Suraj Viswanathan v. AN San Jose Luxury Imports

Defendant is engaged in interstate commerce because its “business involves servicing vehicles that were manufactured outside of California and were in interstate commerce prior to arriving at the dealership for sale and servicing. Defendant also services vehicles for citizens 15

of other states, and as such serviced vehicles that crossed state lines.” (Diaz Decl. at ¶ 3.) Given the broad reach of the Commerce Clause, Defendant’s operations affect interstate commerce. (United States v. Oliver (1995) 60 F.3d 547, 550 [“cars are themselves instrumentalities of commerce, which Congress may protect”].)

Under the FAA, the court’s role is limited to determining “(1) whether a valid agreement to arbitrate exists, and if it does (2) whether the agreement encompasses the dispute at issue.” (Chiron Corp. v. Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130.) To determine “whether a valid contract to arbitrate exists,” courts apply “ordinary state law principles that govern contract formation.” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1093, citations omitted; see also Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1170.)

Plaintiff is Not a Transportation Worker under the FAA

Plaintiff argues he is exempt from the FAA as a “transportation worker.” (Opposition at pp. 11:27-12:28.) Section one of the FAA exempts from the FAA’s coverage “contracts of employment of . . . workers engaged in foreign or interstate commerce.” (9 U.S.C. § 1.) As one court has explained:

Section 1 of the FAA does not exclude all contracts of employment from the coverage of the FAA. Every circuit court to squarely address this issue has held that section 1 excludes from the coverage of the FAA only the employment contracts of workers actually engaged in the movement of goods in interstate commerce. Additionally, the Supreme Court’s interpretation of section 2 of the FAA in Allied–Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995), strongly supports this narrow interpretation of section 1.

(Cole v. Burns Intern. Sec. Services (D.C. Cir. 1997) 105 F.3d 1465, 1467.)

Relevant factors that may be considered in determining whether an employee is a “transportation worker” include:

[F]irst, whether the employee works in the transportation industry; second, whether the employee is directly responsible for transporting the goods in interstate commerce; third, whether the employee handles goods that travel interstate; fourth, whether the employee supervises employees who are themselves transportation workers, such as truck drivers; fifth, whether, like seamen or railroad employees, the employee is within a class of employees for which special arbitration already existed when Congress enacted the FAA; sixth, whether the vehicle itself is vital to the commercial enterprise of the employer; seventh, whether a strike by the employee would disrupt interstate commerce; and eighth, the nexus that exists between the employee’s job duties and the vehicle the employee uses in carrying out his duties (i.e., a

truck driver whose only job is to deliver goods cannot perform his job without a truck).

(Lenz v. Yellow Transp., Inc. (8th Cir. 2005) 431 F.3d 348, 352.)

The exemption is limited to workers in the transportation industry, not just a worker who incidentally transports goods interstate as part of his or her job in an industry that would otherwise be unregulated. (Hill v. Rent-A-Center, Inc. (11th Cir. 2005) 398 F.3d 1286, 1289.)

Plaintiff did not directly transport goods interstate. He did not supervise transportation workers or have any real connection to a vehicle used for the delivery of goods. Plaintiff’s duties involved driving and moving vehicles around the dealership, repositioning inventory, and test-driving vehicles. (Declaration of Suraj Viswanathan at ¶ 12.) Though Plaintiff handled vehicles that travel interstate, his duties were localized to the dealership, incidental to sales and service operations, and divorced from the continuous flow of interstate transit.

Plaintiff is not a transportation worker under the statute. Plaintiff’s job duties are distinguishable from the intrastate truck driver the United States Supreme Court recently found was a transportation worker. (Flowers Foods, Inc. v. Brock (2026) __U.S.__ [146 S.Ct. 1358, 1362, 225 L.Ed.2d 1, 6] [finding that a truck driver who picked up “products from a warehouse in Colorado and delivers them to local stores, all without leaving the State” was a transportation worker].)

The FAA Preempts Labor Code sections 432.6 and 229

Plaintiff argues the Agreement is void under Labor Code section 432.6. (Opposition at pp. 13:24-14:5.) Labor Code section 432.6, subdivision (a) provides, “A person shall not, as a condition of employment, continued employment or the receipt of any employment-related benefit, require any applicant for employment to waive any right, forum, or procedural for a violation of any provision of the California Fair Employment and Housing Act . . . or this code.” But the Ninth Circuit Court of Appeals has held that the “FAA preempts AB 511 as a whole to the extent it applies to arbitration agreements.” (Chamber of Commerce of the United States v. Bonta (2023) 62 F.4th 473, 490.) The court finds that reasoning persuasive.

Plaintiff contends that if the CAA applies, his seventh cause of action for failure to timely pay final wages upon termination is exempt from arbitration under Labor Code section 229. (Opposition at p. 14:6-17.) As noted above, the FAA applies and not the CAA. (See Perry v. Thomas (1987) 482 U.S. 483, 491 [finding Lab. Code, § 229 is preempted by the FAA in cases governed by the FAA].)

ANALYSIS

There is a Valid Agreement to Arbitrate

Defendant seeks to compel arbitration under the Agreement that Defendant contends was executed on January 31, 2024. (Reply at p. 2:19-25.) “A party’s acceptance of an agreement to arbitrate may be express, as when a party signs the agreement.” (Mendoza v.

1 Assembly Bill 51 is codified as Labor Code section 432.6. 17

Trans Valley Transport (2022) 75 Cal.App.5th 748, 777.) “Under Civil Code section 1633.7 . . . an electronic signature has the same legal effect as a handwritten signature.” (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.) The authenticity of an electronic signature may be established by detailing the “security precautions regarding transmission and use of an applicant’s unique username and password, as well as the steps an applicant would have to take to place his or her name on the signature line of the employment agreement.” (Id. at p. 1062.)

According to human resources business partner Cynthia Diaz, each applicant is given a unique login name to create a unique password. (Diaz Decl. at ¶ 7.) Applicants were instructed not to share their credentials with anyone and were instructed to report to security personnel if they suspected that their credentials were used by an unauthorized person. (Ibid.) “Only the applicant and/or employee had access to their unique login credentials, and no one at the company could see the password created by the employee.” (Ibid.)

Once hired, a personnel file is created in an online system called iCIMS. (Diaz Decl. at ¶ 8.) Employees are then required to go through an onboarding process which includes reviewing new hiring documents, including the Arbitration Agreement. (Ibid.) After reviewing the documents, the employee signs the document to indicate their acknowledgement. Employees are informed that checking a box is equivalent to a handwritten signature. (Ibid.)

Regarding plaintiff’s onboarding, Defendant attaches a copy of the Arbitration Agreement. (Diaz Decl., Ex. 1.) The checkbox denoting the employee’s electronic signature is not checked. Defendant also attaches a spreadsheet exported from the iCIMS system software. (Diaz Decl., Ex. 2.) Diaz explains that where an “employee has signed the arbitration agreement, the task export indicates the ‘Completed Date’ with the Complete Label ‘Mark as Complete.’ ” (Diaz Decl., ¶ 11.) The spreadsheet indicates Plaintiff “completed” the Arbitration Agreement on January 31, 2024 at 7:14 p.m. (Diaz Decl., Ex. 2.)

In the declaration filed with his opposition papers, Plaintiff declares he was presented with a set of onboarding documents when he was hired and that, “I recall signing those documents, but I was not aware that I was being presented with an arbitration agreement specifically, nor was any such agreement explained to me.” (Viswanathan Decl. at ¶ 4.) Defendant’s spreadsheet with a timestamp for completion—as well as Plaintiff’s admission that he signed the onboarding documents—are evidence of mutual assent.

A valid agreement to arbitrate exists between the parties.

Plaintiff highlights the lack of a checkbox on exhibit one, arguing that Defendant failed to demonstrate an executed agreement. (Opposition, 3:1-15.) He also contends the spreadsheet is not adequately authenticated. (Id. at 3:27-4:9.) But those arguments are foreclosed by Plaintiff’s own declaration submitted with the opposition, where he admits, “I recall signing those documents.” (Viswanathan Decl. at ¶ 4.) To the extent Plaintiff argues he did not understand the legal significance of the Agreement when he signed it, “[a]n arbitration clause within a contract may be binding on a party even if the party never actually read the clause.” (Pinnacle Museum Tower Assn. v.

Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.) The general rule is that “one who assents to a contract is bound by its provisions and cannot complain of unfamiliarity with the language.” (Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 383.)

The Scope of the Agreement Covers Plaintiff’s Claims

The Agreement provides, in relevant part:

Both employee signing below (the “Employee”) and the Company (as defined below) agree that any claim, dispute, and/or controversy between them which would otherwise require or allow resort to any court or other governmental dispute, resolution forum arising from, related to, or having any relationship in connection whatsoever with Employee’s seeking employment with, employment by, termination of employment from, or other association with the Company, shall be resolved through mandatory neutral binding arbitration on an individual basis only . . . This Agreement covers all theories and disputes, whether styled as an individual claim, class action claim, private attorney general claim or otherwise, and includes but is not limited to, any claims of discrimination, harassment, breach of contract, tort, or alleged violations of statute, regulation, or ordinance, or any claims in equity.

(Diaz Decl., Ex. 1.)

Here, Plaintiff brings several causes of action concerning retaliation, discrimination, wrongful termination in violation of public policy, breach of contract, and failure to pay final wages. These claims all stem from his employment relationship with Defendant. The scope of the Agreement covers Plaintiff’s claims.

The Agreement is Not Unconscionable

Plaintiff argues the Arbitration Agreement is unenforceable because it is both procedurally and substantively unconscionable. The party challenging a contractual arbitration provision bears the burden of proving that it is both procedurally and substantively unconscionable. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (OTO).) This may be done on a sliding scale, where the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required, and vice versa. (Id. at pp. 125-126.) Procedural unconscionability focuses on oppression or surprise to the “weaker” party based on unequal bargaining power. Substantive unconscionability focuses on the terms of the agreement and whether they are overly harsh or one-sided. (OTO, supra, 8 Cal.5th at pp. 125-129.)

Procedural Unconscionability

Factors relevant to whether there was “oppression” in the signing of an agreement include: “ ‘(1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.’” (OTO, supra, 8 Cal.5th at pp. 126-127.)

Plaintiff is correct that the Arbitration Agreement is a contract of adhesion. He was required to sign the Agreement as a condition of his employment. (Opposition at pp. 5:14-6:1.) But “the cases uniformly agree that a compulsory predispute arbitration agreement is not 19

rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis.” (Lagatree v. Luce (1999) 74 Cal.App.4th 1105, 1127.) This type of contract of adhesion in the employment context adds a modest amount of procedural unconscionability and, the amount of procedural unconscionability is increased when the fact of an adhesion contract is combined with other issues. (Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248.)

The court also agrees with Plaintiff that the onboarding process was oppressive. Plaintiff was presented with several documents at the same time. His manager told him to complete his paperwork quickly because he could not start his job without doing so. (Viswanathan Decl. at ¶¶ 7, 8.) Plaintiff did not have an opportunity to ask questions or receive an explanation of the documents he was signing. (Murrey v. Superior Court (2023) 87 Cal.App.5th 1223, 1238 [finding procedural unconscionability where the plaintiff “had a short period of time to click boxes on her computer and electronically sign forms acknowledging she had received multiple lengthy documents”].)

The Agreement here is also dense, with legal jargon and statutory references that are difficult for a layperson to understand. (Diaz Decl., Ex. 1 [referring to “Federal Arbitration Act”, “Federal Rules of Evidence”, “Federal Rules of Civil Procedure”, “Collective-Class Action Waiver”, “the National Labor Relations Act”, and “Private Attorney General Act”].) Procedural unconscionability has been found where the substance of the agreement is filled with statutory references and legal jargon. (OTO, supra, 8 Cal.5th at p. 128.)

Other elements of the Agreement identified by Plaintiff are not procedurally unconscionable. The Agreement here is a standalone three-page document. The waiver of jury trial is written in bold and capitalized letters. (Diaz Decl., Ex. 1.) There is an additional disclosure at the end of the document in capitalized letters before the signature line that states, “I FURTHER UNDERSTAND THAT THIS AGREEMENT REQUIRES ME TO ARBITRATE ON AN INDIVIDUAL BASIS ANY AND ALL DISPUTES THAT ARISE OUT OF MY EMPLOYMENT, UNLESS EXPRESSLY EXCLUDED IN THIS AGREEMENT.” (Ibid.)

The Agreement, therefore, draws the relevant terms to Plaintiff’s attention by using bold and capitalized font and is not procedurally unconscionable in this regard. (Compare with Higgens v. Superior Court (2006) 140 Cal.App.4th 1238, 1250-1251 [noting that procedural unconscionability has been found where the presence of an arbitration provision has not been distinguished through bold letting, larger font, or capitalization].)

Plaintiff argues the Agreement fails to identify an arbitration provider or governing rules. (Opposition at pp. 7:19-8:6.) But a “plain reading of section 1281.6 yields only one reasonable interpretation—that the validity of an arbitration agreement is not contingent upon the agreement identifying a specific arbitrator or specifying a particular method for appointing an arbitrator.” (HM DG, Inc. v. Amini (2013) 219 Cal.App.4th 1100, 1108.) Here, the Agreement provides that the arbitrator is to be mutually selected by the parties, and that if they “cannot agree on an alternative dispute resolution provider, an arbitrator will be appointed according to law.” (Diaz Decl., Ex. 1.) The process for selecting an arbitrator is not concealed from Plaintiff. The court does not find the failure to specify an arbitration provider procedurally unconscionable.

Given that the Agreement is a contract of adhesion, the oppressive nature of the onboarding process, and the dense legal jargon that permeates the Agreement, the court concludes that a moderate degree of procedural unconscionability exists. 20

Substantive Unconscionability

Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create overly harsh or one-sided results. (Armendariz Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) The court assesses whether the agreement reallocates risks in an objectively unreasonable or unexpected matter. (Jones v. Wells Fargo Bank 112 Cal.App.4th 1527, 1539.) “In assessing substantive unconscionability, the paramount consideration is mutuality.” (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 241, internal citation and quotation marks omitted.) Arbitration agreements are substantively unconscionable where they lack a “modicum of bilaterality,” “without at least some reasonable justification for such onesidedness based on ‘business realities.’” (Armendariz, supra, 24 Cal.4th at p. 117.)

Armendariz instructs that there are “five minimum requirements for the lawful arbitration of such rights pursuant to a mandatory employment arbitration agreement. Such an arbitration agreement is lawful if it ‘(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. Thus, an employee who is made to use arbitration as a condition of employment “effectively may vindicate [his or her] statutory cause of action in the arbitral forum.” ’ ” (Armendariz, supra, 24 Cal.4th at p. 102.)

The Agreement satisfies the minimum requirements described by Armendariz. The Agreement provides for a neutral arbitrator in that the arbitrator selected “shall be a retired judge or licensed attorney with experience serving as an arbitrator, as mutually agreed by the Parties.” (Diaz Decl., Ex. 1.) The parties may also petition the court to appoint an arbitrator. (Ibid.) The Agreement incorporates the Federal Rules of Evidence and Federal Rules of Civil Procedure. (Ibid.) The Agreement also requires the arbitrator to issue a decision in writing within 45 days of the arbitration hearing. (Ibid.) The Agreement does not limit statutory remedies. And it provides that the “Company will pay all arbitrator’s fees and other unique costs relating to the arbitration forum.” (Ibid.) Thus, no unreasonable costs are imposed on Plaintiff.

Plaintiff points to several terms that he contends are substantively unconscionable. Plaintiff argues the Agreement is unfairly one-sided. (Opposition at pp. 8:14-10:9.) Plaintiff argues that pursuant to Civil Code section 1642, the court should read the Arbitration Agreement and Confidentiality Agreement together because the execution of these contracts were part of a single transaction. According to Plaintiff, paragraph 7 of the Confidentiality Agreement grants Defendant the right to seek an injunction to enforce its confidentiality and trade secrets provisions, and waives the obligation to prove irreparable harm.

Under this section, Plaintiff is prohibited from using Company trade secrets to compete with the Company. Plaintiff maintains “[t]hese are restrictions that Defendant, as the stronger party, is far more likely to enforce against Plaintiff than the reverse.” (Opposition at p. 9:7-9.) But Plaintiff’s cited language that “Employee agrees the Company shall be entitled to the remedies of injunction (including temporary restraining order and/or preliminary injunction), specific performance and other equitable relief to redress any breach or to prevent any threatened breach” does not specifically waive the requirement for irreparable harm.

Further, “a contract 21

can provide a ‘margin of safety’ that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable.” (Armendariz, supra, 24 Cal.4th at p. 117.) Protecting valuable trade secrets and proprietary and confidential information from public disclosure is a legitimate commercial need. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1250.) Thus, the court does not find the Agreement unduly harsh or one-sided in this regard.

In any event, Plaintiff has neither attached a copy of the Confidentiality Agreement to his opposition nor set forth its full terms verbatim. It is the opposing party’s burden to produce evidence of any fact necessary to the defense by a preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) Plaintiff has not satisfied his burden here by failing to provide the full text of the Confidentiality Agreement to the court.

Plaintiff argues the scope of “Company” subject to the Agreement is unfairly expansive. (Opposition at pp. 10:10-11:6.) The Agreement defines “Company” as “the entity Employee is employed by, together with its parents, subsidiaries, affiliates, predecessors, successors and assigns, and each of their respective owners, directors, officers, managers, employees, vendors, and agents.” (Diaz Decl., Ex. 1.) In Cook v. University of Southern California (2024) 102 Cal.App.5th 312, 326-327, the plaintiff was required to arbitrate any claims she had with USC’s related entities, but the related entities were not required to arbitrate their claims with her.

The related entities there were not included in the definition of “University” and were separately defined. By contrast, here the Agreement defines the scope of “Company” as noted above, and provides that “[b]oth employee signing below (the ‘Employee’) and the Company (as defined below) agree that any claim, dispute, and/or controversy between them . . . shall be resolved through mandatory, neutral, binding, arbitration on an individual basis only.” (Diaz Decl., Ex. 1.) The language of the Agreement is therefore mutual in that the enumerated parties encompassing the “Company” are also required to arbitrate their claims with Plaintiff.

Plaintiff argues the Private Attorney General Act (PAGA) representative action waiver is contrary to public policy. (Opposition at p. 11:12-25.) The Agreement provides for a Class- Collective Action Waiver as follows:

Employee understands and acknowledges that the terms of this Agreement include a waiver of any substantive or procedural rights that Employee may have to bring or participate in an action on a class, collective, private attorney general, representative or other similar basis. This Class-Collective Action Waiver does not take away or restrict the right of Employee to pursue Employee’s own claims, but only requires that such claims be pursued in Employee’s own individual capacity, rather than on a class, collective, private attorney general, representative or similar basis.

(Diaz Decl., Ex. 1.)

In Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 644-645, the United States Supreme Court left the holding of Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380 undisturbed that a blanket PAGA waiver is unconscionable under California law. (See Alberto, supra, 91 Cal.App.5th at p. 494; see also Adolph v. Uber Technologies (2023) 14 Cal.5th 1104, 1117.) However, the Agreement here is not a wholesale 22

waiver because it waives only representative claims. The Agreement is clear that the covered claims are to proceed on an individual basis only, and the waiver is therefore, not unlawful. (See Valencia v. Mattress Firm, Inc. (C.D. Cal. Feb. 16, 2023) C 22-06875 WHA, 2023 U.S. Dist. LEXIS 26863 at *8 [noting that the agreement did not operate as a wholesale waiver because “representative actions” referred to non-individual or class claims, allowing plaintiff to raise the individual portion of her PAGA claim]; see also Martinez-Gonzalez v.

Elkhorn Packing Co., LLC (N.D. Cal. 2022) 635 F.Supp.3d 883, 899 [“The waiver here is not a wholesale waiver of Plaintiff’s individual and representative PAGA rights; it only waives Plaintiff’s right to file a non-individual PAGA claim on behalf of other workers. Accordingly, the waiver provision here is not unlawful.”].) Since the waiver is not unlawful, the court need not consider its severability, but in any event notes that the Agreement contains a severability clause that is identical to that in Viking River, requiring the collective action to proceed in court should the waiver be found invalid.

Plaintiff’s complaint also does not bring any PAGA claims. The Agreement is not substantively unconscionable in this regard.

The Agreement is not substantively unconscionable. The petition to compel arbitration is GRANTED. This action is STAYED in its entirety pending the outcome of arbitration. (Code Civ. Proc. § 1281.4; 9 U.S.C. § 3.)

CONCLUSION

The petition to compel arbitration is GRANTED. This action is STAYED in its entirety pending the outcome of arbitration. A case status review regarding arbitration will be held on July 8, 2027, at 11:00 a.m. in Department 10.

The court will prepare the order.

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Calendar Lines 10 and 11 Case Name: Niloufar Nouri et al. v. Tesla Insurance Services, Inc. et al.