Ramirez v. Pacific Bay Masonry CA1/2

Filed 6/27/22 Ramirez v. Pacific Bay Masonry CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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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ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
JUAN RAMIREZ,
Plaintiff and Respondent,
v. A163316
PACIFIC BAY MASONRY, INC.,
(Alameda County Super. Ct.
Defendant and Appellant. No. HG21093508)
Plaintiff Juan Ramirez and his son Juan Naranjo filed a class action
lawsuit alleging various wage-and-hour claims and violations of California’s
Unfair Competition Law against their former employer Pacific Bay Masonry,
Inc. (Pacific Bay). Pacific Bay moved to compel arbitration pursuant to the
arbitration provision contained in the plaintiffs’ employment agreements.
The trial court granted the motion as to Naranjo only.1 In denying the
motion as to Ramirez, the trial court found that the arbitration provision
contained “minimal” substantive unconscionability, but “significant”
procedural unconscionability.
Naranjo is thus not a party to this appeal. (Reyes v. Macy’s, Inc.
1
(2011) 202 Cal.App.4th 1119, 1122 [order granting motion to compel
arbitration is not an appealable order].)
1
In this appeal, Pacific Bay challenges the denial of its motion to compel
arbitration as to Ramirez. Ramirez responds by abandoning the substantive
unconscionability argument accepted by the trial court, and instead
contending that the agreement was unconscionable because it (1) compels
arbitration of administrative wage claims; (2) bars claims under the Labor
Code Private Attorneys General Act of 2004 (§ 2698 et seq.) (PAGA); and
(3) bars class claims. We reject these arguments and conclude that Ramirez
failed to satisfy his burden to show the arbitration agreement was
substantively unconscionable. We reverse on this basis and remand for
further proceedings consistent with this opinion.
BACKGROUND
Ramirez worked as a mason for Pacific Bay from 2017 to 2019. Naranjo
also worked for Pacific Bay during the same time period as a hod carrier.
A. Arbitration Agreement
At the start of their employment, Ramirez and Naranjo each signed an
“Employment, Confidential Information, and Arbitration Agreement”
(Agreement). Section 9 of the Agreement is entitled “Arbitration and
Equitable Relief” and provides, in relevant part: “COMPANY AND I
BOTH AGREE THAT ANY AND ALL DISPUTES, CLAIMS, OR CAUSES
OF ACTION, IN LAW OR EQUITY, ARISING FROM OR RELATING TO
THE ENFORCEMENT, BREACH, PERFORMANCE . . . OF THIS
AGREEMENT, OUR EMPLOYMENT RELATIONSHIP, OR THE
TERMINATION OF OUR EMPLOYMENT RELATIONSHIP SHALL BE
RESOLVED, TO THE FULLEST EXTENT PERMITTED BY LAW, BY
FINAL, BINDING AND CONFIDENTIAL ARBITRATION IN SANTA
CLARA COUNTY, CALIFORNIA CONDUCTED BEFORE A SINGLE
ARBITRATOR BY JAMS, INC. (‘JAMS’) OR ITS SUCCESSOR, UNDER THE
2
THEN APPLICABLE JAMS RULES.” It continues: “BY AGREEING TO
THIS ARBITRATION PROCEDURE, BOTH PARTIES WAIVE THE RIGHT
TO RESOLVE ANY SUCH DISPUTE THROUGH A TRIAL BY JURY OR
JUDGE OR BY ADMINISTRATIVE PROCEEDING.”
The Agreement states that the arbitration provision applies to “THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP TO THE GREATEST EXTENT
PERMITTED BY LAW, INCLUDING, BUT NOT LIMITED TO, THE
FOLLOWING CLAIMS[.]” It then lists three categories of claims, including
(1) claims for wrongful discharge of employment, breach of contract, breach of
the covenant of good faith and fair dealing, infliction of emotional distress,
misrepresentation, interference with contract or prospective economic
advantage, and defamation; (2) claims for violation of any federal, state, or
municipal statute; and (3) any and all claims arising out of any other laws
and regulations relating to employment or employment discrimination.
B. Class Action Complaint
Ramirez and Naranjo filed a class action lawsuit against Pacific Bay in
March 2020. They asserted causes of action for (1) failure to pay all wages
owed semi-monthly (Lab. Code, § 204); (2) failure to pay overtime
compensation (id. §§ 510, 1194, 1198); (3) failure to reimburse all business
expenses (id. § 2802); (4) failure to pay minimum wage (id. § 1194 et seq.);
(5) failure to provide accurate itemized statements (id. § 226); (6) waiting
time penalties (id. §§ 201–203); (7) failure to provide meal breaks (id.
§§ 226.7 & 512); (8) failure to provide rest periods (id. §§ 226.7 & 512; Cal.
Code Regs., tit. 8, § 11010); and (9) violations of California’s Unfair
Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.).
3
C. Motion to Compel Arbitration
Pacific Bay moved to compel the plaintiffs to arbitration and strike the
class claims pursuant to the California Arbitration Act (Code Civ. Proc.
§ 1280 et seq.). It submitted a declaration from Kristine Auerbach, the
secretary, treasurer, and human resources manager for Pacific Bay. The
declaration attached copies of the Agreement signed by Ramirez and
Naranjo. Auerbach had also signed both copies. As for the class claims,
Pacific Bay argued that the “plain language” of the Agreement “does not
provide for class arbitration” and “cannot be read as permitting their class
claims to survive arbitration.”
Plaintiffs opposed the motion to compel arbitration on the grounds that
the Agreement was procedurally and substantively unconscionable. On
procedural unconscionability, plaintiffs argued that the Agreement was
oppressive because (1) it was a contract of adhesion, (2) they were not given
adequate time to review the Agreement, (3) Ramirez did not read or speak
English, and (4) it referenced JAMS rules without explanation or attachment.
On substantive unconscionability, plaintiffs argued that the Agreement was
one-sided and lacked mutuality because the three categories of claims listed
in Section 9 of the Agreement “appear[] to emphasize its application to claims
that employees bring to employers but not . . . claims employers bring to
employees.” Plaintiffs also argued that the purported class action waiver, as
claimed by Pacific Bay, “only infringes on the employee’s rights, and is yet
another one-sided provision meant to tip the scales in defendant’s favor.”
Ramirez and Naranjo each submitted a declaration in opposition to the
motion. Ramirez declared that his “main language” was Spanish. He had
“an extremely limited understanding of English” and did not have “even the
minimum ability to read or speak English.” He requires an interpreter
4
“when communicating with English speakers regarding anything but the
most basic communications” and “cannot read or write English with
competence for myself.” Ramirez declared that he was given several
documents to sign at the beginning of his employment, but was not aware of
their contents. He was not given any copies in Spanish, and no one discussed
the content of the documents in English or Spanish. He was told to “sign
them and return them immediately.” He signed the documents because he
“thought it was a condition of [his] employment.” To his knowledge, he never
received a copy of the JAMS rules.
Naranjo declared that he completed tenth grade of high school and
began working at Pacific Bay when he was 19 years old. He declared that he
was given documents to sign at the beginning of his employment in an office
while Auerbach was present along with 10-15 other workers. The entire
process took an hour to an hour and a half, where Auerbach spent a few
minutes talking about each document. She explained details “about the
401(k) plan, health benefits, and jobsite details.” To his knowledge, Auerbach
never mentioned or explained the arbitration policy.
On reply, Pacific Bay submitted a supplemental declaration from
Auerbach. Auerbach declared that she had an onboarding meeting on May
30, 2017 with 10 to 12 employees, including both Ramirez and Naranjo. She
declared that she spent an hour going through each page of the employment
documents, explaining them in both English and Spanish.
D. Trial Court’s Ruling
The trial court granted the motion as to Naranjo and denied the motion
as to Ramirez. It first noted the general rule that all material evidence must
be submitted on the motion with the opening brief and new evidence is not
permitted on reply. While courts retain discretion to consider reply evidence
5
where it fills gaps in the original evidence, it determined that the
supplemental Auerbach declaration did more than just fill in gaps; it was
Pacific Bay’s sole evidence regarding procedural unconscionability. The trial
court thus concluded that it would consider the supplemental Auerbach
declaration, but give “little weight to the new evidence that defendant
presented in reply.” It specified that this was “not a reflection on
Ms. Auerbach personally.” The trial court then determined it would decide
whether the arbitration agreement was enforceable because there was “no
‘clear and unmistakable’ evidence that the parties intended to delegate the
issue to the arbitrator.”2
On procedural unconscionability, the trial court found “some procedural
unconscionability regarding Naranjo and significant procedural
unconscionability regarding Ramirez.” The Agreement was a “take it or leave
it agreement,” indicating some procedural unconscionability. The trial court
credited the plaintiffs’ declarations in finding that (1) the Agreement was
presented in a meeting where Pacific Bay did not go over or explain the
arbitration provision; and (2) Pacific Bay knew that many employees were
Spanish speakers, but presented the Agreement in English only and did not
explain it in Spanish. It also found that the failure to provide the JAMS
rules was a factor supporting procedural unconscionability.
On substantive unconscionability, the trial court stated: “The primary
argument for substantive unconscionability is that employees are more likely
to have claims against employers than the other way around. This is a weak
basis for substantive unconscionability.” It concluded, however, that there
was “minimal” substantive unconscionability in the arbitration provision of
the Agreement.
2 Pacific Bay does not challenge this determination on appeal.
6
Given there was only “some” procedural unconscionability regarding
Naranjo and “minimal” substantive unconscionability, it granted Pacific
Bay’s motion to compel Naranjo to arbitration. Considering the “significant”
procedural unconscionability regarding Ramirez and “minimal” substantive
unconscionability, the trial court concluded that “it was unconscionable to
present the arbitration agreement to Ramirez with the strong suspicion or
knowledge that he did not understand English and did not understand that
the contract would waive his access to the courts regarding employment
related claims.” It thus denied the motion as to Ramirez.3
This appeal followed.
DISCUSSION
Pacific Bay argues on appeal that the trial court erred in finding the
Agreement both procedurally and substantively unconscionable as to
Ramirez. Before turning to the merits of these arguments, we set forth the
general framework governing motions to compel arbitration and our review.
I. General Framework
A. Burdens on Motion to Compel Arbitration
The party moving to compel arbitration bears the burden to prove the
existence of an arbitration agreement by a preponderance of the evidence.
(Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413
(Rosenthal).) The moving party must first produce “prima facie evidence of a
written agreement to arbitrate the controversy.” (Id. at p. 413.) That initial
prima facie burden may be met “by attaching to the [motion or] petition a
copy of the arbitration agreement purporting to bear the [opposing party’s]
3 The trial court’s order did not specifically address Pacific Bay’s
request to strike the class claims, presumably because it denied the motion to
compel Ramirez to arbitration and directed his class claims to proceed in the
court action.
7
signature.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541,
543–544.) If “the opposing party does not dispute the existence of the
arbitration agreement, then nothing more is required for the moving party to
meet its burden of persuasion.” (Gamboa v. Northeast Community Clinic
(2021) 72 Cal.App.5th 158, 165.)
The burden then shifts to the opposing party to prove a defense to
enforcement of the arbitration agreement. (Rosenthal, supra, 14 Cal.4th at
p. 413.) “The unconscionability defense has been recognized by the United
States Supreme Court as a general contract defense in California, and
therefore a defense to an agreement to arbitrate.” (Fisher v. MoneyGram
International, Inc. (2021) 66 Cal.App.5th 1084, 1093, citing AT&T Mobility
LLC v. Concepcion (2011) 563 U.S. 333, 341–343; De La Torre v. CashCall,
Inc. (2018) 5 Cal.5th 966, 978–979.) In other words, the party challenging
the arbitration agreement bears the burden to prove its unconscionability.
(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (OTO).)
B. Standards of Review
“There is no uniform standard of review for evaluating an order
denying a motion to compel arbitration.” (Robertson v. Health Net of
California, Inc. (2005) 132 Cal.App.4th 1419, 1425.) “If the court’s order is
based on a decision of fact, then we adopt a substantial evidence standard.”
(Id. at p. 1425.) “Alternatively, if the court’s denial rests solely on a decision
of law, then a de novo standard of review is employed.” (Ibid.) To the extent
there are material facts in dispute, “ ‘we accept the trial court’s resolution of
disputed facts when supported by substantial evidence; we presume the court
found every fact and drew every permissible inference necessary to support
its judgment.’ ” (Carlson v. Home Team Pest Defense, Inc. (2015) 239
Cal.App.4th 619, 630 (Carlson).) An “order denying a petition to compel
8
arbitration, like any other judgment or order of a lower court, is presumed to
be correct, and all intendments and presumptions are indulged to support the
order on matters as to which the record is silent.” (Gutierrez v. Autowest, Inc.
(2003) 114 Cal.App.4th 77, 88 (Gutierrez).) With this general framework in
mind, we turn to the doctrine of unconscionability.
II. Unconscionability
Unconscionability is commonly defined as “ ‘ “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.” ’ ” (Sanchez v. Valencia Holding
Co., LLC (2015) 61 Cal.4th 899, 910 (Sanchez).) The doctrine of
unconscionability contains “ ‘ “both a procedural and a substantive element,
the former focusing on oppression or surprise due to unequal bargaining
power, the latter on overly harsh or one-sided results.” ’ ” (Id. at p. 910.)
“ ‘ “The prevailing view is that [procedural and substantive unconscionability]
must both be present in order for a court to exercise its discretion to refuse to
enforce a contract or clause under the doctrine of unconscionability.” ’ ”
(Ibid.) “But they need not be present in the same degree.” (Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114
(Armendariz).) California courts employ a “ ‘sliding scale’ ” to determine
unconscionability: “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.” (Ibid.) We
address each element in turn.
A. Procedural Unconscionability
Procedural unconscionability “begins with an inquiry into whether the
contract is one of adhesion.” (Armendariz, supra, 24 Cal.4th at p. 113.) “An
adhesive contract is standardized, generally on a preprinted form, and offered
9
by the party with superior bargaining power ‘on a take-it-or-leave-it basis.’ ”
(OTO, supra, 8 Cal.5th at p. 126.) Pacific Bay concedes that the Agreement
here is a contract of adhesion, “and thus contains some procedural
unconscionability.”
“The pertinent question, then, is whether circumstances of the
contract’s formation created such oppression or surprise that closer scrutiny
of its overall fairness is required.” (OTO, supra, 8 Cal.5th at p. 126.)
Oppression occurs “ ‘ “ ‘where a contract involves lack of negotiation and
meaningful choice.’ ” ’ ” (Ibid.) Surprise involves the extent to which “ ‘the
allegedly unconscionable provision is hidden within a prolix printed form.’ ”
(Ibid.)
Here, Pacific Bay challenges the trial court’s findings that the
particular circumstances of Ramirez’s resulted in procedural
unconscionability based on (1) the presentation of the Agreement in English
without any explanation in Spanish; and (2) the failure to provide the JAMS
rules.
First, Pacific Bay argues that procedural unconscionability cannot arise
from its failure to explain the arbitration provision to Ramirez. Pacific Bay
cites the general principle that “ ‘parties dealing at arm’s length’ ” have no
duty to explain to each other the terms of a written contract. (Brookwood v.
Bank of America (1996) 45 Cal.App.4th 1667, 1674, italics added; see also
Sanchez, supra, 61 Cal.4th at p. 914 [seller was under no obligation to
highlight arbitration provision in contract to consumer].) California courts,
however, have made clear that an arbitration provision in an employment
agreement is procedurally unconscionable when presented in English without
explanation to an employee who cannot read English. (See, e.g., Carmona v.
Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85 (Carmona)
10
[concluding “there is no question the arbitration clause was procedurally
unconscionable” where it was not translated into Spanish for employees who
did not read English]; Nunez v. Cycad Management LLC (2022) 77
Cal.App.5th 276, 284 [failure to provide Spanish version of employment
agreement to employee who did not read English “shows oppression and
surprise amounting to procedural unconscionability”].)
Pacific Bay also claims there is insufficient evidence that it knew
Ramirez could not read or speak English. We are not persuaded. In
Carmona, the appellate court explained that the employer “evidently knew”
the plaintiffs required Spanish translations because they provided the
translation of a portion of the multi-page employment agreement. (Carmona,
supra, 226 Cal.App.4th at p. 85.) Here, Auerbach declared that she went
through the employment documents in both English and Spanish during the
onboarding meeting attended by Ramirez. As we must presume the trial
court drew every necessary inference and we indulge such inferences in its
favor, we conclude there was sufficient evidence to support its finding that
Pacific Bay had “strong suspicion or knowledge” that Ramirez did not
understand English. (See Carlson, supra, 239 Cal.App.4th at p. 630;
Gutierrez, supra, 114 Cal.App.4th at p. 88.)
Pacific Bay further argues there was insufficient evidence that Ramirez
could not understand written or spoken English. Again, we are not
persuaded. In Subcontracting Concepts (CT), LLC v. De Melo (2019)
34 Cal.App.5th 201 (Subcontracting Concepts), the plaintiff signed an
employment agreement in English when his native language was Portuguese
and he was “not fluent enough in English to fully understand documents
written in English.” (Id. at p. 206.) We concluded that the arbitration clause
in the agreement contained “at least a moderate level of procedural
11
unconscionability.” (Id. at p. 211.) Our reasoning in Subcontracting Concepts
applies with even greater force here, as Ramirez declared that he did not
have “even the minimum ability to read or speak English.”
Second, Pacific Bay argues that the failure to provide the JAMS rules
was not an appropriate factor to consider on procedural unconscionability
here. We agree. In Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, the
Supreme Court explained that such a factor “might have force if [the
employee’s] unconscionability challenge concerned some element of the
[arbitration] rules of which she had been unaware when she signed the
arbitration agreement.” (Id. at p. 1246.) Like the employee in Baltazar,
Ramirez’s challenge to the enforcement of the Agreement here has nothing to
do with the particular JAMS rules themselves. (Ibid.) Even discounting this
factor, however, we nonetheless conclude there was sufficient evidence to
support the trial court’s finding of procedural unconscionability based on
Pacific Bay’s presentation of the Agreement—a contract of adhesion—in
English without any explanation in Spanish.
Finally, Pacific Bay challenges the finding on procedural
unconscionability by arguing that the trial court abused its discretion by
(1) affording little weight to the supplemental Auerbach declaration; and
(2) declining to hold an evidentiary hearing to resolve the conflicting evidence
in the Ramirez and supplemental Auerbach declarations.
We see some merit in these contentions. As described above, the party
opposing a motion to compel arbitration bears the burden of proving a
defense to enforcement of the arbitration agreement. (Rosenthal, supra,14 Cal.4th 394 at p. 413.) Ramirez attempted to satisfy that burden by
arguing in his opposition that the Agreement was unconscionable. As Pacific
Bay suggests, it seems untenable to require the movant to forecast every
12
possible defense in its opening motion; the better approach may be to afford
plaintiffs an opportunity to respond to any new reply evidence. (See Carbajal
v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 241 [if inclusion of additional
evidentiary evidence with reply is permitted, the other party should be given
the opportunity to respond].) And where, as here, “the enforceability of an
arbitration clause may depend upon which of two sharply conflicting factual
accounts is to be believed, the better course would normally be for the trial
court to hear oral testimony and allow the parties the opportunity for cross-
examination.” (Ashburn v. AIG Financial Advisors, Inc. (2015) 234
Cal.App.4th 79, 98.) On the other hand, we are mindful that the trial court is
vested with the discretion to consider new reply evidence and we may reverse
“only for a clear abuse of that discretion.” (Carbajal, supra, 245 Cal.App.4th
at p. 241.) “There is simply no authority for the proposition that a trial court
necessarily abuses its discretion, in a motion proceeding, by resolving
evidentiary conflicts without hearing live testimony.” (Ashburn, supra,
234 Cal.App.4th at p. 96.)
We need not resolve these issues on procedural unconscionability,
however, because our conclusion on substantive unconscionability is
dispositive here. As explained below, Ramirez failed to satisfy his burden to
show any substantive unconscionability in the Agreement.
B. Substantive Unconscionability
Substantive unconscionability arises when a contract imposes unduly
harsh or one-sided results. (Armendariz, supra, 24 Cal.4th at p. 114.) As the
California Supreme Court explained in Sanchez: “Not all one-sided contract
provisions are unconscionable; hence the various intensifiers in our
formulations: ‘overly harsh,’ ‘unduly oppressive,’ ‘unreasonably favorable.’ ”
(Sanchez, supra, 61 Cal.4th at p. 910.) “In assessing substantive
13
unconscionability, the paramount consideration is mutuality.” (Abramson v.
Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 664.) Beyond mutuality,
“courts often look to whether the agreement meets a minimum level of
fairness based on the factors set forth in Armendariz.” (Davis v. Kozak (2020)
53 Cal.App.5th 897, 910.) These factors include whether the arbitration
agreement: “ ‘(1) provides for neutral arbitrators, (2) provides for more than
minimal discovery, (3) requires a written award, (4) provides for all of the
types of relief that would otherwise be available in court, and (5) does not
require employees to pay either unreasonable costs or any arbitrators’ fees or
expenses as a condition of access to the arbitration forum.’ ” (Armendariz, at
p. 102.)
In this appeal, Ramirez completely abandons the substantive
unconscionability argument accepted by the trial court: that the arbitration
provision covers claims which are “most realistically brought by employees
against their employers.” Ramirez proffered no evidence to support this
argument, and the case he cited in support, Ingle v. Circuit City Stores, Inc.
(2003) 328 F.3d 1165, is easily distinguishable. Ingle held that an arbitration
agreement limited to “ ‘any and all employment-related legal disputes,
controversies or claims of an Associate’ ” was substantively unconscionable.
(Id. at p. 1173.) Unlike Ingle, the arbitration provision here was clear that
Ramirez and Pacific Bay “BOTH AGREE” that disputes “ARISING FROM
OR RELATING TO THE ENFORCEMENT, BREACH, PERFORMANCE
. . . OF THIS AGREEMENT, OUR EMPLOYMENT RELATIONSHIP, OR
THE TERMINATION OF OUR EMPLOYMENT RELATIONSHIP” were
subject to arbitration, whether such disputes were made by or against the
employee or employer. The Agreement was signed by Ramirez as well as
Auerbach, on behalf of the company. The three categories of claims described
14
in the arbitration provision were merely examples of arbitrable claims, and
the inclusion of these examples does not show a lack of mutuality. (See Tiri
v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 247 [concluding
delegation clause is not substantively unconscionable because employee and
employer “bound by it equally”].) To the extent that the trial court’s finding
was based on the general assertion that “employees are more likely to have
claims against employers than the other way around,” there was no evidence
proffered by Ramirez to support this, and courts have rejected similar
assertions as tantamount to concluding that all employment arbitration
agreements are “categorically unenforceable.” (Id. at p. 249.)
Having abandoned this argument, Ramirez raises three alternative
arguments that the Agreement was substantively unconscionable because it:
(1) compels arbitration of administrative wage claims; (2) bars PAGA claims;
and (3) bars class claims. As a preliminary matter, we note that Ramirez
peripherally raised the class claim argument in his opposition to the
underlying motion, but the other arguments were raised for the first time on
appeal. While we could disregard these new arguments as waived, they raise
legal questions determinable from uncontroverted facts and we thus exercise
our discretion to consider them. (Farrar v. Direct Commerce, Inc. (2017)
9 Cal.App.5th 1257, 1275 [addressing new argument on enforceability of
arbitration provision].)
First, Ramirez argues that the Agreement is substantively
unconscionable because it compels arbitration of administrative wage claims
and other “employee remedies.” We agree with Ramirez’s initial proposition
that he need not have actually filed an administrative wage claim to assert
this defense. (Subcontracting Concepts, supra, 34 Cal.App.5th at p. 212
15
[rejecting argument that plaintiffs had not pursued administrative claims].)
We are, however, unpersuaded by the merits of the argument.
In Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1146, the
California Supreme Court concluded that arbitration agreements cannot be
deemed categorically unconscionable because they involve waiver of an
administrative proceeding. (Id. at p. 1146.) In OTO, the court then
explained that an agreement compelling the arbitration of wage disputes
could be enforceable so long as it provides an “accessible and affordable”
process for resolving those disputes. (OTO, supra, 8 Cal.5th at p. 124.) In
other words, the arbitration agreement will not be considered unconscionable
where the arbitration procedure is “relatively ‘low-cost’ ” and “provides a
forum for wage claimants ‘to pursue their claims effectively.’ ” (Ibid.) OTO
determined that the arbitration provision at issue was sufficiently one-sided
as to render it unenforceable. (Id. at pp. 136–137.) Among other things, the
provision did not explicitly address the allocation of arbitration costs, but
instead, referred to Code of Civil Procedure section 1284.2, which generally
provides that parties to an arbitration must bear their own expenses. (Id. at
p. 119.)
We addressed this same issue in Subcontracting Concepts. In that
case, the arbitration provision in the employment agreement required the
employee to bear his own costs for arbitration, barred him from recovering
any attorney fees or other costs, and limited the arbitrator’s authority to an
award of monetary damages only. (Subcontracting Concepts, supra, 34
Cal.App.5th at p. 212.) We concluded that the arbitration provision was
substantively unconscionable because it replaced the administrative claim
process protections with “costs and obstacles he would not otherwise face”
16
and significantly limit[ed] the remedies that would otherwise be available.”
(Id at p. 214.)
Here, unlike OTO and Subcontracting Concepts, the Agreement
explicitly provides that the “COMPANY SHALL PAY ALL OF JAMS’
ARBITRATION FEES.” Moreover, unlike Subcontracting Concepts, there is
no language prohibiting Ramirez from recovering attorney fees or other costs.
There is nothing to suggest that Ramirez would be limited from obtaining a
remedy otherwise available in the administrative claim process. The
Agreement authorizes the arbitrator to “AWARD SUCH RELIEF AS
WOULD OTHERWISE BE PERMITTED BY LAW” and does not prevent
either party “FROM OBTAINING INJUNCTIVE RELIEF IN COURT IF
NECESSARY TO PREVENT IRREPARABLE HARM PENDING THE
CONCLUSION OF ANY ARBITRATION.” The other Armendariz factors
weigh in favor of enforceability: the Agreement provides for a neutral JAMS
arbitrator, authorizes the arbitrator to compel adequate discovery for
resolution of the dispute, and requires the arbitrator to issue a written
decision. (Armendariz, supra, 24 Cal.4th at p. 102.) For these reasons, we
conclude that the waiver of administrative proceeding did not render the
Agreement substantively unconscionable.
Second, Ramirez contends that the Agreement is substantively
unconscionable because it bars PAGA claims. Again, we agree with
Ramirez’s initial propositions that (1) he need not have actually asserted a
PAGA claim to raise this defense; and (2) a wholesale waiver of PAGA claims
is not enforceable. (Subcontracting Concepts, supra, 34 Cal.App.5th at p. 212
[reviewing the arbitration clause for substantive unconscionability at the
time the agreement was made]; Iskanian v. CLS Transportation Los Angeles,
LLC (2014) 59 Cal.4th 348, 383 [employee agreement that waives right to
17
bring PAGA action is “against public policy and may not be enforced”]; Viking
River Cruises, Inc. v. Moriana (June 15, 2022, No. 20-1573) __ S.Ct. __ [2022
U.S. LEXIS 2940 at *33] [prohibition on wholesale waivers of PAGA claims
under Iskanian is not preempted by FAA].) Here, however, Ramirez does not
offer any evidence that the Agreement actually bars PAGA claims. There is
no provision that explicitly prohibits PAGA claims. (Cf. Subcontracting
Concepts, at p. 205 [employment agreement prohibited arbitration of any
claim made “ ‘ “in a private attorney general capacity” ’ ”]; Davis v. TWC
Dealer Group, Inc. (2019) 41 Cal.App.5th 662, 675 [broad language excluding
“class, collective or joint action or arbitration” could be read to preclude
PAGA actions].) On the contrary, the Agreement requires arbitration of
disputes “TO THE FULLEST EXTENT PERMITTED BY LAW[.]” As
explained in Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5th
485, this language “steers clear” of any potential conflict with Ramirez’s right
to bring a PAGA action and does not demonstrate unconscionability.
(Torrecillas, at p. 500.)
Third, Ramirez argues that the Agreement is substantively
unconscionable because it bars class claims. He contends that “Pacific Bay
wrote [the Agreement], and is attempting to use it, to evade Ramirez’s
colorable class claims (and those of other employees).” Ramirez cites no
evidence, relying instead on Pacific Bay’s argument in its underlying motion
to strike the plaintiffs’ class allegations: that the “plain language” of the
Agreement does not explicitly provide for class arbitration. We reject the
parties’ joint assumption that the Agreement prohibits class claims; some
language evidencing an intent to waive class claims is clearly required, and
there is no such language in the Agreement. (Cf. Laster v. T-Mobile USA,
Inc. (S.D.Cal. 2005) 407 F.Supp.2d 1181, 1185 [customer agreement provided
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that parties could only bring claims “IN YOUR OR ITS INDIVIDUAL
CAPACITY, and not as a plaintiff or class member in any purported class or
representative proceeding”]; Muro v. Cornerstone Staffing Solutions, Inc.
(2018) 20 Cal.App.5th 784, 790 [employment agreement explicitly waived
“ ‘the right to initiate or proceed on a class action basis or participate in a
class action in the arbitration’ ”].)4 We cannot conclude that the Agreement is
substantively unconscionable on this basis.
In sum, we conclude that Ramirez failed to satisfy his burden to show
the Agreement was substantively unconscionable. As this element must be
satisfied to some degree to establish unconscionability as a defense to
enforcement of the arbitration agreement (Armendariz, supra, 24 Cal.4th at
p. 114), we thus conclude the trial court erred in denying the motion to
compel Ramirez to arbitration.
DISPOSITION
The July 20, 2021 order denying Pacific Bay’s motion to compel
arbitration as to Ramirez’s individual claims is reversed. We remand for
further proceedings consistent with this opinion, including the resolution of
Pacific Bay’s request to strike the class claims. Costs on appeal are awarded
to Pacific Bay.
4 Based on our conclusion that the Agreement does not contain a class
action waiver, we do not reach the argument in Pacific Bay’s Reply Brief that
such a waiver is not substantively unconscionable.
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_________________________
Mayfield, J.*
We concur:
_________________________
Richman, Acting P.J.
_________________________
Miller, J.
Ramirez v. Pacific Bay Masonry, Inc. (A163316)
* Judge of the Mendocino Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
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