Shannon McElrath v. Commure, Inc.

Southern California Specialty Care, Inc. (2018) 20 Cal.App.5th 835, 840.) However, “[t]he procedural aspects of the FAA do not apply in state court absent an express provision in the arbitration agreement.” (Ibid.) Here, the Agreement expressly provides that it “shall be interpreted and enforced in accordance with the [FAA],” and thus federal procedural and substantive law apply. (See Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122 [“[t]he phrase ‘pursuant to the FAA’ is broad and unconditional,” and unambiguously adopts both the procedural and substantive aspects of the FAA].)

Under the FAA, the Court must grant a motion to compel arbitration if any suit is brought upon “any issue referable to arbitration under an agreement for such arbitration” (9 U.S.C. § 3), subject to “such grounds as exist at law or in equity for the revocation of any contract...” (9 U.S.C. § 2). The moving party must prove by a preponderance of evidence the

existence of the arbitration agreement and that the dispute is covered by the agreement. (See Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396 [under both federal and state law, “the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate”]; Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal) [moving party’s burden is a preponderance of evidence].) The burden then shifts to the resisting party to prove a ground for denial. (Rosenthal, supra, 14 Cal.4th at p. 413.) “In determining the rights of parties to enforce an arbitration agreement within the FAA’s scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration.” (Pinnacle Museum Tower Assn. v.

Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.) But the FAA’s policy favoring arbitration ... is merely an acknowledgment of the FAA’s commitment to overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate and to place such agreements upon the same footing as other contracts. Or in another formulation: The policy is to make arbitration agreements as enforceable as other contracts, but not more so. Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind. (Morgan v.

Sundance, Inc. (2022) 596 U.S. 411 (Morgan) [internal citations and quotations omitted].) III. DEFENDANT’S MOTION TO COMPEL ARBITRATION AND REQUEST TO STAY ACTION Defendant moves for an order compelling arbitration of Plaintiff’s individual claims, dismissing the class claims, and staying any non-individual PAGA claim pending completion of the individual arbitration. a. Existence of Agreement to Arbitrate To establish the existence of an arbitration agreement, Defendant submits the declaration of Celeste Stephens (“Stephens”), Defendant’s Director, People. (Stephens Decl., ¶ 1.)

Stephens states that Cynthia Jiang (“Jiang”), Senior Recruiter, was involved in transmitting Plaintiff’s offer letter via Docusign. (Id. at ¶ 7.) Defendant’s records reflect that a final offer letter containing an arbitration provision (“Arbitration Provision”) was sent to Plaintiff through Docusign and she electronically signed the offer letter on February 28, 2024 and Defendant’s general counsel, Daniel Brian, countersigned on behalf of Defendant. (Id. at ¶ 9.) The Arbitration Provision is found at Paragraph 10 of the offer letter. (Id. at ¶ 10.)

The Arbitration Provision is attached to Stephens’s declaration as Exhibit B. Stephens states that the Docusign was sent to Plaintiff’s email address and accepted by her. (Id. at ¶ 13.) Exhibit B bears Plaintiff’s electronic signature dated February 28, 2024. (See Stephens Decl., Ex. B.) Defendant contends that by executing the offer letter containing the Arbitration Provision, Plaintiff agreed to arbitrate all claims related to her employment on an individual basis and that neither party may proceed by class action. (Motion, p. 1:4-12.)

As relevant here, the following provision constitutes the Arbitration Provision: To ensure the rapid and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, your employment with the Company, or the termination of your employment, shall

be resolved, to the fullest extent permitted by law, by final, binding arbitration conducted by AAA or its successor, under AAA’s then applicable rules and procedures for employment disputes (available upon request and also currently available at http://www.adr.org/sites/default/files/EmploymentRules-Web.pdf. You acknowledge that by agreeing to this arbitration procedure, both you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.

You will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based.

The arbitrator shall be authorized to award all relief that you or the Company would be entitled to seek in a court of law. The Company shall pay all AAA arbitration fees in excess of the administrative fees that you would be required to pay if the dispute were decided in a court of law. Nothing in this letter agreement is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. You and the Company further agree that any arbitration shall be conducted in an individual capacity only, and neither party shall file suit as a class action or other representative action.

If any court or arbitrator determines that the class-action waiver set forth in this section is void or unenforceable for any reason, or that an arbitration can proceed on a class basis, then the arbitration provision set forth above shall be deemed null and void in its entirety and neither you nor the Company shall be deemed to have agreed to arbitrate disputes. (Stephens Decl., Ex. B, ¶ 10 [Arbitration Provision][emphasis original].) By producing a copy of the Arbitration Provision purportedly bearing Plaintiff’s signature, Defendant has established the existence of an agreement to arbitrate between itself and Plaintiff.

In opposition, Plaintiff does not appear to dispute the existence of the Arbitration Provision, instead arguing that the entire Arbitration Provision is null and void because the representative-action waiver is unenforceable as applied to Plaintiff’s PAGA claim. (Opposition, p. 2:18-25.) Accordingly, Defendant has met its initial burden by submitting prima facie evidence of a written agreement to arbitrate the claims asserted in the action. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060 [a defendant may meet their initial burden on a motion to compel arbitration “by attaching a copy of the arbitration agreement purportedly bearing [the opposing party’s] electronic signature”].) b.

Validity and Scope of the Agreement to Arbitrate The crux of Plaintiff’s argument in opposition is that the Arbitration Provision contains a waiver that is unenforceable and therefore, the entire provision is null and void per the language of the provision itself. (Opposition, p. 4:8-16.) i. Unenforceable Waiver As noted above, the Arbitration Provision contains the following waiver: “You and the Company further agree that any arbitration shall be conducted in an individual capacity only,

and neither party shall file suit as a class action or other representative action. If any court or arbitrator determines that the class-action waiver set forth in this section is void or unenforceable for any reason, or that an arbitration can proceed on a class basis, then the arbitration provision set forth above shall be deemed null and void in its entirety and neither you nor the Company shall be deemed to have agreed to arbitrate disputes.” (Stephens Decl., Ex. B [emphasis added].) Plaintiff contends that the language of the provision does not distinguish between individual and non-individual PAGA claims and instead states that employees may not fille any other representative actions, a “wholesale waiver [that] California law forbids.” (Opposition, p. 5:24-26.)

Plaintiff directs the Court to DeMarinis v. Heritage Bank of Commerce (2023) 98 Cal.App.5th 776 (DeMarinis) to support her argument that where an agreement prohibits class, collective, or representative proceedings, and separately provides that if waiver is unenforceable, the entire arbitration agreement became null and void, the court will find the waiver unenforceable. (Opposition, p. 4:17-22.) In DeMarinis, the Court explained that [E]mployers are free to draft a severability clause like the one that Viking River interpreted in conjunction with the PAGA waiver to permit arbitration of just the individual PAGA claim. (Viking River, supra, 596 U.S. at p. 649 [142 S.Ct. at p. 1917.].)

But here, [defendant] did not do so; instead, it used an arbitration agreement containing a nonseverability clause and a poison pill which together specified that all conditions in the waiver provision are material and may not be modified or severed, either ‘in whole or in part,’ and that if the waiver provision is found unenforceable, then ‘the entirety’ of the arbitration agreement is ‘null and void.’ As the trial court aptly observed, these provisions preclude ‘giving effect to the Viking River distinction between ‘individual’ and ‘non-individual claims’ because they prohibit severance of the unenforceable nonindividual PAGA claims waiver.

And because the waiver provision’s terms cannot be severed in any way, application of Iskanian’s3 principal rule renders the entire waiver provision unenforceable, which in turn renders void the entire arbitration agreement. (DeMarinis, supra, 98 Cal.App.5th at p. 787; see also Westmoreland v. Kindercare Education LLC (2023) 90 Cal.App.5th 967, 982 (Westmoreland).) Plaintiff emphasizes that the Arbitration Provision was presented to Plaintiff in February 2024, after Viking River and Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 were decided and the courts had “already drawn the individual/non-individual PAGA distinction.” (Opposition, p. 5:4-9.)

In other words, Defendant could have drafted the provision to allow for severability but chose complete nullification instead. (Id. at p. 5:7-9.) Westmoreland followed similar logic, explaining that “[h]ad [defendant] simply included a waiver of representative claims in its arbitration agreement, and not included the poison pill at the end of the agreement, the result here could have been substantially similar to Viking River. . . The arbitration agreement[] in [this] case[] did not have a poison pill provision like the one in [defendant’s] agreement here . . . .” (Westmoreland, supra, 90 Cal.App.5th at p. 982.)

In reply, Defendant argues that if the class action waiver is deemed void then only the class action waiver provision will be deemed null and void. (See Reply, p. 3:9-15.) In other words, Defendant asserts a severability argument. Defendant attempts to distinguish both Westmoreland and DeMarinis, arguing that “[n]either decision holds that every reference to a

3 Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 [overruled in part, on other grounds, by Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639].

representative action automatically renders a separately stated, class-specific nullification condition operative” and that the agreements in these cases had specific sections within the agreements addressing waiver, unlike the Arbitration Provision. (Reply, pp. 4:22-27, 5:19-26.) Neither argument is persuasive. The language of the Arbitration Provision is clear and unambiguous: “If any court or arbitrator determines that the class-action waiver set forth in this section is void or unenforceable for any reason, or that an arbitration can proceed on a class basis, then the arbitration provision set forth above shall be deemed null and void in its entirety and neither you nor the Company shall be deemed to have agreed to arbitrate disputes.” (Stephens Decl., Ex.

B, ¶ 10 [emphasis added].) Here, like DeMarinis and Westmoreland, the class-action waiver is unenforceable and therefore the “arbitration provision set forth above” is null and void. (See Westmoreland, supra, 90 Cal.App.5th at p. 979 [“Here, the ‘Savings Clause & Conformity Clause’ states that the arbitration agreement is ‘invalid’ if the ‘Waiver of Class and Collective Claims’ is ‘found to be unenforceable.’ This is an unambiguous expression of the parties’ intent to avoid parallel litigation before an arbitrator and before a court.”].)

As Plaintiff states in opposition, Paragraph 10 of the Arbitration Provision necessarily prohibits the parties from filing suit as a “class action or other representative action” entirely, and PAGA actions are representative actions. (See Opposition, p. 5:12-17, citing Adolph, supra, 14 Cal.5th at pp. 1116-1117 and Viking River, supra, 596 U.S. at p. 646 [stating PAGA gives “employees a right to assert the State’s claims for civil penalties on a representative basis . . .”].) Given that the waiver provision in Paragraph 10 prohibits severance of the unenforceable, nonindividual PAGA claims, the entire waiver provision is therefore unenforceable, rendering the entire Arbitration Provision null and void. (See Viking River, supra, at p. 647 [employer could enforce arbitration of just the individual PAGA claims where the arbitration agreement contained a “severability clause specifying that if the waiver was found invalid, any class, collectively, representative, or PAGA action would presumptively be litigated in court.”].)

Accordingly, the Court declines to compel arbitration. Based on the foregoing, the motion to compel arbitration and stay the action is DENIED. Given this ruling, any remaining arguments need not be addressed.

IV. CONCLUSION

The motion to compel arbitration and stay the action is DENIED. The Court will prepare the final order.

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