds to avoid arbitration. (See Metters v. Ralphs Grocery Co. (2008) 161 Cal.App.4th 696, 701; Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1673; Madden v. Kaiser Found. Hosp. (1976) 14 Cal.3d 699, 710.)

As such, though not dispositive, there exists at most a minimal degree of procedural unconscionability in the Agreement.

Substantive Unconscionability

Plaintiff further argues that the Agreement is substantively unconscionable because the Agreement imposes a waiver on residents while preserving the facility's right to sue in court, and requires Plaintiff to bear costs that make arbitration impracticable.

"A provision is substantively unconscionable if it 'involves contract terms that are so one-sided as to "shock the conscience," or that impose harsh or oppressive terms.' [Citation.] The phrases 'harsh,' 'oppressive,' and 'shock the conscience' are not synonymous with 'unreasonable.' Basing an unconscionability determination on the reasonableness of a contract provision would inject an inappropriate level of judicial subjectivity into the analysis. ¿'With a concept as nebulous as "unconscionability" it is important that courts not be thrust in the paternalistic role of intervening to change contractual terms that the parties have agreed to merely because the court believes the terms are unreasonable. The terms must shock the conscience.' [Citations.]"¿¿ (Walnut Producers of California v. Diamond Foods, Inc. supra, 187 Cal.App.4th at 647-48.)

Plaintiff relies on Cook v. University of Southern California (2024) 102 Cal.App.5th 312, in which an agreement was held substantively unconscionable in part because it required the employee to arbitrate claims against non-signatory third parties who were not reciprocally bound. Cook is distinguishable.

The agreement there was not limited to claims arising from the employment relationship and was of indefinite duration. (Id. at p. 327.)

Here, the Agreement is expressly confined to disputes "ARISING OUT OF OR RELATING TO MY EMPLOYMENT RELATIONSHIP WITH CII" and the affiliated persons and entities it identifies (owners, officers, managers, employees, supervisors, and related or affiliated companies). (Sinatra Decl., Exh. A.)

Claims against those persons and entities arising from Plaintiff's employment would be based on the same facts and inherently inseparable from the arbitrable claims against CII. (Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 786-788.)

Moreover, the Agreement provides that claims may be compelled "at the request of either the employee or employer" (Sinatra Decl., Exh. B, p. 12), reflecting a mutual obligation. On this record, the extension to affiliated persons for employment-related claims does not render the Agreement substantively unconscionable.

Plaintiff next contends CII's reservation of the right to modify Handbook policies "in its sole and absolute discretion" renders its promise to arbitrate illusory.

The Acknowledgement, however, carves the arbitration provision out of that general reservation: the "Agreement for Binding Arbitration" expressly states, "THIS POLICY CANNOT CHANGE EXCEPT BY WRITTEN AGREEMENT BETWEEN MYSELF AND CII." (Sinatra Decl., Exh. A.) The arbitration commitment is thus not subject to unilateral modification and is not illusory.

Finally, the Court addresses the Agreement's provision that employees "knowingly and voluntarily waive the right to be a party in or to any class action or representative lawsuit including lawsuits under the Private Attorney General Act." (Sinatra Decl., Exh. B, p. 13.)

To the extent this provision purports to waive an employee's right to bring representative PAGA claims on a wholesale, predispute basis, it is unenforceable under California law. This defect is nonetheless collateral to the central purpose of the Agreement and is severable.

It is also not implicated by this action: Plaintiff asserts a single, individual cause of action under Labor Code section 1102.5, and no class or representative claim is before the Court. Defendant expressly disclaims any attempt to enforce the waiver here.

"The strong legislative and judicial preference is to sever the offending term and enforce the balance of the agreement" unless the agreement is "permeated by unconscionability." (Lange v. Monster Energy Company (2020) 46 Cal.App.5th 436, 453, internal quotes, citations, and alterations omitted.)

The Court therefore severs and declines to enforce the provision waiving the right to participate in "any class action or representative lawsuit including lawsuits under the Private Attorney General Act," and enforces the remainder of the Agreement. Therefore, there is some substantive unconscionability. However, the Court severs the unconscionable provision from the Agreement.

Conclusion

There is a valid, enforceable arbitration agreement. The dispute is covered by the agreement. The FAA governs the agreement. The Agreement bears at most a low degree of procedural unconscionability and a single substantively unconscionable provision (the representative-action/PAGA waiver), which the Court severs. The motion is GRANTED. Plaintiff and Defendant are ordered to arbitration of Plaintiff's cause of action under Labor Code section 1102.5.

Stay

This action is ordered stayed pending resolution of the arbitration. (Code Civ. Proc., Sec. 1281.4.) Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at [email protected] indicating intention to submit on the tentative, and copying all parties in the email communication. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear