Ojeda vs. Talent4Health, LLC

“If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement. [Citation.] The opposing party can do this in several ways. For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement.” (Ibid.)

“If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party.” (Id., at pp. 165-166.)

B.

Analysis

Defendant meets its step one burden. It submits the declaration of Christine Kodner, its Manager of Legal and Contracts. Exhibit A to Kodner’s declaration, she testifies, is a complete, executed copy of Plaintiff’s employment agreement and all attachments thereto. Included in Exhibit A is a standalone document titled “Alternative Dispute Resolution Agreement” (“Agreement”). The Agreement purports to bear Plaintiff’s electronic signature.

The burden shifts to Plaintiff, who “bears the burden of producing evidence to challenge the authenticity of the agreement.” (Gamboa, supra, 72 Cal.App.5th at p. 165.) Plaintiff puts on no evidence challenging the agreement. She argues only that Defendant’s showing is inadequate. (Opp. at p. 9.) This is insufficient. Defendant’s initial burden, as stated in Gamboa, is simply to produce a copy of the Agreement purporting to bear her signature. Plaintiff must then produce evidence challenging the authenticity of the Agreement. For example, as Gamboa explains, Plaintiff might declare under penalty of perjury that she has no memory of signing the Agreement. But Plaintiff’s only supporting declaration comes from her counsel, who says nothing of the sort.

In the two cases cited by Plaintiff, the parties opposing arbitration submitted their own declarations with evidence contesting the authenticity of the agreements. (See Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 423-425 (multiple declarations detailing facts supporting claim of fraud in the execution); Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1054 (declaration stating plaintiff specifically recalled signing his employment contract, but had no recollection of signing arbitration agreement).) Plaintiff fails to meet her shifted burden. The Court therefore finds, by a preponderance of the evidence, that an agreement to arbitrate exists and that it is the Agreement included in Exhibit A to Konder’s declaration.

II. Terms of Agreement

The parties to the agreement are “TALENT4HEALTH LLC (‘Company’) and the undersigned employee below (‘Employee’).” (Agreement ¶ 1.) The Agreement covers “any dispute involving you and the Company that would otherwise be brought in a court of law (State or Federal Court) or with an administrative agency (Labor Commissioner), including, without limitation, any claim related to your employment . . . based on . . . statute.” (Id. ¶ 3.) The Agreement has a class, collective, representative, and PAGA action waiver. (Ibid.) The Agreement is enforceable under both the FAA and the CAA (the latter, to the extent not preempted by the FAA). (Id. ¶ 10.) The Agreement contains a severability clause. (Ibid.)

In opposition, Plaintiff contends it is unclear whether the claims asserted in this case are covered by the Agreement. The Court disagrees. Plaintiff’s argument is based on the following sentence from paragraph 3 of the Agreement: “Notwithstanding the above, [a]ll claims listed under Sections 200 to 244 of California Labor Code shall be first filed with the California Department of Labor Standards Enforcement or other administrative agency if required by law prior to arbitration or civil action.” This is a PAGA-only case, so the language about sections 200 to 244 of the Labor Code is arguably irrelevant. The Court therefore understands Plaintiff’s confusion to arise from whether this case belongs before an “other administrative agency” or a court or arbitrator.

This confusion is easily cleared up. PAGA claims must be exhausted with the LWDA pre-filing. (Lab. Code § 2699.3.) Plaintiff alleges she exhausted her administrative remedies. (Compl. ¶ 22.) As a result, the administrative phase of the PAGA claim is complete, and her PAGA claim is properly before a court or arbitrator. Because her PAGA claim is a claim based on statute, it is within the scope of claims to be arbitrated.

III. Mediation as Condition Precedent to Arbitration

Section 14 of Plaintiff’s employment agreement provides that the parties agree they will first mediate any dispute before resorting to formal dispute resolution. Plaintiff argues that whether this case is arbitrable or not, Defendant must be ordered to mediate the case before arbitration would be appropriate. The Court disagrees. The declaration from Plaintiff’s counsel attaches a chain of emails discussing post-filing attempts to mediate. By filing suit before attempting to mediate, Plaintiff herself breached the mediation requirement. Defendant has no obligation to follow a contractual provision Plaintiff already breached.

IV. Unconscionability

“‘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.’ [Citation.] But they need not be present in the same degree. ‘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.’” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)

A. Procedural Unconscionability

Defendant concedes the Agreement was offered on a take-it-or-leave-it basis and was a condition of employment. Accordingly, the Court finds the agreement procedurally unconscionable, but no more so than in the usual employment dispute. Plaintiff argues the Agreement has an additional element of surprise not found in most cases. She points to language in ¶ 2 of the Agreement that says the AAA Employment Dispute rules will govern the arbitration unless they conflict with the Agreement, in which case “this Agreement controls.”

Plaintiff contends this admits the possibility that the AAA rules may be displaced by the Agreement. True enough, but this possibility isn’t unconscionable absent proof of an actual conflict. Procedural unconscionability exists, for example, where the employer’s policy in fact limits discovery beyond what the AAA rules would otherwise permit, and furthermore fails to provide a copy of the policy to the employee. (See Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 691 (discussing Fitz v.

NCR Corp. (2004) 118 Cal.App.4th 702).) Plaintiff’s speculation about potential conflicts is no substitute for evidence of an actual conflict.

B. Substantive Unconscionability

Plaintiff offers several reasons she believes the agreement is substantively unconscionable.

1. Agreement Controls over AAA Rules

First, Plaintiff renews her argument about the Agreement controlling over AAA rules in the event of a conflict. Again, she points to no actual conflict between the Agreement and the AAA rules. She offers only speculation that the Agreement will advantage Defendant in the event of such a conflict. Plaintiff, as the party seeking to avoid enforcement on unconscionability grounds, bears the burden of showing the Agreement is unconscionable. Her speculation is not evidence.

2. Administrative Exhaustion

Second, Plaintiff argues the administrative exhaustion requirement discussed above is substantively unconscionable in that it restricts the employee’s ability to seek relief before a court or an arbitrator. The Court disagrees. This requirement provides that administrative remedies must be exhausted if required by operative law, such as Labor Code § 2699.3. The Agreement requires no administrative process unless the relevant statute requires it.

3. Class, Collective, Representative, and PAGA Waiver

Plaintiff contends the class, collective, representative, and PAGA waiver in the agreement is “sweeping” and substantively unconscionable. Insofar as class and collective actions are waived, the FAA applies here, and such waivers are permitted under the FAA. (See generally AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333.) The PAGA waiver is a different matter. The Agreement contains a wholesale PAGA waiver, which is illegal under California law. Moreover, this rule survives the United States Supreme Court’s Viking River decision. (See Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 662 (“that aspect of Iskanian is not preempted by the FAA”).) The inclusion of an illegal PAGA waiver in the Agreement is substantively unconscionable. (The proper way to deal with this unconscionable term is a separate question from whether it’s unconscionable in the first place.)

4. Fee Clause

Paragraph 8 of the Agreement provides: “Company shall pay the application fee and cost of arbitration. Each party shall pay its own attorney fees and expenses.” Plaintiff contends the second sentence is substantively unconscionable. The Court agrees. Many provisions of the Labor Code allow a prevailing employee to recover attorney’s fees and costs, including PAGA. (See Lab. Code § 2699(k)(1).) The Agreement purports to waive fees and costs that are otherwise collectible by statute. Defendant argues the Agreement doesn’t bar the arbitrator from awarding fees and costs by statute.

True enough, but the Agreement expressly provides that each side will bear its own fees and costs, and it nowhere says such awards are permitted. A fee clause that says each side will bear its own fees and costs, coupled with silence on whether statutory fees and cost awards are allowed, implies the arbitrator cannot award statutory fees and costs. “The fact that the contract expressly so provides tends to negate any inference that the parties also intended another consequence to flow from the same event.

Expressio unius est exclusio alterius.” (Stephenson v. Drever (1997) 16 Cal.4th 1167, 1175.)

5. Severability

The Agreement contains a severability clause. Considering the record before it and considering the degree of substantive unconscionability in the Agreement, the Court in its discretion concludes the Agreement is not so permeated with unconscionability as to deny enforcement. Rather, the proper course is to (1) sever the fee clause and (2) under Viking River, sever the PAGA waiver to the extent it purports to waive the non-individual component of Plaintiff’s PAGA claim.

V. Further Proceedings

Under Viking River and Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, the proper course of action is to order the individual component of Plaintiff’s PAGA claim to arbitration and stay the non-individual component pending completion of arbitration. Plaintiff argues a stay would be inappropriate under the CAA, but this result is compelled by the FAA, Viking River and Adolph.