Rosa Perez v. Tempest Telecom Solutions, LLC, et al

Case Number

24CV03524

Case Type

Hearing Date / Time

Wed, 10/23/2024 - 10:00

Nature of Proceedings

Defendants’ Motion To Compel Arbitration

Tentative Ruling

For Plaintiff Rosa Perez: Justin Hanassab, Steven I. Azizi, Katherine Shuai, Miracle Mile Law Group LLP.

For Defendants Tempest Telecom Solutions, LLC, Nina Firestone, and Patricia Mata: Avi M. Attal, Mimi Ahn, Kahana & Feld LLP.

RULING

For all reasons discussed herein, the motion of Defendants to compel arbitration of Plaintiff’s claims is granted. This action shall be stayed pending the completion of arbitration. Defendants shall submit a revised proposed order which accurately reflects the Court’s ruling herein.

This matter is also on the 8:30am CMC Calendar. The Court will call both matters on the 10am Law & Motion Calendar. No appearances required at 8:30am.

Background

On June 24, 2024, Plaintiff Rosa Perez (Perez) filed a complaint against Defendants Tempest Telecom Solutions, LLC (Tempest), Nina Firestone (Firestone), and Patricia Mata (Mata) (collectively, Defendants), alleging nine causes of action: (1) disability discrimination in violation of Government Code section 12900 et seq. (the California Fair Employment and Housing Act or FEHA) (against Tempest only); (2) failure to provide reasonable accommodation in violation of FEHA (against Tempest only); (3) failure to engage in the interactive process in violation of FEHA (against Tempest only); (4) retaliation in violation of FEHA (against Tempest only); (5) failure to prevent discrimination and retaliation in violation of FEHA (against Tempest only); (6) negligent hiring, retention, and supervision (against Tempest only); (7) wrongful termination in violation of public policy (against Tempest only); (8) intentional infliction of emotional distress (against all Defendants); and (9) defamation (against Tempest and Firestone only). As alleged in the complaint:

In October 2021, Perez was hired as a sales administrative assistant by Tempest, which is a national network solutions provider that assists clients and network operators with building, maintaining, and repairing network infrastructure, services, and software. (Compl., ¶¶ 1-2.) Firestone was Perez’s supervisor and Mata is the Human Resources Director for Tempest. (Id. at ¶¶ 16-17.)

On April 1, 2022, Perez sustained a knee injury requiring medical attention. (Compl., ¶ 16.) After receiving medical treatment, Perez informed Firestone and Mata on April 4, 2022, that the knee injury limited Perez’s mobility, and that Perez would require further medical treatment and to work remotely. (Id. at ¶ 17.) On April 13, 2022, Perez provided Mata with a copy of a doctor’s note placing Perez on a medical leave of absence until April 18, 2022. (Id. at ¶ 18.)

On April 18, 2022, after learning that the knee injury was an “ACL” tear, Perez informed Mata that she would require surgery, and requested to work remotely which Mata granted. (Compl., ¶ 19.) On May 10, 2022, Perez provided Mata with a doctor’s note placing Perez on medical leave through June 17, 2022. (Id. at ¶ 20.) Perez’s medical leave was later extended to August 5, 2022, after which Perez contracted Covid-19 which delayed Perez’s recovery. (Id. at ¶ 21.) Perez provided Tempest with doctor’s notes substantiating the extensions of leave. (Ibid.) On July 25, 2022, while Perez was still on medical leave, Mata informed Perez that Tempest could no longer accommodate her and that Perez’s employment had been terminated due to a restructure. (Id. at ¶ 22.)

On August 15, 2024, Defendants filed a motion for an order compelling the arbitration of the claims alleged in Plaintiff’s complaint. In support of the motion, Defendants submit a declaration made by Mata under penalty of perjury, in which Mata declares that she has been employed by Tempest as the Human Resources Director since June 2019. (Mata Decl., ¶ 1.) In this position, Mata has access to the personnel files of Tempest and Tempest’s business-related data and information stored by Tempest in the ordinary course of business, and is familiar with Tempest’s hiring and onboarding process and the review and signature process for the agreements of Tempest including the arbitration agreement at issue in the present motion. (Ibid.)

Mata states that Tempest is based in Santa Barbara, California, and specializes in business network solutions such as equipment, repair, technical services, and logistics. (Mata Decl., ¶ 2.) Tempest contracts with and solicits services from vendors and clients outside of California and in Canada, and has employees nationwide including in Arkansas, Colorado, North Carolina, Oregon, and Pennsylvania. (Ibid.)

Mata further states that on October 14, 2021, she presented Perez with an arbitration agreement (the Arbitration Agreement) by email as part of Perez’s onboarding with Tempest. (Mata Decl., ¶ 3.) Mata contends that the Arbitration Agreement contains a mutual arbitration provision requiring that any claims or disputes between Perez and Tempest or Tempest’s employees and agents, be submitted to arbitration. (Ibid.) On October 18, 2021, Perez emailed to Mata a copy of the Arbitration Agreement which Perez voluntarily executed. (Ibid.) Attached to the Mata declaration is a copy of the Arbitration Agreement that Mata located and retrieved from Tempest’s secure business records/data storage system and that Mata contends was executed by Perez. (Id. at ¶ 3 & Exh. 1.)

Mata further asserts that at no time did Perez ask that the Arbitration Agreement be translated into another language, nor did Mata have reason to believe that a translation was necessary. (Mata Decl., ¶ 4.) In addition, Mata asserts that Perez was free to speak with whomever she wished, and to ask any questions or request clarification, regarding the Arbitration Agreement and chose not to do so. (Ibid.) Further, the Arbitration agreement has never been modified or revoked. (Id. at ¶ 5.)

The present motion of Defendants is opposed by Perez.

Analysis:

“ ‘Arbitration is ... a matter of contract.’ [Citation.] ‘The policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate. Although the law favors contracts for arbitration of disputes between parties, there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate. Absent a clear agreement to submit disputes to arbitration, Courts will not infer that the right to a jury trial has been waived.’ [Citations]” (Remedial Construction Services, LP v. AECOM, Inc. (2021) 65 Cal.App.5th 658, 663, original italics.)

“Under both federal and state law, the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate.” (Cheng-Canindin v. Renaissance Hotel Associates (1996) 50 Cal.App.4th 676, 683.) The Court first applies state law principles governing contract interpretation to determine whether the parties to a dispute have agreed to submit the controversy to arbitration. (Garcia v. Stoneledge Furniture LLC (2024) 102 Cal.App.5th 41, 51.)

“Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 409-410, 413 (Rosenthal).) “The arbitration proponent must first recite verbatim, or provide a copy of, the alleged agreement. [Citations.] A movant can bear this initial burden ‘by attaching a copy of the arbitration agreement purportedly bearing the opposing party’s signature.’ [Citation.] At this step, a movant need not ‘follow the normal procedures of document authentication’ and need only ‘allege the existence of an agreement and support the allegation as provided in [California Rules of Court,] rule [3.1330].’ [Citation.] [¶] If the movant bears its initial burden, the burden shifts to the party opposing arbitration to identify a factual dispute as to the agreement’s existence…. To bear this burden, the arbitration opponent must offer admissible evidence creating a factual dispute as to the authenticity of their signatures. The 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. [Citation.]” (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755, original italics (Iyere).)

The Arbitration Agreement attached to the Mata declaration as exhibit 1 consists of a two-page document ostensibly signed by Perez on October 18, 2021. The first page includes its substantive provisions set forth in two separate paragraphs, and the second consists of a signature page. (See Mata Decl., Exh. 1.) The Arbitration Agreement includes the following provision:

“Employer and Employee agree that they prefer and choose to arbitrate any dispute they may have instead of litigating in Court before a judge or jury. Therefore, as a condition of employment, they agree that any claim or dispute between them or against the other or any agent or employee of the other, whether related to the employment relationship or otherwise, including those created by practice, common law, Court decision, or statute, now existing or arising or created later, concerning in any way the subject of the Employee’s employment with Employer or its termination, including any related to allegations of violations of state or federal statutes related to wrongful termination, sexual harassment, discrimination, compensation, wage and hour issues, and all disputes about the validity of this arbitration clause, shall be resolved by final binding arbitration before a single, mutually-selected, neutral arbitrator.”

(Mata Decl., Exh. 1 at PDF p. 5.)

Defendants have sufficiently alleged the existence of an agreement to arbitrate the present dispute by providing a copy of the Arbitration Agreement which appears to be signed by Perez and by reciting its relevant provisions including those that provide for arbitration of the FEHA and other claims alleged by Perez in the complaint. For these reasons, Defendants have met their initial prima facie burden to provide evidence of a written agreement to arbitrate the present controversy. (Cal. Rules of Court, rule 3.1330; see also Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543-544 [“[t]he party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent’s signature”]; Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219 [moving party may allege the existence of the agreement by reciting its terms in the motion].)

In addition, though the express terms of the Arbitration Agreement do not reference the Federal Arbitration Act, codified at 9 U.S.C. § 1 et seq. (the FAA), Defendants also and effectively contend that the Arbitration Agreement is governed by the FAA due to the presence of interstate commerce. (See, e.g., Memo at pp. 3, l. 12 – p. 4, l. 7 [asserting that the Arbitration Agreement satisfies the requirement of a nexus to interstate commerce].)

“[T]he United States Supreme Court has identified ‘three categories of activity that Congress may regulate under the commerce power: (1) the channels of interstate commerce, (2) the instrumentalities of interstate commerce and persons or things in interstate commerce, and (3) those activities having a substantial relation to interstate commerce.’ [Citation.]” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238 (Carbajal).) The FAA “provides for the enforcement of arbitration provisions in any contract evidencing a transaction involving interstate commerce.” (Mount Diablo Medical Center v. Health Net of California, Inc. (2002) 101 Cal.App.4th 711, 717.) “The party asserting FAA preemption bears the burden to present evidence establishing a contract with the arbitration provision affects one of these three categories of activity, and failure to do so renders the FAA inapplicable.” (Carbajal, supra, 245 Cal.App.4th at p. 238.)

The terms “involving commerce” are “the functional equivalent of “affecting[]” commerce. (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 273-274.) “[T]he pertinent question is whether the contract evidences a transaction involving interstate commerce, not whether the dispute arises from the particular part of the transaction involving interstate commerce.” (Shepard v. Edward Mackay Enterprises, Inc. (2007) 148 Cal.App.4th 1092, 1101; see also Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56-57 [in individual cases, the economic activity at issue and in the aggregate must reflect a “general practice” which “bears on interstate commerce in a substantial way”].)

Defendants present unopposed evidence to show that Tempest conducts its business with out of state and international vendors and clients and employs individuals from states outside of California. (See Mata Decl., ¶ 2.) As further detailed above, Perez also alleges in the complaint that Tempest is a national provider of the services described in the complaint. In addition, in the complaint and opposition to the present motion, Perez states that during her employment with Tempest, she was “responsible for providing sales order support and customer services, sourcing equipment, creating purchase orders, assisting with customer quotes, and other order management functions.” (Compl., ¶ 14; Perez Decl., ¶ 5.) For this reason, available information and evidence shows that as part of her duties while employed with Tempest, Perez provided services to out of state clients and vendors.

Based on the multistate and international business activities of Tempest and the undisputed responsibilities and duties of Perez while employed with Tempest, Tempest’s aggregate economic activity demonstrates a general practice that bears on interstate commerce in a substantial manner. By virtue of Perez’s responsibilities as described in the complaint and opposing Perez declaration, Perez was engaging in activity as part of her employment with Tempest which affected or involved interstate commerce. Even if the Court were to find that the responsibilities or activities of Perez did not have a specific effect on interstate commerce, because the aggregate economic activity of Tempest represents a general practice bearing on commerce, it is subject to federal control. Therefore, notwithstanding the absence of express terms providing that the FAA governs the Arbitration Agreement, Tempest has met its burden to show that the employment activity at issue in this action substantially affected interstate commerce such that the Arbitration Agreement is subject to and preempted by the FAA. (Bernhardt v. Polygraphic Co. of America (1956) 350 U.S. 198, 200-201 [FAA governs if employee performing duties was “working ‘in’ commerce, was producing goods for commerce, or was engaging in activity that affected commerce”].)

As Defendants have met their initial prima facie burden for all reasons further discussed above, the burden now shifts to Perez to identify a factual dispute as to the existence of the Arbitration Agreement and to produce evidence to challenge its authenticity. (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.)

In the opposing Perez declaration, Perez states that she was presented with the Arbitration Agreement on October 18, 2021, at the start of her employment with Tempest. (Perez Decl., ¶ 6.) Wholly absent from the Perez declaration is any information showing that Perez did not sign the Arbitration Agreement or that the handwritten signature that appears on the Arbitration Agreement is not authentic. (Iyere, supra, 87 Cal.App.5th at pp. 756-758; see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle) [arbitration clause may be binding even if party did not read it].)

Perez also offers no reasoned legal or factual argument showing that the dispute giving rise to the claims alleged in the complaint is not encompassed within the terms of the Arbitration Agreement. (See Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 386 (Cronus) [“any doubts or ambiguities as to the scope of the arbitration clause itself should be resolved in favor of arbitration”].) Perez also does not contend that Firestone and Mata may not enforce the Arbitration Agreement. (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614 [discussing of exception to rule that only signatories may enforce an arbitration agreement]; Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 353 [addressing circumstances under which Plaintiff may be compelled to arbitrate claims against a non-signatory Defendant].)

Also absent from the opposition is any factual or legal argument to show that Mata does not possesses sufficient personal knowledge regarding the Arbitration Agreement or the circumstances surrounding its execution, or to show why any information or evidence offered in the Mata declaration or the motion is insufficient to demonstrate that Perez was provided with and executed the Arbitration Agreement at the time of hire. (Estate of O’Connor (2017) 16 Cal.App.5th 159, 170 [general discussion of what constitutes a “qualified” witness]; Ramos v. Westlake Services LLC (2015) 242 Cal.App.4th 674, 684 [a writing may be authenticated by circumstantial evidence].)

Perez also does not dispute Defendants’ contention that the Arbitration Agreement is not subject to or governed by the FAA.

Because Perez has failed to identify a factual dispute as to the existence of the Arbitration Agreement or to produce evidence challenging its authenticity or the authenticity of Perez’s handwritten signature, and considering the totality of the evidence and information offered by the parties and for all reasons discussed above, Defendants have met their burden to prove the existence of an agreement to arbitrate the present dispute.

The opposition of Perez to the motion is directed to whether or not the Arbitration Agreement is unconscionable. Perez contends that the Arbitration Agreement is procedurally unconscionable because it is adhesive in nature, was presented on a “take it or leave it” basis as a condition of Perez’s employment with no opportunity to discuss or negotiate its terms, because there exists no opt-out clause or other manner in which Perez could refuse to sign the Arbitration Agreement, and because Defendants failed to provide Perez with or inform Perez where she could access a copy of rules referenced in the Arbitration Agreement under which the arbitration would be conducted. Perez further contends the Arbitration Agreement is substantively unconscionable because it does not provide Perez with adequate discovery rights, includes a waiver of rights under the Labor Code, and grants excessive authority to the arbitrator to deny an award of attorney’s fees under FEHA. For these reasons, Perez argues, the Arbitration Agreement is unenforceable.

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281; see also 9 U.S.C. § 2.) Contract defenses such as unconscionability may be applied to invalidate an agreement to arbitrate. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (OTO).) “The overarching unconscionability question is whether an agreement is imposed in such an unfair fashion and so unfairly one-sided that it should not be enforced.” (Id. at p. 124.) “A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party.” (Id. at p. 125.)

“Unconscionability consists of both procedural and substantive elements. The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. [Citations.] Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided. [Citations.] A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be ‘so one-sided as to “shock the conscience.” ’ [Citation.]” (Pinnacle, supra, 55 Cal.4th at pp. 246-247.)

In addition, though the party resisting arbitration must show both procedural and substantive unconscionability, “they need not be present in the same degree” but are evaluated on a “sliding scale”. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Id. at p. 114.) The party asserting unconscionability as a defense to enforcement of an arbitration agreement, “bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.” (Rosenthal, supra, 14 Cal.4th at p. 413.)

Procedural Unconscionability:

“A procedural unconscionability analysis ‘begins with an inquiry into whether the contract is one of adhesion.’ [Citation.] An adhesive contract is standardized, generally on a preprinted form, and offered by the party with superior bargaining power ‘on a take-it-or-leave-it basis.’ [Citations.]” (OTO, supra, 8 Cal.5th at p. 126.) “[A] contract of adhesion is fully enforceable according to its terms [citations] unless certain other factors are present which, under established legal rules—legislativeor judicial—operate to render it otherwise.” (Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 819-820, fn. omitted.) “It is only when the contract is (1) contrary to the reasonable expectations of the ‘adhering party’ or (2) is ‘unduly oppressive or unconscionable,’ that it will not be enforced. [Citation.]” (Painters Dist. Council No. 33 v. Moen (1982) 128 Cal.App.3d 1032, 1040.)

The parties here do not and cannot reasonably dispute that the Arbitration Agreement, which requires the signatory employee to agree to arbitrate the claims or disputes described therein as a condition of employment with Tempest, is one of adhesion. In the employment context present here, the adhesive nature of the Arbitration Agreement presented as a condition of Perez’s employment, alone, is sufficient to establish a “modest degree of procedural unconscionability.” (Carbajal, supra, 245 Cal.App.4th at p. 243.)

The Arbitration Agreement provides that binding arbitration will be conducted “in accordance with the American Arbitration Association’s National Rules for the Resolution of Employment Disputes then in effect (“AAA Rules”) as they may be modified to meet California law.” (Mata Decl., Exh. 1 at PDF p. 5.) Though the rules governing the arbitration are identified by their specific title, these express provisions allow for modification of the governing rules. Moreover, the information offered by Perez indicates that Perez was never provided with a copy of the AAA Rules specifically identified in the Arbitration Agreement. (Perez Decl., ¶ 8.)

In addition, Defendants offer no evidence to show that a copy of the AAA Rules was provided to Perez with the Arbitration Agreement, nor does the evidence show that a copy of the AAA Rules was attached to the Arbitration Agreement at the time it was executed by Perez. The Arbitration Agreement itself also includes no information regarding the manner in which an employee may access the AAA Rules. Under the circumstances present here, the apparent failure by Defendants to provide Perez with a copy of the AAA Rules referenced in the Arbitration Agreement further contributes to a finding of procedural unconscionability. (Carbajal, supra, 245 Cal.App.4th at p. 246.)

Available and undisputed evidence and information also shows that Perez signed the Arbitration Agreement at the time of hire, and suggests that Perez did not have sufficient time to obtain and review the AAA Rules under which the arbitration would be conducted. The relatively short time period within which Perez was provided with and executed a copy of the Arbitration Agreement together with the apparent failure by Defendants to provide or make available a copy of the AAA Rules also indicates the existence of both oppression and surprise. (Carbajal, supra, 245 Cal.App.4th at pp. 245-246.)

Furthermore, notwithstanding Mata’s statement that Perez did not ask questions or request clarification regarding the Arbitration Agreement, there is no evidence or information to suggest that Perez was ever informed that she could negotiate its adhesive terms or opt out of arbitration. Available information also shows that Perez is not a sophisticated business person. (Perez Decl., ¶ 4; Carbajal, supra, 245 Cal.App.4th at pp. 245, 246 [noting that procedural unconscionability may not exist to the extent rules governing arbitration were available on the internet, arbitration agreement was negotiable, and the employee was a sophisticated business person with the capacity to locate them].)

For all reasons discussed above, also considering that Perez presents no information or evidence sufficient to show that the Arbitration Agreement is contrary to Perez’s reasonable expectations, the Court finds that there exists a moderate level of procedural unconscionability based on the adhesive nature of the Arbitration Agreement, the time frames and context in which it was presented to and executed by Perez, Perez’s lack of business sophistication, the lack of any ability to negotiate or opt out of the Arbitration Agreement, and Defendants’ failure to provide Perez with a copy of the AAA Rules governing the arbitration.

Substantive unconscionability:

For all reasons further discussed below, Perez has failed to show that the Arbitration Agreement is substantively unconscionable.

“Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided.” (Pinnacle, supra, 55 Cal.4th at p. 246.) A substantive unconscionability analysis “ ‘ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as “ ‘ “overly harsh” ’ ” [citation], “ ‘unduly oppressive’ ” [citation] “ ‘so one-sided as to “shock the conscience” ’” [citation], or ‘unfairly one-sided” [citation] All of these formulations point to the central idea that the unconscionability doctrine is concerned not with “a simple old-fashioned bad bargain” [citation], but with terms that are “unreasonably favorable to the more powerful party.” ’ [Citation.]” (OTO, supra, 8 Cal.5th at pp. 129-130; see also Pinnacle, supra, 55 Cal.4th at p. 246 [“[a] contract term is not substantively unconscionable when it merely gives one side a greater benefit”].)

Perez contends that the Arbitration Agreement is substantively unconscionable because it improperly waives rights held by Perez under the Labor Code. Perez cites a provision appearing in the Arbitration Agreement which states that Tempest and Perez “expressly acknowledge and waive any rights granted under section 229 of the California Labor Code providing for any means other than arbitration to resolve their disputes relating to wages.” (Opp. at p. 7; see also Mata Decl., Exh. 1 at PDF p. 5.) Perez contends that this provision is unconscionable because it forces Perez to arbitrate wage claims in direct contravention of California law.

Labor Code section 229 provides that “[a]ctions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.” (Lab. Code, § 229.) Based on the allegations of the complaint further detailed above, it does not appear to the Court that Perez alleges or intends to assert a cause of action for due and unpaid wages within the meaning of Labor Code section 229. Perez also fails to explain the manner in which Defendants seek to compel arbitration of any claims asserted by Perez under Labor Code section 229.

Even if the Court were to find that Perez alleged in the complaint a cause of action under Labor Code section 229 (and the Court makes no findings in this regard), the Court has determined that the Arbitration Agreement is subject to the FAA. “To ensure that arbitration agreements are enforced according to their terms, ‘the FAA pre-empts state laws which “require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.” ’ [Citations.]” (Pinnacle, supra, 55 Cal.4th at p. 235.) Similarly, the FAA precludes a Court from construing an arbitration agreement “in a manner different from that in which it otherwise construes nonarbitration agreements under state law.” (Perry v. Thomas (1987) 482 U.S. 483, 492 (Perry); Cronus, supra, 35 Cal.4th at p. 385 [“the FAA preempts all state laws that apply of their own force to limit those agreements against the parties’ will or to withdraw the power to enforce them”].)

Because Labor Code section 229 permits an action to enforce statutory provisions for the collection of due and unpaid wages to be maintained “without regard to the existence of any private agreement to arbitrate”, its provisions discriminate against arbitration and are therefore pre-empted by the FAA. (Perry, supra, 482 U.S. at pp. 490-492; Pinnacle, supra, 55 Cal.4th at p. 235.) Accordingly, although the complaint does not allege any claim for due and unpaid wages under Labor Code section 229, to the extent the Arbitration Agreement is valid, enforceable, and subject to or governed by the FAA as further discussed above, Labor Code section 229 is pre-empted under its terms.

Similarly, Perez contends that the Arbitration Agreement is substantively unconscionable because it effectively limits the recovery of attorney’s fees which Perez contends are mandatory under FEHA. The express terms relied on by Perez to support this contention provide that “[e]ach party shall bear its own attorneys’ fees, unless otherwise permitted by law and so ordered by the arbitrator.” (Mata Decl., Exh. 1 at PDF p. 5.) Defendants contend that this provision permits the recovery of statutory attorney’s fees under FEHA. (Reply at p. 4.)

Under FEHA, a successful Plaintiff may recover attorney’s fees from the employer. (Gov. Code, § 12965, subd. (c)(6) [also setting forth circumstances under which a Defendant may recover fees and costs].) To the extent the Arbitration Agreement prohibits the recovery of attorney’s fees otherwise authorized under FEHA, it effectively limits Perez’s statutory rights and remedies and is substantively unconscionable. (Armendariz, supra,  24 Cal.4th at pp. 101, 103.)

Though the provision at issue requires the parties to bear their own attorney’s fees, it includes an exception for those fees permitted by law and ordered by the arbitrator. Though Perez contends that an award of attorney’s fees to a prevailing Plaintiff is mandatory under FEHA, the express language of that statute gives the Court discretion to award attorney’s fees which must also be “reasonable”. (Gov. Code, § 12965, subd. (c)(6); see also Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478, 507-508.) FEHA further provides that a prevailing Defendant may be awarded fees and costs to the extent a Court finds the action was “frivolous, unreasonable, or groundless when brought, or the Plaintiff continued to litigate after it clearly became so.” (Gov. Code, § 12965, subd. (c)(6).)

Reading the operative provisions of the Arbitration Agreement at issue “together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other” (Civ. Code, § 1641), it is reasonable to interpret the Arbitration Agreement to exclude or provide an exception for any award of fees and costs made within the arbitrator’s discretion as authorized under FEHA. For these reasons, the Arbitration Agreement does not improperly limit or waive Perez’s statutory remedies with respect to any discretionary or reasonable attorney’s fees that may be awarded under FEHA.

Perez also contends that the Arbitration Agreement does not clearly set forth the parameters of discovery that may be conducted by the parties, does not allow for any discovery absent leave by the arbitrator, and improperly grants unchecked discretion and authority to the arbitrator. For these additional reasons, Perez contends that the Arbitration Agreement is substantively unconscionable.

“[A]dequate discovery is indispensable for the vindication of FEHA claims.” (Armendariz, supra, 24 Cal.4th at p. 104.) The sole provision of the Arbitration Agreement addressing discovery states that the arbitrator “shall have the authority to make discovery orders and rulings, award all appropriate relief ….” (Mata Decl., Exh. 1 at PDF p. 5.) It is evident from the express terms of this provision that the Arbitration Agreement does not deny Perez the opportunity to conduct discovery with respect to her FEHA claims, but contemplates that the parties will conduct discovery during the arbitration proceeding. Further, it can be inferred from the discovery provision at issue that the parties to the Arbitration Agreement recognize that “a limitation on discovery is one important component” of arbitration and that the arbitrator will “balance this desirable simplicity with the requirements of the FEHA in determining the appropriate discovery ….” (Armendariz, supra, 24 Cal.4th at p. 106, fn. 11.)

For all reasons discussed above, it can be inferred from the express provisions of the Arbitration Agreement that the parties are permitted to conduct appropriate discovery with respect to any claims alleged under FEHA. For this reason, Perez has failed to show why the terms of the Arbitration Agreement deny Perez an opportunity to conduct discovery regarding her FEHA claims. Therefore, and considering the typical limitations on discovery in arbitration, the Court does not find that the Arbitration Agreement is substantively unconscionable based on any inappropriate limitation or wholesale denial of Perez’s ability to conduct discovery necessary to vindicate her claims.

Though there exists a moderate level of procedural unconscionability in the Arbitration Agreement for all reasons further discussed above, 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.” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1533, original italics; accord, Armendariz, supra, 24 Cal.4th at p. 114.) As the Court does not find that the Arbitration Agreement is substantively unconscionable, the Court will grant the motion and order the action stayed pending the completion of arbitration. (See Code Civ. Proc., § 1281.4.)
 

The Court has reviewed the proposed order submitted by Defendants and does not intend to sign it. The Court will order Defendants to submit a proposed order which accurately reflects the Court’s ruling herein.