Dennise Royval v. Evolution Fresh, LLC; et al.

The Federal Arbitration Act (9 U.S.C. §1, et. seq.) (hereinafter, “FAA”) authorizes enforcement

of arbitration clauses unless grounds exist in law or equity for the revocation of any contract. (9

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U.S.C. §2.) To compel arbitration under the FAA, a finding must be made that an arbitration

agreement exists between the parties and that the agreement covers the dispute. (AT&T

Technologies, Inc. v. Communications Workers of America (1986) 475 U.S. 643, 648-49.)

Arbitration agreements are on equal footing with other contracts and should be enforced according

to their terms. (AT&T Mobility LLC v. Concepcion (2011) 131 S. Ct. 1740, 1745.) Thus,

arbitration agreements can be declared unenforceable based on contract defenses, such as fraud,

duress, or unconscionability. (Id. at 1746.) Any doubt about the arbitrability of a dispute under

the FAA is resolved in favor of arbitration. (Id. at 650.)

The FAA applies to arbitration clauses involving interstate commerce. (9 U.S.C. §2;

Aviation Data, Inc. v. American Express Travel Related Services Company, Inc. (2007) 152

Cal.App.4th 1522, 1534.) However, the FAA does not apply to “contracts of employment of

seamen, railroad employees, or any other class of workers engaged in foreign or interstate

commerce.” (9 U.S.C. §1.) “The party opposing arbitration bears the burden of demonstrating

that the exemption applies.” (Performance Team Freight Systems, Inc. v. Aleman (2015) 241

Cal.App.4th 1233, 1241.)

Similar to California law, any doubt about the arbitrability of a dispute under the FAA is

resolved in favor of arbitration. (AT&T Technologies, Inc., supra, 475 U.S. at 650.) “[C]ourts

applying the FAA rely on state law contract principles in determining whether an arbitration

agreement exists.” (Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425, 1463.)

In March 2022, the FAA was amended for the first time in 100 years by the Ending Forced

Arbitration of Sexual Assault and Sexual Harassment Act of 2021, which allows “the person

alleging conduct constituting a sexual harassment dispute or sexual assault dispute” to nullify a

“predispute arbitration agreement” and have it remain in state or federal court. (9 U.S.C. § 402.)

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b. California Law.

The enforcement language of the FAA is almost identical to Code of Civil Procedure,

section 1281, which governs the application of arbitration under California law. California Code

of Civil Procedure sections 1280 et seq. provide a procedure for the determination of whether a

valid agreement to arbitrate exists that satisfies both state and federal law. (Rosenthal v. Great

Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)

Under Code of Civil Procedure, section 1281.2, a party to an arbitration agreement may

move to compel arbitration if another party to the agreement refuses to arbitrate, and the court shall

order the parties to arbitrate if it determines an agreement to arbitrate exists, unless it determines:

(a) The right to compel arbitration has been waived by the petitioner; (b) Grounds exist for the revocation of the agreement; or (c) 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.

(Code Civ. Proc., § 1281.2.)1

When a petition to compel arbitration is filed and accompanied by prima facie evidence of

a written arbitration agreement, the court must determine whether a written arbitration agreement

exists, if any defense to its enforcement is raised, and whether the agreement is enforceable.

(Rosenthal v. Great Western Fin. Sec. Corp. (1996) 14 Cal.4th 394, 413.) “In the trial court, the

party seeking arbitration bears the burden of proving the existence of an arbitration agreement by

a preponderance of the evidence, and the party opposing arbitration bears the burden of proving

by a preponderance of the evidence any defense, such as unconscionability.” (Peng v. First

Republic Bank (2013) 219 Cal.App.4th 1462, 1468; see also Pinnacle Museum Tower Assn. v.

1 Under the FAA and CA law, analysis of whether to compel arbitration is the same, in that both the FAA and California law require a finding of an enforceable agreement that covers the claims. Contract defenses such as fraud, duress, or unconscionability apply. (AT&T Mobility LLC, supra, 563 U.S. at 339.)

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Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.) “The trial court sits as the

trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any

oral testimony the court may receive at its discretion, to reach a final determination.” (Ruiz v. Moss

Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.)

The defense of “unconscionability has 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. 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.” (Armendariz v. Foundation

Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (“Armendariz”) (internal citations

omitted) (emphasis in the original).)

California law favors the enforcement of valid arbitration agreements. (Ericksen,

Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 320; In re

Tobacco I (2004) 124 Cal.App.4th 1095, 1103.) Any doubts to arbitration will be resolved against

the party asserting a defense to arbitration, whether the issue is construction of contract language,

waiver, delay or any like defense to arbitrability. (Erickson, supra, 35 Cal.3d at p. 320; In re

Tobacco I, supra, 124 Cal.App.4th at p. 1103.)

The party seeking to compel arbitration may also seek a stay of pending litigation either by

itself or in conjunction with a petition to compel contract arbitration. A stay must be granted where

a court has previously ordered arbitration of the dispute or an application for such an order has

been made but not ruled upon. (Code Civ. Proc., § 1281.4.)

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Appellate review of an order regarding an arbitration agreement's validity is de novo if the

evidence is not in conflict and the ruling is based entirely on an interpretation of law. (Pinnacle

Museum Tower Assn. v. Pinnacle Market Development (US), LLC, supra, 55 Cal.4th at 236.)

II. Analysis.

In filing the motion to compel arbitration, Defendants provided a signed “Mutual

Arbitration Agreement,” (“Agreement”) and Plaintiff, in opposition, does not contest that it is her

signature on the Agreement. She opposes the motion, however, on grounds that: 1) the FAA does

not apply; 2) Plaintiff’s claims for injunctive relief are exempt from arbitration; and 2) the

Agreement is unconscionable.

a. Defendants’ Objection to Plaintiff’s Declaration.

Defendants object to Plaintiff’s late filed declaration because it was untimely filed and

Plaintiff did not seek leave of Court to file it late. However, “a trial court has broad discretion to

accept or reject late-filed papers.” (Rancho Mirage Country Club Homeowners Assn. v.

Hazelbaker (2016) 2 Cal.App.5th 252, 262.) Although Defendants argue they were prejudiced by

Plaintiff’s late filing, they also admit they were able to address it in their reply.

As such, the Court overrules Defendants’ objection.

b. The FAA Applies.

Arbitration is ordered if an agreement to arbitrate the controversy exists; an agreement only

needs to be found to exist, not an evidentiary determination of its validity. (Condee v. Longwood

Management Corp. (2001) 88 Cal.App.4th 215, 218-19.) The defendant providing an executed

copy of the arbitration agreement satisfies the initial burden. (Espejo v. Southern California

Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1058-60.)

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In opposing the motion to compel arbitration and stay these proceedings, Plaintiff first

argues the FAA does not apply because it should be read in conjunction with the confidentiality

agreement, which states that California law applies. Even if the two contracts were read together,

the FAA applies. The choice of law provision in the confidentiality agreement states:

This Agreement and all questions with respect to the construction of this Agreement and the rights and liabilities of the parties shall be governed by the laws of the State of California without regard to its laws relating to choice of law or conflict of laws. Unless the dispute is subject to arbitration under an applicable agreement, the parties to this agreement irrevocably consent to the exclusive jurisdiction of the Superior Court of Kern County, or the United States District Court for the Eastern District of California in any and all actions between the parties.

(K. Grobman Decl., Ex. A at ¶16 (emphasis added).) The Agreement, in turn, states that:

The Federal Arbitration Act (“FAA”) applies to this Agreement and shall govern the interpretation, enforcement, stay, and arbitrability of claims under this Agreement, unless the FAA is found not to apply to this Agreement, in which case the applicable arbitration act of the state of Generous Brand’s business will apply.

(P. Shiguiyama Decl. Ex. 2 at 1.) As such, even when interpreted together, unless there is a

successful external challenge to either agreement, both state that the FAA applies to arbitration

because it is exempt from the California law selection clause in the confidentiality agreement.

Plaintiff next argues that the FAA does not apply because Plaintiff was not involved in

interstate commerce. As stated by the US Supreme Court, however, “the term ‘involving

commerce’ in the FAA as the functional equivalent of the more familiar term ‘affecting

commerce’--words of art that ordinarily signal the broadest permissible exercise of Congress'

Commerce Clause power.” (Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56.) “Because the

statute provides for ‘the enforcement of arbitration agreements within the full reach of the

Commerce Clause,’ [Citation], it is perfectly clear that the FAA encompasses a wider range of

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transactions than those actually ‘in commerce’--that is, ‘within the flow of interstate commerce’

[Citation]”. (Ibid.)

Here, even though Plaintiff attests that she “did not cross state lines for my job, and...did

not transport any goods from the site,” she also attests that her “job was to haul trailers with fruit

products and juice containers around the facility, then load and unload the trailers.” (Pl. Decl. ¶¶3-

4.) Coupled with Defendants’ attestations that Defendants operate “a consumer packaged goods

company of chilled juice, smoothies, shakes, and protein drinks,” and that they have

“facilities/hubs in California and Illinois [with] products are available nationally,” Defendants’

products are within the flow of interstate commerce, such that the FAA applies, especially since

agreed to by the parties in the Agreement.

c. Injunctive Relief.

Plaintiff next argues that her pursuit of injunctive relief under California’s Unfair

Competition Law (“UCL”) allows her to pursue this claim in court and outside of arbitration.

The Agreement carves out of arbitration “[c]laims for public injunctive relief,” and

specifically states that “a court, not an arbitrator shall decide whether a claim is for public or private

injunctive relief, and any claims for private injunctive relief must be arbitrated on an individual

basis”. (P. Shiguiyama Decl. Ex. 2 at ¶F(6).)

In Clifford v. Quest Software Inc. (2019) 38 Cal.App.5th 745, the Court of Appeal, Fourth

District looked at this issue and found that a complaint that “repeatedly refers to wage and hour

violations directed at” the plaintiff only, and not the “public at large” includes a UCL claim that is

private in nature, and eligible for arbitration. (Id. at 753.)

Here, the complaint contains several generic allegations alleging violations against

“Plaintiff and all the other class members.” (See, e.g., Compl. ¶102.) As such, although they are

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slightly broader than the allegations in Clifford, they do not convert Plaintiff’s UCL claim into a

public one because, as stated by the California Supreme Court, “[r]elief that has the primary

purpose or effect of redressing or preventing injury to an individual plaintiff—or to a group of

individuals similarly situated to the plaintiff—does not constitute public injunctive relief.

(McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 955.) Public injunctive relief, on the other hand,

seeks to assist the “general public.” (Ibid.) As such, Plaintiff’s claims for injunctive relief can be

properly classified as private, and subject to arbitration.

d. Unconscionability.

Plaintiff also argues the arbitration agreement is procedurally and substantively

unconscionable.

Unconscionability is generally recognized as the absence of meaningful choice on the part

of one of the parties together with contract terms which are unreasonably favorable to the other

party. (Allan v. Snow Summit, Inc. (1996) 51 Cal.App.4th 1358, 1376.) It requires a showing of

both procedural and substantive unconscionability, with the former focusing on oppression or

surprise due to unequal bargaining power, and the latter on overly harsh or one-sided results.

(Armendariz, supra, 24 Cal.4th at 114, abrogated on other grounds by AT&T Mobility LLC, supra,

563 U.S. 333; see also 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1214.)

“The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in

view of all relevant circumstances, that a court should withhold enforcement.” (Sanchez v.

Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 911–912 (“Sanchez”.) “Unconscionability is

ultimately a question of law.” (Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1562.)

i. Procedural Unconscionability.

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Procedural unconscionability focuses on oppression or surprise due to unequal bargaining

power. (Sanchez, supra, 61 Cal.4th at 910.) Surprise is a function of the disappointed reasonable

expectations of the weaker party. (Armendariz, supra, 24 Cal.4th at 113.)

“[T]here are degrees of procedural unconscionability. At one end of the spectrum are

contracts that have been freely negotiated by roughly equal parties, in which there is no procedural

unconscionability.... Contracts of adhesion that involve surprise or other sharp practices lie on the

other end of the spectrum. [Citation.] Ordinary contracts of adhesion, although they are

indispensable facts of modern life that are generally enforced [citation], contain a degree of

procedural unconscionability even without any notable surprises, and ‘bear within them the clear

danger of oppression and overreaching.' [Citations.] “Both procedural and substantive

unconscionability must be present for the court to refuse to enforce a contract under the doctrine

of unconscionability although “they need not be present in the same degree.” (Baltazar v. Forever

21, Inc. (2016) 62 Cal.4th 1237, 1243.) Essentially, the court applies a sliding scale to the

determination: “[T]he 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.” (Pinnacle Museum Tower Assn., supra, 55 Cal.4th at 247.)

Plaintiff attests that she was required to sign documents in 2024, was given no advance

warning regarding the documents, was not told she could have an attorney review the documents,

was not explained what the Agreement was, and would not have signed it if she had proper

knowledge of the Agreement. (Pl. Decl. ¶¶5-10.)

These attestations go to the finding that the arbitration agreement was presented on a take-

it-or-leave-it basis, making it a contract of adhesion. A contract of adhesion will support minimal

procedural unconscionability. (See, e.g., Baltazar v. Forever 21, Inc., supra, 62 Cal.4th 1237,

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1244; Sanchez, supra, 61 Cal.4th at 915; Serpa v. California Surety Investigations, Inc. (2013) 215

Cal.App.4th 695, 704; Parada v. Superior Court (Monex Deposit Company) (2009) 176

Cal.App.4th 1554, 1570-73.)

As such, the arbitration agreement is procedurally unconscionable.

ii. Substantive Unconscionability.

Substantive unconscionability focuses on the terms of the agreement and the presence of

overly harsh or one-sided results such that it shocks the conscience. (Suh v. Superior Court, supra,

181 Cal.App.4th 1504, 1515; Martinez v. Master Protection Corp., supra, 118 Cal.App.4th 107,

113.) There must be both procedural and substantive unconscionability in order for a court

to find a contract containing an arbitration provision to be unenforceable.

Whether the Agreement is Indefinite, Too Broad, and Lacks Mutuality.

Here, Plaintiff argues that the arbitration contract is substantively unconscionable because

the alleged agreement is indefinite, too broad, and lacks mutuality. Although the language of the

Agreement states it stays in effect after termination, such a clause is not definitively

unconscionable because if one had a claim based on one’s termination, and the Agreement did not

extend past point, such a claim would not be covered – and those are routinely covered in

arbitration agreements. Plaintiff cites to Cook v. University of Southern California (2024) 102

Cal.App.5th 312, but there the arbitration agreement specifically stated “that it ‘shall survive the

termination of Employee’s employment, and may only be revoked or modified in a written

document that expressly refers to the ‘Agreement to Arbitrate Claims’ and is signed by the

President of the University.’” (Id. at 325.) No such language exists here.

Further, Plaintiff relies on Cook to argue the Agreement lacks mutuality. But in Cook,

defendant USC had a “one-sided,” clause which allowed USC to compel arbitration when it

involved third-parties, but made a plaintiff seeking to “enforce the arbitration agreement against Page | 10

USC’s agents or employees as third party beneficiaries, ... to show they actually accepted a benefit

under the agreement.” (Id. at 328.) Here, all parties included in the Agreement are Defendants’

own entities, not unrelated third parties. Further, the plain language of the Agreement binds both

Defendants and Plaintiff to bring any covered claims against each other in arbitration. (P.

Shiguiyama Decl. Ex. 2 at 1.)

The Confidentiality Agreement Does Not Render the Agreement Unconscionable.

Lastly, Plaintiff argues that the Agreement is substantially unconscionable based on the

confidentiality agreement that also exists between the parties. (K. Grobman Ex. A.) Specifically,

Plaintiff relies heavily on Alberto v. Cambrian Homecare (2023) 91 Cal.App.5th 482 (“Alberto”),

and argues that the confidentiality agreement’s provisions related to Defendants’ remedies are

unconscionable.

Unconscionable terms in an arbitration agreement cannot be enforced. (OTO, L.L.C. v.

Kho (2019) 8 Cal.5th 111, 118.) “[T]he party opposing arbitration bears the burden of proving by

a preponderance of the evidence any defense, such as unconscionability.” (Peng v. First Republic

Bank (2013) 219 Cal.App.4th 1462, 1468.) Here, Plaintiff argues that under Alberto, Defendants

ability to “pursue any ‘breaches’ involving disclosure of trade secrets and confidential business

information through injunctive relief in court” is unconscionable because it gives Defendant an

avenue that Plaintiff does not have. (Opp. at 12.)

There are big differences between the allegations and agreements here, than those

considered in Alberto. First, in Alberto, defendant “Cambrian largely concede[d] that parts of the

Confidentiality Agreement are substantively unconscionable.” (Alberto, 91 Cal.App.5th at 490.)

Defendants do not concede the same here.

Second, the remedies outside of arbitration available to defendant Cambrian in Alberto

included the right “to obtain—outside of arbitration—an ‘immediate’ injunction for [] breach Page | 11

of Cambrian’s confidentiality requirements. Specifically, the Confidentiality Agreement

required Alberto to consent to an ‘order of an immediate injunction, without bond, from any court

of competent jurisdiction, enjoining and restraining’ Alberto from disclosing confidential or

proprietary information.” (Id. at 492.)

Here, Defendants’ confidentiality agreement does say a breach by Plaintiff entitles them to

“injunctive relief,” but it also states that Plaintiff must submit to California state court jurisdiction.

(K. Grobman Decl., Ex. A, ¶¶8.1, 16.) Further, the Alberto court found unconscionability not

because it allowed Cambrian to seek a preliminary injunction, but because “the Confidentiality

Agreement and Addendum waived Cambrian’s need to obtain a bond before seeking an injunction,

required Alberto to agree in advance to the existence of irreparable injury, and required Alberto to

consent to the issuance of an injunction.” (Alberto, supra, 91 Cal.App.5th at 493.) Those

conditions are missing from the confidentiality agreement at issue here.

As such, given “[t]he burden of proving unconscionability rests upon the party asserting

it.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126), the Court find the Agreement is not

substantially unconscionable, on its own or when read in conjunction with the confidentiality

agreement. As stated by the California Supreme Court, “the central idea that the unconscionability

doctrine is concerned not with ‘a simple old-fashioned bad bargain’ [Citation], but with terms that

are ‘unreasonably favorable to the more powerful party’.” (Baltazar v. Forever 21, Inc., supra, 62

Cal.4th at 1244.)

Ruling

Based on the foregoing, this Court grants Defendants’ motion to compel arbitration and

grant the requested stay.

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Movant to give notice.

Dated-

____________________________ Judge

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