Amy Hunter vs San Jose Motorsport, Inc. et al.

Since the Employment Agreement is the more recent agreement and contains an integration clause, it supersedes the Binding Arbitration Agreement and controls.

Having considered the Employment Agreement (the “Agreement”) and the circumstances of its execution, the court will grant the motion to compel arbitration and stay this action.

II. LEGAL STANDARD

A. OBJECTION TO EVIDENCE

Plaintiff objects to the Declaration of Willie Hodgson for lack of personal knowledge, improper lay opinion, speculation, lack of foundation, hearsay, and lack of authentication.

The Court OVERRULES these objections.

First, the Declaration of Willie Hodgson does not offer any out-of-court statements offered for the truth of the matter asserted.

Second, “the custodian of a document need not have been present or employed when the document was created or signed to authenticate a document in a company’s files.” (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 758-759).

Plaintiff also objects to Exhibits A and B attached to the Petition to Compel Arbitration.

Exhibit A is the Binding Arbitration Agreement executed December 18, 2019.

Exhibit B is the Employment Agreement executed March 22, 2024.

Plaintiff objects to these documents for lack of foundation and authentication as well as hearsay.

The Declaration of Willie Hodgson provides that these documents are maintained in the normal course and scope of business and thus fall within the business records exception.

Additionally, “documents containing operative facts such as words forming an agreement are not hearsay.” (Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 316).

The agreements are submitted to prove the existence of an agreement to arbitrate and are not offered for the truth of the underlying assertions contained therein.

Nevertheless, “[f]or purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of authentication.” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165-166 (Gamboa)).

All that is required is that the moving party attach the agreement to the motion or set forth its terms. (Ibid).

As explained below, Defendant has met its burden.

For these reasons, the objections to Exhibits A and B are also OVERRULED.

B. FEDERAL ARBITRATION ACT (“FAA”)

The Federal Arbitration Act’s (“FAA”) term “involving commerce” is interpreted broadly.

The basic coverage provision of the FAA “makes the law applicable to contracts evidencing a transaction ‘involving commerce’ (9 U.S.C. § 2), which language reflects that Congress intended the law’s coverage to extend to the full reach of its commerce clause power.” (Nieto v. Fresno Beverage Co. (2019) 33 Cal.App.5th 274, 279 [internal citations omitted]).

“Congress Commerce Clause power ‘may be exercised in individual cases without showing any specific effect upon interstate commerce’ if in the aggregate the economic activity in question would represent ‘a general practice . . . subject to federal control.’” (Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56-57 [quoting Mandeville Island Farms, Inc. v. American Crystal Sugar Co. (1948) 334 U.S. 219, 236]).

Defendant San Jose BMW is engaged in interstate commerce.

“The Company purchases goods, including, inter alia, motorcycle parts and motorcycles from suppliers throughout the United States and abroad, sells its vehicles to customers who reside both in California and in other states, works with its customers to obtain financing with lenders throughout the United States, and services and repairs vehicles of customers who reside both in California and in other states; and who are reasonably expected to operate their vehicles while traveling throughout the United States.” (Declaration of Willie Hodgson at ¶ 4).

Based on this description, Defendant San Jose Motor Sport, Inc.’s operations meet the broad definition of interstate commerce.

Moreover, “employment contracts, except for those covering workers engaged in transportation, are covered by the FAA.” (EEOC v. Waffle House, Inc. (2002) 534 U.S. 279, 289).

Therefore, the FAA applies.

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).

III. ANALYSIS

A. THERE IS A VALID AGREEMENT TO ARBITRATE THAT COVERS CLAIMS AGAINST SAN JOSE BMW

Defendants have attached a copy of the Employment Agreement to their petition to compel arbitration. (Petition to Compel Arbitration, Exh. B).

(Gamboa, supra, 72 Cal.App.5th at pp. 165-166 [noting that it is a moving party’s burden to produce prima facie evidence of an agreement to arbitrate by attaching the agreement to the motion]).

The Employment Agreement is signed by Plaintiff and dated March 22, 2024.

Plaintiff does not dispute that she signed the Employment Agreement. (Declaration of Amy Hunter [“Hunter Decl.”] at ¶ 6 [“The signature on that document is mine.”]).

Therefore, the Employment Agreement is a valid agreement to arbitrate.

The Employment Agreement sets forth the requirement for arbitration in paragraph 15 as follows: “Settlement by Arbitration. Any claim or controversy that arises out of or relates to this agreement, or the breach of it, shall be settled by arbitration in accordance with the rules of the American Arbitration Association. Judgment upon the award rendered may be entered in any court with jurisdiction.” (Petition to Compel Arbitration, Exh. B at ¶ 15).

Plaintiff does not allege breach of the Employment Agreement, but her causes of action are related to it.

For example, in addition to discrimination and retaliation, Plaintiff’s claims include wrongful termination in violation of public policy, failure to issue accurate and itemized wage statements, and failure to pay wages due upon termination; waiting time penalties.

Plaintiff’s claims arise out of her employment relationship with San Jose BMW and therefore encompass the scope of the Employment Agreement.

However, the Employment Agreement only covers the claims against San Jose BMW and not Hodgson.

“Because arbitration is a matter of contract, the basic rule is that one must be a party to an arbitration agreement to be bound it or invoke it—with limited exceptions.” (Soltero v. Precise Distribution, Inc. (2024) 102 Cal.App.5th 887, 892-893).

“Whether an arbitration agreement is binding on a third party (e.g. a nonsignatory) is a question of law subject to de novo review.” (Benaroya v. Willis (2018) 23 Cal.App.5th 462, 468).

“There are circumstances in which nonsignatories to an agreement containing an arbitration clause can be compelled to arbitrate under that agreement. As one authority has stated, there are six theories by which a nonsignatory may be bound to arbitrate ‘(a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e) estoppel; and (f) third party beneficiary.’” (Id. at p. 469 [citing Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1513]).

Unlike the Binding Arbitration Agreement, the Employment Agreement does not expressly apply to the benefit of third parties like Hodgson.

Defendants argue Plaintiff must be compelled to arbitrate her claims against Hodgson based on equitable estoppel. (Defendants’ Memorandum of Points & Authorities at p. 5:17-28).

However, Defendants’ argument is directed toward the Binding Arbitration Agreement and not the Employment Agreement. (Ibid).

The Court, in any event, considers whether the doctrine of equitable estoppel applies to the Employment Agreement.

“[T]he sine qua non for application of equitable estoppel as the basis for allowing a nonsignatory to enforce an arbitration clause is that the claims the plaintiff asserts against the nonsignatory must be dependent upon, or founded in and inextricably intertwined with the underlying contractual obligations of the agreement containing the arbitration clause.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 217-218).

In the Ford Motor Warranty Cases (2025) 17 Cal.5th 1122, the car manufacturer moved to compel arbitration of this action pursuant to the sales contract as a non-party.

The California Supreme Court denied the petition to compel arbitration because the manufacturer was not a signatory to the sales contract and because the breach of warranty claims under the Song-Beverly Act were “not intimately found in or intertwined with the sales contracts[.]” (Id. at p. 1126).

Plaintiff asserts only two causes of action against Hodgson: the eleventh cause of action for failure to issue accurate and itemized wage statements; and the twelfth cause of action for failure to pay wages due upon termination; waiting time penalties.

Plaintiff brings these causes of action pursuant to Labor Code sections 226(a), and 201-203.

These causes of action do not depend on the existence of a written employment agreement and are independently alleged under the statute.

These claims relate to the Employment Agreement as to San Jose BMW because it is a party to the Agreement.

Hodgson, however, is not a party to the Employment Agreement and these claims are not so intertwined with the Agreement such that Plaintiff’s claims against him are dependent upon it.

Thus, the scope of the Agreement covers Plaintiff’s claims as to San Jose BMW only.

B. THE EMPLOYMENT AGREEMENT IS NOT UNCONSCIONABLE

Plaintiff maintains 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).

Nevertheless, both must be shown.

Procedural unconscionability focuses on oppression or surprise to the “weaker” party based on unequal bargaining power, whereas 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).

The court thus proceeds to consider whether the Agreement is procedurally and substantively unconscionable.

C. PROCEDURAL UNCONSCIONABILITY

The circumstances that the court examines to determine whether there was “oppression” in the signing of an agreement generally 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 [quoting Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348]).

Plaintiff maintains she was not given an opportunity to negotiate or opt out of the arbitration provision, and that she was not told the agreement contained an arbitration provision in the first place. (Hunter Decl. at ¶¶ 7-10).

Plaintiff further maintains she was pressured into signing the Agreement quickly, and that she believed doing so was a precondition to resolving her pay dispute. (Ibid).

However, Plaintiff concedes that she was able to negotiate a noncompete provision and have it excluded from the Agreement. (Hunter Decl. at ¶ 8).

Plaintiff also concedes that the execution of the Agreement took a total of five days. (Id. at ¶ 7).

To the extent Plaintiff argues the terms were not explained to her, the fact that she chose not to read or take the time to understand these provisions is irrelevant.” (Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 383 (Harris).

“An 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, supra, 248 Cal.App.4th at p. 383).

The Employment Agreement was offered as a condition of employment, and was, therefore, a contract of adhesion.

Nevertheless, “the cases uniformly agree that a compulsory predispute arbitration agreement is not 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. (See Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248).

Given the adhesive nature of the Agreement, the Court concludes there is a modest degree of procedural unconscionability.

D. 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 one-sidedness 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 these factors.

The Agreement provides that arbitration shall be held in accordance with the rules of the American Arbitration Association (“AAA”). (Petition to Compel Arbitration, Exh. B at ¶ 15).

Though not attached to the Agreement, “the failure to attach the arbitration rules [is] of ‘minor significance to [the courts’] analys[e]s’ of procedural unconscionability.” (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 691 [noting that there could be no surprise because the AAA rules are available on the Internet] [quoting Bigler v. Harker School (2013) 213 Cal.App.4th 727, 737]).

With respect to substantive unconscionability, the “absence of express provisions requiring a written arbitration award and allowing discovery does not render the arbitration agreement unconscionable.

Rather, those terms are implied as a matter of law as part of the agreement.” (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 177).

The Second District Court of Appeal in Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1476 noted, “[t]here appears to be no meaningful difference between the scope of discovery approved in Armendariz and that authorized by the AAA employment dispute rules[.]”

The Court, thus, concludes reference to the AAA rules is sufficient for finding that the arbitration shall provide for a neutral arbitrator, discovery, and a written award.

The AAA rules also set forth a fee schedule outlining the costs to be undertaken by each party.

“The rules of the American Arbitration Association specified by the clause as governing the resolution of disputes are generally regarded to be neutral and fair.” (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1126-1127).

Thus, reference to the AAA rules alone is sufficient for finding the lack of substantive unconscionability.

Plaintiff does not, in any event, argue there are any overly harsh or one-sided provisions in the Employment Agreement.

Given the moderate degree of procedural unconscionability and the absence of substantive unconscionability, the Court does not find the Agreement unenforceable.

Accordingly, the motion to compel arbitration is GRANTED as to San Jose BMW only.

The entirety of this action, including the non-arbitrable claims against Hodgson are STAYED pending the outcome of arbitration. (Code Civ. Proc. § 1281.4; 9 U.S.C. § 3).

IV. CONCLUSION

Based on the foregoing, the motion to compel arbitration is GRANTED.

This action is STAYED in its entirety pending the outcome of arbitration.

The Court will prepare the formal Order.

Calendar Line # 8 Case Name David Dixon, Jr., Ind. And as SII to the Estate of David Dixon, Sr. et al vs Jason Murray et al.