Navas v. Fresh Venture Foods CA2/6 ( 2022 )

Filed 10/11/22 Navas v. Fresh Venture Foods CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
JUAN NAVAS et al., 2d Civ. No. B312888
(Super. Ct. No. 17CV02222)
Plaintiffs and Respondents, (Santa Barbara County)
v.
FRESH VENTURE FOODS,
LLC,
Defendant and Appellant.
Defendant Fresh Venture Foods, LLC (FVF) appeals an
order denying its motion to compel arbitration of a lawsuit filed
against it for wages and damages by plaintiffs Juan Navas,
Martha Herrera Lopez (Lopez), and Benjamin Hernandez Ramos
(Ramos). We conclude, among other things, that: 1) FVF did not
prove a valid and enforceable arbitration agreement with Lopez
and Ramos; 2) the arbitration agreement with Navas was
procedurally and substantively unconscionable; and 3) the trial
court did not err by alternatively ruling that if the agreement is
valid, enforcement of it would be stayed. (Code Civ. Proc.,
§ 1281.2, subd. (c).)1 We affirm.
FACTS
Navas, Lopez, Ramos, and other FVF employees filed a
class action lawsuit against FVF alleging, among other things,
that the company did not pay minimum wages and overtime
wages. They also alleged a Private Attorney Generals Act
(PAGA) cause of action (Lab. Code, §§ 2698, 2699) for civil
penalties “for themselves and other current and former
employees” for “labor law violations.”
In 2021, FVF filed a motion “to compel arbitration” of the
claims made by Navas, Lopez, and Ramos. FVF claimed they
signed arbitration agreements and agreed to arbitrate their
individual claims against FVF and “giv[e] up the right to
represent others in litigation or to participate in any class,
collective, or representative action in a court of law.”
Navas, Lopez, and Ramos claimed they did not recognize
the purported arbitration agreement or the signatures on them.
Moreover, the agreement presented by FVF contained
unconscionable provisions.
The trial court found FVF did not prove Lopez and Ramos
entered into arbitration agreements. The arbitration agreement
signed by Navas was procedurally and substantively
unconscionable. Among other things, it contained “an
acknowledgement that [a] waiver [of PAGA rights] occurred.”
The court alternatively found that even if the agreement is valid,
it had to be stayed. This is because a lawsuit Navas and others
filed against FVF involved common issues of law and fact
All further statutory references are to the Code of Civil
1
Procedure unless otherwise stated.
2.
resulting in the possibility of conflicting adjudications between an
arbitration and court action. (§ 1281.2, subd. (c).)
DISCUSSION
An Arbitration Agreement with Lopez and Ramos
There is a strong policy favoring arbitration as a “ ‘ “speedy
and relatively inexpensive means of dispute resolution.” ’ ”
(Adajar v. RWR Homes, Inc. (2008) 160 Cal.App.4th 563, 568.)
“[H]owever, arbitration cannot be compelled absent an
arbitration agreement.” (Id. at p. 569.)
“The petitioner bears the burden of proving” a “valid
arbitration agreement.” (Engalla v. Permanente Medical Group,
Inc. (1997) 15 Cal.4th 951, 972.) “An arbitration clause is a
contractual agreement.” (Salgado v. Carrows Restaurants, Inc.
(2019) 33 Cal.App.5th 356, 359.) “[A]n essential component to a
contract is the consent of the parties to the contract.” (Mitri v.
Arnel Management Co. (2007) 157 Cal.App.4th 1164, 1170.)
Here the trial court found: 1) FVF did not prove Lopez and
Ramos signed the agreements, and 2) “consent cannot be implied
from [the] circumstances.”
Ramos declared, “I do not recall seeing or signing the
document . . . . I do not recognize the signature on the document
as my own.” “When I began working at Fresh Venture, I was
asked to sign a bunch of paperwork very quickly. No one
explained it to me and I was never told I could take it home to
read.”
In her deposition Lopez said she did not recognize the
arbitration document. She never saw it before, and she did not
recognize the signature on the agreement as hers.
FVF contends Ramos and Lopez were evasive, not credible,
and the trial court did not credit the declaration from its witness.
3.
Credibility is decided exclusively by the trial court and we do not
weigh the evidence. (People v. Ochoa (1993) 6 Cal.4th 1199, 1206;
Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th
619, 630.) On a motion to compel arbitration, the “trial court sits
as a trier of fact.” (Engalla v. Permanente Medical Group, Inc.,
supra, 15 Cal.4th at p. 972.) If there are evidentiary conflicts,
“those in favor of the prevailing party . . . must be considered
established.’ ” (Chronometrics, Inc. v. Sysgen, Inc. (1980) 110
Cal.App.3d 597, 603.) The evidence is sufficient.
Whether Navas’s Arbitration Agreement
Was Unconscionable
“Courts may refuse to enforce unconscionable contracts and
this doctrine applies to arbitration agreements.” (Salgado v.
Carrows Restaurants, Inc., supra, 33 Cal.App.5th at p. 362.)
“ ‘ “Unconscionability has procedural and substantive aspects.” ’ ”
(Ibid.) “ ‘ “ ‘Both procedural and substantive unconscionability
must be present before a court can refuse to enforce an
arbitration provision based on unconscionability. . . .’ ” ’ ” (Ibid.)
“Substantive unconscionability relates to the fairness of the
agreement’s terms. Procedural unconscionability involves the
‘ “circumstances of contract negotiation and formation.” ’ ” (Ibid.)
Courts use a sliding scale. “In other words, the 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.” (Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83,
114.) Our review is de novo. (Fitz v. NCR Corp. (2004) 118
Cal.App.4th 702, 711.)
4.
Procedural Unconscionability
The trial court found that “Navas testified that he
understood that if he did not initial the arbitration document, he
would not have been hired.” It found “the ‘take it or leave it’
basis renders the Agreement procedurally unconscionable.”
Navas testified he did not “agree to the content of” the
agreement, but he was told “it’s a requirement.”
An agreement “imposed on employees as a condition of
employment” with “no opportunity to negotiate” is an “adhesive”
contract which may be procedurally unconscionable.
(Armendariz v. Foundation Health Psychcare Services, Inc.,
supra, 24 Cal.4th at p. 115.) “Private arbitration” may “ ‘become
an instrument of injustice imposed on a “take it or leave it”
basis.’ ” (Ibid.) As Navas notes, the facts show “there was an
absence of real negotiation or meaningful choice” for Navas. FVF
used its superior bargaining power to draft an agreement with
provisions favorable for itself and gave it to him on a “take it or
leave it basis.” (Ibid.) This supports the finding of procedural
unconscionability. (McManus v. CIBC World Markets Corp.
(2003) 109 Cal.App.4th 76, 101.)
But procedural unconscionability alone is not sufficient to
find the agreement is unenforceable. (Salgado v. Carrows
Restaurants, Inc., supra, 33 Cal.App.5th at p. 362.) There must
also be substantive unconscionability. (Ibid.) With a high degree
of procedural unconscionability, “even a relatively low degree of
substantive unconscionability may suffice to render the
agreement unenforceable.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th
111, 130.)
5.
Substantive Unconscionability
The unconscionability doctrine ensures that contracts that
contain terms that are “overly harsh,” “unduly oppressive,” or are
“ ‘ “ ‘so one-sided as to “shock the conscience” ’ ” ’ ” are not
enforced. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237,
1244.)
Absence of Discovery Rights
Navas claims the arbitration agreement is unconscionable
because it did not mention discovery rights.
But the absence of such a provision does not make it
unconscionable because the right to discovery is guaranteed by
section 1283.05, subdivision (a), which provides, in relevant part,
“ [T]he parties to the arbitration shall have the right to take
depositions and obtain discovery . . . .” An employer who agrees
to arbitrate claims impliedly “consent[s]” to a procedure that
allows for discovery. (Armendariz v. Foundation Health
Psychcare Services, Inc., supra, 24 Cal.4th at p. 106; Lane v.
Francis Capital Management LLC (2014) 224 Cal.App.4th 676,
693.)
PAGA Rights
Navas claims the arbitration agreement was unenforceable
because it “requires employees to renounce . . . their . . . right to
bring a PAGA action,” and such a waiver makes the agreement
substantively unconscionable.
Under PAGA, an “aggrieved employee” may file a civil
action against an employer for “a civil penalty” for violations of
the Labor Code “on behalf of himself or herself and other current
or former employees.” (Lab. Code, §§ 2698, 2699, subd. (a), italics
added.)
6.
The arbitration agreement provides, in relevant part,
“There will be no right or authority for any dispute to be brought,
heard, or arbitrated as a representative action under the Private
Attorney General Act (PAGA) of California . . . .” (Italics added.)
“I will be giving up the right to represent others in litigation or to
participate in any class or representative action in a court of law.”
(Italics added.) That constitutes FVF’s and the employee’s
agreement relating to PAGA. It only includes the waiver of the
right to bring a representative PAGA action. It does not involve a
waiver of the right to bring an individual PAGA action.
But later in the agreement there is a separate unilateral
provision that provides, “Fresh Venture Foods reserves the right”
to enforce “the Waiver of Individuals to Self-Representation in
Trials (Private Attorney General Waiver).” (Italics added.)
California courts have held employers may not force
employees to waive their right to bring a PAGA action. (Juarez v.
Wash Depot Holdings, Inc. (2018) 24 Cal.App.5th 1197, 1203;
Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 871.) PAGA
lawsuits include: 1) individual PAGA actions where the
employee seeks damages for violations committed against the
individual employee, and 2) “representative” actions where an
employee seeks damages because of the employer’s PAGA
violations committed against a group of employees.
Our Supreme Court held “[w]here, as here, an employment
agreement compels the waiver of representative claims under the
PAGA, it is contrary to public policy and unenforceable as a
matter of state law.” (Iskanian v. CLS Transportation Los
Angeles, LLC (2014) 59 Cal.4th 348, 384, italics added.)
But in Viking River Cruises, Inc. v. Moriana (June 15,
2022, No. 20-1573) _ U.S. _ [213 L.Ed.2d 179, 200], the United
7.
States Supreme Court held “the FAA preempts the rule of
Iskanian insofar as it precludes division of PAGA actions into
individual and non-individual claims through an agreement to
arbitrate.” The court said, “Viking was entitled to enforce the
agreement insofar as it mandated arbitration of Moriana’s
individual PAGA claim. The lower courts refused to do so based
on the rule that PAGA actions cannot be divided into individual
and non-individual claims. Under our holding, that rule is
preempted . . . .” (Id. at p. _, italics added [Ibid.].)
Consequently, the Iskanian rule requiring mandatory
joinder of individual and representative PAGA claims is
preempted. The employer and employee, however, may agree to
arbitrate an individual PAGA claim. But in this agreement the
employee is not even given that choice.
Although Iskanian is partly preempted, the standards for
obtaining individual PAGA waivers under state law remain in
effect. Here FVF unilaterally declared a right to forfeit an
employee’s individual PAGA claim without first: 1) explaining to
the Spanish-speaking employee what is an individual PAGA
claim, and 2) obtaining the employee’s consent to waive the right
to file an individual PAGA claim in court. The trial court
correctly found the agreement improperly contains “an
acknowledgement” that “the right to self-representation” in PAGA
cases had been waived, and it does so prematurely, without an
employee’s consent, and as part of an automatic forfeiture before
the employment relationship is established.
An employee with an individual PAGA claim “is free to
forgo the option of pursuing a PAGA action. But it is against
public policy for an employment agreement to deprive employees of
this option altogether, before any dispute arises.” (Iskanian v.
8.
CLS Transportation Los Angeles, LLC, supra, 59 Cal.4th at
p. 387, italics added.)
The Self-Representation Provision
The trial court also found the provision providing a “Waiver
of Individuals to Self-Representation in Trials” was ambiguous
and invalid. Where an arbitration agreement is “uncertain
regarding a material term,” it “cannot be enforced.” (Lindsay v.
Lewandowski (2006) 139 Cal.App.4th 1618, 1623; see also Mitri v.
Arnel Management Co., supra, 157 Cal.App.4th at p. 1173.)
Navas claimed this provision meant employees had to hire
counsel at arbitrations and they could not afford it. FVF claims it
did not intend that result. But this explanation was not included
in the agreement, the provision was conclusory and open ended,
and FVF has not shown error. “[W]here, as here, the written
agreement has been prepared entirely by the employer, . . . any
ambiguities must be construed against the drafting employer.”
(Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 248.)
One-Sided Provisions Against Employee Rights
The arbitration agreement’s terms are primarily one-sided
in favor of FVF. The agreement provides it “will be valid for all
legal claims between [FVF] and [the employee].” But it then
specifically describes the type of “Covered Claims” that fall within
arbitration. They include disputes involving: 1) “the termination
of [the employee’s] employment from Fresh Venture Foods”; 2)
employee claims about “wage and hour laws (federal, state, and
local)”; 3) employee claims about “compensation”; 4) “breaks and
rest periods”; 5) “training”; 6) employee challenges to
“termination”; 7) employee claims of “discrimination”; 8)
employee claims of “harassment”; and 9) “claims arising under
state and federal statutes and/or common law relating to these or
9.
similar matters.” (Italics added.) The agreement also provides,
“There will be no right or authority under this Agreement for any
dispute to be brought, heard, or arbitrated as a class or collective
action.”
But these are the type of claims that only employees bring
against employers. Arbitration agreements that primarily
require arbitration of the type of claims only employees bring
against employers are substantively unconscionable as being
“one-sided and harsh.” (Zullo v. Superior Court (2011) 197
Cal.App.4th 477, 486; Stirlen v. Supercuts, Inc. (1997) 51
Cal.App.4th 1519, 1540-1541.) They are unfair to employees
where, for example, “[t]he mandatory arbitration requirement
can only realistically be seen as applying primarily . . . to claims
arising out of the termination of employment, which are virtually
certain to be filed against, not by, [the employer].” (Stirlen, at pp.
1540-1541, italics added.) In such cases the agreement is not
neutral or mutual. (Ibid.)
The agreement also provides that it shall not “excuse [the
employee] from utilizing the internal complaint procedures of
[FVF].” But because those procedures are not described, the
employee does not know what he or she is agreeing to. (OTO,
L.L.C. v. Kho, supra, 8 Cal.5th at p. 136.) The agreement thus
funnels employee claims into both arbitration and FVF’s own
complaint system without requiring FVF to follow any defined
procedure to limit its discretion. It creates a “one-sided” shield
exclusively for FVF’s benefit. (Zullo v. Superior Court, supra, 197
Cal.App.4th at p. 486.)
FVF claims the trial court erred by not severing these
provisions and enforcing the remainder of the agreement. But
whether to sever is within the trial court’s discretion. (Magno v.
10.
The College Network, Inc. (2016) 1 Cal.App.5th 277, 292.) Given
the number of challenged provisions, the court could reasonably
find severance was not an acceptable option.
But even so, the trial court alternatively found that even if
the agreement is valid, its enforcement would have to be stayed
because of the lawsuit Navas filed against FVF.
Staying Enforcement of the Arbitration Agreement
The trial court stayed the enforcement of Navas’s
arbitration agreement based on section 1281.2, subdivision (c).
That provision gives the court the authority to decline to order
arbitration in cases where, “[a] party to the arbitration
agreement is also a party to a pending court action or special
proceeding with a third party, arising out of the same transaction
or series of related transactions and there is a possibility of
conflicting rulings on a common issue of law or fact.” (Ibid.)
The trial court found that Navas, Lopez, and Ramos “are
the plaintiffs, along with three others” and they “each allege
wage and hour violations as well as PAGA claims” against FVF.
Their claims “arise out of the same transaction or series of related
transactions” with the claims of the other plaintiffs who are not
subject to arbitration. All six plaintiffs worked for FVF “within
the last four years of the filing of the complaint, likely at
overlapping times. “While damages may vary . . . , liability
should not, and that is where there is a potential of conflicting
rulings.”
FVF contends the trial court erred by applying section
1281.2, subdivision (c) because this provision is not authorized by
the Federal Arbitration Act (FAA). FVF notes the agreement
provides, “This arbitration Agreement is governed by the [FAA].”
11.
This means the validity of the agreement’s terms is decided
under FAA standards.
But as the trial court correctly noted, the parties did not
agree that the procedures involving arbitration would be
exclusively determined by federal law. The arbitration
agreement refers to California arbitration law procedures. For
example, the parties agreed that disputes about who would be the
arbitrator would be decided under section 1281.6. This
incorporates the California arbitration law procedures into this
agreement.
FVF cites Rodriguez v. American Technologies, Inc. (2006)
136 Cal.App.4th 1110, and it notes there the court ruled that
under the FAA, unlike California law, the court must stay the
court proceeding and compel the arbitration. (Id. at p. 1122.)
But in Rodriguez, the court ruled that federal law applied
because there was no “contract provision suggesting the parties
intended to incorporate California arbitration law.” (Ibid.) Here
the parties expressly incorporated California arbitration law.
Moreover, in Cronus Investments, Inc. v. Concierge Services
(2005) 35 Cal.4th 376, 380, our Supreme Court held that the FAA
“does not preempt the application of section 1281.2, subdivision
(c).” This section “is part of California’s statutory scheme
designed to enforce the parties’ arbitration agreements, as the
FAA requires.” (Id. at p. 393.) “[I]t does not conflict with the
applicable provisions of the FAA and does not undermine or
frustrate the FAA’s substantive policy favoring arbitration.” (Id.
at p. 394.) FVF has not shown the trial court erred.
12.
DISPOSITION
The judgment (order) is affirmed. Costs on appeal are
awarded in favor of respondents.
NOT TO BE PUBLISHED.
GILBERT, P. J.
We concur:
YEGAN, J.
PERREN, J.*
*Retired Associate Justice of the Court of Appeal, Second
Appellate District, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
13.
Timothy J. Staffel, Judge
Superior Court County of Santa Barbara
______________________________
Mullen & Henzell, Rafael Gonzalez and Brian T. Daly for
Defendant and Appellant Fresh Venture Foods.
Mallison & Martinez, Stan S. Mallison, Hector R. Martinez
and Heather M. Hamilton for Plaintiffs and Respondents Juan
Navas, Martha Herrera Lopez, and Benjamin Hernandez Ramos.
14.