Velasquez v. Northgate Gonzalez Markets CA2/2 ( 2022 )

Filed 8/25/22 Velasquez v. Northgate Gonzalez Markets CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
YADIRA VELASQUEZ, B309831
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No.
v. 20STCV28061)
NORTHGATE GONZALEZ
MARKETS, INC. et al.,
Defendants and
Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Michael P. Linfield, Judge. Reversed with
directions.
Pearlman Brown & Wax, Corinne D. Spencer, and Antwoin
D. Wall for Defendants and Appellants.
Employee Justice Legal Group, Kaveh S. Elihu, and Sylvia
V. Panosian for Plaintiff and Respondent.
******
Yadira Velasquez (plaintiff) sued her former employer for a
variety of employment-related and other claims. The employer
moved to compel arbitration of the dispute pursuant to two
different arbitration agreements—one plaintiff indisputably
signed in 2015 and a second the employer claimed plaintiff signed
in 2018. The trial court denied the motion, finding that plaintiff
never signed the 2018 agreement and that the employer
expressed an intent to “replace” the 2015 agreement with the
2018 agreement. Although the trial court’s ruling denying to
compel arbitration based on the 2018 agreement is supported by
substantial evidence, the court erred in refusing to give effect to
the 2015 agreement. Accordingly, we reverse and remand with
instructions to order the matter to arbitration.
FACTS AND PROCEDURAL BACKGROUND
I. Facts
A. Hiring, employment, and termination
In July 2015, plaintiff was hired by Northgate Gonzalez
Markets, Inc. (Northgate) to work as a “cocina clerk” in its Bell,
California grocery store. In December 2018, plaintiff “severely
injured” her hand. She was fired the next month.
2
B. Arbitration agreements
1. The 2015 Agreement
On July 6, 2015, plaintiff was presented with a document
called “Mutual Binding Arbitration Agreement” (the 2015
Agreement) as part of her new employee intake. She signed the
2015 Agreement.
With regard to its scope, the 2015 Agreement requires both
plaintiff and Northgate to arbitrate “any claim, dispute, and/or
controversy . . . arising from, relating to, or having any
relationship with or connection whatsoever” to plaintiff’s
“employment” or “other association” with Northgate.
With regard to procedures during arbitration, the 2015
Agreement provides in pertinent part that (1) the arbitrator
“shall be a retired Judge, or otherwise qualified individual to
whom the parties mutually agree, and shall be subject to
disqualification on the same grounds as would apply to a judge of
such court,” and (2) the arbitrator “shall have the authority to
order such discovery, by way of deposition, interrogatory,
document production, or otherwise, as the arbitrator considers
necessary to a full and fair exploration of the issues in dispute,
consistent with the expedited nature of arbitration.”
2. The 2018 Agreement
In early 2018, Northgate circulated a revised arbitration
agreement (the 2018 Agreement) on a web-based platform where
employees could log in with unique credentials to access
documents related to their employment.
Plaintiff and Northgate dispute whether plaintiff
electronically acknowledged—and thereby agreed to—the 2018
Agreement. Northgate contends that plaintiff acknowledged the
2018 Agreement on the platform on March 28, 2018. Plaintiff, on
3
the other hand, contends she has no memory of seeing the 2018
Agreement or being instructed on how to access it on the
platform.1
II. Procedural Background
In July 2020, plaintiff sued Northgate as well as the
director of the store where she worked (collectively, defendants).2
In her complaint, plaintiff alleged 11 causes of action3; as relief,
1 On appeal, plaintiff submitted additional evidence with her
respondent’s brief that she claims shows she did not work on the
day the acknowledgment was time-stamped on the web-based
platform. We grant defendants’ motion to strike this improperly
filed evidence, and we deny plaintiff’s motion to augment filed in
an effort to circumvent defendants’ well-taken motion to strike.
2 Plaintiff also sued Northgate Gonzalez, Inc. We collectively
refer to Northgate Gonzalez Markets, Inc. and Northgate
Gonzalez, Inc. as “Northgate.”
3 Specifically, plaintiff alleged claims for (1) discrimination
on the basis of disability (namely, her injured hand), in violation
of California’s Fair Employment and Housing Act (Gov. Code, §
12940 et seq.) (FEHA), (2) harassment, in violation of FEHA, (3)
retaliation for reporting her injury, in violation of FEHA, (4)
failure to prevent discrimination, harassment and retaliation, in
violation of FEHA, (5) failure to provide reasonable
accommodation for her disability, in violation of FEHA, (6) failure
to engage in good faith interactive process, in violation of FEHA,
(7) wrongful termination in violation of public policy, (8)
declaratory judgment, (9) negligent supervision and retention,
(10) intentional infliction of emotional distress, and (11)
retaliation for disclosing violations of law, in violation of Labor
Code sections 1102.5 and 1102.6.
4
she sought compensatory damages, punitive damages, and
attorney fees.
Defendants moved to compel arbitration under the 2015
Agreement and the 2018 Agreement.4 After receiving additional
briefing as well as a mountain of evidentiary objections and a
last-minute supplemental declaration from Northgate, the trial
court held a hearing on the motion. Following the hearing, the
trial court denied the motion to compel. After excluding all of
defendants’ evidence authenticating plaintiff’s electronic
acknowledgment of the 2018 Agreement, the trial court ruled
that the 2018 Agreement was not a “valid arbitration
agreement.” However, citing a passage from the declaration of a
Northgate human resources employee that “[t]he 2018 . . .
Agreement replaced all prior agreements regarding the
arbitration of disputes,” the trial court ruled that the 2018
Agreement was “the relevant arbitration agreement” and, on that
basis, treated the 2015 Agreement as if it were a nullity.
Defendants filed a timely notice of appeal.
DISCUSSION
Defendants appeal the trial court’s order denying their
motion to compel arbitration under the 2015 Agreement and the
2018 Agreement. We generally review such motions for an abuse
of discretion, while reviewing any subsidiary legal questions de
novo and any findings of fact based on disputed facts for
substantial evidence. (Gamboa v. Northeast Community Clinic
(2021) 72 Cal.App.5th 158, 166 (Gamboa).)
4 Plaintiff does not challenge her supervisor’s ability to seek
to compel arbitration, as both agreements apply also to claims
against Northgate’s “employees.”
5
In denying the motion, the trial court relied on two
rationales: (1) the 2018 Agreement cannot be the basis for
arbitration because plaintiff never signed it, and (2) the 2015
Agreement cannot be the basis for arbitration because a human
resources employee indicated that the 2018 Agreement was
meant to “replace[]” the 2015 Agreement. As we explain below,
the trial court’s evidentiary rulings—which defendants largely do
not attack on appeal—leave the record in a state that provides
substantial evidence supporting the factual finding underlying its
first rationale, but the court’s second rationale is incorrect under
settled principles of contract law, such that the 2015 Agreement
remains enforceable. In the interest of judicial economy (and
because the parties litigated or had the opportunity to litigate the
question), we also decide that the 2015 Agreement is not
unconscionable. (See 24 Hour Fitness, Inc. v. Superior Court
(1998) 66 Cal.App.4th 1199, 1212 (24 Hour Fitness) [appellate
court may decide unconscionability issue, even if not decided by
trial court].)
I. Governing Principles
“The validity of an arbitration agreement in California is
determined by a . . . motion to compel arbitration.” (Juen v. Alain
Pinel Realtors, Inc. (2019) 32 Cal.App.5th 972, 977.) Such a
motion “‘is in essence a suit in equity to compel specific
performance of a contract.’” (Spear v. California State Auto.
Assn. (1992) 2 Cal.4th 1035, 1040.) Thus, the party seeking to
compel arbitration has the “burden of proving the existence of an
arbitration agreement.” (Pinnacle Museum Tower Assn. v.
Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223,
236 (Pinnacle).) In assessing whether a valid arbitration
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agreement exists, courts look to “‘[g]eneral principles of contract
law.’” (Ibid.)
II. Validity of the 2018 Agreement
As pertinent to this case, a party may manifest her consent
to an arbitration agreement (1) expressly, by signing the
agreement, or (2) implicitly, by continuing her employment while
knowing of the agreement and that it is a condition of her
continued employment. (Pinncale, supra, 55 Cal.4th at p. 236;
Schacter v. Citigroup, Inc. (2009) 47 Cal.4th 610, 619-620
(Schacter); DiGiacinto v. Ameriko-Omserve Corp. (1997) 59
Cal.App.4th 629, 637 (DiGiacinto); Craig v. Brown & Root, Inc.
(2000) 84 Cal.App.4th 416, 422 (Craig).)
The trial court’s factual finding that plaintiff did not sign
the 2018 Agreement is supported by substantial evidence.
Although defendants presented evidence that plaintiff signed the
2018 Agreement using an electronic acknowledgment process,
and although such evidence—if credited by the trial court—can
support a finding of consent (e.g., Tanis v. Southwest Airlines, Co.
(C.D. Cal., Mar. 11, 2019, No. 18-cv-2333-BAS-BGS) 2019 U.S.
Dist. Lexis 38876, *11-*16; Hose v. Washington Inventory Servs.
(C.D. Cal., Aug. 30, 2016, No. 14cv2869-WQH-WVG) 2016 U.S.
Dist. Lexis 188368, *39-*42), the trial court here excluded
defendants’ evidence regarding plaintiff’s electronic
acknowledgment. With one exception, defendants do not
challenge those evidentiary rulings on appeal. (Toho-Towa Co.,
Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th
1096, 1105 [when trial court excludes evidence and that ruling is
not attacked on appeal, “it should go without saying that the
excluded evidence . . . may not be used by th[e appellate] court to
reverse the order of the trial court”].)
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The only evidentiary ruling defendants challenge is the
trial court’s refusal to consider the “clearer” copy of the electronic
print out of the computer record showing the time and date that
plaintiff allegedly acknowledged the 2018 Agreement; defendants
submitted this “clearer” copy on the day before the hearing on
their motion and after the trial court issued its tentative ruling.
The trial court ruled that this late-filed evidence was untimely,
and that ruling was well within its discretion. (People v.
Williams (1997) 16 Cal.4th 153, 197 [trial court decision to admit
or not admit evidence reviewed for abuse of discretion]; In re
Marriage of Hoffmeister (1984) 161 Cal.App.3d 1163, 1171 [trial
court has power to exclude evidence belatedly filed]; Carbajal v.
CWPSC, Inc. (2016) 245 Cal.App.4th 227, 241 [“Whether to
accept new evidence with the reply papers is vested in the trial
court’s sound discretion, and we may reverse the trial court’s
decision only for a clear abuse of that discretion.”].) Thus, the
record is confined to plaintiff’s denial of ever electronically
acknowledging the 2018 Agreement, which certainly supports the
trial court’s finding that plaintiff did not consent to that
agreement.
Even if we were to ignore the trial court’s evidentiary
rulings and consider defendants’ evidence, that evidence at most
creates a conflict in the evidence regarding whether plaintiff
electronically signed the 2018 Agreement; such conflicting
evidence is insufficient to carry defendants’ burden, as the
parties bearing the burden of proof below, that the evidence
compels a finding in their favor as a matter of law. (Accord,
Trinity v. Life Ins. Co. of North America (2022) 78 Cal.App.5th
1111, 1123-1125 [during employer’s appeal of order denying
motion to compel arbitration, conflicting evidence regarding
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validity of employee’s electronic signature does not satisfy
employer’s burden of showing record “compel[s] a finding that
[the employee] agreed to arbitrate her claims”]; Bannister v.
Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 546-548
[same]; Fabian v. Renovate America, Inc. (2019) 42 Cal.App.5th
1062, 1067-1070 [same]; Ruiz v. Moss Bros. Auto Group, Inc.
(2014) 232 Cal.App.4th 836, 842-846 [same]; Smith v. Rent-A-
Center, Inc. (E.D. Cal., Mar. 21, 2019, No. 1:18-CV-
01351LJOJLT) 2019 U.S. Dist. Lexis 47369, *11-*17 [same].)
Although the trial court did not rely on this rationale,
defendants urge on appeal that plaintiff’s continued employment
with Northgate constitutes implied consent to the 2018
Agreement. Defendants are wrong. Consent is implied only if
the evidence shows that the employee knew of the arbitration
agreement and continued working anyway. (Schacter, supra, 47
Cal.4th at pp. 619-620; DiGiacinto, supra, 59 Cal.App.4th at p.
637; Craig, supra, 84 Cal.App.4th at p. 422.) As noted above, the
record here does not compel a finding as a matter of law that
plaintiff knew about the 2018 Agreement; thus, her continued
employment does not implicitly amount to consent.
III. Validity of the 2015 Agreement
In light of defendants’ evidence that plaintiff signed the
2015 Agreement, and plaintiff’s failure to dispute that evidence,
the trial court aptly noted that plaintiff does not “seem to dispute
the existence of the 2015 . . . Agreement.” Thus, the validity of
the 2015 Agreement in this case turns on two questions: (1) Did
Northgate’s proposal that plaintiff sign the 2018 Agreement—
even though it was rejected—extinguish the earlier contract
between the parties, and (2) Is the 2015 Agreement otherwise
9
invalid because it is voidable under the general contract-law
doctrine of unconscionability?5
A. Did the proposal of the 2018 Agreement
extinguish the 2015 Agreement?
The trial court found that the 2018 Agreement was not a
valid contract between the parties, and we have concluded that
that this finding is supported by substantial evidence. As a
result, the 2018 Agreement was at most a modification of the
2015 Agreement that was offered by Northgate but never
accepted by plaintiff. (Accord, Northam v. Gordon (1873) 46 Cal.
582, 588 [“no contract [is] created” when an “offer” is “not
5 Plaintiff’s counsel also argued in opposition to the motion to
compel arbitration filed in the trial court that the 2015
Agreement was no longer valid because it expired when plaintiff
was “re-employed” by Northgate. In response, Northgate
clarified that plaintiff had been continuously employed from her
date of hire in July 2015 until her date of termination in January
2019, and that the notation in her personnel records that she had
been terminated on January 19, 2017, and “re-hired” five days
later was a computer glitch. Indeed, Northgate submitted
evidence that plaintiff had worked and had received
compensation during the period of this glitch. Plaintiff did not
object to that evidence, did not counter that evidence, and did not
personally dispute in her declaration that she was continuously
employed by Northgate. What is more, by failing to raise it at the
hearing on the motion to compel arbitration and in the briefing
on appeal, plaintiff’s counsel abandoned the contention that
plaintiff was terminated in January 2017. We accordingly reject
plaintiff’s counsel’s attempt to revive this unsubstantiated
contention for the first time at oral argument on appeal. (People
v. Crow (1993) 6 Cal.4th 952, 960, fn. 7 [argument raised for first
time at oral argument; waived]; Kinney v. Vaccari (1980) 27
Cal.3d 348, 356, fn. 6 [same].)
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accepted”].) Thus, the question becomes: Did Northgate’s
unaccepted offer to modify the 2015 Agreement extinguish that
agreement?
The trial court answered “yes,” on the ground that
Northgate’s human resources employee stated, in her declaration
in support of defendants’ motion to compel arbitration, that “[t]he
2018 . . . Agreement replaced all prior agreements regarding the
arbitration of disputes.” Plaintiff urges us to follow the same
logic. We decline to do so. One party’s subjective belief about the
effect that a contract offer would have on prior contracts had the
offer been accepted is wholly irrelevant where, as here, the offer
was rejected. (Accord, Berman v. Bromberg (1997) 56
Cal.App.4th 936, 948 [“‘It is the objective intent, as evidenced by
the words of the contract, rather than the subjective intent of one
of the parties, that controls interpretation.’”]; Harris v. TAP
Worldwide, LLC (2016) 248 Cal.App.4th 373, 381 [‘“Mutual
assent is determined under an objective standard”’].) Thus,
Northgate’s statements about what the 2018 Agreement would
have done did not somehow nullify the 2015 Agreement.
Nor did Northgate unilaterally rescind the 2015
Agreement. A party can unilaterally rescind a prior agreement if
(1) the party has reserved the power, in a prior agreement, to
unilaterally modify the agreement and exercises that power to
extinguish the prior agreement (e.g., Martinez v. Scott Specialty
Gases, Inc. (2000) 83 Cal.App.4th 1236, 1246), or (2) the party
follows the statutory procedures for unilateral rescission, which
require that (a) the rescission be based on a statutorily
enumerated reason (Civ. Code, § 1689, subd. (b)), and (b) the
rescinding party give the other party notice and also offer to
restore all benefits it received by virtue of the rescinded contract
11
to the other party (Civ. Code, § 1691; Southern Ins. Co. v.
Workers’ Comp. Appeals Bd. (2017) 11 Cal.App.5th 961, 971;
Little v. Pullman (2013) 219 Cal.App.4th 558, 569; Medina v.
Safe-Guard Products, Internat., Inc. (2008) 164 Cal.App.4th 105,
112, fn. 8). The 2015 Agreement did not grant Northgate the
power to unilaterally modify the agreement. Nor did Northgate
satisfy the requirements to effect a unilateral rescission because
there is no showing of a statutorily enumerated basis for
rescission (namely, and under Civil Code section 1689, that the
agreement to be rescinded was agreed to by virtue of mistake,
duress, menace, fraud or undue influence in consenting to the
contract; that it lacked consideration or there was a failure of
consideration; that it was unlawful; or that it is against the
public interest), no notice of rescission, and no offer to restore
benefits to plaintiff.
Northgate argues that the 2018 Agreement effected a
novation. This argument ignores that a novation occurs when a
new contract is designed to extinguish a prior contract. (Civ.
Code, § 1532 [“Novation is made by contract . . . .”]; Alexander v.
Angel (1951) 37 Cal.2d 856, 860, 863 [novation requires a “new
agreement”]; Wells Fargo Bank v. Bank of America (1995) 32
Cal.App.4th 424, 431 [novation is “the substitution . . . by
agreement and with the intent to extinguish the prior
obligation”]; accord, Civ. Code, § 1531 [further defining
novation].) Here, there was at most an offer to create a new
contract, but no new contract was formed. Thus, the doctrine of
novation is irrelevant.
Consequently, the 2015 Agreement remains intact.
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B. Is the 2015 Agreement unconscionable?
Even though the 2015 Agreement has not been superseded,
plaintiff argued below that it nevertheless did not provide a basis
to compel arbitration because it is unconscionable.
Like any other contract, an agreement to arbitrate is
invalid if it is unconscionable. (OTO, L.L.C. v. Kho (2019) 8
Cal.5th 111, 125 (OTO); 9 U.S.C. § 2; Code Civ. Proc., § 1281; Civ.
Code, § 1670.5, subd. (a).) A party seeking to invalidate an
agreement to arbitrate as unconscionable bears the burden of
proving its unconscionability. (Pinnacle, supra, 55 Cal.4th at p.
236.) A contract is unconscionable if there is ‘“‘“‘an absence of
meaningful choice on the part of one of the parties together with
contract terms which are unreasonably favorable to the other
party.’”’”’ (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237,
1243 (Baltazar).) Consequently, the doctrine of unconscionability
requires proof of both procedural unconscionability and
substantive unconscionability; the more of one that exists, the
less of the other that must exist for a contract to be declared
invalid due to unconscionability. (Id. at pp. 1243-1244.)
Procedural unconscionability is assessed along a “‘spectrum’”: At
one end are “‘contracts that have been freely negotiated’”; at the
other are “‘[c]ontracts of adhesion that involve surprise or other
sharp practices.’” (Id. at p. 1244.) Substantive unconscionability
exists when a contract’s terms are themselves “‘“overly harsh”’” or
“‘“so one-sided as to “shock the conscience.’”’” (Ibid.) We
independently review a finding regarding whether an agreement
is unconscionable where, as here, the pertinent facts are
undisputed. (Serpa v. California Surety Investigations, Inc.
(2013) 215 Cal.App.4th 695, 702 (Serpa).)
13
The 2015 Agreement has a “low” degree of procedural
unconscionability. Here, plaintiff proffered two reasons for why
the 2015 Agreement is procedurally unconscionable: (1) it is a
contract of adhesion, and (2) plaintiff would not have signed it
had she been informed of the rights she was giving up. Together,
these reasons amount to no more than a low degree of procedural
unconscionability. First, adhesive arbitration agreements are
“typical[]” in the employment context (OTO, supra, 8 Cal.5th at p.
126) and thus have little impact on the unconscionability analysis
unless there is proof that the employee was “lied to, placed under
duress, or otherwise manipulated into signing the arbitration
agreement.” (Baltazar, supra, 62 Cal.4th at p. 1245; Serpa,
supra, 215 Cal.App.4th at p. 704.) Plaintiff made no showing of
deception or duress. Second, plaintiff’s buyer’s remorse after
consenting to the 2015 Agreement provides no basis to invalidate
the contract. (Madden v. Kaiser Foundation Hospitals (1976) 17
Cal.3d 699, 710 [“the general rule [is] that one who assents to a
contract is bound by its provisions and cannot complain of
unfamiliarity with the language of the instrument”]; cf. McCarn
v. Pacific Bell Directory (1992) 3 Cal.App.4th 173, 183 [failure to
read provision because felt hurried relevant to “surprise” element
of a claim of unconscionability].)
Because the 2015 Agreement comes with a relatively low
degree of procedural unconscionability, the agreement is
unconscionable only if it has a high degree of substantive
unconscionability due to overly harsh and one-sided terms.
(Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 982.) The
terms of this agreement do not meet this threshold. The
agreement binds both Northgate and the signatory employee to
arbitrate all of their claims; grants both sides equal rights to
14
discovery, a fair hearing, and a written award; and does not limit
their remedies. Such terms are not substantively
unconscionable. (E.g., Peng v. First Republic Bank (2013) 219
Cal.App.4th 1462, 1472-1473 [both parties’ claims subject to
arbitration; not unfair]; 24 Hour Fitness, supra, 66 Cal.App.4th
at p. 1213 [equal rights to discovery and open remedies; not
unfair].)
Plaintiff argued that the 2015 Agreement is substantively
unconscionable because (1) it does not use the word “neutral” to
describe the mutually agreed upon arbitrator; and (2) it does not
provide for the same scope of discovery as in a trial court forum.
These arguments are frivolous. First, it is clear that the 2015
Agreement imposes a requirement of neutrality without ever
using the word “neutral” because the arbitrator must “be a
retired Judge” or other “qualified individual” agreed to by the
parties and “subject to disqualification” based on Code of Civil
Procedure section 170 et seq. Section 170.1 of the Code of Civil
Procedure specifically requires the disqualification of a judge who
is not neutral. Second, it is well settled that adequate discovery
in arbitration does not mean unfettered discovery (Fitz v. NCR
Corp. (2004) 118 Cal.App.4th 702, 715; Mercuro v. Superior Court
(2002) 96 Cal.App.4th 167, 184) and that the parties may agree to
something less than the full panoply of discovery in California’s
Civil Discovery Act (Armendariz v. Foundation Health Psychare
Services, Inc. (2000) 24 Cal.4th 83, 104-106). Indeed, “[l]imited
discovery rights are the hallmark of arbitration” (Coast Plaza
Doctors Hospital v. Blue Cross of California (2000) 83
Cal.App.4th 677, 690), and the sine qua non of arbitration’s
“promise of quicker, more informal, and often cheaper [dispute]
15
resolutions for everyone involved” (Epic Systems Corp. v. Lewis
(2018) 138 S.Ct. 1612, 1621).
DISPOSITION
We reverse the order denying defendants’ motion to compel
and direct the trial court to enter a new and different order
compelling arbitration pursuant to the 2015 Agreement and
staying the litigation. The parties are to bear their own costs on
appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
______________________, J.
HOFFSTADT
We concur:
_________________________, P. J.
LUI
_________________________, J.
ASHMANN-GERST
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