Jordan Morrison v. Ronald Morrison, et al.

I. LEGAL STANDARD

Code of Civil Procedure section 1281.21 requires that the Court order the parties to arbitrate if it “determines that an agreement to arbitrate exists, unless it finds that (a) the right to compel

1 All statutory references are to the Code of Civil Procedure unless otherwise indicated. 1

arbitration has been waived by the moving party, (b) grounds exist for revocation of the agreement, or (c) a party to the arbitration is also a party to a pending court action with a third party arising out of the same transaction.” (Sargon Enterprises, Inc. v. Browne George Ross LLP (2017) 15 Cal.App.5th 749, 762.) There is a strong legislative policy favoring arbitration. (Morris v. Zuckerman (1967) 257 Cal.App.2d 91, 95.)

When determining a motion to compel arbitration, “[t]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)

II. DISCUSSION

A. The LLC has Shown the Existence of an Agreement to Arbitrate

In determining the existence of an agreement to arbitrate, the trial court must employ a three-step burden shifting process. The party seeking to compel arbitration bears an initial burden to show an agreement to arbitrate; that burden can be met by providing a copy of the alleged agreement. If that initial burden is met, the burden shifts to the party opposing arbitration to identify a factual dispute as to the agreement’s existence, thereby shifting the burden back to the arbitration proponent. At that point, and “[b]ecause the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.”

(Garcia v. Stoneledge Furniture LLC (2024) 102 Cal.App.5th 41, 51, citations omitted; Kinder v. Capistrano Beach Care Center, LLC (2023) 91 Cal.App.5th 804, 814 [while the burden of production may shift, the burden of persuasion is always on the moving party].)

To meet its prima facie burden, the LLC relies on section 1.5 of the Employee Handbook provides:

In return for Company’s promise to do the same, your continued employment, and other benefits conferred through the employment relationship, you the employee (hereinafter “you,” “your”) promise to submit to binding arbitration all claims, disputes, or controversies with the Company and its officers, directors, and employees arising out of or relating to your employment relationship with Company, including disputes related to your wages and benefits, your termination, intellectual property rights, confidentiality, and any breach of this agreement, to be decided by an independent, mutually agreed upon arbitrator and any Company arbitration policy or agreement.

(Ronald Morrison Decl., Ex. A.)

Pages 41 and 42 of the Employee Handbook include an Employee Acknowledgment stating, “That I have received a copy of this Employee Handbook and that it is my responsibility to read

and be aware of, and comply with, ALL policies contained in it ....” (Ronald Morrison Decl., Ex. A.) While specifically referencing “policies on confidentiality, health, safety, antiharassment, discrimination, and drugs and alcohol,” the acknowledgement does not reference the arbitration policy set forth in section 1.5. (Ronald Morrison Decl., Ex. A.)

Plaintiff responds by pointing to the following statements in the Employee Handbook: “The Employee Handbook is not an employment contract,” “Nothing in this Employee Handbook creates a binding employment contract between Company and its employees,” and “this is not a contract of employment.” (Ronald Morrison Decl., Ex. A [Forward, § 1.3, Employee Acknowledgments].)

“ ‘To support a conclusion that an employee has relinquished his or her right to assert an employment-related claim in court, there must be more than a boilerplate arbitration clause buried in a lengthy employee handbook given to new employees. At a minimum, there should be a specific reference to the duty to arbitrate employment-related disputes in the acknowledgment of receipt form signed by the employee at commencement of employment.’ ” (Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 791 (Esparza), quoting Sparks v. Vista Del Mar Child and Family Services (2012) 207 Cal.App.4th 1511, 1522, 145 Cal.Rptr.3d 318, abrogated on other grounds by Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 390.)

Like the Employee Acknowledgment here, the acknowledgment in Esparza also stated the handbook was not a “contract of employment.” However, the first page of the handbook in Esparza was a welcome letter which stated the handbook was “not intended to be a contract (express or implied), nor is it intended to otherwise create any legally enforceable obligations.” (Esparza, supra, 2 Cal.App.5th at p. 784.) The court relied on that broad language to support its finding the handbook in that case did not create an agreement to arbitrate.

In contrast, in Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, the acknowledgment form specifically highlighted the arbitration agreement and the table of contents included the subject heading, “BINDING ARBITRATION OF CLAIMS.” 2 Additionally, the obligation to arbitrate was highlighted by bold underscored letters at the top of the page where the provision was located and the provision itself expressly referenced appendix A of the handbook for a complete summary of the company’s mandatory arbitration policy and required the prospective employee to execute a copy of the Agreement to Arbitrate prior to employment.

In addition, the arbitration provision provided, “If, for any reason, an applicant fails to execute the Agreement to Arbitrate yet begins employment, that employee will be deemed to have consented to the Agreement to Arbitrate by virtue of receipt of this Handbook.” (Id. at pp. 376-378; 383.)

This case falls somewhere in between the facts in Esparza and Harris. Here, however, additional evidence shows Plaintiff understood his obligation “to read and be aware of, ... ALL policies contained” in the Employee Handbook. (Ronald Morrison Decl., Ex. A [Employee Acknowledgment].) After receiving the Employee Handbook, Plaintiff informed the LLC that he

2 The Table of Contents in the Employee Handbook identifies section 1.5 as “Dispute Arbitration.” (Ronald Morrison, Ex. A.) No emphasis is included in the description of that section. 3

needed “more time for my lawyer to review and advise.” (Ronald Morrison Reply Decl., ¶ 5, Ex. A.) The LLC granted him an extension for that purpose and ten days later Plaintiff returned a signed copy of the Employee Handbook. (Id., Exs. A, B; Harris, supra, 248 Cal.App.4th at p. 381 [mutual assent is determined under an objective standard applied to the outward manifestations of the parties, i.e., the reasonable meaning of their words and acts].) Based on the evidence provided, the Court finds the LLC has shown an agreement to arbitrate exists.

As for the Morrisons and Cheneys, the LLC has not provided any authority that, under the circumstances presented here, non-signatories to an arbitration agreement can force a plaintiff to submit his or her claims against them to arbitration. 3 Any request by those individual defendants to compel arbitration is denied.

Plaintiff further argues the arbitration agreement lacks material terms. “An arbitration agreement exists where there is ‘(1) a third party decision maker; (2) a mechanism for ensuring neutrality with respect to the rendering of the decision; (3) a decision maker who is chosen by the parties; (4) an opportunity for both parties to be heard, and (5) a binding decision.’ [Citations.]” (Ortega v. Contra Costa Community College Dist. (2007) 156 Cal.App.4th 1073, 1084-1085 (Ortega).) The LLC also cites Ortega and then without any explanation states, “The Arbitration Provision (Section 1.5) of the Employee Handbook fulfills all above criteria.” (Reply, p. 3, l. 16.)

The parties’ reliance on Ortega is misplaced. The issue in Ortega was whether the grievance procedure set forth in a collective bargaining agreement constituted an agreement to arbitrate despite not using the term “arbitration.” (Ortega, supra, 156 Cal.App.4th at p. 1084.) That issue in turn was part of the court’s larger discussion of whether the Plaintiff’s FEHA claims were barred by the doctrine of administrative or judicial exhaustion. In the absence of a procedure specified in an agreement, section 1282 et seq. sets forth general rules for the conduct of arbitration provisions and section 1281.6 sets forth a process for appointment of a neutral arbitrator.

The Court finds the LLC has shown an agreement to arbitrate exists between itself and Plaintiff.

B. Despite the Agreement to Arbitrate, the Overlapping Claims Against the Other Defendants are Grounds to Deny the Motion

Under section 1281.2(c), the court may deny a request to compel arbitration when “[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.”

Here, Plaintiff’s employment claims and minority member claims against the individual defendants and the C&N Defendants arise out of a series of related transactions. (FAC, ¶¶ 26

3 Exceptions to the rule that an arbitration agreement may not be enforced by or against nonsignatories is generally limited to three situations: a preexisting agency relationship, equitable estoppel, or where the nonsignatory is a third party beneficiary of the agreement. (See e.g., Jones v. Jacobsen (2011) 195 Cal.App.4th 1, 18; Toothman v. Redwood Toxicology Laboratory, Inc. (2026) 120 Cal.App.5th 412, ***, 344 Cal.Rptr.3d 285, 296.) 4

[“Defendants began a calculated effort to diminish Plaintiff’s rights as both an employee and member of PUREINFLUENCER”], 33 [adverse employment actions taken in retaliation for Plaintiff’s investigation into actions affecting his membership rights].) Thus, despite any agreement to arbitrate between Plaintiff and the LLC, the motion is denied on the ground that Plaintiff has claims against nonsignatories that present the possibility of conflicting rulings.

The LLC argues in its reply that the claims against the Morrisons are also covered by section 1.5 because both are employees of the LLC, and Ronald Morrison is also a manager, officer, and director. The LLC argues section 1.5 covers all disputes “with the Company and its officers, directors, and employees arising out of or relating to your employment relationship with the Company.” (Ronald Morrison Decl., Ex. A, italics added.) However, the Morrisons’ fiduciary duties to minority shareholders exist independently of any employment relationship. (Howard v. Goldbloom (2018) 30 Cal.App.5th 659, 670 [same duty would be owed to minority shareholder if he had acquired shares in a completely different manner than as compensation for his employment].)

The fact that the Morrisons and Cheneys have agreed to arbitrate the claims made against them does not alter this analysis. As set forth above, those individual defendants have not set forth grounds on which they, as nonsignatories, may enforce section 1.5 of the Employee Handbook.

C. Plaintiff has Failed to Show Waiver or Unconscionability

In light of the Court’s denial of the motion under section 1281.2(c), Plaintiff’s waiver and unconscionability defenses are immaterial. The Court nonetheless briefly addresses both arguments and finds Plaintiff has failed to show these defenses apply based on the facts of this case.

Plaintiff argues the arbitration is procedurally and substantively unconscionable. In support, Plaintiff notes, among other things, that the Employee Handbook states, “Do not discuss the contents of this document with persons who are not employees, officers, or otherwise privy to this information through an affiliation with Pureinfluencer, LLC.” (Ronald Morrison Decl., Ex. A [Foreward].)

The LLC reports that when the Employee Handbook was emailed to Plaintiff in February 2023, Plaintiff responded that he needed “more time for my lawyer to review and advise.” (Ronald Morrison Reply Decl., ¶ 5, Ex. A.) Ronald Morrison responded, “If you or your attorney have any questions about it, please direct them to myself and Emilie Elliott.” (Id., ¶ 6, Ex. A.) After Plaintiff raised concerns about finalizing the review prior to the scheduled deadline to return the signed handbook, Ronald Morrison replied, “Indeed have your lawyer review it, if your lawyer needs more time to review it just have them communicate that back to us. I’m happy to work with their timetable.” (Id., ¶ 8, Ex. A.)

Based on the evidence presented, the Court finds Plaintiff has failed to support its unconscionability defense. (See OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125-126 [discussing general principles of unconscionability defense].)

Plaintiff next argues the LLC waived the right to arbitration by actively participating in this litigation. Plaintiff reports the LLC filed a demurrer on substantive grounds, propounded over 1,400 discovery demands via the Morrisons (represented by the same counsel), engaged in an informal discovery conference, and submitted a Case Management Statement in November 2025 demanding a jury trial with the “willing to participate in arbitration” box left unchecked. (Taran Decl., ¶ 4.) The LLC responds it withdrew its demurrer to the initial complaint,4 has not answered the first amended complaint, and has not propounded or responded to any discovery. (Voronin Reply Decl., ¶¶ 4, 5.)

In support of his waiver argument, Plaintiff cites Quach v. Commerce Club, Inc. (2024) 16 Cal.5th 562 (Quach). In that case, the defendant answered the complaint, propounded discovery, indicated its preference for a jury trial on its Case Management Statement and failed to mark the box that it was willing to participate in arbitration, and did not file a motion to compel arbitration until thirteen months after the complaint had been filed. Unlike the defendant in Quach, the LLC did not directly participate in discovery and filed this motion within nine months of being served with the initial complaint. (Taran Decl., Ex. B [Request for Discovery Conference filed by the Morrisons and Cheneys]; Ex. D [joint Case Management Statement with the Morrisons and Cheneys].)

Plaintiff argues the LLC was aware of the arbitration provision in the Employee Handbook as early as February 7, 2025, when Ronald Morrison sent a termination letter to Plaintiff referencing the handbook. The letter, however, did not reference the arbitration provision. (Taran Decl., Ex. E.) In addition, counsel for the LLC reports he did not learn of the arbitration provision in the Employee Handbook until after the FAC was filed. (Voronin Decl., ¶ 4.)

Plaintiff argues despite not propounding its own discovery, the LLC was nonetheless acting in concert with the other defendants who did and are represented by the same attorney. Plaintiff does not explain whether the discovery propounded by the other defendants sought information connected to the employment claims asserted against the LLC. Based on the evidence provided, the Court finds Plaintiff has not shown the LLC unreasonably delayed filing this motion or that it took advantage of being in court to actively litigate the merits of the case over a prolonged period of time.

ORDER (PROPOSED)

The Motion to Compel Arbitration and Stay Proceedings is denied.

Plaintiff’s Motion to Compel Further Responses to Requests for Production and the C&N Defendants’ Motion for Protective Order are continued to June 25, 2026, at 9:00 a.m. in Department 2.

4 The Court takes judicial notice of the Request to Withdraw Motion filed by the LLC on November 18, 2025, before any opposition was due. (Evid. Code, § 452(d).) 6