Herrera v. Behavioral Systems Southwest CA4/3 ( 2023 )

Filed 6/27/23 Herrera v. Behavioral Systems Southwest CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
ARACELI HERRERA,
Plaintiff and Respondent, G061702
v. (Super. Ct. No. 30-2022-01243365)
BEHAVIORAL SYSTEMS OPINION
SOUTHWEST, INC.,
Defendant and Appellant.
Appeal from an order of the Superior Court of Orange County, Randall J.
Sherman, Judge. Affirmed. Motion to Take Additional Evidence. Denied.
Workwise Law, George P. Albutt and Renee N. Noy, for Defendant and
Appellant.
Lawyers for Justice, Edwin Aiwazian, Arby Aiwazian, Elizabeth M.
Parker-Fawley and Won Christina Chang, for Plaintiff and Respondent.
* * *
After Araceli Herrera filed a class action complaint against her former
employer Behavioral Systems Southwest, Inc. (BSS or appellant), BSS filed a motion to
compel arbitration on an individual basis. The trial court denied the motion, after
determining the arbitration agreement was unconscionable because it was a contract of
adhesion and lacked mutuality. On appeal, BSS contends the court erred in determining
the agreement lacked mutuality. As discussed below, we conclude there was a lack of
mutuality, and accordingly, we affirm.
I
FACTUAL AND PROCEDURAL BACKGROUND
A. Motion to Compel Arbitration
On January 28, 2022, Herrera filed a class action complaint for restitution,
alleging a single cause of action for violation of the Business and Professions Code
section 17200 et seq. The complaint did not reference any arbitration agreement.
On May 3, 2022, BSS filed its motion to compel arbitration on an
individual basis, to dismiss the class claims, and to stay the action (Arbitration Motion).
In the motion, BSS alleged that its Employee Handbook contained a mandatory
arbitration agreement. On June 26, 2017, Herrera signed a statement affirming she had
‘“read the rules and regulations set forth in the BSS Employee Handbook,”’ and ‘“agreed
to abide by these rules during [her] employment.”’ BSS further alleged that after her first
week of training, on July 3, 2017, Herrera signed the arbitration agreement in the
handbook. Three weeks later, on July 26, 2017, Herrera signed another statement again
affirming she had read and agreed to the rules in the handbook.
The arbitration agreement which Herrera purportedly signed on July 3,
2017, was attached in a supporting declaration. The three-page document, which appears
to be an excerpt from the Employee Handbook covering pages 85 through 87, states on
the first page that “Signed acknowledgement of the following conditions is required for
employment with BSS.” Twelve conditions are then listed over the following three
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pages, and the last condition is headlined in boldfaced text “Binding Arbitration.” The
arbitration agreement then states as follows:
“I agree to Binding Arbitration in accordance with the arbitration rules of
the American Arbitration Association for all claims, actions, disputes and other matters in
question arising out of my employment with BSS, including but not limited to, claims or
actions for discrimination, sexual harassment, wages, benefits, wrongful termination, and
defamation.
“Any decision by an arbitrator shall be final, binding, and non-appealable
and the arbitrator [sic] shall be enforceable as any judgment may be rendered upon it in
accordance with applicable law of any court having jurisdiction.
“This mandatory arbitration agreement applies to the permissible extend
[sic] of the law and is not intended to compel arbitration where it is unlawful.”
Underneath the arbitration agreement is an acknowledgment statement.
Immediately under the acknowledgement are the signatures of the employee and a
witness.
B. Opposition to Arbitration Motion
Herrera opposed the Arbitration Motion, arguing that BSS failed to meet its
burden of proving the existence of an agreement to arbitrate, and that the purported
arbitration agreement was unconscionable and cannot be enforced. Herrera disputed
BSS’s allegation that she signed the arbitration agreement and stated she does not recall
signing it.
Herrera also argued the arbitration agreement was procedurally and
substantively unconscionable. Specifically, there was a high degree of procedural
unconscionability because it was a contract of adhesion, the arbitration agreement was
“in a packet of documents at least 99 pages long,” and the referenced arbitration rules
were not attached. There was substantive unconscionability because of the lack of
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mutuality. Specifically, the “I agree” language binds only Herrera to the arbitration, not
appellant.
In a supporting declaration, Herrera stated she was “surprised” to learn
appellant was claiming she had signed an agreement to arbitrate claims. Herrera further
stated that when she was hired, “the person providing the [new hire] paperwork to me did
not explain the paperwork and required that the signed paperwork be returned as soon as
possible. . . . The content of the document was not presented to me as a document that I
could review in my own time, or that I could discuss with an attorney. I could not
negotiate or change the terms or language contained in the document. I also was not
given a copy of any arbitration rules at that time.”
C. Reply
In reply, BSS asserted that it had proved the existence of an arbitration
agreement because Herrera’s sworn declaration merely stated she was surprised to learn
she had signed an arbitration agreement, not that she did not recall signing it.
Additionally, BSS argued the attached declaration of Shaney Gray sufficiently showed,
by a preponderance of evidence, that Herrera signed the arbitration agreement. Gray was
the person who signed as a witness on the arbitration agreement. In Gray’s declaration,
she attested that she was “personally familiar with Plaintiff’s signature.” She further
stated that on July 3, 2017, “[o]n being provided with [the arbitration agreement] initialed
and signed by Plaintiff, I in turn signed and dated it that same day.”
BSS also argued the arbitration agreement was not unconscionable.
Acknowledging the adhesive nature of the contract, BSS contended the procedural
unconscionability was minimal. However, BSS argued there was no substantive
unconscionability. Relying on Roman v. Superior Court (2009) 172 Cal.App.4th 1462(Roman), BSS argued the “I agree” language did not establish the lack of mutuality
because the “all . . . disputes” language binds both BSS and Herrera to arbitration.
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E. Order Denying Arbitration Motion
On July 22, 2022, the trial court denied the Arbitration Motion. It found
that “Defendant [BSS] has shown the existence of an arbitration agreement signed by
plaintiff [Herrera], but not by defendant.” The court explained: “On June 26, 2017,
plaintiff signed a statement affirming that she had ‘read the rules and regulations set forth
in the BSS Employee Handbook’ and agreed to ‘abide by these rules during my
employment’. (However, defendant did not provide the court with the actual handbook
that allegedly contains the arbitration agreement to show that plaintiff in fact received the
arbitration agreement on June 26, 2017.) On July 3, 2017, after plaintiff’s week of
training, plaintiff signed the arbitration agreement in the employee handbook. Around
July 26, 2017, plaintiff signed another statement, again affirming that she had read the
rules in the employee handbook and that she agreed to abide by them. (However, this
statement does not reference any arbitration agreement, but only the employee handbook
which was not provided as evidence.)”
The trial court, however, concluded that the arbitration agreement was
unenforceable because it was unconscionable. It found “[p]rocedural unconscionability
is present here based on the arbitration agreement being a contract of adhesion.” It found
substantive unconscionability based on lack of mutuality. The court determined that
“Defendant has not shown that it agreed to arbitrate any or all disputes with plaintiff, but
only that plaintiff so agreed.” The court distinguished Roman, supra, 172 Cal.App.4th
1462, based on the differing language in the respective arbitration agreements and the
fact that the instant arbitration agreement was “on page 87 of a document package.”
II
DISCUSSION
A. Applicable Law
Code of Civil Procedure section 1281.2 requires the trial court to order
arbitration of a controversy “[o]n petition of a party to an arbitration agreement alleging
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the existence of a written agreement to arbitrate a controversy and that a party to the
agreement refuses to arbitrate that controversy . . . if it determines that an agreement to
arbitrate the controversy exists.” “The party seeking arbitration bears the burden of
proving the existence of an arbitration agreement, and the party opposing arbitration
bears the burden of proving any defense, such as unconscionability.” (Pinnacle Museum
Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236
(Pinnacle).) “Absent conflicting evidence, we review de novo the trial court’s
interpretation of an arbitration agreement, including the determination whether it is
enforceable on unconscionability grounds.” (Trinity v. Life Ins. Co. of North America
(2022) 78 Cal.App.5th 1111, 1120.) “Where the court’s ruling is based on a finding of
fact, we review the decision for substantial evidence. [Citations.] Under this deferential
standard, “‘[a]ll factual matters will be viewed most favorably to the prevailing party
[citations] and in support of the judgment.”’ [Citations.]” (Id. at p. 1121.)
B. The Trial Court Did Not Err in Finding Appellant Established the Existence of An
Arbitration Agreement
The trial court found that appellant had shown the existence of an
arbitration agreement signed by respondent, but not by appellant. Herrera interprets the
court’s finding to mean that appellant failed to meet its threshold burden of proving the
existence of an arbitration agreement between the parties. We disagree because we read
the court’s finding to mean that appellant had met its initial burden to improve the
existence of an arbitration agreement. In any event, an arbitration agreement generally is
enforceable against a signatory, even if not signed by the party seeking arbitration. (See
Serafin v. Balco Properties (2015) 235 Cal.App.4th 165, 176 [“the writing memorializing
an arbitration agreement need not be signed by both parties in order to be upheld as a
binding arbitration agreement”]; see also Pinnacle, supra, 55 Cal.4th at p. 236 [“A signed
[arbitration] agreement is not necessary, however, and a party’s acceptance may be
implied in fact [citation] or be effectuated by delegated consent [citation].”].)
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C. The Trial Court Did Not Err In Determining Respondent Proved The Arbitration
Agreement Was Unconscionable
Herrera has the burden of proving unconscionability. “Unconscionability
consists of both procedural and substantive elements. The procedural element addresses
the circumstances of contract negotiation and formation, focusing on oppression or
surprise due to unequal bargaining power.” (Pinnacle, supra, 55 Cal.4th at p. 246.)
“Substantive unconscionability pertains to the fairness of an agreement's actual terms and
to assessments of whether they are overly harsh or one-sided.” (Ibid.) An example of
substantive unconscionability is lack of mutuality, without at least some reasonable
justification for such one-sidedness based on “business realities.” (Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 117.) “Both procedural
unconscionability and substantive unconscionability must be shown, but ‘they need not
be present in the same degree’ and are evaluated on “‘a sliding scale. ”’ [Citation.]
‘[T]he more substantively oppressive the contract term, the less evidence of procedural
unconscionability is required to come to the conclusion that the term is unenforceable,
and vice versa.’ [Citation.]” (Pinnacle at p. 247.)
Appellant does not challenge the trial court’s determination that there was
procedural unconscionability because of the adhesive nature of the arbitration agreement.
Given that “the paramount consideration in assessing conscionability is mutuality,”
(Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 657), even if the
degree of procedural unconscionability is low, the lack of mutuality would still render the
arbitration agreement unenforceable. We thus turn to whether the arbitration agreement
lacked mutuality. Because the court did not rely on extrinsic evidence to determine lack
of mutuality, we review de novo the court’s determination.
As noted above, the arbitration agreement provides: “I agree to Binding
Arbitration in accordance with the arbitration rules of the American Arbitration
Association for all claims, actions, disputes and other matters in question arising out of
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my employment with BSS, including but not limited to, claims or actions for
discrimination, sexual harassment, wages, benefits, wrongful termination., and
defamation. [¶] Any decision by an arbitrator shall be final, binding, and non-appealable
and the arbitrator [sic] shall be enforceable as any judgment may be rendered upon it in
accordance with applicable law of any court having jurisdiction. [¶] This mandatory
arbitration agreement applies to the permissible extend [sic] of the law and is not
intended to compel arbitration where it is unlawful.”
In Higgins v. Superior Court (2006) 140 Cal.App.4th 1238 (Higgins), the
appellate court determined that similar language evidenced lack of mutuality. There,
the arbitration agreement provided: “‘I agree that any and all disputes or controversies
arising under this Agreement or any of its terms, any effort by any party to enforce,
interpret, construe, rescind, terminate or annul this Agreement, or any provision thereof,
and any and all disputes or controversies relating to my appearance or participation in the
Program, shall be resolved by binding arbitration in accordance with the following
procedure. . . . All arbitration proceedings shall be conducted under the auspices of the
American Arbitration Association. . . . I agree that the arbitrator’s ruling, or arbitrators’
ruling, as applicable, shall be final and binding and not subject to appeal or challenge. . . .
The parties hereto agree that, notwithstanding the provisions of this paragraph, Producer
shall have a right to injunctive or other equitable relief as provided for in California Code
of Civil Procedure [section] 1281.8 or other relevant laws.’” (Id. at p. 1243.)
The Higgins court concluded the arbitration agreement lacked mutuality
because “the arbitration provision requires only petitioners to submit their claims to
arbitration. The clause repeatedly includes ‘I agree’ language, with the ‘I’ being a
reference to the ‘applicant’ (i.e., each of the petitioners). The only time the phrase ‘the
parties’ is used is in the last sentence, where ‘the parties’ agree that, notwithstanding the
arbitration provision, the producer has the right to seek injunctive or other equitable relief
in a court of law as provided for in Code of Civil Procedure section 1281.1 or other
8
relevant laws.” (Higgins, supra, 140 Cal.App.4th at p. 1253.) Similarly, here, the
arbitration agreement uses the “I agree” phrase, with the “I” referring to Herrera. Thus,
on its face the arbitration agreement binds only Herrera.
Appellant contends Higgins, supra, 104 Cal.App.4th 1238, is an “outlier,”
citing numerous cases that have found mutuality despite the use of the phrase “I agree.”
(See, e.g., Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232(Nguyen); Roman, supra, 172 Cal.App.4th 1462.) The holdings in these cases and in
Higgins can be harmonized. Serpa v. California Surety Investigations, Inc. (2013) 215
Cal.App.4th 695 (Serpa), issued by the same appellate court that decided Roman is
illustrative.
In Serpa, the employee signed a separate arbitration agreement that
provided: ‘“I understand and agree that if my employment is terminated or my
employment status is otherwise changed or if any other dispute arises concerning my
employment and The Company and I cannot resolve such dispute through informal
internal efforts, I will submit any such dispute (including, but not limited to wage and
hour claims, claims of unlawful discrimination based on race, sex, age, national origin,
disability or any other basis prohibited by law, but excluding claims which are required
by law to be resolved solely by a public agency, such as claims relating to workers’
compensation or unemployment insurance) exclusively to binding arbitration before a
retired judge. I further agree to abide by the procedures in The Company’s Arbitration
Policy. I have received a copy of the Arbitration Policy that is located in the employee
handbook.”’ (Id. at p. 699.) The employee handbook contained the following relevant
provision: “If your employment is terminated or your employment status is otherwise
changed and you believe that your rights were violated or if any other dispute arises
concerning your employment which you and the Company cannot resolve informally and
internally, you and the Company agree to submit the dispute (including, but not limited to
wage and hour claims and, claims of unlawful discrimination based on race, sex, age,
9
national origin, disability or any other basis prohibited by law), exclusively to binding
arbitration before a retired judge. This Arbitration Policy specifically excludes only
those claims that are required by law to be heard solely by a public agency such as
worker's compensation. . . . [¶] . . . [¶]” (Id. at pp. 699–700.)
In response to the employee’s argument that the arbitration agreement
lacked mutuality based on the language in the separate arbitration agreement, the
appellate court stated: “Were that the full extent of the agreement, we would likely agree
it lacked mutuality because it requires Serpa to submit to arbitration ‘any such dispute[s]’
involving her employment without imposing a similar obligation on CSI. [Citations.] In
this way, this document, at least on its face, is far different from that in Roman, supra,
172 Cal.App.4th 1462, in which we held the words ‘I agree’ did not vitiate an otherwise
bilateral obligation to arbitrate ‘all disputes and claims that might arise out of my
employment.’” (Serpa, supra, 215 Cal.App.4th at p. 705.) “However, . . . , the
agreement’s incorporation of the arbitration policy in the employee handbook [citations]
salvages the agreement by establishing an unmistakable mutual obligation on the part of
CSI and Serpa to arbitrate ‘any dispute’ arising out of her employment.” (Ibid.) As
noted above, the employee handbook provided that “you and the Company agree to
submit the dispute . . . to binding arbitration. . . .” (Id. at p. 700.)
Similarly, in Nguyen, supra, 4 Cal.App.5th 232, because the arbitration
agreement contained language showing mutuality, the use of the “I agree” language did
not destroy the otherwise bilateral agreement. There, the arbitration agreement provided:
‘“I hereby agree to submit to binding arbitration all disputes and claims arising out of or
relating to the submission of this application. I further agree, in the event that I am hired
by the company, that all disputes that cannot be resolved by informal internal resolution
which might arise out of or relate to my employment with the company, whether during
or after that employment, will be submitted to binding arbitration. I agree that such
arbitration shall be conducted under the rules of the [AAA]. This application contains the
10
entire agreement between the parties with regard to dispute resolution, and there are no
other agreements as to dispute resolution, either oral or written. However, the company
and I shall each pay one-half of the costs and expenses of such arbitration, and each of
us shall separately pay our counsel fees and expenses. The prevailing party shall be
entitled to recover reasonable attorneys fees, costs, and expenses. The arbitration shall be
held in Orange County, California. It shall be governed by California law without regard
to California choice-of-law statutes, rules and cases.”’ (Id. at p. 241, italics added.)
Like Serpa and Nguyen, the arbitration agreement in Fuentes v. Empire
Nissan, Inc. (2023) 90 Cal.App.5th 919 (Fuentes), issued while this appeal was pending
and which appellant discussed in a supplemental briefing and at oral argument, contains
language showing a bilateral agreement. There the arbitration agreement provided in
relevant part: “‘“Because of the mutual benefits . . . which private binding arbitration can
provide both the Company and myself, I and the Company both agree that any claim,
dispute, and/or controversy that either party may have against one another . . . which
would otherwise require or allow resort to any court or other governmental dispute
resolution forum between myself and the Company . . . arising from, related to, or having
any relationship or connection whatsoever with my seeking employment with,
employment by, or other association with the Company, whether based on tort, contract,
statutory, or equitable law, or otherwise, . . . shall be submitted to and determined
exclusively by binding arbitration.”’[Citation]” (Fuentes, 90 Cal.App.5th at pp. 515 &
520; see also Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1241 & 1249 [finding
bilateral agreement where arbitration agreement provided that the parties “‘mutually
agree’” to arbitrate “‘any claim or action arising out of or in any way related to the hire,
employment, remuneration, separation or termination of Employee.’”].)
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Finally, in Roman, the arbitration agreement stated that, “This application
contains the entire agreement between the parties with regard to dispute resolution, and
there are no other agreements as to dispute resolution, either oral or written.” (Roman,
supra, 172 Cal.App.4th at p. 1467.) Although not explicit like the bilateral language in
other arbitration agreements described above, this language indicates there were mutual
obligations concerning dispute resolution imposed on all parties. During oral argument,
appellant discounted the import of this language, noting that all agreements are between
parties. However, the inclusion of this otherwise superfluous language (“agreement
between the parties”) indicates something other than the mere existence of an agreement
between the parties, perhaps, as stated above, that there were bilateral obligations. The
ambiguity in the inclusion of the language would allow a court to find a bilateral
agreement, as the Roman court did. (See id. at p. 1473 [“Even if the language in the . . .
arbitration provision were somehow ambiguous on this point, given the public policy
favoring arbitration [citation] and the requirement we interpret the provision in a manner
that renders it legal rather than void [citations], we would necessarily construe the
1
arbitration agreement as imposing a valid, mutual obligation to arbitrate.”].)
Here, the “I agree” language, which applies only to Herrera, shows lack of
mutuality. There is no other evidence in the record that suggests otherwise. For
example, there is no provision that stated Herrera and BSS agreed or that the parties
“mutually agree” to submit their claims to arbitration. Nor is there any language
referencing BSS in connection with arbitration, such as the procedure for initiating
arbitration or the paying of arbitral costs. Finally, there is no language that the agreement
1
Appellant also cited Bigler v. Harker School (2013) 213 Cal.App.4th 727 (Bigler),
as a case that disagreed with the holding of Higgins. Bigler, however, never mentions
Higgins. Moreover, its discussion of mutuality and the “I agree” language is both cursory
and conclusory. (See Bigler, supra, 213 Cal.App.4th at p. 738.) Bigler thus does not
persuade us that the arbitration agreement here was bilateral.
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was between the parties. In sum, the trial court did not err in determining that the
2
arbitration lacked mutuality and denying the arbitration motion.
III
DISPOSITION
The order of the trial court denying the motion to compel arbitration is
affirmed. Herrera may recover her costs on appeal.
DELANEY, J.
WE CONCUR:
SANCHEZ, Acting P. J.
MOTOIKE, J.
2
We deny appellant’s Motion to Take Additional Evidence, which requests that this
court consider the entire BSS handbook. The motion is premised on the ground that the
consideration of the entire handbook is necessary to address Herrera’s new argument on
appeal that the arbitration agreement lacked mutuality because the term “BSS” in the
agreement is not defined. We reject Herrera’s argument because it is undisputed that the
Employee Handbook is referenced as the “BSS Employee Handbook” in the trial court’s
ruling without objection, and the only reasonable inference is that BSS refers to
appellant. Because we reject respondent’s argument, we need not consider the entire
Employee Handbook. Additionally, our conclusion that there is a lack of mutuality does
not depend on whether “BSS” is defined in the arbitration agreement. Accordingly, the
entire Employee Handbook is not materially relevant to our ruling.
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