Solorio v. ABC Phones of North Carolina, Inc. ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 PRISCILLA SOLORIO and MARIANO DIAZ, ) Case No.: 1:20-cv-01051 NONE JLT on behalf of themselves and all others similarly ) 12 situated, ) FINDINGS AND RECOMMENDATIONS ) GRANTING DEFENDANTS’ MOTION TO 13 Plaintiffs, ) COMPEL ARBITRATION ) 14 v. ) (Doc. 7) ) 15 ABC PHONES OF NORTH CAROLINA, INC. ) and DOES 1-100, ) 16 ) Defendants. ) 17 ) 18 Priscilla Solorio and Mariano Diaz were employed by ABC Phones of North Carolina, Inc., at 19 retail locations in California. Plaintiffs seek to hold their former employer liable for wage and hour 20 violations under California law, on behalf of a class of others similarly situated. (See generally Doc. 21 1-3) Defendant ABC asserts Plaintiffs agreed to arbitrate claims on an individual basis and seeks to 22 compel arbitration of the claims pursuant to that agreement. (Doc. 7) Plaintiffs oppose the motion, 23 asserting ABC has not established the existence of an arbitration agreement and any agreement 24 between the parties was unconscionable. (Doc. 8) 25 The Court found the matter suitable for decision without oral arguments, and the motion was 26 taken under submission pursuant to General Order 618 and Local Rule 230(g). (Doc. 11) For the 27 following reasons, the Court recommends Defendant’s motion to compel arbitration be GRANTED 28 and the action be STAYED. 1 I. Background 2 Plaintiffs allege they are former store managers for ABC Phones of North Carolina, and were 3 classified as “non-exempt, hourly” employees. (Doc. 1-3 at 3, ¶ 4) Priscilla Solorio was hired by ABC 4 in March 2018 and became a store manager in September 2018. (Id. at 6, ¶ 18) Solorio remained a 5 store manager until her employment with Defendant ended in August 2019. (Id.) During the course of 6 her employment, Solorio worked at stores located in Delano and Fresno, California. (Id.) Mariano 7 Diaz worked as a store manager in Chula Vista, California, “from approximately October 2017 to June 8 2019.” (Id., ¶ 19) 9 According to Plaintiffs, “they typically were scheduled to work eight hours per day, five days a 10 week, for a total of approximately 40 hours per week.” (Doc. 1-3 at 8, ¶ 32) Plaintiffs contend they 11 “were regularly required by management to work additional hours far beyond this scheduled time,” and 12 some days “worked ten hours per day and more.” (Id.) They contend they were “regularly unable to 13 take a meal period at the required time, and would otherwise have to perform work and be under 14 Defendant’s control during breaks.” (Id.) Plaintiffs assert ABC employees are “routinely denied meal 15 and rest periods for two reasons: (1) Defendant does not authorize, permit, and/or make available 16 timely meal and rest breaks” and (2) employees “are often too busy with work during the day to have 17 time to take bona fide meal and rest breaks.” (Id. at 10, ¶ 40) 18 Plaintiffs allege the ABC Phones employees were required to “perform off-the-clock work for 19 which they [were] not adequately compensated.” (Doc. 1-3 at 3, ¶ 5) For example, Plaintiffs assert that 20 ABC “requires its Store Managers to arrive at the store prior to the start of their paid shifts to perform 21 work activities,” such as unlocking the store, disengaging the alarm, logging in to the computer system, 22 and loading “the necessary application to clock in to work via Defendant’s timekeeping system.” (Id. 23 at 9, ¶ 35) Plaintiffs estimate they “spent approximately five to ten minutes performing work-related 24 tasks” before they were “on-the-clock.” (Id.) Plaintiffs contend other “off-the-clock” task occurred 25 before and after their shifts, “including… completing sales, inventories, creating reports, training new 26 employees, and cleaning.” (Id., ¶ 36) They allege that off-the-clock tasks continued away from the 27 stores, when they received “work-related calls and text messages outside of their shifts from 28 Defendant’s managers and employees, without pay.” (Id., ¶ 37) 1 According to Plaintiffs, they were “required to pay out of pocket for necessary business 2 expenses accrued as result of their work for Defendant,” without reimbursement. (Doc. 1-3 at 12, ¶ 47) 3 Plaintiffs assert ABC Phones required them “to use their personal cellular phones and personal cellular 4 voice, text, and date plans for extensive, regular work-related communications.” (Id.) Plaintiffs allege 5 the communications included work calls, text messages, and use of group message applications. (Id.) 6 In addition, Plaintiffs assert ABC did not provide them “accurate wage statements as required 7 by California.” (Doc. 1-3 at 12, ¶ 48) They contend ABC employees “receive wage statements that do 8 not reflect all hours worked, premium pay for missed meal and rest break, and applicable overtime 9 premiums.” (Id.) Plaintiffs allege they are “owed wages and premium pay for all time worked, 10 overtime, and missed meal and rest breaks when their employment ends.” (Id., ¶ 49) 11 Based upon the foregoing, Plaintiffs filed a complaint on June 22, 2020, in Kern County 12 Superior Court Case No. BCV-20-101428. (Doc. 1-3 at 2) Plaintiffs seek to challenge the applicable 13 policies and practices of their former employer on behalf of themselves and others similarly situated. 14 (Id. at 2) Specifically, Plaintiffs seek to hold ABC liable for the following: (1) failure to compensate 15 for all hours worked in violation of Cal. Labor Code §§ 200, 204, 1194, and 1198; (2) failure to pay 16 overtime wages in violation of Cal. Labor Code §§ 200, 510, 1194; (3) failure to provide meal and rest 17 periods as required under Cal. Labor Code §§ 203, 223, 226.7, 512, and 1998; (4) failure to timely 18 reimburse for necessary business expenditures under Cal. Labor Code § 2802; (5) failure to provide 19 accurate, timely, and itemized wage statements in violation of Cal. Labor Code § 226; (6) waiting time 20 penalties under Cal. Labor Code §§ 201-203; and (7) unfair business practices in violation of Cal. Bus. 21 & Prof. Code § 17200. (Id. at 2, 16-27) On July 30, 2020, ABC filed a Notice of Removal (Doc. 1), 22 thereby initiating the action in this Court. 23 On November 25, 2020, ABC filed the motion to compel arbitration now bending before the 24 Court, asserting Plaintiffs “each executed an arbitration agreement” and agreed to arbitrate claims 25 encompassed in this lawsuit on an individual basis. (Doc. 7-1 at 2, 8) Thus, ABC seeks to compel 26 Plaintiff to arbitrate the claims, dismissal of the class action allegations, and a stay of the action 27 pending completion of arbitration. (Doc. 7 at 2) Plaintiffs filed their opposition to the motion on 28 January 13, 2021 (Doc. 8), to which ABC filed a reply on January 20, 2021 (Doc. 10). 1 II. Evidence of Arbitration Agreements and Objections Thereto 2 Defendant contends that “when Plaintiffs were hired by ABC, they each executed an arbitration 3 agreement.” (See Doc. 7-1 at 2) ABC reports Diaz and Solorio had different hiring procedures—which 4 the company refers to as “on-boarding”— because Diaz was brought in to the company “as part of 5 ABC’s acquisition of another wireless company, 4G Wireless.” (Id. at 2) After Diaz accepted the 6 offer, he “was on-boarded in or around February 2016.” (Id., citing Patel Decl. ¶ 4) Former 4G 7 Wireless employees, such as Diaz, were required to complete an arbitration agreement no later than 8 December 2016 if they wanted to be eligible to earn commissions. (Id.; see also Doc. 7-2, Patel Decl. 9 ¶¶ 5, 18) Solorio, who “was not a former 4G employee, …went through ABC’s normal on-boarding 10 process” when she was hired in March 2018. (Doc. 7-1 at 2) 11 During the on-boarding process, “Solorio and Diaz both utilized ABC’s online employee 12 interface called Learning Management System (‘LMS’) to access a course titled “Arbitration 13 Agreement for CA- ABC Phones of NC.” (Doc. 7-1 at 3, citing Patel Decl. ¶¶ 11-12) Meenal Patel, 14 who has “worked in the Training Department for ABC” since 2004, explained the LMS system, as well 15 as other electronic employment tools used by ABC, required the employees “to enter a login that was 16 assigned to each of them by ABC at the time each was hired, along with a password that he or she was 17 required to create for himself or herself the first time they each logged on to the system.” (Id. at 3, 18 citing Patel Decl. ¶¶ 7-10; see also Doc. 10-2 at 3, ¶ 2) 19 Ms. Patel reports that Solorio and Diaz “were required to complete two ‘courses’ in the LMS.” 20 (Doc. 7-2 at 3, Patel Decl. ¶ 11) Notably, at the time Diaz completed the courses, the company used the 21 Greenlight LMS, but by the time Solorio started, had switched to a different system and used the 22 Cornerstone LMS. (Id., ¶ 7) However, “for purposes of reviewing and assenting to ABC’s arbitration 23 agreement, both the Greenlight and the Cornerstone system operated similarly and displayed similar 24 language on the screens asking for each employee’s acknowledgement.” (Id., ¶ 14) 25 The first course required Plaintiffs to input their unique usernames and passwords prior to the 26 display of “a PDF of the Arbitration Agreement for CA - ABC Phones of NC.” (Doc. 7-2 at 4, Patel 27 Decl. ¶ 11) Once the PDF was launched, Plaintiffs “had to back out… and launch the second course, 28 which was titled ‘Arbitration Agreement for CA.” (Id. at 4, ¶ 12) Diaz and Solorio “each had to click- 1 through an acknowledgement” and the computer screen indicated that “by clicking a button labeled 2 ‘Acknowledge,’ Plaintiffs were agreeing to the terms of ‘Arbitration Agreement for CA – ABC Phones 3 of NC.’” (Id., ¶¶ 12-13) According to Ms. Patel, “Only after Plaintiffs launched both the Arbitration 4 Agreement and the Acknowledgement courses in the LMS was the Arbitration Agreement considered 5 completed.” (Id., ¶ 15, emphasis added) Defendant asserts that as part of the on-boarding process, 6 Diaz completed these arbitration courses in the Greenlight LMS on July 2, 2016; and Solorio completed 7 the arbitration courses in the Cornerstone LMS on March 9, 2018. (Doc. 7-1 at 4; see also Doc. 7-2 at 8 3-5, ¶¶ 7, 18-19) 9 A. Agreement Displayed in the PDF Format 10 Initially, Ms. Patel indicated the Arbitration Agreements PDFs viewed during the LMS course 11 were different for Diaz and Solorio, though “[t]he two versions… [were] nearly identical in all material 12 respects.” (Doc. 7-2 at 4, Patel Decl. ¶ 11) Ms. Patel asserted, “A true and correct copy of the 13 electronically stored PDF that was displayed when Plaintiff Diaz completed the [arbitration] ‘course’ is 14 being filed along with ABC’s Motion as Exhibit ‘A’,” which was entitled “Arbitration Agreement.” 15 (Id.; see also Doc. 7-4) (emphasis in original) In addition, Ms. Patel stated: “A true and correct copy of 16 the electronically stored PDF that was displayed when Plaintiff Solorio completed the above referenced 17 ‘course’ is being filed along with ABC’s Motion as Exhibit ‘B’,” which was entitled “Arbitration 18 Agreement (CA).” (Id.; see also Doc. 7-5) (emphasis in original) 19 Opposing the motion to compel arbitration, Plaintiffs observed that Exhibit B, which Ms. Patel 20 indicated was viewed by Solorio, “indicate[d] at the bottom of each page that it was revised in August 21 2018.” (Doc. 8 at 5, citing Doc. 7-5) Plaintiffs note that “Ms. Patel’s declaration and the LMS Report 22 both state that Plaintiff Solorio executed the arbitration agreement on March 9, 2018—months before 23 the apparent date of the purported arbitration agreement at ECF 7-5.” (Id. at 6, citing Doc. 7-2, ¶ 19; 24 Doc. 7-8 at 5 [Exhibit E]) Plaintiffs assert, “After [counsel] pointed this out in pre-motion meet and 25 confer, Defendant’s counsel provided an earlier version of the agreement.” (Id. at 6, n.1, citing Doc. 7- 26 9 at 50 [Exhibit F]) Plaintiffs contend, “How . . . Solorio could have reviewed the 8.2018 version in 27 March 2018, . . . remains unexplained.” (Id. at 6, n.1) 28 In reply, ABC asserts that counsel made a “clerical human error” when it included Exhibit ‘B’ 1 in its motion package and drafted Ms. Patel’s declaration to reference Exhibit ‘B’ instead of including 2 only Exhibit ‘A’ for both Plaintiffs.” (Doc. 10 at 4, citing Gray Supp. Decl. ¶ 2) Brandon Gray, 3 counsel for ABC, reports he believes that Exhibit B “was provided to [his] office in connection to other 4 employees in separate matters where arbitration is at issue,” and his reference to the document was an 5 error when preparing a declaration for Ms. Patel. (Doc. 10-1 at 2, Gray Supp. Decl. ¶ 2) 6 In addition, Ms. Patel asserted that she “should have referenced Exhibit ‘A’ for both Solorio and 7 Diaz.” (Doc. 10-2 at 3, ¶ 7) According to Ms. Patel, “In order to be sure of the version of the 8 Arbitration Agreement displayed to Plaintiff Solorio on March 9, 2018, I accessed Defendant’s LMS 9 system as an administrator on January 15, 2021, and conducted a ‘double check’ of the records relating 10 to arbitration for Plaintiff Solorio.” (Id., ¶ 8) Ms. Patel reports that in the LMS system, she selected 11 “View Training Details” for Solorio, which displayed the course description. (Id. at 3-4, ¶¶ 11-12; see 12 also Doc. 10-3 at 2) She asserts, “The course description at the bottom [of the screen] shows that the 13 ‘Arbitration Agreement for CA – ABC Phones of NC’ was a completed ‘publications’ course.” (Id., ¶ 14 12; see also Doc. 10-3 at 3) Ms. Patel clicked “Launch” for the publication and “was able to see the 15 PDF document stored in the LMS.” (Id.) In doing so, Ms. Patel confirmed “[t]he stored document is 16 Defendant’s Arbitration agreement… [and] the version that was submitted as Exhibit ‘A’.” (Id., ¶ 13; 17 see also Doc. 10-3 at 4-8) 18 B. Evidence of Completion of Courses 19 Ms. Patel reports Diaz completed the LMS arbitration courses on July 2, 2016, and Solorio 20 completed the LMS arbitration courses on March 9, 2018. (Id. at 5, ¶¶ 18-19; see also Exhs. D and E). 21 Defendant provided the LMS Reports for both Diaz and Solorio to confirm Diaz completed a 22 publication course entitled “Arbitration Agreement for CA - ABC Phones of NC” and curriculum 23 course entitled “Arbitration Agreement of California” on July 2, 2016. (Doc. 7-7 at 4) The LMS report 24 for Solorio indicates she completed the “Arbitration Agreement of California” and curriculum on 25 March 9, 2018. (Doc. 7-8 at 5 [Exhibit E]). 26 In opposing the motion to compel, Plaintiffs observe the LMS Report in Exhibit E “does not 27 show that Plaintiff Solorio ever completed the ‘Arbitration Agreement for CA - ABC Phones of NC’ 28 ‘Publications’ course. (Doc. 8 at 6) Plaintiffs contend, “The screenshots at ECF 7-6 show that this 1 course is specifically titled ‘the Arbitration Agreement for CA - ABC Phones of NC’ but there is no 2 reliable evidence that Plaintiff Solorio completed it.” (Id., citing Doc. 7-8 at 5) However, Plaintiffs 3 acknowledge that during the meet and confer process prior to filing this motion, ABC provided 4 Plaintiffs’ counsel with an LMS Report showing Solorio completed the following arbitration courses: 5 “Arbitration Agreement of California” (curriculum), “Arbitration Agreement for CA ‐ ABC Phones of 6 NC” (publication), “Arbitration Agreement of ABC Phones ‐ NC” (curriculum), and “Arbitration 7 Agreement ABC Phones of North Carolina” (publication) on March 9, 2018. (Id., citing Doc. 7-9) 8 In reply, addressing Plaintiffs’ observations related to inconsistencies between the LMS Reports 9 for Solorio found in Exhibit E and F, Defendant reports that Exhibit E was “an abridged copy of the 10 LMS Report for Plaintiff Solorio,” and acknowledges it “should have been the full LMS.” (Doc. 10 at 11 2) Mr. Gray notes he “mistakenly included” the abridged document, while “[t]he correct LMS report 12 that should have been labeled as pages 14-28 of Exhibit ‘F’, which is the full LMS including the 13 relevant entries evidencing that Plaintiff Solorio viewed and electronically assented to Defendant’s 14 Arbitration Agreement.” (Doc. 10-1 at 2, ¶ 3) To the extent the same information is conveyed in a 15 different format, Ms. Patel explains: “When an LMS report is commissioned from Defendant’s LMS, 16 the person pulling down the report has the option to customize the fields that will appear in the report,” 17 and the information pulled and presented in Exhibit F “was more extensive.” (Doc. 10-2 at 3, ¶ 6) 18 Thus, Defendant’s records indicate Solorio also completed the course entitled “Arbitration Agreement 19 for CA – ABC Phones of NC” on March 9, 2018. (Id. at 2-3, Patel Supp. Decl. ¶¶ 4-5) 20 C. Objections 21 Plaintiffs assert “the Court should strike Defendant’s new and repackaged reply evidence.” 22 (Doc. 11-1 at 3) Plaintiffs assert, “The introduction of new evidence in reply papers is improper where 23 the nonmovant does not have the opportunity to respond to the new evidence.” (Id. at 4, citing J.G. v. 24 Douglas County Sch. Dist., 552 F.3d 786, 803 n.14 (9th Cir. 2008); Provenz v. Miller, 102 F.3d 1478, 25 1483 (9th Cir. 1996)). Further, Plaintiffs note: “Courts routinely apply this rule to exclude from 26 consideration new evidence presented for the first time in a movant’s reply brief, particularly where 27 the ‘new’ evidence could have been presented at the time of the original motion.” (Id., citing, e.g., 28 Wallace v. Countrywide Home Loans, Inc., 2009 U.S. Dist. LEXIS 110140, at *18-19 (C.D. Cal. Nov. 1 23, 2009); SEC v. Private Equity Mgmt. Group, Inc., 2009 U.S. Dist. LEXIS 75158, at *21 (C.D. Cal. 2 Aug. 10, 2009); Iconix, Inc. v. Tokuda, 457 F. Supp. 2d 969, 976 (N.D. Cal. 2006)). 3 Plaintiffs request the Court should strike the evidence supporting the assertion that “Solorio 4 agreed to the arbitration agreement at ECF 7-4, and not the August 2018 version at ECF 7-5 as it stated 5 in its opening papers.” (Id.) In addition, Plaintiffs argue the Court should not consider the LMS Report 6 in Exhibit F, because Defendant “never provided any briefing or explanation on that LMS Report until 7 its reply.” (Id.) Plaintiffs contend the reply evidence related to the LMS Reports “raises credibility 8 issues at to Defendant’s declarations and HR recordkeeping, all of which are particularly important in 9 the absence of signed agreements.” (Id. at 5) Plaintiffs assert also, “Defendant offers no real 10 explanation as to why an abridged version of the LMS Report – that omitted key entries regarding 11 arbitration modules – was proffered in support of the motion.” (Id. at 6) According to Plaintiffs, 12 “simply saying that it was a ‘clerical error’ ignores the issue of why there were LMS Reports that 13 omitted some, but not all, of the arbitration courses in the first place.” (Id.) 14 Although Plaintiffs contend the evidence submitted on reply should be stricken, the Court 15 granted the parties’ stipulation allowing Plaintiffs to file a sur-reply to counter the new arguments and 16 evidence presented in reply. See El Pollo Loco v. Hashim, 316 F.3d 1032, 1040-41 (9th Cir. 2003). To 17 the extent Plaintiffs suffered any initial harm from Defendant’s clarification of the evidence found in 18 the moving papers and submission of supplemental declarations in the reply, this was cured when 19 Plaintiffs filed their sur-reply. Because Plaintiffs had the opportunity to respond, the Court will 20 consider the evidence presented on reply. See Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir. 1996). 21 Thus, the objection is overruled.1 22 Also, the Court finds the new evidence does not raise credibility issues as to the evidence 23 provided. To the contrary, the differences between the LMS Reports found in Exhibits E and F was 24 explained by Ms. Patel, who noted “the person pulling down the report has the option to customize the 25 fields that will appear in the report.” (Doc. 10-2 at 3, ¶ 6) Because different customizations differed 26 27 1 Some of the evidence to which Plaintiff objects was not new, as Defendant filed Exhibits A, B, C, D, E, and F in support of the initial motion. Indeed, Plaintiff acknowledges that prior to the filing of the motion, she reviewed the 28 Arbitration Agreements in Exhibits A and B, as well as the complete LMS Report that Defendant referred to in reply, as 1 between Exhibits E and F, the reports are not inconsistent, but instead, Exhibit F merely contained 2 “more extensive” information. (Id.) Plaintiffs have not presented any evidence that casts doubt upon 3 the veracity of the exhibits presented, or the statements made by Ms. Patel regarding her verification of 4 the agreement viewed by Solorio when she completed the “Arbitration Agreement for CA – ABC 5 Phones of NC” course. Thus, the objection is overruled. 6 D. Conclusion 7 At the time Diaz and Solorio completed the “on-boarding” process for employment with 8 Defendant, the company required completions of courses in its LMS system related to arbitration. 9 (Doc. 7-2 at 4, Patel Decl. ¶¶ 12-13, 15) Plaintiff does not challenge the evidence that Diaz completed 10 the publication course entitled “Arbitration Agreement for CA - ABC Phones of NC” that displayed the 11 agreement (found in Exhibit A) and curriculum course, which required acknowledgement of the terms, 12 on July 2, 2016. (See Doc. 7-2 at 3-5, Patel Decl. ¶¶ 11-15, 18; see also Doc.7-7 [LMS Report for 13 Diaz]). In addition, based upon the evidence presented, the Court finds Solorio completed the 14 publication course entitled “Arbitration Agreement CA - ABC Phones of NC,” and viewed a PDF of 15 the agreement found in “Exhibit A” on March 9, 2018. (See Doc. 10-2 at 3-4, Patel Supp. Decl. ¶¶ 7- 16 13; Doc. 10-3 at 3-8). The evidence shows also that Solorio completed the curriculum course—which 17 required assent to the arbitration terms—on March 9, 2018. (Doc. 10-2 at 2-3, Patel Supp. Decl. ¶ 5; 18 Doc. 7-9 at 27 [LMS Report for Solorio]) 19 III. Arbitration Agreement Terms 20 ABC Phones of North Carolina, Inc. implemented the Arbitration Agreement for disputes 21 between the company and employees, and the agreement indicated it was made “[i]n consideration of 22 Employee’s employment or continued employment.” (Doc. 7-4 at 2) Pursuant to the agreement: 23 Company and Employee mutually agree to arbitrate before a neutral arbitrator (the “Arbitrator”) any and all disputes or claims by and between Employee, on the one 24 hand, and Company, its parent, subsidiary, and affiliated corporations and entities, and each of their present and former officers, directors, agents, and employees (the 25 “Company Parties”), on the other hand, including but not limited to any and all claims arising from or relating to Employee’s recruitment, hiring, and employment, the 26 termination of that employment, and any claims arising post-employment, including claims by or against the Company Parties, whether such disputes or claims arise in tort, 27 in contract, or under a statute, regulation, or ordinance… 28 (Doc. 7-4 at 2, ¶ 1) Thus, the agreement encompasses “[c]laims for nonpayment or incorrect payment 1 of compensation and benefits, including, but not limited to, claims for salary, wages, overtime, 2 premium pay, commissions, bonuses, severance, meal and rest periods, penalties, employee fringe 3 benefits, stock options, and the like.” (Id.) It also includes claims arising under “the California Labor 4 Code, the California Business and Professions Code, the Fair Labor Standards Act, the Employee 5 Retirement Income Securities Act (ERISA), or any other federal, state, or municipal laws concerning 6 wages, compensation, or employee benefits.” (Id.) 7 The Agreement indicates the “Employee and Company understand and agree the arbitration of 8 disputes and claims under this Agreement will be instead of a trial before a court or jury.” (Doc. 7-4 9 at 3, ¶ 2) A demand for arbitration could be made by either ABC or an employee by serving the 10 demand “on the opposing party within the statute of limitation applicable to the claim(s).” (Doc. 7-4 11 at 3, ¶ 3) A failure to serve a demand “within this time frame and according to [the] Agreement will 12 constitute a waiver of all rights to raise any claims in any forum arising out of any dispute subject to 13 arbitration to the same extent such claims would be barred if the matter proceeded in court.” (Id.) 14 Arbitration is to be “administered by the American Arbitration Association under its 15 Employment Arbitration Rules and Mediation Procedures and judgment upon the award rendered by 16 the arbitrator(s) may be entered in any court having jurisdiction thereof.” (Doc. 7-4 at 4, ¶ 3) 17 Individuals were informed that “[a] copy of the rules of the American Arbitration Association may be 18 obtained at the American Arbitration Association website at https://www.adr.org/aaa/faces/home.” 19 (Id.) Further, the Agreement indicated “the Arbitrator will allow reasonable discovery to prepare for 20 arbitration of any claims. (Id.) At a minimum, the Arbitrator will allow discovery authorized or 21 permitted by the rules of American Arbitration Association and such other discovery required by law 22 in arbitration proceedings.” (Id.) 23 The requested arbitration would “take place at office of the American Arbitration Association 24 located within the county in which Employee is or was last employed by Company at the time the 25 arbitrable dispute or claim arose, or if no such office exists, within the office of the American 26 Arbitration Association closest to the location where Employee is or was last employed at the time the 27 arbitrable dispute or claim arose.” (Doc. 7-4 at 5, ¶ 4) Alternatively, the parties and the American 28 Arbitration Association could agree to a different location. (Id.) 1 Pursuant to the Agreement, “costs of arbitration, including the Arbitrator’s fees, will be 2 allocated and paid in accordance with then-applicable law.” (Doc. 7-4 at 5, ¶ 6) Thus, ABC Phones 3 “will pay all of the Arbitrator’s fees and the arbitration-related costs,” if required by applicable laws. 4 (Id.) If ABC was not required to pay all fees and arbitration-related costs, “such fees and costs will be 5 apportioned between the parties by the Arbitrator in accordance with applicable law.” (Id.) The 6 parties “will each pay their own attorney fees and costs incurred in connection with the arbitration,” 7 but the arbitrator may award fees and costs to the prevailing party when “a statute or contract in issue 8 in the dispute authorizes the award of attorney fees and costs to the prevailing party.” (Id.) 9 The Arbitration Agreement includes a “Class Action Wavier” under which “the Company and 10 Employee agree to bring any dispute in arbitration on an individual basis only, and not on a class, 11 collective, or private attorney general representative basis.” (Id.) The parties agreed: “There will be 12 no right or authority for any dispute to be brought, heard or arbitrated as a class, collective, 13 representative, or private attorney general action…” (Id.) The issue of the validity and enforceability 14 of the Class Action Wavier was reserved for resolution by “a civil court of competent jurisdiction and 15 not by an arbitrator.” (Id.) 16 IV. The Federal Arbitration Act 17 The Federal Arbitration Act applies to arbitration agreements in any contract affecting 18 interstate commerce and “governs the allocation of authority between courts and arbitrators.” Cox v. 19 Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008); Circuit City Stores, Inc. v. Adams, 532 20 U.S. 105, 119 (2001); 9 U.S.C. § 2. The FAA provides that written arbitration agreements “shall be 21 valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the 22 revocation of any contract.” 9 U.S.C. § 2. This provision “create[s] a body of federal substantive law 23 of arbitrability applicable to any arbitration agreement within the coverage of the Act.” Moses H. 24 Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). A party seeking to enforce an 25 arbitration agreement may petition the Court for “an order directing the parties to proceed to 26 arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4. 27 Generally, the Court’s role in applying the FAA is “limited to determining whether a valid 28 agreement to arbitrate exists and, if so, whether the agreement encompasses the dispute as issue.” 1 Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). If the response is 2 affirmative on both counts, then the [FAA] requires the court to enforce the arbitration agreement in 3 accordance with its terms.” Chiron Corp. v. Ortho Diagnostic Systems, 207 F.3d 1126, 1130 (9th Cir. 4 2000). Thus, a court shall stay or dismiss an action for arbitration proceedings to occur. See 9 U.S.C. 5 §§ 3, 4; see also Delgadillo v. James McKaone Enters. Inc., 2012 WL 4027019 at *3 (E.D. Cal. Sept. 6 12, 2012) (if the court “determines that an arbitration clause is enforceable, it has the discretion to 7 either stay the case pending arbitration, or to dismiss the case if all of the alleged claims are subject to 8 arbitration”). Because the FAA “is phrased in mandatory terms,” “the standard for demonstrating 9 arbitrability is not a high one [and] a district court has little discretion to deny an arbitration motion.” 10 Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 475 (9th Cir. 1991). 11 “[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of 12 arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). As a 13 result, arbitration should only be denied when “it may be said with positive assurance that the 14 arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” AT&T Tech., 15 Inc. v. Communs. Workers of Am., 475 U.S. 643, 650 (1986). It is well-established that “arbitration 16 provides a forum for resolving disputes more expeditiously and with greater flexibility than litigation.” 17 Lifescan, 363 F.3d at 1011. 18 A party opposing arbitration has the burden to demonstrate the claims at issue should not be 19 sent to arbitration. Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 81 (2000); see also 20 Mortensen v. Bresnan Communications LLC, 722 F.3d 1151, 1157 (9th Cir. 2013) (“the parties 21 challenging the enforceability of an arbitration agreement bear the burden”). An arbitration agreement 22 may “be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or 23 unconscionability,’ but not by defenses that apply only to arbitration or that derive their meaning from 24 the fact that an agreement to arbitrate is at issue.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 25 340 (2011) (quoting Doctor’s Assocs. Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). In addition, a party 26 may show a claim should not be sent to arbitration if the right to arbitration has been waived. Fisher v. 27 A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986). 28 V. Discussion and Analysis 1 A. Involvement in Interstate Commerce 2 The parties do not dispute that the FAA applies to the action. Notably, “[t]he FAA applies to 3 employment contracts if the employment affects interstate commerce.” CarMax Auto Superstores Cal. 4 LLC v. Hernandez, 94 F. Supp. 3d 1078, 1100 (C.D. Cal. 2015). The Supreme Court has interpreted 5 “involving commerce” broadly as it applies to the scope of the FAA. See Circuit City Stores, Inc. v. 6 Adams, 532 U.S. 105, 120-21 (2001). 7 ABC “is a retailer of cellular phones, other devices, and cellular plans” and “is a corporation 8 organized under the laws of North Carolina with its principal place of business in North Carolina.” 9 (Doc. 1-3 at 3, ¶ 2; Doc. 7 at 3, citing Reed Decl. ¶ 2) Also, ABC “has numerous locations throughout 10 California and the United States.” (See Doc. 1-3 at 3, ¶ 2) The presumption of FAA applicability, 11 coupled with evidence that Defendant operates nationwide, indicates that the FAA applies to the 12 arbitration agreement. 13 B. Validity of the Arbitration Agreement 14 When determining whether a valid and enforceable agreement to arbitrate has been established 15 for the purposes of the FAA, the Court should apply “ordinary state-law principles that govern the 16 formation of contracts to decide whether the parties agreed to arbitrate a certain matter.” First Options 17 of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Circuit City Stores v. Adams, 279 F.3d 889, 892 18 (2002). Here, the parties agree the law of the state of California governs the determination of whether 19 the agreement is valid. (See generally Doc. 7-1 at 5-6; Doc. 8 at 3-5, 9-15) 20 Pursuant to California contract law, the elements for a viable contract are “(1) parties capable 21 of contracting; (2) their consent; (3) a lawful object; and (4) sufficient cause or consideration.” United 22 States ex rel. Oliver v. Parsons Co., 195 F.3d 457, 462 (9th Cir. 1999) (citing Cal. Civ. Code § 1550; 23 Marshall & Co. v. Weisel, 242 Cal. App. 2d 191, 196 (1966)). The Supreme Court explained, an 24 agreement to arbitrate may be “invalidated by generally applicable contract defenses, such as fraud, 25 duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their 26 meaning from the fact that an agreement to arbitrate is at issue.” AT&T Mobility LLC v. Concepcion, 27 563 U.S. 333, 339 (2011). 28 /// 1 1. Parties capable of contracting 2 There is no dispute that Diaz and Solorio were capable of entering into contracts with ABC. 3 Thus, this factor is satisfied. 4 2. Consent to arbitration 5 When evaluating a request to compel arbitration, the “threshold inquiry is whether the parties 6 agreed to arbitrate.” Van Ness Townhouses v. Mar Indus. Corp., 862 F.2d 754, 756 (9th Cir. 1988) 7 Generally, “a party cannot be required to submit to arbitration any dispute which he has not agreed so 8 to submit.” AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986). 9 Although technology “exposed courts to many new situations, it has not fundamentally changed the 10 principles of contract.” Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014), quoting 11 Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004). One principle that remains 12 unchanged is that “[m]utual manifestation of assent, whether by written or spoken word or by conduct, 13 is the touchstone of contract.” Id., quoting Specht v. Netscape Comm. Corp., 306 F.3d 17, 29 (2d Cir. 14 2002). 15 The contracting parties manifest mutual assent when a “specific offer is communicated to the 16 offeree, and an acceptance is subsequently communicated to the offeror.” Netbula, LLC v. BindView 17 Dev. Corp., 516 F. Supp. 2d 1137, 1155 (N.D. Cal. 2007), citing Russell v. Union Oil Co., 7 Cal. App. 18 3d 110, 114 (Ct. Cal. App. 1970). With the Internet and digital software, the Court must examine how 19 the terms of an agreement were presented to a user, and how a user indicated his or her consent to the 20 terms. Nguyen, 763 F.3d at 1176-77. When software or a website requires a user to take an affirmative 21 action to review the terms and indicate consent, courts have routinely determined the user indicated his 22 or her consent. See Nguyen, 763 F.3d at 1175-1176; see also Fteja v. Facebook, Inc., 841 F. Supp. 2d 23 829, 837-38 (S.D.N.Y. 2012) (consent may be found where the software “forces the user to actually 24 examine the terms before assenting”). 25 Plaintiffs argue that ABC failed to provide sufficient evidence that they assented to the 26 arbitration agreement. (Doc. 8 at 8) According to Plaintiffs, Solorio does not recall specifically what 27 documents she was required to sign when she began working for ABC, though she does not deny use 28 1 of the LMS system as part of the “onboarding” process.2 (Doc. 8-1 at 2, Solorio Decl. ¶ 4) However, 2 “nothing in the law requires a party to remember having contracted for the agreement to be valid.” 3 Pinto v. Squaw Valley Resort, LLC., 2018 WL 5630702 at *2 (E.D. Cal. 2018). Thus, the fact that an 4 individual “does not remember signing [an] Arbitration Agreement … is not sufficient.” See Garcia v. 5 NRI USA, LLC, 2018 WL 3702293 (C.D. Cal. Aug. 1, 2018). 6 In Garcia, the plaintiff “challenge[d] the validity of the Arbitration Agreement, claiming she 7 [did] not remember signing it.” Id., 2018 WL 3702293 at *2. However, the defendants presented 8 testimonial evidence to show that Garcia assented to the agreement, including: 9 • Each employee or prospective Decton employee, including Plaintiff, is required to create an online user account within the HR System, which in turn requires the 10 employee or prospective employee to create her own unique username and secure password. [Citation.] 11 • Plaintiff was required to use her unique username and password when she signed into 12 the HR System in order to apply for employment and to sign electronic forms and agreements. [Citation.] 13 • The only way for Plaintiff to access the Arbitration Agreement was by signing into 14 the online HR System with the confidential, unique username and password she created. [Citation.] 15 • Plaintiff affirmatively indicated through the HR System her agreement to abide by the 16 terms and conditions of the Arbitration Agreement and her electronic signature and the date was automatically inserted on the form. [Citation.] 17 18 Id. at *2-3 (citations omitted). The court determined, “Plaintiff's testimony that she does not remember 19 signing the Arbitration Agreement or accessing the online system is not sufficient to contradict [this] 20 evidence.” Id. at *3. 21 Similarly, Defendant presents evidence that Diaz and Solorio were “provided each… [with] a 22 unique username to be used to access the LMS and ABC’s intra-net,” and upon the initial login, “the 23 LMS system forced each of them to create a personal password.” (Doc. 7-2 at 3, Patel Decl. ¶¶ 8-9) 24 As part of the on-boarding process, Plaintiffs “were required to complete two ‘courses’ in the LMS.” 25 (Id., ¶ 11) The first course required Plaintiffs to input their unique usernames and passwords prior to 26 the display of “a PDF of the Arbitration Agreement for CA - ABC Phones of NC.” (Id.) Once the 27 28 2 Diaz does not provide any statements regarding whether he recalls use of the LMS system or the courses related 1 Arbitration Agreement PDF launched, Plaintiffs “had to back out… and launch the second course, 2 which informed them that “by clicking a button labeled ‘Acknowledge,’ Plaintiffs were agreeing to the 3 terms” of the agreement. (Id., ¶¶ 12-13) Only after both courses—including reviewing the Arbitration 4 Agreement in PDF form and the consent to terms— “was the Arbitration Agreement considered 5 completed.” (Id., ¶ 15) The evidence submitted by ABC—including the LMS Reports transcripts— 6 establish Diaz completed the arbitration courses on July 2, 2016. (Doc. 7-2 at 3-5, Patel Decl. ¶¶ 11-15, 7 18; Doc.7-7 [LMS Report for Diaz]). Solorio completed the arbitration courses on March 9, 2018. 8 (See Doc. 10-2 at 2-4, Patel Supp. Decl. ¶¶ 5, 7-13; Doc. 10-3 at 3-8; Doc. 7-9 at 27 [LMS Report for 9 Solorio]). Given the LMS courses displayed the terms and required consent, Defendant has established 10 that Plaintiffs gave their consent digitally to the Arbitration Agreement. Solorio’s statement that she 11 does not recall the agreement is not sufficient to dispute this evidence. See Pinto, 2018 WL 5630702 at 12 *2; Garcia, 2018 WL 3702293 at *2-3; see also Tagliabue v. J.C. Penney Corp., Inc., 2015 WL 13 8780577, at *2 (E.D. Cal. Dec. 15, 2015) (noting declaratory evidence may be sufficient to establish 14 electronic signatures). 15 3. Conclusion 16 Plaintiffs do not argue there was not a lawful object to the agreement or insufficient 17 consideration. Thus, the Court finds Solorio and Diaz assented to viable contracts under California 18 law. See Parsons Co., 195 F.3d at 462; Marshall & Co., 242 Cal. App. 2d at 196. 19 C. Enforceability of the Arbitration Agreements 20 Under California law, an arbitration agreement may only be invalidated for the same reasons as 21 other contracts. Cal. Code Civ. Proc. § 1281. For example, a contract “is unenforceable if it is both 22 procedurally and substantively unconscionable.” Davis v. O’Melveny & Myers, 485 F.3d 1066, 1072 23 (9th Cir. 2007)). Procedural unconscionability focuses on “oppression and surprise,” while substantive 24 unconscionability focuses upon “overly harsh or one-sided results.” Stirlen v. Supercuts, Inc., 51 25 Cal.App.4th 1519, 1532 (1997) (citations omitted). Both forms of unconscionability must be present in 26 order for a court to find a contract unenforceable, but it is not necessary that they be present in the same 27 degree. Davis, 485 F.3d at 1072; Stirlen, 51 Cal. App. 4th at 1532. Consequently, “[c]ourts apply a 28 sliding scale: ‘the more substantively oppressive the contract term, the less evidence of procedural 1 unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’” 2 Id. (quoting Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, 99 (2000)). 3 ABC notes that its arbitration agreement has been enforced in other actions in the Ninth Circuit. 4 (Doc. 7-1 at 7, citing Itkoff v. ABC Phones of North Carolina, No. 02043-JLS-JDE, 2018 WL 6242158 5 (C.D. Cal. Oct. 11, 2018); Akrami v. ABC Phones of North Carolina, No. 2:19-cv-02547-JLS-JDE, 6 2019 WL 6998776 (C.D. Cal. Nov. 27, 2019); and Aguilar v. ABC Phones of North Carolina, No. 2:19- 7 cv-02244-JLS-JDE (C.D. Cal. Nov. 27, 2019)). On the other hand, Plaintiffs argue the agreement is 8 procedurally and substantively unconscionable and should not be enforced. (Doc. 8 at 10-15) 9 1. Procedural unconscionability 10 Procedural unconscionability focuses on the “manner in which the contract was negotiated and 11 the circumstances of the party at the time.” Kinney v. United Healthcare Servs., Inc., 70 Cal. App. 4th 12 1322, 1329 (1999). The Court must consider both oppression and surprise “due to unequal bargaining 13 power.” Armendariz, 24 Cal. 4th at 114. Oppression derives from a lack of “real negotiation and an 14 absence of meaningful choice,” while surprise arises from the terms of the bargain being “hidden in a 15 prolix printed form,” or drafted in “fine-print terms.” Bruni v. Didion, 160 Cal. App. 4th 1272, 1288 16 (2008); Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899, 911 (2015). 17 a. Oppression 18 In evaluating the process in which the parties entered into an arbitration agreement, the Court 19 considers whether the contract was “imposed on employees as a condition of employment.” Soltani, 20 258 F.3d at 1042. In general, under California law, it is “procedurally unconscionable to require 21 employees, as a condition of employment, to waive their right to seek redress of grievance in a judicial 22 forum.” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003); see, e.g., Armendariz, 23 24 Cal.4th at 113 (explaining an arbitration agreement was procedurally unconscionable because it was 24 imposed on employees as a condition of employment, and there was no opportunity for them to 25 negotiate); Aral v. Earthlink, Inc., 134 Cal.App.4th 544, 557 (2005) (an arbitration clause on a “take it 26 or leave it” basis demonstrates “quintessential procedural unconscionability”); Martinez v. Master 27 Protection Corp., 118 Cal. App. 4th 107 (2004) (finding an agreement procedurally unconscionable 28 because it was a prerequisite of employment and the employee did not have an “opportunity to 1 negotiate or refuse to sign the arbitration agreement”); Flores v. Transamerica HomeFirst, Inc., 93 Cal. 2 App. 4th 846, 853 (Ct. App. 2001) (“A finding of a contract of adhesion is essentially a finding of 3 procedural unconscionability”). Plaintiffs contend the agreement was “an adhesion contract,” and they 4 “had the ability only to accept the provision and could not alter or modify it.” (Id. at 12-13). 5 Diaz was required to accept the terms of the arbitration agreement if he wanted to be eligible to 6 earn commissions once he agreed to continue employment with ABC after it acquired 4G Wireless. 7 (Doc. 7-2, Patel Decl. ¶¶ 5, 18) Thus, ABC indicated Diaz’s opportunities would be more limited if he 8 did not accept the terms. 9 Solorio was required to complete the arbitration courses as part of the “normal on-boarding 10 process.” (Doc. 7-1 at 2) Solorio faced the choice of accepting the arbitration agreement or seeking 11 employment elsewhere. As such, the company was in a stronger bargaining position than Plaintiffs. 12 See Armendariz, 24 Cal. 4th at 115 (explaining “the economic pressure exerted by employers on all but 13 the most sought-after employees may be particularly acute, for the arbitration agreement stands 14 between the employee and necessary employment, and few employees are in a position to refuse a job 15 because of an arbitration agreement”). Because the Arbitration Agreement was offered to both Diaz and 16 Solorio on a “take it or leave it” basis, this factor supports a conclusion that the agreement was 17 procedurally unconscionable. Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 893 (9th Cir. 2002). 18 b Surprise 19 Under California law, Plaintiffs cannot avoid the terms of a contract by asserting they did not— 20 or were unable to—read the terms of an arbitration agreement before signing it. See Marin Storage & 21 Trucking, Inc., 89 Cal.App.4th 1042, 1049 (2001) (“A party cannot avoid the terms of a contract on the 22 ground that he or she failed to read it before signing”). Plaintiffs were presented with the Arbitration 23 Agreement in PDF format in the first arbitration course in the LMS. Thus, Plaintiffs are unable to show 24 “surprise” because the terms were not hidden from view or drafted in “fine-print terms.” See Bruni, 25 160 Cal. App. 4th at 1288; Sanchez, 61 Cal. 4th at 911. 26 Because the agreement to submit to Arbitration Agreement was offered on a “take it or leave 27 it” basis, the agreement was procedurally unconscionable. Circuit City Stores, Inc. v. Adams, 279 F.3d 28 889, 893 (9th Cir. 2002). However, the lack of surprise supports a conclusion that the level of 1 procedural unconscionability is lessened. See Stirlen, 51 Cal.App.4th at 1532 (directing the court to 2 consider both “oppression and surprise”). 3 2. Substantive unconscionability 4 “Substantive unconscionability addresses the fairness of the term in dispute.” Szetela v. 5 Discover Bank, 97 Cal. App. 4th 1094, 1100 (Ct. App. 2002). While “parties are free to contract for 6 asymmetrical remedies and arbitration clauses of varying scope,” substantive unconscionability “limits 7 the extent to which a stronger party may, through a contract of adhesion, impose the arbitration forum 8 on the weaker party without accepting the forum for itself.” Ting v. AT&T, 319 F.3d 1126, 1149 (9th 9 Cir. 2003) (quoting Armendariz, 24 Cal. 4th at 118). The focus of the Court’s inquiry is whether an 10 agreement is one-sided and will have an overly harsh effect on the party not given an opportunity to 11 negotiate its terms. Flores, 93 Cal. App. 4th at 854. The Ninth Circuit instructs courts applying 12 California law to arbitration agreements “look beyond facial neutrality and examine the actual effects 13 of the challenged provision.” Ting, 319 F.3d at 1149. 14 In evaluating the substantive fairness of an arbitration agreement, the Court may consider 15 various terms of the arbitration agreement, including which claims are subject to arbitration, any 16 statute of limitations imposed, class action, fee and cost-splitting arrangements, remedies available, 17 and modification of the agreement. See Ingle, 328 F.3d at 1180; see also Sinclare v. Servicemaster 18 Co., 2007 WL 3407138 (E.D. Cal. Nov. 14, 2007) (“factors that may indicate unconscionability 19 include a forum selection clause of the employer’s choice and preventing full recovery of damages by 20 employees, while placing no such restriction on employers”) Here, Plaintiffs argue the agreement is 21 “unconscionable because it threatens employees with arbitral costs under some undefined “applicable 22 law” but provides no indication to these laypersons of what that actually means.” (Doc. 8 at 13) 23 a. Claims subject to arbitration 24 An arbitration agreement that “compels arbitration of the claims employees are most likely to 25 bring against [the employer] but exempts from arbitration the claims [the employer] is most likely to 26 bring against its employees” is substantively unconscionable. Ferguson v. Countrywide Credit Indus., 27 298 F.3d 778, 785 (2002) (quoting Mercuro v. Superior Court, 96 Cal. App. 4th 167, 175-76 (Ct. App. 28 1 2002). For example, in Ferguson and Mercuro,3 the courts found Countrywide’s arbitration agreement 2 was substantively unconscionable, because it excluded claims “for intellectual property violations, 3 unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential 4 information.” Ferguson, 298 F.3d at 785 Mercuro, 96 Cal. App. 4th at 176. 5 ABC’s Arbitration Agreement encompasses “any and all disputes or claims by and between 6 Employee on the one hand, and Company, its parent, subsidiary, and affiliated corporations and 7 entities, and each of their present and former officers, directors, agents, and employees …, on the other 8 hand.” (Doc. 7-4 at 2, ¶ 1) This includes “any and all claims arising from or relating to Employee’s 9 recruitment, hiring, and employment, the termination of that employment, and any claims arising post- 10 employment.” (Id.) The Arbitration Agreement indicates this includes claims for unfair business 11 practices; “for nonpayment or incorrect payment of compensation and benefits;” and “relating to the 12 misappropriation of trade secrets or confidential information, breach of duty, unfair competition, or 13 other similar claims.” (Id. at 2-3, ¶ 1(a)-(g)) However, the agreement “does not apply to claims for 14 worker’s compensation benefits or unemployment compensation benefits.” (Id. at 10) 15 Significantly, unlike in Armendariz, the agreement does not exempt ABC from arbitrating 16 disputes it has with the employee. Rather, the Plan notes that “any and all” disputes between the ABC 17 and its employees are subject to arbitration. (Doc. 7-4 at 2) Thus, it does not appear Defendant has 18 reserved for itself the ability to seek judicial intervention as to claims brought by it against employees 19 while requiring the employees to arbitrate claims against ABC. 20 i. Provisional remedies 21 ABC’s Arbitration Agreement indicates that “nothing in this Agreement prohibits either party 22 from seeking provisional remedies in court,” which include “temporary restraining orders, preliminary 23 injunctions, and other provisional remedies.” (Doc. 7-4 at 3, ¶ 2) Consequently, there is nothing that 24 precludes a party —whether a prospective, current or former employee—from seeking an injunction 25 against ABC. Thus, the provision is not substantively unconscionable. 26 ii. Individual claim requirement 27 3 Both cases involved the arbitration agreement of Countrywide Credit Industries. See Ferguson, 298 at 784 28 (“During oral argument, counsel for Countrywide conceded that the provisions of the arbitration agreement in the present 1 Plaintiffs do not challenge the provision requiring claims to be brought individually as 2 substantively unconscionable. (See Doc. 8 at 13-14) This Court previously observed that “an 3 arbitration agreement in which an employee agrees to arbitrate claims against an employer on an 4 individual − rather than on a class or collective − basis, is enforceable.” Guerrero v. Halliburton 5 Energy Services, Inc., 2018 WL 3615840 at *5 (citing Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 6 (2018)). Thus, the provision does not render the Arbitration Agreement substantively unconscionable. 7 iii. Conclusion 8 The totality of the claims subject to arbitration does not appear unconscionable. See Ferguson, 9 298 F.3d at 784, n.6 (explaining substantive unconscionability may be demonstrated when an employer 10 seeks to enforce “what is essentially a unilateral arbitration agreement” because the company excludes 11 claims it may bring against the employee from the agreement). 12 b. Filing fees and cost arrangement 13 When arbitration is a condition of employment, an employer “cannot generally require the 14 employee to bear any type of expense that the employee would not be required to bear . . . in court.” 15 Armendariz, 24 Cal. 4th at 110 (emphasis in original). A scheme that makes each party bear half the 16 costs of the arbitration “alone would render an arbitration agreement unenforceable.” Circuit City v. 17 Adams, 279 F.3d 889, 894 (9th Cir. 2002). For example, the Ninth Circuit found a cost-splitting 18 provision substantively unconscionable when the agreement forced the plaintiffs to pay the filing fee 19 up to a maximum of $125.00 and share costs equally after the first day of arbitration. Ferguson, 298 20 F.3d at 781; see also Ingle, 328 F.3d at 1177-78 (finding a provision unconscionable that stated “each 21 party shall pay one-half of the costs of arbitration following the issuance of the arbitration award”). 22 ABC’s Arbitration Agreement includes the following provision governing “Costs of 23 Arbitration and Recovery of Attorney Fees”: 24 The costs of arbitration, including the Arbitrator’s fees, will be allocated and paid in accordance with then-applicable law. If required by applicable law, Company will pay 25 all of the Arbitrator’s fees and the arbitration-related costs. If, however, under applicable law, Company is not required to pay all of the Arbitrator’s fees and the 26 arbitration-related costs, such fees and costs will be apportioned between the parties by the Arbitrator in accordance with applicable law, and, if applicable law is silent on this 27 issue, such arbitration fees and costs will be allocated between and paid equally by Company and Employee. 28 1 Except as otherwise required under applicable law, Company and Employee will each pay their own attorney fees and costs incurred in connection with the arbitration. 2 However, the Arbitrator will not have authority to award attorney fees and costs to the prevailing party unless a statute or contract at issue in the dispute authorizes the award 3 of attorney fees and costs to the prevailing party, in which case the Arbitrator will have the authority to make an award of attorney fees and costs to the same extent available 4 under applicable law. If there is a dispute regarding whether Company or Employee is the prevailing party in the arbitration, the Arbitrator will decide this issue. 5 (Doc. 7-4 at 5) 6 Plaintiffs argue this fees and costs “provision is substantively unconscionable because it 7 threatens employees with arbitral costs under some undefined ‘applicable law’ but provides no 8 indication to these laypersons of what that actually means.” (Doc. 8 at 13) Plaintiffs contend that 9 under the agreement, they “may be left to pay indeterminate arbitration fees unless (1) the arbitrator 10 decides under some unspecified body of law that Defendant is required to pay the arbitration fees; or 11 (2) Plaintiffs persuade the arbitrator to exercise unbounded discretion not to apportion any of the fees 12 to Plaintiffs.” (Id. at 14) Thus, Plaintiffs assert, “The fee provision here has the same deleterious 13 effect as the fee provision in Armendariz—employees faced with a vague and unknown risk of 14 substantial arbitration fees and costs will be dissuaded from bringing claims against Defendant to hold 15 it accountable for its violations of California law.” (Id., citing Armendariz, 24 Cal.4th at 111) 16 Defendant argues the provision is not unconscionable and “the plain language of Defendant’s 17 Arbitration Agreement does not require Plaintiffs to pay any costs that would violate the California 18 Supreme Court’s holding in Armendariz.” (Doc. 10 at 7) Defendant observes, “In essence, Plaintiff’s 19 argument is her contention that the provision is too confusing for “employee-plaintiffs.” But Plaintiffs 20 cite no authority that stands for the proposition that an arbitration agreement is substantively 21 unconscionable on this ground.” (Id.) Instead, Defendant notes that “a contract is enforceable against 22 a signatory even if he or she does not read the agreement or understand the provisions it contains.” 23 (Id., citing Nguyen v. Applied Medical Resources Corp., 4 Cal. App. 5th 232, 249 (2016); Gutierrez v. 24 Autowest, Inc., 114 Cal. App. 4th 77, 88 (2003)). 25 Significantly, the agreement indicates the arbitrator has “authority to make an award of 26 attorney fees and costs to the same extent available under applicable law.” (Doc. 7-4 at 5, ¶ 6) In 27 28 1 addition, costs are to “be allocated and paid in accordance with then-applicable law.” (Id.) Faced with 2 identical terms, the Central District observed: 3 In California, applicable law provides that “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process 4 cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” 5 Armendariz, 6 P.3d at 687. The cost provision in the Arbitration Agreement does not conflict with this requirement and is therefore not substantively unconscionable. 6 7 Itkoff v. ABC Phones of North Carolina, Inc., 2018 WL 6242158 at *8 (C.D. Cal. Oct. 11, 2018) 8 (citing, e.g. Jackson v. Rent-A-Ctr. W., Inc., 581 F.3d 912, 919 (9th Cir. 2009) [no substantive 9 unconscionability where “the agreement itself effectively states that the fee-sharing provision is 10 inapplicable if it is unconscionable under [applicable state] law”], rev'd on other grounds, 561 U.S. 63 11 (2010)). Because the fees and costs provision clearly is limited to applicable law, ABC employees are 12 not required to incur any type of costs they would otherwise avoid in court. 13 Moreover, as Defendant asserts, the “general rule [is] that one who assents to a contract is 14 bound by its provisions and cannot complain of unfamiliarity,” even when claiming difficulty with the 15 language. Madden v. Kaiser Found. Hospitals, 17 Cal. 3d 699, 710 (1976). Thus, Plaintiffs’ 16 understanding of the fees and costs provision—or lack thereof—does not render the Arbitration 17 Agreement substantively unconscionable. 18 c. Location of arbitration 19 A provision that requires the arbitration to occur in a location inconvenient to the plaintiffs may 20 be substantively unconscionable. A forum selection clause requiring arbitration in a distant forum is 21 unconscionable where it imposes significant hardships on the weaker party and has “no justification 22 other than as a means of maximizing an advantage.” Bolter v. Superior Court, 87 Cal. App. 4th 900, 23 910 (2001); see also Nagrampa v. Mailcoups, Inc., 469 F.3d 1257, 1289 (9th Cir. 2006) (finding a 24 provision designating Boston as the arbitral forum was unconscionable under California law because it 25 required arbitration “only a few miles from [the employer’s] headquarters, but three thousand miles 26 away from Nagrampa’s home); Pinedo v. Premium Tobacco Stores, Inc., 85 Cal. App. 4th 774, 781 27 (2000) (a provision requiring a Los Angeles plaintiff to arbitrate in Oakland was a factor showing 28 unconscionability of the agreement). Thus, courts have consistently determined clauses setting the 1 venue in a location inconvenient to an employee are substantively unconscionable. 2 The ABC Arbitration Agreement provides that “arbitration will take place at office of the 3 American Arbitration Association located within the county in which Employee is or was last 4 employed by Company at the time the arbitrable dispute or claim arose.” (Doc. 7-4 at 5, ¶ 4) If the 5 AAA did not have an office in that county, arbitration could occur “within the office of the American 6 Arbitration Association closest to the location where Employee is or was last employed at the time the 7 arbitrable dispute or claim arose.” (Id.) Finally, arbitration could occur at “any such other location to 8 which the parties and the American Arbitration Association might agree.” (Id.) This provision does 9 not impose significant hardship upon employees, and ABC does not receive an advantage from the 10 location. Thus, this provision is not substantively unconscionable. 11 d. Discovery 12 The Supreme Court recognized that arbitration typically involves limited discovery rights. 13 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 31 (1991). Parties to an arbitration agreement 14 are “permitted to agree to something less than the full panoply of discovery provided in Code of Civil 15 Procedure section 1283.05.” Armendariz, 24 Cal. 4th at 106 (emphasis added). For a discovery 16 provision to be unconscionable, it must be so limited as to “prove insufficient to allow [plaintiffs] a 17 fair opportunity to present their claims." Gilmer; 500 U.S. at 31; see also Armendariz, 24 Cal. 4th at 18 106 (holding plaintiffs “are entitled to discovery sufficient to adequately arbitrate their statutory 19 claims, including access to essential documents and witnesses”). Further, discovery provisions cannot 20 be one-sided. See Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 786 (9th Cir. 2002) 21 (finding the discovery provision one-sided because it only placed limits on the number of corporate 22 representatives that could be deposed, but no comparable limits for the plaintiff). 23 Under the terms of the agreement between ABC and Plaintiffs, the arbitrator must “allow 24 reasonable discovery to prepare for arbitration of any claims.” (Doc. 7-5 at 4) This includes, at a 25 minimum, discovery authorized by law and “permitted by the rules of American Arbitration 26 Association.” (Id.) Plaintiffs do not assert this provision is insufficient, and there is no evidence the 27 AAA rules fail to “provide for adequate discovery.” See Armendariz, 24 Cal. 4th 83 at 122. To the 28 contrary, courts have observed the AAA rules provide sufficient discovery. See, e.g., Lagatree v. Luce, 1 Forward, Hamilton & Scripps, 74 Cal.App.4th 1105, 1130 n. 21 (1999) (noting AAA rules provide 2 “[t]he arbitrator shall have the authority to order such discovery, by way of deposition, interrogatory, 3 document production, or otherwise, as the arbitrator considers necessary to a full and fair exploration 4 of the issues in dispute,” and the provision is “fair to claimants”); Roman v. Superior Court, 172 Cal. 5 App. 4th 1462, 1475-76 (2009) (finding no meaningful difference between AAA rules for discovery 6 and the discovery rules in the California Arbitration Act, which were sufficient in Armendariz). 7 Therefore, the discovery provision of the Arbitration Agreement is not substantively unconscionable. 8 e. Remedies 9 Remedy provisions that “fail[] to provide for all the types of relief that would otherwise be 10 available in court” by limiting an employee’s total and punitive damages are substantively 11 unconscionable. Adams, 279 F.3d at 895 (citing Cole v. Burns Int’l Sec. Servs.,105 F.3d 1465, 1482 12 (9th Cir. 1997)). The Arbitration Agreement provides the arbitrator has “the authority to award any 13 and all relief authorized by applicable law in connection with the asserted claims or disputes.” (Doc. 14 7-4 at 5) Therefore, the agreement does not improperly limit available remedies, and the provision is 15 not substantively unconscionable. 16 f. Unilateral amendment 17 When provisions of an arbitration agreement permit an employer to unilaterally amend or 18 terminate the agreement, even with written notice to employees, the provision is substantively 19 unconscionable. See, e.g., Ingle, 328 F.3d at 1179; Ramirez-Baker v. Beazer Homes, Inc., 636 F. Supp. 20 2d 1008, 1021-22 (E.D. Cal. 2008). The Ninth Circuit explained a provision granting an employer 21 unilateral power to amend or terminate an arbitration agreement, even with written notice to employees, 22 proscribes an employee’s ability negotiate and “embeds its adhesiveness.” Ingle, 328 F.3d at 1179. 23 The agreement provides it “may be modified only in a writing expressly referencing this 24 Agreement and issued by the Company’s President.” (Doc. 7-4 at 5, ¶ 8) ABC maintains the right to 25 amend or terminate the Arbitration Agreement, and “affords no such power to employees.” See Ingle, 26 328 F.3d at 1179. Consequently, the provision is substantively unconscionable. 27 g. Agreement as a whole 28 California law provides: “If the court as a matter of law finds the contract or any clause of the 1 contract to have been unconscionable at the time it was made the court may refuse to enforce the 2 contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may 3 so limit the application of any unconscionable clause as to avoid any unconscionable result.” Cal. Civ. 4 Code § 1670.5(a). Refusing to enforce an arbitration agreement is appropriate “only when an 5 agreement is permeated by unconscionability.” Armendariz, 24 Cal.4th 83 at 122 (internal quotation 6 marks omitted). Courts often look to whether the offending provisions “indicate a systematic effort to 7 impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum 8 that works to the employer’s advantage.” Id. at 124; see also Ferguson, 298 F.3d at 787-88. For 9 example, the Ninth Circuit found an arbitration agreement was “permeated by unconscionable 10 clauses” where there was a “lack of mutuality regarding the type of claims that must be arbitrated, the 11 fee provision, and the discovery provision.” Ferguson, 298 F.3d at 788. 12 In this agreement, the only provisions of the Program appearing substantively unconscionable 13 are those granting unilateral amendment and termination of the dispute resolution program. The 14 Arbitration Agreement is not permeated by unconscionability and does not establish an inferior forum 15 that works to ABC’s advantage. See Armendariz, 24 Cal. 4th 83 at 122. Significantly, it does not 16 appear the provisions regarding amendment and termination are relevant to Plaintiffs’ claims, and may 17 be severed from the agreement. See, e.g., Grabowski, 817 F. Supp. 2d 1159; Stacy, 2012 U.S. Dist. 18 LEXIS 150345, at * 31-32. Accordingly, the provisions governing amendment and termination may 19 be severed, and the arbitration agreement enforced because the terms, taken as a whole, do not appear 20 substantively unconscionable. 21 C. Scope of the Arbitration Agreement 22 To determine whether an arbitration agreement encompasses particular claims, the Court looks 23 to the plain language of the agreement, and “[i]n the absence of any express provision excluding a 24 particular grievance from arbitration . . . only the most forceful evidence of a purpose to exclude the 25 claim from arbitration can prevail.” United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 26 U.S. 574, 584-86 (1960). 27 Each of Plaintiffs’ claims arise out of their employment with Defendant, including violations 28 of the California Labor Code: (1) failure to compensate for all hours; (2) failure to pay overtime 1 wages; (3) failure to provide required meal and rest periods; (4) failure to timely reimburse for 2 necessary business expenditures; (5) failure to provide accurate, timely, and itemized wage. Plaintiffs 3 also state a claim for unfair business practices in violation of Cal. Bus. & Prof. Code § 17200. (See 4 Doc. 1-3 at 2, 16-27) Significantly, the Arbitration Agreement indicates it encompasses “all claims 5 arising from or relating to… 6 Claims for nonpayment or incorrect payment of compensation and benefits, including, but not limited to, claims for salary, wages, overtime, premium pay, commissions, 7 bonuses, severance, meal and rest periods, penalties, employee fringe benefits, stock options, and the like, whether such claims derive from alleged express or implied 8 contract or obligation, equity, the California Labor Code, the California Business and Professions Code the Fair Labor Standards Act, the Employee Retirement Income 9 Securities Act (ERISA), or any other federal, state, or municipal laws concerning wages, compensation, or employee benefits” 10 11 (Doc. 7-4 at 2, ¶ 1(d)) Thus, it is clear the agreement encompasses the wage and hour claims 12 presented by Plaintiffs in their complaint. 13 D. Entry of a Stay 14 The FAA provides, “If any suit or proceeding be brought in any of the courts of the United 15 States upon any issue referable to arbitration under an agreement in writing for such arbitration, the 16 court in which such suit is pending, upon being satisfied that the issue involved in such suit or 17 proceeding is referable to arbitration under such an agreement, shall on application of one of the 18 parties stay the trial of the action until such arbitration has been had in accordance with the terms of 19 the agreement . . .” 9 U.S.C § 3. 20 The Seventh and Tenth Circuits have adopted the view that a stay is the most reasonable 21 approach rather than a dismissal, explaining: “[I]t would be ‘wasteful’ and inconsistent ‘with 22 principles of judicial economy’ for a court which has jurisdiction of the parties to be required to 23 dismiss the parties, and to compel one of them to sue in another forum to enforce its award under § 9.” 24 Denver & Rio Grande W. R. Co. v. Union Pac. R. Co., 868 F. Supp. 1244, 1250 (D. Kan. 1994) aff'd, 25 119 F.3d 847 (10th Cir. 1997), quoting In re VMS Sec. Litig., 21 F.3d 139, 145 (7th Cir. 1994). 26 Therefore, the Court recommends the matter be stayed pending the completion of arbitration. 27 VI. Findings and Recommendations 28 Plaintiffs and ABC entered into valid arbitration agreements, which encompass the issues in 1 dispute. As a result, “there is a presumption of arbitrability” and ABC’s motion to compel arbitration 2 should not be denied. See AT&T Tech., Inc., 475 U.S. at 650. Further, the Court finds a stay of the 3 proceedings while arbitration is pending is appropriate. See 9 U.S.C. §§ 3, 4; see also Delgadillo v. 4 James McKaone Enters. Inc., 2012 WL 4027019 at *3 (E.D. Cal. Sept. 12, 2012) (if the court 5 “determines that an arbitration clause is enforceable, it has the discretion to either stay the case pending 6 arbitration, or to dismiss the case if all of the alleged claims are subject to arbitration”). Based upon the 7 foregoing, the Court RECOMMENDS: 8 1. The clause governing amendment be severed from the agreement; 9 2. Defendant’s motion to compel arbitration on an individual basis be GRANTED ; 10 3. The matter be STAYED to allow the completion of the arbitration; 11 4. Counsel be directed to file a joint status report within 120 days and every 120 days 12 thereafter. In addition, counsel be directed to file a joint status report within 10 days of 13 the determination by the arbitrator; and 14 5. The Court retain jurisdiction to confirm the arbitration award and enter judgment for 15 the purpose of enforcement. 16 These Findings and Recommendations are submitted to the United States District Judge 17 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and Rule 304 of the Local 18 Rules of Practice for the United States District Court, Eastern District of California. Within 14 days 19 after being served with these Findings and Recommendations, any party may file written objections 20 with the Court. Such a document should be captioned “Objections to Magistrate Judge’s Findings and 21 Recommendations.” The parties are advised that failure to file objections within the specified time may 22 waive the right to appeal the District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991); 23 Wilkerson v. Wheeler, 772 F.3d 834, 834 (9th Cir. 2014). 24 25 IT IS SO ORDERED. 26 Dated: February 3, 2021 /s/ Jennifer L. Thurston 27 UNITED STATES MAGISTRATE JUDGE 28