Superior Court, State of California



DATE: MARCH 16, 2023 TIME: 1:30 P.M.

PREVAILING PARTY SHALL PREPARE THE ORDER

UNLESS OTHERWISE STATED (SEE RULE OF COURT 3.1312)

|LINE # |CASE # |CASE TITLE |RULING |

|LINE 1 |22CV397620 |Tovar v. California Skin Institute Management, LLC,|See tentative ruling. The Court will issue |

| | |et al. (Class Action) |the final order. |

|LINE 2 |22CV402030 |STATE WATER RESOURCES CURTAILMENT CASES (JCCP 5229)|See tentative ruling. The Court will issue |

| | | |the final order. |

|LINE 3 |21CV375168 |Trigueros v. Stanford Federal Credit Union, et al. |The Court already issued the tentative |

| | | |ruling to the parties, which asked for more |

| | | |information. Plaintiffs’ counsel has |

| | | |provided that information, and this new |

| | | |information has satisfied the Court’s |

| | | |concerns. The Court will issue a final |

| | | |order following the hearing. No need for |

| | | |counsel to show up at the hearing unless |

| | | |they want to do so. |

|LINE 4 |21CV381526 |Joven v. IMPEC Group, Inc. (Class Action) |Rescheduled to May 4, 2023 at 1:30 pm. |

|LINE 5 |19CV349023 |Jaramillo v. Marriott International, Inc., et al. |Rescheduled to April 13, 2023 at 1:30 p.m. |

| | |(PAGA) | |

|LINE 6 | | | |

|LINE 7 | | | |

|LINE 8 | | | |

|LINE 9 | | | |

|LINE 10 | | | |

|LINE 11 | | | |

|LINE 12 | | | |

|LINE 13 | | | |

Calendar Line 1

Case Name: Kristell Tovar v. California Skin Institute Management, LLC, et al.

Case No.: 22CV397620

This is a putative class action. Plaintiff alleges that Defendants California Skin Institute Management, LLC (“CSI”), California Skin Institute Holdings, LLC (“CSI Holdings”), and Greg S. Morganroth failed to pay minimum and overtime wages, failed to provide compliant meal and rest periods or pay associated premiums, and committed other wage and hour violations.

Before the Court is Defendants’ motion to compel arbitration, which Plaintiff opposes on several grounds. For the reasons discussed below, the Court GRANTS Defendants’ motion.

I. BACKGROUND

As alleged in the operative complaint,[1] Plaintiff worked for Defendants as a non-exempt employee from August 2017 to July 2021. (Class Action Complaint, ¶ 2.) Her duties included ordering supplies, assisting clients, and assisting medical staff. (Ibid.)

Plaintiff alleges that Defendants failed to pay overtime when she and other employees worked over eight hours per day, forty hours per week, and seven consecutive days in a work week, by failing to accurately track and/or pay for all time worked at the proper overtime rate. (Complaint, ¶ 15.) They also failed to pay minimum wages by failing to accurately track and/or pay for time worked at employees’ regular rates of pay that is above the minimum wage. (Id., ¶ 16.) Defendants failed to provide compliant meal and rest periods or to pay associated premiums. (Id., ¶¶ 17–18.) They failed to pay all wages due at separation of employment, including by failing to pay overtime wages, minimum wages, premium wages, and vacation pay. (Id., ¶ 19.) Defendants also failed to provide itemized wage statements that accurately reflect gross wages earned, total hours worked, net wages earned, all applicable hourly rates in effect during the pay period, and the corresponding number of hours worked at each hourly rate. (Id., ¶ 20.) And Defendants at times failed to pay employees their full wages in a timely fashion per Labor Code section 204 and to reimburse employees for expenses related to driving personal vehicles and using cellular phones for work. (Id., ¶¶ 21–22.)

Based on these allegations, Plaintiff asserts putative class claims for (1) failure to pay overtime wages, (2) failure to pay minimum wages, (3) failure to provide meal periods, (4) failure to provide rest periods, (5) failure to pay all wages due upon termination, (6) failure to provide accurate wage statements, (7) failure to timely pay wages during employment, (8) violation of Labor Code section 2802 by failing to reimburse business expenses, (9) violation of Labor Code section 227.3 by failing to pay vested vacation at separation of employment, and (10) unfair competition.

II. MOTION TO COMPEL ARBITRATION

Defendants move to compel arbitration based on an Arbitration Agreement and an associated Handbook Acknowledgement executed by Plaintiff, which are both attached to the Declaration of Brenda Delgado as Exhibit A. Plaintiff opposes the motion, urging that she never consented to the Agreement, the Agreement is unconscionable, and CSI Holdings and Dr. Morganroth cannot enforce the Agreement in any event.

A. Legal Standards

“The FAA [Federal Arbitration Act], which includes both procedural and substantive provisions, governs [arbitration] agreements involving interstate commerce.” (Avila v. 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 provides for arbitration “pursuant to and governed by the Federal Arbitration Art,” so 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) ___U.S.___ [142 S.Ct. 1708, 1713] (Morgan), internal citations and quotation marks omitted.)

B. Existence and Scope of Agreement to Arbitrate

To show that Plaintiff consented to the Agreement, Defendants provide a declaration by CSI’s Human Resources Manager, Brenda Delgado. Ms. Delgado explains that CSI maintains hard copy employee personnel files for all employees at a San Jose support building. “As a general rule, once employees sign any onboarding or employment related documents, those documents are transferred from the local office at which the employee works to the San Jose Building and are placed in the employee’s paper personnel file.” Ms. Delgado declares that she located a copy of the Agreement and Handbook Acknowledgement in Plaintiff’s personnel file, which are attached to her declaration as Exhibit A.

Plaintiff objects to Ms. Delgado’s declaration and states that she does not remember signing an arbitration agreement and does not recognize Exhibit A. Plaintiff does not deny that the signature on the Handbook Acknowledgement is hers, but explains that management would typically rush her to sign documents without explaining them.

1. Legal Standard

As one Court of Appeal summarized, 

the moving party bears the burden of producing “prima facie evidence of a written agreement to arbitrate the controversy.” (Rosenthal, supra, 14 Cal.4th at p. 413.)  The moving party “can meet its initial burden by attaching to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party’s] signature.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543–544 [279 Cal. Rptr. 3d 112] (Bannister).)  Alternatively, the moving party can meet its burden by setting forth the agreement’s provisions in the motion.  (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219 [105 Cal. Rptr. 2d 597] (Condee); see also Cal. Rules of Court, rule 3.1330 [“The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.”].)  For this step, “it is not necessary to follow the normal procedures of document authentication.” (Condee, at p. 218.)  If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.

If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement.  (See Condee, supra, 88 Cal.App.4th at p. 219.) The opposing party can do this in several ways. For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement.  [Citations.]

If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party. (Rosenthal, supra, 14 Cal.4th at p. 413.)

(Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165–166 (Gamboa).)

2. Plaintiff’s Burden

Here, Plaintiff submits a declaration stating that she does not recognize the Agreement and does not remember signing any arbitration agreement. Under Gamboa, this would be enough to place the burden on Defendants to prove Plaintiff consented to the Agreement with admissible evidence. However, Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747 (Iyere) recently disagreed with Gamboa when it comes to handwritten signatures. Iyere reasoned that, unlike with electronic signatures, “[i]f a party confronted with his or her handwritten signature on an arbitration agreement is unable to allege that the signature is inauthentic or forged, the fact that that person does not recall signing the agreement neither creates a factual dispute as to the signature’s authenticity nor affords an independent basis to find that a contract was not formed.” (Id. at p. 758.)

The Court agrees with Iyere and will follow it. But this only gets Defendants so far because Plaintiff only signed the Handbook Acknowledgement, not the Agreement itself. And Plaintiff submits evidence undercutting any finding that she actually received the Agreement, in the form of CSI’s discovery responses concerning this issue—which are far more detailed than Ms. Delgado’s declaration.

Those responses explain that a CSI employee emailed employees in February 2019 asking them to review CSI’s 2019 handbook and electronically sign the Handbook Acknowledgement. Plaintiff did not take action in response to this email or multiple follow-up emails.[2] CSI asserts that its South Bay Regional Director, Monique Gatson, received an email on October 1, 2019 indicating that Plaintiff still needed to sign the “last page of the attachment.” According to CSI, Ms. Gatson “believes that upon receiving this email she would have printed the handbook acknowledgement form and handed it to Heba Fakhruldin (who also worked in the San Jose office) in order to have Ms. Fakhruldin collect the remaining three employee signatures,” including Plaintiff’s.[3] CSI asserts that later on October 1, 2019, Ms. Gatson and Ms. Fakhruldin sent emails confirming that the signatures were collected and attaching three signature pages, including Plaintiff’s.

CSI’s discovery responses thus suggest that Plaintiff was presented with only the “last page of the attachment”—in Ms. Gatson’s words, “the handbook acknowledgement form”—without the full employee handbook or even the Agreement itself. And there is no evidence in the record concerning whether or how Plaintiff was made aware of the handbook or the Agreement and instructed where to find them.[4] Considered together with Plaintiff’s declaration, this evidence that Plaintiff did not receive the Agreement suffices to shift the burden to Defendants to prove that she did.

3. Defendants’ Burden

Defendants provide only Ms. Delgado’s declaration stating that the Agreement and Handbook Acknowledgement were found in Plaintiff’s personnel file, and “[a]s a general rule, once employees sign any onboarding or employment related documents, those documents are transferred from the local office at which the employee works to the San Jose Building and are placed in the employee’s paper personnel file.”

Plaintiff objects that this declaration does not provide a foundation authenticating her signature on the Handbook Acknowledgement.[5] Defendants contend Ms. Delgado’s declaration provides a foundation to admit the Agreement and Handbook Acknowledgement as business records. They further contend that these documents are admissible as party admissions.

a. business record

Evidence Code section 1271 permits the admission of business records to establish the truth of the matters reflected therein if (a) the writing was made in the regular course of a business; (b) the writing was made at or near the time of the act, condition, or event; (c) the custodian or other qualified witness testifies to its identity and the mode of its preparation; and (d) the sources of information and method and time of preparation were such as to indicate its trustworthiness.  “A trial judge has broad discretion in admitting business records under Evidence Code section 1271, and it has been held that the foundation requirements may be inferred from the circumstances.”  (People v. Dorsey (1974) 43 Cal.App.3d 953, 961.)   

Here, the placement of documents in a personnel file does not constitute a “writing” reflecting whether and how these documents were presented to an employee. And Ms. Delgado’s vague statement that once employees sign documents, they make their way to the personnel file “[a]s a general rule” does not show this reliably occurred at or near the time of the documents’ signing, or establish that this practice is routinely followed and trustworthy. The business record exception to the hearsay rule does not apply here.

b. party admission or statement against interest

While Defendants do not explain their argument that the Agreement and Handbook Acknowledgement reflect party admissions or statements against interest, presumably, they rely on Plaintiff’s execution of the acknowledgement, which states, “I acknowledge that I have received the company’s Employee Handbook (‘the Handbook’), dated February 19, 2019, including the Arbitration Agreement which is Attachment 1 to the Handbook. [¶] … [¶] My signature below certifies that I understand the at-will employment relationship between the company and myself and agree to be bound to the Arbitration Agreement.”

“Signatures on receipts, invoices, hotel registration records and other documents may constitute adoptive admissions of the representations contained in those writings.” (Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2020), ¶ 8:1163.1, citing People v. DeHoyos (2013) 57 Cal.4th 79, 132–135 (DeHoyos).) But even where a signature is accepted as genuine, where there is no evidence “regarding the preparation of the document, or its purpose,” then “[t]he signature alone demonstrate[s] nothing about the authenticity of the contents.” (People v. Maki (1985) 39 Cal.3d 707, 711 (Maki).) As explained in Maki,

to prove “adoption” of a hearsay statement sufficient to make it admissible under section 1221, not merely as corroboration, it must be shown “that the party to an action against whom a declarant’s hearsay statement is offered as an adoptive admission, (1) had knowledge of the contents of declarant’s statement, and (2) having such knowledge, has, by words or other conduct, manifested his adoption or his belief in its truth.” (1 Jefferson, Cal. Evidence Benchbook (2d ed. 1982) § 1.1, pp. 19-20, italics in original.)  Defendant’s signature thus would constitute an adoptive admission if it were shown that he had read over the document and signed it after doing so. (People v. Pic’l (1981) 114 Cal. App. 3d 824, 859 [171 Cal. Rptr. 106]; see Zenith Radio Corp. v. Matsushita Elec. Ind. Co. (E.D. Pa. 1980) 505 F. Supp. 1190, 1245.)  This prerequisite for introduction of such evidence may be provided by testimony of a person describing the circumstances surrounding the signing of the document. (See, e.g., United States v. Johnson (8th Cir. 1976) 529 F.2d 581, 584-585; cf. Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co., supra, 69 Cal.2d at pp. 42-43.)

(Maki, supra, 39 Cal.3d at pp. 711–712, italics original.)

Here, as in Maki, no such foundation has been provided. (See Maki, supra, 39 Cal.3d at pp. 713 [“Defendant’s authenticated signatures on the invoice, even when considered in conjunction with the fact that it was found when his home was searched, did not provide sufficient foundation for the documents to be admitted pursuant to section 1221 or any other hearsay exception for use as to their content”]; cf. DeHoyos, supra, 57 Cal.4th at pp. 133–135 [discussing “substantial evidence from which the trial court reasonably could infer that defendant knew he was being registered at the motel for two guests and that he adopted the registration card and receipts’ representation to that effect by his signature on the documents”].)

c. conclusion

In sum, Defendants fail to show that the Agreement and Handbook Acknowledgement are admissible as business records or party admissions.

4. Discussion

To summarize, because Plaintiff fails to dispute the authenticity of her signature on the Handbook Acknowledgement, the Court follows Iyere and finds that she signed it. But there is no admissible evidence in the record establishing that Plaintiff received the Agreement itself, or detailing how the Handbook Acknowledgement was presented to her.

So where does that leave us? Ultimately, Plaintiff signed an acknowledgement specifically describing the Agreement and stating that it is Attachment 1 to the governing employee handbook. The Handbook Acknowledgement Plaintiff signed states that “[m]y signature below certifies that I … agree to be bound to the Arbitration Agreement.” Even if Plaintiff was never presented with the Agreement and never actually read it, this is enough to bind her to it. (See Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 383 (Harris) [the fact that a party “either chose not to read or take the time to understand the[] provisions” to which he or she assented “is legally irrelevant,” citing cases]; see also Daniels v. Securitas Sec. Servs. USA, Inc. (C.D.Cal. Apr. 5, 2019, No. SACV 18-00265-CJC(SKx)) 2019 U.S.Dist.LEXIS 169670, at *9–10.)

As discussed below, the case law governing consent in the context of arbitration provisions contained in employee handbooks is consistent with this outcome.

a. relevant case law

A recent opinion by the Court of Appeal for the Sixth District summarizes the law in this context. As that opinion explains,

[t]he strong public policy favoring contractual arbitration does not extend to parties who have not agreed to arbitrate. (Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787 [206 Cal. Rptr. 3d 474] (Esparza).) As the California Supreme Court explained in Pinnacle, in “California, ‘[g]eneral principles of contract law determine whether the parties have entered a binding agreement to arbitrate.’ (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420 [100 Cal. Rptr. 2d 818] [(Craig)]; [citation].)  Generally, an arbitration agreement must be memorialized in writing.  [Citation.] A party’s acceptance of an agreement to arbitrate may be express, as where a party signs the agreement.  A signed agreement is not necessary, however, and a party’s acceptance may be implied in fact (e.g., Craig, at p. 420 [employee’s continued employment constitutes acceptance of an arbitration agreement proposed by the employer]) or be effectuated by delegated consent ([citation].)  An arbitration clause within a contract may be binding on a party even if the party never actually read the clause. (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1215 [78 Cal. Rptr. 2d 533].)” (Pinnacle, supra, 55 Cal.4th at p. 236.)

(Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 777 (Mendoza).)

Mendoza summarizes in detail six California authorities that have considered “whether the language of an arbitration provision in an employee handbook, on its own or when combined with other documents, creates a binding agreement to arbitrate employment-related claims.” (Mendoza, supra, 75 Cal.App.5th at p. 778.) These include three authorities relied on by Plaintiff here: Romo v. Y-3 Holdings (2001) 87 Cal.App.4th 1153 (Romo), Esparza, and Sparks v. Vista Del Mar Child & Family Services (2012) 207 Cal.App.4th 1511 (Sparks), abrogated on another ground as stated in Harris.

The employer in Romo … moved to compel arbitration based on an arbitration agreement in a 44-page employee handbook. Section VIII of the handbook contained a three-page arbitration agreement that included signature lines for both the employer and the employee, which neither party had signed. Section IX of the handbook contained an acknowledgment form that the employee did sign, in which she acknowledged receipt of the handbook, agreed to abide by the policies and rules in the handbook, and acknowledged that the employer could change its policies and rules at any time. The appellate court concluded that there were two separate agreements in the handbook: (1) an arbitration agreement that the parties had not signed and (2) an agreement to be bound by the employer’s rules, policies, and procedures.  The court concluded that the arbitration agreement was intended to be a complete, stand-alone agreement that contemplated signatures from both parties that were separate from the signature on the acknowledgment form and held that since the parties had not assented to the arbitration agreement, they had not agreed to arbitrate.

(Mendoza, supra, 75 Cal.App.5th at p. 778, citations omitted.)

In Sparks, an

arbitration clause in [an employee] handbook was not prominently distinguished from the other clauses, was not specifically highlighted, and there was no place for the employee to acknowledge it in writing. In addition, the acknowledgment form “did not reference the arbitration clause much less advise [the employee] that he would be bound by it.” Because the language in the handbook suggested it “was informational rather than contractual” and the employer failed to call attention to the arbitration clause in the acknowledgment form, the court found there was no agreement to arbitrate.

(Mendoza, supra, 75 Cal.App.5th at p. 780, citations omitted.)

Mendoza also discussed Harris, where “[t]he employee argued that the parties had not agreed to arbitrate because he did not sign the separate arbitration agreement described by the handbook, the [summary] arbitration provision on page 9 of the handbook, or Appendix A [providing the full arbitration policy announced by the handbook], and had only acknowledged receipt of documents.” (Mendoza, supra, 75 Cal.App.5th at p. 781, citation omitted.) The Harris court nevertheless concluded that the parties had agreed to arbitrate:

The court reasoned that the employee had specifically acknowledged receipt of the arbitration agreement. The court added that the handbook’s table of contents referred the reader to page 9 with the subject heading of “‘BINDING ARBITRATION OF CLAIMS,’” that the obligation to arbitrate was highlighted on page 9 in bold underscored letters, that page 9 expressly mentioned appendix A, and stated “without equivocation that receipt and agreement to the mandatory arbitration policy is ‘an absolute prerequisite’ to hiring and continued employment” and that “‘[i]f, 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.’”

(Mendoza, supra, 75 Cal.App.5th at p. 781, citation omitted.)

Mendoza also summarized Esparza, which held that an employee’s execution of an “acknowledgment form did not create an agreement to arbitrate because (1) although it mentioned the employer’s arbitration policy, it did not say that the employee agreed to abide by the arbitration provision; (2) it said the handbook was merely informational; and (3) it expressly recognized that the employee had not yet read the handbook and there was no basis to assume the employee agreed to be bound by something she had not read.” (Mendoza, supra, 75 Cal.App.5th at p. 782.)

In Mendoza itself, Court of Appeal noted that the arbitration policy was the first substantive provision in the employee handbook and was identified in bold as a condition of employment and a “Binding Arbitration Policy”—but this did not stand out from several other policies that were similarly or even more emphasized. (Mendoza, supra, 75 Cal.App.5th at pp. 783–784.) Ultimately, “[t]he Arbitration Policy was not prominently distinguished from the other clauses in the Handbook, was not specifically highlighted, did not stand out from other sections in the Handbook visually or in its use of language, and there was no place in the Handbook for the employee to sign or acknowledge the Arbitration Policy in writing.” (Ibid.) The court emphasized that the operative documents included “language … indicat[ing] that the Handbook and acknowledgment forms were intended to be informational, not contractual” and “referred to the arbitration clause … as a ‘policy,’ rather than a ‘contract’ or ‘agreement’ to arbitrate. These factors all weigh against finding an agreement to arbitrate.” (See id. at pp. 784–785.)

The acknowledgement forms the employee executed did not fix these problems:

The First Acknowledgment that Mendoza signed mentions numerous topics in 12 paragraphs on two pages (i.e., his “pay plan,” the at-will nature of his employment, meal and rest breaks, and other matters). It contains the following general reference to the Handbook: “You will be required to abide by all applicable rules and policies, including but not necessarily limited to those set forth in the [Handbook].” Above the signature line, it stated, “I have read the [First] Acknowledgment and agree to its terms.” Conspicuously absent was any mention of arbitration, alternative dispute resolution, or the Arbitration Policy.

The Second Acknowledgment consisted of 3 paragraphs and a signature line on a single page, in which Mendoza acknowledged receipt of the Handbook. The form stated: “In consideration of my employment with the Company, I hereby agree to read, observe, and abide by the conditions of employment, policies and rules contained in this Handbook.” It … stated that the Handbook and the policies contained therein “are not in any way intended as a contract of employment,” that the Handbook represented “the entire understanding between” Mendoza and FTU and could only be altered by a “written agreement, signed by an officer of the Company.” As before, conspicuously absent was any mention of arbitration, alternative dispute resolution, or the Arbitration Policy.

Nothing in the acknowledgment forms notified Mendoza either that the Handbook contained an arbitration clause or that his acceptance of the Handbook constituted a waiver of his right to a judicial forum in which to resolve his wage and hour claims.  (Sparks, supra, 207 Cal.App.4th at p. 1520….) Since the Handbook “was informational rather than contractual” and FTU failed to call attention to the arbitration requirement in the acknowledgment form, Mendoza should not be required to arbitrate.  (Sparks, at p. 1520.)  Merely agreeing to abide by all applicable rules and policies and to “read, observe and abide by” the contents of the Handbook that “is designed for quick reference and general information” does not constitute a contract and does not bind the employee to arbitration.  (See id. at p. 1521.)  “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 … . At a minimum, there should be a specific reference to the duty to arbitrate … in the acknowledgment of receipt form signed by the employee.” (Id. at p. 1522.) …

(Mendoza, supra, 75 Cal.App.5th at pp. 785–786.)

Mendoza distinguished Harris because “(1) the acknowledgment forms here did not mention the Arbitration Policy or otherwise incorporate it by reference; (2) the Arbitration Policy was not highlighted in a table of contents and did not stand out from the other sections of the Handbook; (3) the ‘condition of employment language’ at the end of the Arbitration Policy is not nearly as explicit or unequivocal as the language in the arbitration clause in Harris; and (4) nothing advised Mendoza that he would be deemed to have consented to arbitration by accepting the employment if he failed to sign an arbitration agreement.” (Id. at p. 788.)

b. application of the case law here

We now apply the above-discussed authorities to this case. Here, the Handbook Acknowledgement that Plaintiff signed does expressly mention the Agreement and unequivocally indicates that “[m]y signature below certifies that I … agree to be bound to the Arbitration Agreement.” While the Handbook Acknowledgement also states that the handbook “do[es] not form a written employment contract for employment for a specific term or duration” (italics added), the acknowledgement is clear that the Agreement is a binding contract. And while Plaintiff contends that the Agreement is buried in the handbook, the single-page Handbook Acknowledgement refers to it multiple times—including in the first sentence of the acknowledgement—and explains where it can be found as a standalone Attachment 1 to the handbook. Ultimately, the Handbook Acknowledgement is quite clear that the Agreement is a contract to which Plaintiff agreed to be bound by signing the acknowledgement.

5. Conclusion

In sum, Defendants have shown that Plaintiff signed the Handbook Acknowledgement and thus expressly consented to the Agreement. And there is no dispute that the employment claims at issue here are within the scope of that Agreement, which mutually covers “any dispute” between the Company and Employee. So the burden shifts to Plaintiff to prove a ground to deny arbitration.

C. Unconscionability

On opposition, Plaintiff urges that the Agreement is unconscionable. Unconscionability has both procedural and substantive elements. (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz); Jones v. Wells Fargo Bank (2003) 112 Cal.App.4th 1527, 1539 (Jones).) Both must appear for a court to invalidate a contract or one of its individual terms (Armendariz, supra, 24 Cal.4th at p. 114; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174), but they need not be present in the same degree: “the 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” (Armendariz, supra, 24 Cal.4th at p. 114).  

1. Procedural Unconscionability

Procedural unconscionability focuses on the elements of oppression and surprise. (Armendariz, supra, 24 Cal.4th at p. 114.)  “Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice,” while “[s]urprise involves the extent to which the terms of the bargain are hidden in a prolix printed form drafted by a party is a superior bargaining position.” (Davis v. TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662, 671, internal citation and quotation marks omitted.)

Here, some amount of procedural unconscionability is present due to Plaintiff’s status as an employee with weaker bargaining power and Defendants’ presentation of the Agreement on a take-it-or-leave it basis. (See Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1282–1286 (Nyulassy).) Plaintiff contends that surprise is also present, because “the phrase ‘agree to be bound to the Arbitration Agreement’ is buried at the end of a sentence near the very bottom of the very last page of the 54-page Employee Handbook, in a document misleadingly titled, ‘Handbook Acknowledgment.’ ” But as already discussed, the single-page Handbook Acknowledgement that Plaintiff executed refers to the Agreement multiple times—including in its first sentence—and explains where it can be found as a standalone Attachment 1 to the handbook. And while Plaintiff declares that she was generally “rushed” to sign documents by management, she provides no details about how the Handbook Acknowledgement, specifically was presented to her (since she does not remember signing it). The discovery responses that Plaintiff submits suggest that the acknowledgement was presented to Plaintiff on its own, not “buried” within the handbook. So the Court assumes that is what occurred. And there is no evidence in the record either way regarding whether or how the Agreement was presented or made available to Plaintiff—an issue on which Plaintiff bears the burden when urging the Agreement is unconscionable.

Under these circumstances, the Court does not find that Plaintiff was “surprised” by Agreement, so this element is “less dominant.” (Nyulassy, supra, 120 Cal.App.4th at p. 1283.) Ultimately, the adhesive nature of an employment contract does not subject the contract to the same degree of scrutiny as contracts of adhesion that involve surprise or “other sharp practices.” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245.)  

2. Substantive Unconscionability

Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create “overly harsh” or “one-sided results” (Armendariz, supra, 24 Cal.4th at p. 114, internal citation and quotations omitted), that is, whether they reallocate risks in an objectively unreasonable or unexpected manner (Jones, supra, 112 Cal.App.4th at p. 1539). “In assessing substantive unconscionability, the paramount consideration is mutuality.” (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 241 (Pinela), 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.)

Here, Plaintiff contends the Agreement is substantively unconscionable “because it provides that the employer shall pay all of the arbitrator’s fees and expenses except for what the employee would have to pay to bring a lawsuit in court, but only ‘[t]o the extent required by applicable law.’ ” (Emphasis original.) But this is consistent with Armendariz. (See Armendariz, supra, 24 Cal.4th at pp. 110–113 [“when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement … cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court”], italics original; see also Solorio v. ABC Phones of N.C. (E.D.Cal. Feb. 3, 2021, No. 1:20-cv-01051) 2021 U.S.Dist.LEXIS 20871, at *42 [no substantive unconscionability shown where “the fees and costs provision clearly is limited to applicable law”].) Plaintiff cites Pinela on this point, but in that case, the issue was the interaction between similar fee and expense language and an unconscionable choice of law provision. (See Pinela, supra, 238 Cal.App.4th at p. 255 [agreement “authorize[d] an award of arbitration costs or attorney fees ‘to the extent such an award is permitted by applicable law’ ”, “[b]ut … the arbitrator’s authority to apply … California law’s limitations on the imposition of fees and costs[] is questionable in light of” the agreement’s choice of law provision].) There is no similar choice of law provision here.

Plaintiff further argues that the Agreement’s discovery provisions are too vague, providing “merely that ‘[b]oth parties will have the right to subpoena witnesses and records, and to conduct discovery.’ ” Plaintiff cites Beco v. Fast Auto Loans, Inc. (2022) 86 Cal.App.5th 292 (Beco) for the proposition that this is unconscionable. But the provision at issue in Beco gave the arbitrator “unfettered discretion over how much discovery” would take place. (Id. at p. 312.) Here, by contrast, the Agreement expressly incorporates the AAA Employment Arbitration Rules and their discovery provisions. This distinguishes Beco. (See ibid. [“Although Fast Auto now claims discovery would proceed according to AAA rules, there is no mention of AAA rules in this subparagraph.  Indeed, by its plain language, the subparagraph puts the issue of whether to allow discovery or not entirely in the arbitrator’s hands….”]; cf. Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1476 [“[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”].)

In sum, Plaintiff does not identify any substantively unconscionable provisions in the Agreement.

3. Conclusion

Plaintiff fails to show that the Agreement or any of its terms should be invalidated due to unconscionability.

D. Claims Against CSI Holdings and Mr. Morganroth

Plaintiff further contends that the Agreement should not be enforced as to her claims against CSI Holdings and Mr. Morganroth, who are not parties to the Agreement.

A nonsignatory to an arbitration agreement may compel or be bound to arbitration under the agreement on several theories, including assumption of the agreement or status as an agent or third party beneficiary.  (See DMS Services, LLC v. Superior Court (2012) 205 Cal.App.4th 1346, 1353 [these theories are recognized under both federal and California law].)  “The question of whether a nonsignatory is a party to an arbitration agreement is one for the trial court in the first instance.”  (American Builder’s Assn. v. Au-Yang (1990) 226 Cal.App.3d 170, 179.)  The nonsignatory bears the burden of proof on this issue.  (Jones v. Jacobson (2011) 195 Cal.App.4th 1, 15.

Here, the Agreement expressly “applies to claims arising from or relating to Employee’s employment with the Company that Employee may have against any supervisor, co-employee, or agent of The Company, or against any of the Company’s related business entities.” This clearly encompasses Plaintiff’s claims against CSI Holdings and Mr. Morganroth. Plaintiff herself alleges that Mr. Morganroth is the Chief Executive Officer for both CSI and CSI Holdings (Complaint, ¶ 5), and that “[a]ll of the acts and conduct described [in the Complaint] of each and every corporate defendant was duly authorized, ordered, and directed by the respective and collective defendant corporate employers, and the officers and management-level employees of said corporate employers” (id., ¶ 8), and there is a unity of interest and ownership between the defendants (id., ¶¶ 10–11). (See Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 788 (Garcia) [plaintiff was equitably estopped from refusing to arbitrate with entity alleged to be his joint employer and the agent of the entity that was the counterparty to the arbitration agreement].)[6] And Defendants submit a declaration by CSI’s Chief Financial Officer, Jeff Hertzig, who knows Mr. Morganroth personally and declares that he is the founder and Chief Executive Officer of CSI. Mr. Hertzig further declares that CSI Holdings “is a related business entity of CSI involved in the ownership structure of CSI.”[7] Thus, Defendants meet their burden to show that the Agreement applies to Plaintiff’s claims against CSI Holdings and Mr. Morganroth, and Plaintiff is estopped from arguing otherwise.

Finally, contrary to Plaintiff’s argument and to the facts in Revitch v. DIRECTV, LLC (9th Cir. 2020) 977 F.3d 713 (Revitch),[8] there is nothing absurd about enforcing the Agreement as to employment-related claims against CSI Holdings and Mr. Morganroth. The Court will therefore enforce the Agreement as to these claims.

E. Class Action Waiver

There is no dispute that the agreement provides for a waiver of class claims.  Multiple appellate courts have held that arbitration provisions with language analogous to the operative language here do not permit class arbitration, and a trial court should dismiss such claims and compel individual arbitration upon motion by the defendant.  (See Kinecta Alternative Financial Solutions, Inc. v. Superior Court (2012) 205 Cal.App.4th 506, disapproved of on another ground by Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233; Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115.)  Accordingly, the Court will dismiss the class claims.[9]  

III. CONCLUSION

For the reasons discussed above, Defendants’ motion to compel arbitration is GRANTED.  Plaintiff’s individual claims must proceed in arbitration.  The putative class claims are dismissed, and the matter is hereby STAYED pending arbitration.

The Court will prepare the order.

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LAW AND MOTION HEARING PROCEDURES

Remote appearances are encouraged and, as of August 15, 2022, must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.

If any party/attorney wishes to appear in person, please check in at Court Services (1st floor, Downtown Superior Courthouse, 191 N. 1st St., San Jose) and wait for a sheriff's deputy to escort you to the courtroom for your hearing.

State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. No court order has been issued which would allow recording of any portion of this motion calendar.  

  

The Court does not provide court reporters for proceedings in the complex civil litigation departments. Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters. The court reporter must participate remotely and need not be present in the courtroom.   

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22CV402030

STATE WATER RESOURCES CURTAILMENT CASES (JCCP 5229)

In this coordinated proceeding, Westlands Water District, the California Department of Water Resources (“DWR”), and State Water Contractors (“SWC”) seek to intervene in all coordinated cases. While no current party outright opposes these motions, some parties seek to place conditions on the interventions. Other current parties have filed statements of non-opposition to these intervention motions.

After reviewing the filings for these motions, the Court finds/holds as follows:

1. The intervention motions are timely, as: a) the administrative record is still being prepared and no trial date has been set; b) there has been no material delay in Westlands and SWC filing these motions; and c) the Court sees no particular prejudice to any existing party by allowing intervention. (See Code Civ. Proc., § 387, subd. (d)(1); Crestwood Behavioral Health, Inc. v. Lacy (2021) 70 Cal.App.5th 560, 574.)

2. SWC is entitled to mandatory intervention in these cases because it has a direct interest in the subject matter of these cases, and resolution of the coordinated proceeding may impair or impede its members’ interests. Moreover, it is not clear that any party is completely aligned with SWC such that intervention is unnecessary. Alternatively, the Court finds that SWC has met the requirements for permissive intervention. (Code Civ. Proc., § 387, subd. (d)(2).)

For the same reasons, Westlands is entitled to mandatory intervention. Alternatively, the Court finds that Westlands meets the requirements for permissive intervention.

As for DWR, Water Code section 184 specifically permits DWR to intervene in this proceeding, since the proceeding challenges various actions of the Board. (Code Civ. Proc., § 387, subd. (d)(2).)

3. The Court agrees that it generally has “inherent power to place reasonable conditions on intervention,” whether that intervention is mandatory or permissive. (Carlsbad Police Officers Assn. v. City of Carlsbad (2020) 49 Cal.App.5th 135, 153 (Carlsbad).)

A. As to Westlands and SWC, some parties propose the following conditions: a) limiting briefing by these proposed intervenors to certain issues where it is plain —right now—that these intervenors have an interest; and b) limiting intervention to specific, enumerated causes of action in their petitions.

In the Court’s view, it is premature to impose these conditions, as the claims in this proceeding may change. And depending on the theories proffered by the current parties, these intervenors’ interests may be affected. The Court would prefer to deal with any limitations on intervention until later in the case or until any issues actually arise, and believes those limitations (if any are required) can be imposed informally. The Court will accept the intervenors’ representations that they will “stay in their lane” (so to speak), but plans to hold them to those representations.

B. As for DWR, it is not clear whether the Court has authority to condition their intervention, since DWR is entering the case under Water Code section 184, not under the usual intervention statute (Code of Civil Procedure section 387). Assuming without deciding that the Court has such authority, the Court would not exercise it at this early stage in the litigation for the reasons discussed above. The Court would prefer to wait for any issues concerning DWR’s participation to become “live” before making broad pronouncements about DWR’s scope of intervention.

For these reasons, the Court GRANTS all three intervention motions without conditions.

The Court will prepare the order.

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LAW AND MOTION HEARING PROCEDURES

Remote appearances are encouraged and, as of August 15, 2022, must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.

If any party/attorney wishes to appear in person, please check in at Court Services (1st floor, Downtown Superior Courthouse, 191 N. 1st St., San Jose) and wait for a sheriff's deputy to escort you to the courtroom for your hearing.

State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. No court order has been issued which would allow recording of any portion of this motion calendar.  

  

The Court does not provide court reporters for proceedings in the complex civil litigation departments. Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters. The court reporter must participate remotely and need not be present in the courtroom.   

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[1] While unnecessary, the Court GRANTS Defendants’ request for judicial notice of the Complaint. (Evid. Code, § 452, subd. (d).)

[2] In her declaration, Plaintiff explains that she and other staff members very seldom checked their work emails, which management knew.

[3] Ms. Fakhruldin left her employment with CSI in 2019, and CSI does not have her contact information.

[4] The emails referenced in CSI’s interrogatory responses are not in evidence, and CSI cannot rely on its own interrogatory responses as evidence (see Bayramoglu v. Nationstar Mortgage LLC (2020) 51 Cal.App.5th 726, 740).

[5] As already discussed, under Iyere, Defendants met their initial burden by submitting the Agreement and the Handbook Acknowledgement apparently signed by Plaintiff, without the need to follow the normal procedures of document authentication. (Iyere, supra, 87 Cal.App.5th at p. 755.) This shifted the burden to Plaintiff to “offer admissible evidence creating a factual dispute as to the authenticity of [her] signature[].” (Ibid.) Only then would Defendants need to prove the authenticity of the signature by a preponderance of the evidence. (Ibid.)

Because Plaintiff does not dispute the authenticity of her signature, Defendants do not need to authenticate it with admissible evidence. So the Court does not need to rule on Plaintiff’s objections to Ms. Delgado’s declaration, which all pertain to this issue.

[6] While Grande v. Eisenhower Medical Center (2022) 13 Cal.5th 313 (Grande) calls into question the conclusion “that a client is an ‘agent’ of a staffing agency” (at p. 322), it does not call the other aspects of Garcia’s holding into doubt. There is no suggestion that any of the defendants here are staffing agencies, so Grande is inapposite.

[7] The Court OVERRULES Plaintiff’s objections to these portions of Mr. Hertzig’s declaration, since he provides a foundation and adequate context for his statements and is not testifying about the content of a document.

[8] In Revitch, the entity that sought to enforce the arbitration agreement “was not an affiliate” of the signatory entity “at the time Revitch and [that entity] entered into their contract and … [only] became an affiliate years later following a corporate acquisition that had nothing to do with Revitch or his wireless services agreement” that contained the arbitration provision. (Revitch, supra, 977 F.3d at p. 717.)

[9] Plaintiff’s only argument against this result is that the Agreement as a whole is unenforceable. For the reasons already discussed, this argument lacks merit.

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