Superior Court, State of California
DATE: AUGUST 3, 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 |19CV345045 |VanCleave, et al. v. Abbott Laboratories (Class Action)|See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 2 |22CV404498 |Aguila v. Becton and Dickinson, et al. (PAGA) |See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 3 |22CV395084 |Lakey v. Poshmark, Inc. (Class Action/PAGA) |See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 4 |21CV386962 |Loera v. Cellco Partnership (Class Action) |See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 5 |22CV407249 |Treespring Investments, LP v. Rautner, et al. |The Court invites oral argument. |
|LINE 6 |22CV405334 |Hecker v. Mathew Enterprise, Inc. (Class Action) |See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 7 |21CV385965 |Frayle v. Barrita Corporation (Class Action) |CONTINUED to 8.17.23, at the parties’ |
| | | |request. |
|LINE 8 | | | |
|LINE 9 | | | |
|LINE 10 | | | |
|LINE 11 | | | |
|LINE 12 | | | |
|LINE 13 | | | |
Calendar Line 1
Case Name: VanCleave, et al. v. Abbott Laboratories
Case No.: 19CV345045
INTRODUCTION
Plaintiffs Elizabeth J. VanCleave and Katharine Hassan (collectively, “Plaintiffs”) bring this putative class action arising out of the alleged deceptive and misleading business practices of defendant Abbott Laboratories, Inc. (“Defendant”) with respect to the labeling and advertising of its PediaSure products in California. (First Amended Class Action Complaint (“FAC”), ¶ 1.) According to the allegations of the FAC, filed on October 9, 2020, Defendant is a health care company that manufactures, markets, and distributes pediatric nutrition shakes for consumption by children ages one to thirteen under its PediaSure brand. (Id. at ¶ 3.) By placing statements such as “Complete, Balanced Nutrition,” “Balanced Nutrition to Help Fill Gaps,” “Nutrition to Help Kids Grow,” “Use as part of a healthy diet,” and “Clinically Proven to Help Kids Grow” on the PediaSure labeling, Defendant represents to consumers that PediaSure is a healthy option that provides balanced nutrition. (Id. at ¶ 5.) Defendant’s representations are false and misleading because the pediatric nutrition shakes are neither healthy nor balanced – they are highly processed, sugar sweetened beverages. (Id. at ¶ 8.)
The FAC sets forth the following causes of action: (1) Violation of the California Commercial Code, § 2313, Breach of Express Warranty; (2) Violation of the California Commercial Code, § 2314, Breach of Implied Warranty of Merchantability; (3) Violations of the Consumers Legal Remedies Act, California Civil Code § 1750, et seq.; (4) Violations of California Business & Professions Code, § 17500, et seq.; (5) Violations of California Business & Professions Code, § 17200, et seq., Unlawful, Unfair and Fraudulent Business Acts and Practices; and (6) Unjust Enrichment.
Now before the Court are: (1) Plaintiffs’ motion for class certification; (2) Defendant’s motion to exclude expert opinions of Derek Rucker; (3) Defendant’s motion to exclude expert opinions of Steven Gaskin and Colin Weir; (4) Plaintiffs’ motion to exclude portions of the declaration of Dr. Bruce Strombom; (5) Plaintiffs’ motion to exclude the expert report of Dr. Ran Kivetz in support of Defendant’s opposition to the motion for class certification and in response to the declaration of Dr. Derek Rucker; and (6) Defendant’s motion to seal pleadings and exhibits filed in connection with Plaintiffs’ motion for class certification and related expert motions.
The Court will deny Plaintiffs’ motion for class certification without prejudice for the reasons discussed below. As the Court did not rely on the expert evidence submitted in support of the motion, it finds that evidence immaterial and declines to rule on the motions to exclude evidence at this time. Defendant may file a new motion to seal with additional evidence within 15 days of the Court’s order and all items lodged under seal may remain under seal until that motion has been resolved.
DISCUSSION
I. Motion for Class Certification
A. Legal Standard
As explained by the California Supreme Court,
The certification question is essentially a procedural one that does not ask whether an action is legally or factually meritorious. A trial court ruling on a certification motion determines whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.
(Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326, internal quotation marks, ellipses, and citations omitted (Sav-on Drug Stores).)
“Indeed, at the class certification stage, as long as the plaintiff’s posited theory of liability is amenable to resolution on a classwide basis, the court should certify the action for class treatment even if the … theory is ultimately incorrect at its substantive level….” (ABM Industries Overtime Cases (2017) 19 Cal.App.5th 277, 307-308, citation and quotation marks omitted.)
California Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ….” As interpreted by the California Supreme Court, section 382 requires: (1) an ascertainable class and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, supra, 34 Cal.4th at p. 326.) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.)
The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385.) The court must examine all the evidence submitted in support of and in opposition to the motion “in light of the plaintiffs’ theory of recovery.” (Department of Fish and Game v. Superior Court (2011) 197 Cal.App.4th 1323, 1349.) The evidence is considered “together”: there is no burden-shifting as in other contexts. (Ibid.)
B. Merits of the Motion
i. Numerous and Ascertainable Class
“The trial court must determine whether the class is ascertainable by examining (1) the class definition, (2) the size of the class and (3) the means of identifying class members.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.) A class is ascertainable “when it is defined in terms of objective characteristics and common transactional facts that make the ultimate identification of class members possible when that identification becomes necessary.” (Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 980 (Noel).) “Class members are ‘ascertainable’ where they may be readily identified without unreasonable expense or time by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932.)
A class definition satisfying these requirements
puts members of the class on notice that their rights may be adjudicated in the proceeding, so they must decide whether to intervene, opt out, or do nothing and live with the consequences. This kind of class definition also advances due process by supplying a concrete basis for determining who will and will not be bound by (or benefit from) any judgment.
(Noel, supra, 7 Cal.5th at p. 980, citation omitted.)
“As a rule, a representative plaintiff in a class action need not introduce evidence establishing how notice of the action will be communicated to individual class members in order to show an ascertainable class.” (Noel, supra, 7 Cal.5th at p. 984.) Still, it has long been held that “[c]lass members are ‘ascertainable’ where they may be readily identified … by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal. App. 3d 926, 932, disapproved of on another ground by Noel, supra, 7 Cal.5th 955; see also Cohen v. DIRECTV, Inc. (2009) 178 Cal.App.4th 966, 975-976 [“The defined class of all HD Package subscribers is precise, with objective characteristics and transactional parameters, and can be determined by DIRECTV’s own account records. No more is needed.”].)
Plaintiffs seek to certify of the following class
All persons who, from March 3, 2015 through to date of class certification (the ‘Class Period’), purchased within California any of the following products in any flavor: PediaSure Grow and Gain, PediaSure Grow and Gain with Fiber, PediaSure Grow and Gain Shake Mix and PediaSure SideKicks bearing at least one of the following statements: Complete, Balanced Nutrition,” “Balanced Nutrition to Help Fill Gaps,” “Nutrition to help kids grow,” and “Use as part of a healthy diet.”
Excluded from the Class are Abbott’s agents, legal representatives, current and former employees, Plaintiffs’ counsel, and the judge and staff to whom this case is assigned, and any member of the judge’s immediate family.
Alternatively, Plaintiffs seek to certify the following class
All persons who, from March 3, 2015 through to date of class certification (the ‘Class Period’), purchased within California any of the following products in any flavor: PediaSure Grow and Gain, PediaSure Grow and Gain with Fiber, PediaSure Grow and Gain Shake Mix and PediaSure SideKicks.
Excluded from the Class are Abbott’s agents, legal representatives, current and former employees, Plaintiffs’ counsel, the judge and staff to whom this case is assigned, and any member of the judge’s immediate family.
Here, Defendant does not argue that the proposed class is not sufficiently numerous, nor does it argue that the proposed class would not be ascertainable. Plaintiffs claim that the numerosity requirement is met because the amount of Defendant’s sales of PediaSure suggest that at least thousands of class members exist. Plaintiffs assert that the ascertainability requirement is satisfied because class members must have purchased one of Defendant’s products bearing one of the challenged nutritional claims.
But, Plaintiffs do not explain exactly how members of the class will be identified. In the context of a discussion regarding the commonality requirement, Defendant contends that it is unaware of any data that would indicate exactly which packaging each consumer purchased. Because the class is defined by reference to the purchase of a product bearing one of the challenged statements, in order to be able to ascertain who is a member of the class, Plaintiff must necessarily be able to point to a method to determine whether the challenged statements were present on the products at the time of purchase. If the class were defined using Plaintiff’s alternative definition, class members could be identified based on receipts or other point of sale data. But, such data would not readily identify which version of the packaging each consumer received. And, Plaintiffs’ alternative class definition would not support Plaintiffs’ theory that all class members were necessarily exposed to the challenged statements because the class is defined with reference to purchase of products bearing the challenged statements.
The Court will deny the motion for class certification without prejudice and the Court requests that, in the event Plaintiffs again seek certification, they should provide the Court with an explanation as to how it will be determined that class members purchased products bearing the challenged statements.
ii. Community of Interest
The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact; (2) class representatives with claims or defenses typical of the class; and, (3) class representatives who can adequately represent the class. (Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326.) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) It must be shown that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385.)
1. Predominant Questions of Law or Fact
For the first community of interest factor, “[i]n order to determine whether common questions of fact predominate the trial court must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.” (Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916 (Hicks).) The court must also give due weight to any evidence of a conflict of interest among the proposed class members. (See J.P. Morgan & Co., Inc. v. Superior Court (2003) 113 Cal.App.4th 195, 215.) The ultimate question is whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants. (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104–1105 (Lockheed Martin).) “As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” (Hicks, supra, 89 Cal.App.4th at p. 916.)
Defendant’s main argument is that common questions do not predominate. First, it contends that Plaintiffs cannot prove uniform exposure to the challenged statements. Second, it asserts that Plaintiffs cannot prove predominance as to reliance on the challenged statements. Finally, it maintains that Plaintiffs have not established a viable classwide damages model.
a. Uniform Exposure
Here, the statements at issue were printed on the packaging of the products class members purchased and are not alleged to have been used in advertising. Defendant argues that not all of the products sold during the class period contained all of the statements at issue and that some products did not contain any of the statements at issue. But, importantly, the proposed class definition requires that one of the allegedly false or misleading statements was present on the package purchased. Adopting this definition necessarily means that at least one of the challenged statements appears on the packaging of the products purchased by each class member.
Plaintiffs assert that this definition assures that class members were exposed to the challenged statements. Defining classes in this manner appears to be well accepted in the federal courts. (See Hadley v. Kellogg Sales Co. (N.D.Cal. 2018) 324 F. Supp. 3d 1084, 1097 (Hadley) [listing various cases].) Defendant argues that Hadley is basically applying a presumption that members of the class were exposed to the challenged statements where the statements were prominently displayed on the front of the packaging of cereals and cereal bars in that case. Here, however, Defendant contends that some of the challenged statements were located on the back of the packaging, in smaller font, and were not prominently displayed on the front of the packaging. Defendant correctly points out that Plaintiff cites to no California cases in which such a presumption was applied where the statements were positioned as they are in this case. Although not a California case, Hadley itself rejected the argument that the positioning of some of the statements on the back of the box meant that not all class members had been exposed to the statements. (See Hadley, supra, 324 F. Supp. 3d at p. 1098.)
That said, Hadley noted that, where the statements were only present on the back of the package, in small font, and with other text, classwide exposure could not be presumed. The Hadley court stated
In the instant case, the Court finds that class-wide exposure to the ‘wholesome goodness’ phrase on Nutri-Grain packaging cannot be inferred. Much like the ‘atopic dermatitis’ statement in [Zakaria v. Gerber Prods. Co (N.D. Cal. Mar. 23, 2016), 2016 U.S. Dist. LEXIS 184861, 2016 WL 6662723, at *8], ‘wholesome goodness’ only appeared (1) on the back panel of the Nutri-Grain packaging; (2) ‘in small font’; and (3) in the middle of a block of text. 2016 U.S. Dist. LEXIS 184861, 2016 WL 6662723 at *8; see ECF No. 160-7; ECF No. 130 Exhs. 19-22. Thus, the ‘wholesome goodness’ phrase on Nutri-Grain packaging was not sufficiently ‘prominently displayed’ to warrant an inference of class-wide exposure. Zakaria, 2016 U.S. Dist. LEXIS 184861, 2016 WL 6662723 at *8.
(Hadley, supra, 324 F. Supp. 3d at pp. 1099-1100.)
Because class-wide exposure to the ‘wholesome goodness’ phrase on Nutri-Grain packaging cannot be inferred, in order to resolve Kellogg’s liability for that phrase, the Court would have to engage in individualized inquiries to discover which members of the Nutri-Grain Soft-Baked Breakfast Bar Subclass actually saw ‘wholesome goodness’ and which did not. Additionally, the ‘wholesome goodness’ phrase is the only statement on the packaging for Nutri-Grain Soft-Baked Breakfast Bars that Plaintiff challenges as misleading. See ECF No. 130 Exhs. 19-22. As a result, Plaintiff fails to meet Rule 23(b)(3)’s predominance requirement for his proposed Nutri-Grain Soft-Baked Breakfast Bar Subclass.
(Hadley, supra, 324 F. Supp. 3d at p. 1100.)
Here, the class is not separated into subclasses. But, Defendant indicates that for certain products the challenged statements were made only on the back or side of the packaging. The Court notes that Plaintiff has provided proofs of many of the packages of the products at issue, (see Declaration of Laura L. Ho in Support of Plaintiff’s Motion for Class Certification, Exhibit E (“Ho Decl.”)), and, where the statements are made on the back of the packages, they are in small font and are not prominently displayed separately from other text such that they would stand out to a reasonable consumer.[1] For products like these, individual proof would be required to determine class member exposure.
Plaintiffs argue that California law does not require the misleading statements to be prominently displayed. They cite to Krommenhock v. Post Foods, LLC (N.D.Cal. 2020) 334 F.R.D. 552 (Krommenhock) and Prescott v. Reckitt Benckiser LLC (N.D.Cal. July 14, 2022, No. 20-cv-02101-BLF) [2022 U.S.Dist.LEXIS 135329] (Prescott).) In Krommenhock, supra, 334 F.R.D. at p. 563, the defendant argued that “because there are 45 Challenged Statements that were made in varying combinations for 31 varieties of cereal, the impact of the Challenged Statements is highly individualized” and, therefore, the common issues would not predominate over individualized issues.
The Krommenhock Court explained
Post mischaracterizes the pertinent, predominant questions that arise under the California consumer protection statutes. The relevant analysis under California law does not consider whether each class member saw and relied on each of the Challenged Statements and in what combination, but instead whether the Challenged Statements were used consistently through the Class Period, supporting an inference of classwide exposure, and whether the Challenged Statements would be material to a reasonable consumer. Hadley v. Kellogg Sales Co., 324 F. Supp. 3d 1084, 1095 (N.D. Cal. 2018) (Hadley I) (the question is how an objective ‘reasonable consumer’ would react to a statement, and not whether individual class members saw or were deceived by statements). Those are common questions, supported at this juncture by plaintiffs’ experts and subject to attack at trial by defendant’s experts.
(Krommenhock, supra, 334 F.R.D. at pp. 563-564.) The Court concluded that, “under California law prominence goes only to the inapposite question of whether significant numbers of prospective class members saw or interacted with the statement.” (Id. at p. 565.) Citing only federal cases, the Court went on to state that where there is evidence that a representation is made consistently on the label, the only questions is whether it is material to the reasonable consumer. The Prescott court agreed with Krommenhock that “California law does not support a requirement that an alleged misrepresentation must be prominently displayed on the label or packaging before classwide exposure may be inferred.” (Prescott, supra, [2022 U.S.Dist.LEXIS 135329, at *16].)
Defendant asserts that “where plaintiffs seek to certify a class aimed solely at recovering restitution under the unfair competition law or false advertising law and define the members of the class as anyone who purchased the good or service to which the advertisement pertains, those plaintiffs must prove that (1) the class members were exposed to the advertisement, (2) the advertisement was deceptive, and (3) the deception was material.” (Downey v. Public Storage, Inc. (2020) 44 Cal.App.5th 1103, 1115 (Downey).)[2] Thus, it contends that one who seeks restitution as Plaintiffs do, must do more than show that consumers were likely to be misled.
It appears to the Court that the class definition is overbroad in that it includes products for which statements only appeared in small font, on the back or side of the package, and with other text. In other words, the class definition include products that do not prominently feature the challenged statements such that it can be inferred that class members were exposed to those products. Plaintiffs challenge four separate statements appearing on labels in varying combinations and locations, and with levels of prominence.[3]
Plaintiffs argue that other federal cases have rejected the idea that prominence is requires under California law. But, obviously, “one who was not exposed to the alleged misrepresentations and therefore could not possibly have lost money or property as a result of the unfair competition is not entitled to restitution.” (Pfizer Inc. v. Superior Court (2010) 182 Cal.App.4th 622, 631.) And, “[c]ommon issues do not predominate (and class certification is properly denied) when the evidence demonstrates variations in how—and, critically, whether—class members were exposed to an allegedly deceptive advertisement. [Citations.]” (Downey, supra, 44 Cal.App.5th at p. 1117.) Thus, although the federal court opinions Plaintiffs rely on have interpreted California law differently, California law requires that the class members be exposed to the allegedly deceptive or misleading content at issue. The Court questions whether a consumer can be said to have been exposed to the challenged statements if they are not prominent enough to have been seen by a reasonable consumer, let alone so small or unclear that they may well be illegible in the case of internet purchases.
Here, further, it is not merely the lack of prominence of certain statements but the variation in the prominence of the statements on different packaging that concerns the Court. Here, some of the statements are in significantly smaller font, located on the back or side of the package, located surrounded by other text. And, the statements’ prominence is not uniform across different packages.
The Court declines to expressly decide at exactly what point the statements are displayed prominently enough to warrant an inference of exposure under Hadley. The class is not separated into subclasses and it is not immediately clear to the Court how the class definition can be limited to remedy this issue. Defendant asserts that nearly 120 variations of the packaging were used at various times during the class period for the products included in the class.
Accordingly, the Court will deny the motion for class certification without prejudice to refiling with a narrowed class definition based on the reasoning in Hadley. The Court requests that Plaintiffs consider whether separating the class into subclasses would be appropriate.
Defendant also argues that the class definition does not account for purchasers who may have bought their products via the internet. It contends that those purchasers may not have seen the challenged statements prior to purchase even if they were located on the products because the print may have been illegible in the product depictions on the internet. The Court finds Defendant’s argument persuasive. Plaintiffs’ theory is that the presence of the challenged statements on the products exposed consumers to those statements. If the statements could not be read by consumers, it stands to reason that they could not have relied on them. Accordingly, Plaintiffs should explain how they plan to show that internet consumers were exposed to the challenged statements or define the class such that it excludes internet purchases.
Defendant also contends that Plaintiffs cannot show uniform deception because its packaging displays nutrition information that includes the actual sugar content of each product. Defendant points to several lower federal court decisions in which it was held that consumers are not deceived by advertising statements where the product contains nutrition labels disclosing the actual amount of sugar in the product. (See, e.g., Truxel v. General Mills Sales, Inc. (N.D.Cal. Aug. 13, 2019, No. C 16-04957 JSW) 2019 U.S.Dist.LEXIS 144871, at *10 [“no reasonable consumer is deceived regarding the product’s sugar content, and whether it may or may not be healthy as a result, when the product’s label plainly discloses the amount of sugar in the product”]; Clark v. Perfect Bar, LLC (N.D. Cal. Dec. 21, 2018) 2018 WL 7048788, at *1 [same].) However, these cases involved motions to dismiss, not motions for class certification.
Plaintiffs argue that the issue of the effect of the nutrition labels is amenable to classwide treatment. The Court agrees. The nutrition labels are likely to be similar in placement on all products at issue and would contain the sugar content for each product.
b. Reliance
Defendant also asserts that reliance on the challenged statements would not be uniform. It maintains that some consumers purchase its products due to recommendations or prescriptions from doctors. With respect to prescriptions for the items in question, the Court finds that changing the class definition to remove consumers for whom the products in question were prescribed will eliminate any concerns on that front. The products in question are widely available in stores without a prescription and the class will remain sufficiently numerous with prescribed purchases omitted from the class.
With respect to recommendations, Plaintiffs argue that the fact that consumers may have heard about Defendant’s products from another source does not absolve Defendant from its misleading statements present on the product packaging. The Court finds Plaintiffs’ argument and authority in support persuasive. A consumer who received a recommendation for a PediaSure product would also have been exposed to the challenged statements to the same extent as any other purchaser. For the same reason, the Court rejects Defendant’s argument that other individualized factors motivate decisions to purchase the products at issue. Further, to the extent Defendant argues that consumers generally did not rely on the challenged statements to make their purchasing decisions, this speaks to the merits of the matter and not to the question at hand, which is whether common questions of law and fact predominate.
Because the Court will deny the motion without prejudice, the Court notes that customers might purchase Defendant’s products for resale or distribution rather than for personal use. Such customers may not have been affected by challenged statements. Plaintiffs should consider amending the class definition to take this into account.
c. Damages Model
Defendant contends that Plaintiffs have failed to establish a classwide damages model and, therefore, they cannot establish predominance of common questions. Specifically, it argues that Plaintiffs have consistently taken the position that the combination of statements on its product packaging led class members to pay a premium for Defendant’s products. But, Defendant maintains, Plaintiffs’ damages model attempts to calculate damages based on individual price premia, which cannot be added together to determine damages for a product. The model proffered by Plaintiffs fails to take into account how the statements interact with other challenged statements and how they interact with other statements on the label and other external information. Thus, Defendant asserts that
Awarding damages here to Plaintiffs and other class members would require an individualized inquiry to sort out on a consumer-by-consumer basis: (i) whether the price premium paid by plaintiffs is the same or different based on the 119 different label variations; (ii) whether the price premium paid by class members changes depending upon the challenged statements they were exposed to; and (iii) whether class members nevertheless would have paid the same price premium (and suffered no damages) because they drew the same impression about the product from nonchallenged label statements (e.g., ‘Clinically Proven to Help Kids Grow’ or ‘#1 Pediatrician Recommended Brand’) or challenged statements that appeared in off-label advertising that Plaintiffs do not challenge.
(Opposition to Motion, p. 20, lns. 17-25.)
“As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” (Hicks, supra, 89 Cal.App.4th at p. 916.) Here, it appears that common issues of law and fact will predominate once the class is limited as discussed above.
Because the Court will deny the motion for class certification without prejudice for other reasons, it suffices for the Court to observed that it has been stated that “[i]t is well-established that the ‘ “price premium” attributable to’ an alleged misrepresentation on product labeling or packaging is a valid measure of damages in a mislabeling case under the FAL, CLRA, and UCL.” (Hadley, supra, 324 F. Supp. 3d at p. 1104.) In response to the defendant’s argument that the “conjoint” damages model in that case failed to take into factors other than the challenged statements that would influence consumer’s buying decisions, including taste, product names, and promotions, the Hadley court explained that these types of critiques go to the weight and not admissibility of the survey-based analyses. (Id. at pp. 1108-1109.)
2. Adequacy and Typicality
“Adequacy of representation depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) The fact that a class representative does not personally incur all of the damages suffered by each different class member does not necessarily preclude the representative from providing adequate representation to the class. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 238, disapproved of on another ground by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.) Only a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status. (Ibid.)
“Although the questions whether a plaintiff has claims typical of the class and will be able to adequately represent the class members are related, they are not synonymous.” (Martinez v. Joe’s Crab Shack Holdings (2014) 231 Cal.App.4th 362, 375 (Martinez).) “The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.” (Ibid., quoting Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502.)
Here, Defendant does not challenge adequacy of the class representatives or of their counsel. There is no evidence that Plaintiffs are inadequate to represent the class due to a conflict of interest and Plaintiffs are represented by experienced class counsel. Further, Plaintiffs have suffered the same injuries due to the allegedly false and misleading challenged statements. Namely, Plaintiffs contend that the would not have purchased the products in question in the absence of the challenged statements, which led them to believe the products were healthy, and that they paid a premium for the products due to their claimed healthiness. Accordingly, the Court finds that the adequacy and typicality requirements have been met in this case.
iii. Superiority
“[A] class action should not be certified unless substantial benefits accrue both to litigants and the courts. . . .” (Basurco v. 21st Century Ins. (2003) 108 Cal.App.4th 110, 120, internal quotation marks omitted.) The question is whether a class action would be superior to individual lawsuits. (Ibid.) “Thus, even if questions of law or fact predominate, the lack of superiority provides an alternative ground to deny class certification.” (Ibid.) Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Id. at pp. 120-121, internal quotation marks omitted.)
Defendant does not argue that superiority is not met in this case. In light of the vast number of potential class members, it is clear that a single class action would be superior to a multitude of individual lawsuits. Accordingly, the Court finds that the superiority requirement is met in this case.
C. Conclusion
The motion for class certification is denied without prejudice for the reasons discussed above.
II. Motions to Exclude Evidence
As mentioned above, Defendant moves to exclude the opinions of Plaintiffs’ experts Derek Rucker, Steven Gaskin, and Colin Weir. The Court declines to rule on these motions at this time because the outcome of the motion can be determined without reference to them. In other words, the evidence the parties seek to exclude is not material. For the same reason, the Court declines to rule on Plaintiffs’ opposed request for judicial notice in support of their opposition to Defendant’s motion to exclude the opinions of Steven Gaskin and Colin Weir.
III. Motion to Seal
Defendant moves to seal multiple documents and portions of documents filed in connection with the motion for class certification and related motions to exclude evidence. The specific documents Defendant seeks to seal are listed in the Declaration of Michael Glick in Support of Abbott Laboratories’ Omnibus Motion to Seal (“Glick Seal Decl.”). Defendant’s main argument in support of sealing is that publically revealing the information it seeks to redact or seal, consisting of Defendant’s confidential business information would “put [it] at a competitive disadvantage against other current or potential healthcare companies and makers of pediatric nutrition drinks.” (Motion to Seal, p. 6, lns. 3-5.) Plaintiffs oppose the motion arguing that Defendant’s outside counsel’s declaration is insufficient to establish his personal knowledge of the confidential nature of the material and that Defendant’s request is not narrowly tailored and covers information that is either non-confidential or that has already been made public. In its reply brief, Defendant withdraws its request to seal as to Figure 15 of Dr. Kivetz’s expert report and the portions of its internal presentations titled “PediaSure-Superboy Neuroscience TV Ad Testing,” and “Abbott Sugar Reduction Recommendations and Audit” as identified by Plaintiffs.
“Unless confidentiality is required by law, court records are presumed to be open.” (Cal. Rules of Court, rule 2.550(c).) “A record must not be filed under seal without a court order. The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.” (Cal. Rules of Court, rule 2.551(a).) The court may order that a record be filed under seal only if it expressly finds facts that establish:
1) There exists an overriding interest that overcomes the right of public access to the record;
2) The overriding interest supports sealing the record;
3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;
4) The proposed sealing is narrowly tailored; and
5) No less restrictive means exist to achieve the overriding interest.
(Cal. Rules of Court, rule 2.550(d).)
A party moving to seal a record must file a memorandum and a declaration containing facts sufficient to justify the sealing. (Cal. Rules of Court, rule 2.551(b)(1).) A declaration supporting a motion to seal should be specific, not conclusory, as to the facts supporting the overriding interest. If the court finds that the supporting declarations are conclusory or otherwise unpersuasive, it may conclude that the moving party has failed to demonstrate an overriding interest that overcomes the right of public access. (See In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 305.)
Further, where some material within a document warrants sealing but other material does not, the document should be edited or redacted if possible, to accommodate the moving party’s overriding interest and the strong presumption in favor of public access. (See Cal. Rules of Court, rule 2.550(e)(1)(B); see also In re Providian Credit Card Cases, supra, 96 Cal.App.4th at p. 309.) In such a case, the moving party should take a line-by-line approach to the information in the document, rather than framing the issue to the court on an all-or-nothing basis. (In re Providian Credit Card Cases, supra, 96 Cal.App.4th at p. 309.)
The Court is inclined to seal most of the requested items. But, as Plaintiffs correctly point out, the declaration of Defendant’s outside counsel fails to show the basis of declarant’s personal knowledge and the allegations of confidentiality and potential harm to Defendant are conclusory. And, Plaintiffs point out that there are additional portions of the documents that could be sealed (although Defendant correctly states that Plaintiffs fail to specify exactly what they contend could be further redacted). Accordingly, Defendant may file a new motion to seal with additional evidence within 15 days of the date of the Court’s final order. The items lodged conditionally under seal will remain sealed pending the outcome of that motion. The Court requests that Defendant take a further look at the documents at issue to determine if the sealing and redactions can be any further minimized.
CONCLUSION
The motion for class certification is DENIED WITHOUT PREJUDICE. The Court declines to rule on the parties’ motions to exclude evidence because the challenged evidence is not material to the outcome of the motion for class certification. Defendant may file a new motion to seal with additional evidence within 15 days of the Court’s order and all items lodged under seal may remain under seal until that motion has been resolved.
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LAW AND MOTION HEARING PROCEDURES
Parties may appear in person or remotely. Remote appearances must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating or listening in a hearing remotely. 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 can either be in person or appear remotely.
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Case Name: Aguila v. Becton and Dickinson, et al.
Case No.: 22CV404498
This is an action under the Private Attorney General Act (“PAGA”) alleging wage and hour violations by Defendants Becton Dickinson and Company (erroneously sued and Becton and Dickinson) (“BD”) and Apidel Technologies, LLC. Plaintiff alleges that Defendants failed to provide code-compliant meal and rest breaks, failed to reimburse expenses and committed other wage and hour violations.
Before the Court is Defendants’ motion to compel arbitration of the individual claims in this action and stay Plaintiff’s representative PAGA claim pending the outcome of his individual claim pursuant to Code of Civil Procedure section 1281.4.[4] Alternatively, Defendants move to stay this entire action pending completion of Plaintiff’s earlier-filed class action titled Ramon Aguila v. Becton and Dickinson, et al., U.S. District Court for the Northern District of California, Case No. 22-cv-06670-EJD (“Aguila I”). Plaintiff opposes the motion.[5]
For the reasons discussed below, the Court GRANTS Defendants’ motion to compel arbitration. Plaintiff’s representative PAGA claim is stayed pending the outcome of his individual claim pursuant to Code of Civil Procedure section 1281.4.
I. BACKGROUND
As alleged in the Complaint, Plaintiff worked for Defendants as an hourly, non-exempt employee from approximately November 2020 through August 30, 2021. (Complaint, ¶ 10.) Plaintiff and the aggrieved employees allegedly were not compensated with all overtime and minimum wages, and were not provided with all meal breaks and rest periods to which they were entitled. (Ibid., ¶ 11(r).) Meal breaks and rest periods were missed at least once per month and were often interrupted and cut short, and Plaintiff and the aggrieved employees were not compensated an additional hour of pay as required by California law (Ibid., ¶ 11(s), (t) and (y).) Defendants also required Plaintiff and the aggrieved employees to keep their personal cell phone on their persons at all times during their shift to respond to work related calls, even during meal periods and rest breaks. (Ibid., ¶ 11(v) and (bb).)
Defendants additionally failed to compensate Plaintiff and the aggrieved employees for pre-shift activities and did not reimburse them for business expenses incurred pursuant to Labor Code section 2802. (Complaint, ¶ 11(ff) and (gg).) Plaintiffs and the aggrieved employees were also sent home within the first two hours of their shift due to the presence of COVID-19 infected individuals at the jobsite but were not compensated as required. (Ibid., ¶ 11(hh).)
Defendants did not provide accurate, lawful itemized wage statements to Plaintiff and the aggrieved employees, in part because of the aforementioned violations. (Complaint, ¶ 11(ii).) Upon his separation from his employment with Defendants, Plaintiff did not receive all wages he was owed. (Ibid., ¶ 11(kk).) Plaintiff worked for Defendants through a staffing agency throughout the duration of his employment and received weekly paychecks every Friday. (Ibid.) However, Plaintiff’s final paystub indicates a bi-weekly pay period. (Ibid.)
Based on the foregoing, Plaintiff brings this action a asserting a single claim for PAGA penalties.
II. MOTION TO COMPEL ARBITRATION
Defendants move to compel arbitration based on specific language pertaining to arbitration (the “Arbitration Provision”) contained in the Employee Consulting Project Acceptance Agreement attached to the Declaration of Ed Altom as Exhibit 1.
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, there does not appear to be any dispute between the parties that the agreement at issue, which pertains to employment in California by an Illinois resident, Apidel, on an assignment with a New York resident, BD, that assembles medical devices that are marketed, sold and transported out-of-state, involves interstate commerce. However, there is also is no language in the subject agreement which provides that it is governed by the FAA. Accordingly California arbitration law controls procedure while the FAA controls substance.
Under such California arbitration law, a court must grant a petition to compel arbitration “if it determines that an agreement to arbitrate … exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement,” among other exceptions. (Code Civ. Proc., § 1281.2.) 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], internal citations and quotation marks omitted.)
B. Existence and Scope of Agreement to Arbitrate
To establish that Plaintiff consented to the Arbitration Agreement, Defendants submit the declarations of Ed Altom, a Human Resources consultant working with Apidel Technologies, LLC and Jaime Serrano, a Human Resource Business Partner with Becton Dickinson. According to Mr. Altom, Plaintiff was hired by Apidel, a staffing agency, to work for BD, a medical device and technology company, as an Assembler, Instrument, in San Jose. In connection with accepting employment with Apidel, Plaintiff electronically signed the Employee Consulting Project Acceptance Agreement (the “Agreement”), which included an agreement to arbitrate claims (the “Arbitration Provision”), on November 9, 2020.[6] The portion pertaining to the issue of arbitration reads, in pertinent part, as follows:
SIGNATURE ACKNOWLEDGMENT
Employee agrees to comply without exception to all of the above terms and conditions, and any security protocols, standard business conduct codes, or ethics codes, as have or may be provided to Employee or Apidel or the Client. Employee also allows sharing the background check report with the client and understands that the client may take an adverse action on employment if the checks are not cleared. The violation of any of the above shall be deemed a material breach of this agreement. Employee agrees that any dispute that arises out or relating to this agreement is to be governed by the Model Employment Arbitration Procedures of the American Arbitration Association (“AAA”) and any dispute will be settled by final and binding arbitration held in Chicago, IL.
Defendants maintain that Plaintiff’s claims are encompassed by the Arbitration Provision, i.e., the foregoing italicized language, because the overall agreement in which it sits, the Employee Consulting Project Acceptance Agreement, outlines the terms and scope of his employment, including his hourly rate of pay, the process for reimbursement of Plaintiff’s expenses, and information about whether or not Plaintiff is eligible for benefits. Plaintiff’s underlying claims, Defendants insist, relate directly to the terms of his pay and reimbursement and thus, relate directly to the Agreement, inclusive of the Arbitration Provision.
In his opposition, Plaintiff conversely suggests that the Arbitration Provision only relates to disputes arising out of the Agreement, and not his employment generally, and its language focuses on things that are unrelated to the claims asserted in this action: “The violation of any of the above shall be deemed a material breach of this agreement. Employee agrees that any dispute that arises of or relating to this agreement is governed by the Model Employment Arbitration Procedures of [AAA].” Thus, Plaintiff concludes, in application the “violation of terms” is only related to the terms he could potentially violated, which are the: (1) Confidentiality/Non-Competition Clause, (2) the Overpayment or Payment Made in Error Clause, and (3) Conflict of Interest Clause. As none of these terms are related to this action, Plaintiff continues, his claims fall outside the scope of the Arbitration Provision. The Court disagrees.
Plaintiff’s interpretation of the Arbitration Provision not only ignores its broad edict that it applies to “any dispute that arises out of or relating to the [Employee Consulting Project Acceptance Agreement],” but requires a narrow reading that impermissibly focuses on specific provisions of the Agreement to the detriment of the Agreement as whole. As Defendants respond, because the Arbitration Provision is substantively governed by the FAA, Plaintiff’s reading cannot survive in the face of well-settled federal policy that any issues regarding interpretation “as to the scope of the arbitration clause [must be] resolved in favor of arbitration.” (Volt Info. Sciences, Inc. v. Bd. of Tr. of Leland Stanford Junior Univ. (1989) 489 U.S. 468, 475-476.) Moreover, the Court does not believe Plaintiff’s reading of the Arbitration Provision as only applying to disputes concerning the Confidentiality/Non-Competition, Overpayment or Payment Made in Error and Conflict of Interest clauses is reasonable given that the Agreement sets forth more than just those terms. As Defendants assert, the Agreement outlines the terms and scope of Plaintiff’s employment, listing Plaintiff’s hourly rate of pay, the process for reimbursement of his expenses, information about whether or not he is eligible for benefits, and when he is to be paid. This lawsuit specifically challenges the amount of compensation received by Plaintiff (and other aggrieved employees), which is in part based on the hourly rate of pay set forth in the Agreement, and whether he was reimbursed for necessary business expenses, and also involves Plaintiff’s expectations involving payroll (e.g., purported failures to receive proper wage statements and timely payment of wages upon termination). As such, Plaintiff’s claims falls within the scope of the Agreement.
Notably, none of the authorities cited by Plaintiff in support of his interpretation of the Arbitration Provision involve agreements to arbitrate, and Plaintiff otherwise offers no argument regarding the effect of the FAA and its policy of resolving disputes concerning the scope of an arbitration provision in favor of arbitration in interpreting this provision. Ultimately, the Court agrees with Defendants that Plaintiff’s claims arise out or relate to the Agreement and thus are subject to arbitration to the extent the Arbitration Provision is enforceable. As such, unless Plaintiff establishes a defense to the enforcement of the Arbitration Provision, Defendants’ motion must be denied.
C. Unconscionability
Plaintiff urges that even if the Arbitration Provision provides for arbitration of his PAGA claim, it 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). The burden of proving unconscionability rests upon the party asserting it. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 911.)
Defendants contend that the Arbitration Provision is not procedurally or substantively unconscionable, but even if any portion is found to be substantively unconscionable, it is easily severed.
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.)
Plaintiff contends that the Arbitration Provision is procedurally unconscionable for the following reasons: it was imposed on him without any opportunity for discussion or negotiation and thus constitutes a per se contract of adhesion; it was “strategically blended” into Plaintiff’s offer letter of employment and was preceded by the deceptive heading, “Signature Acknowledgment”; Plaintiff was not provided with any of the model AAA rules; and Plaintiff did not have an opportunity to review the Agreement or consult with an attorney prior to signing it.
Analyzing procedural unconscionability “begins with an inquiry into whether the contract is one of adhesion” (Armendariz, 24 Cal.4th at 113) i.e., one that is “standardized, generally on a preprinted form, and offered by the party with superior bargaining power ‘on a take-it-or-leave-it basis’” (OTO, LLC v. Kho (2019) 8 Cal.5th 111, 126.) Arbitration agreements imposed as a condition of employment are typically deemed to be adhesive and the pertinent situation in such a circumstance is “whether circumstances of the contract’s formation created such oppression or surprise that closer scrutiny of its overall fairness is required.” (Id.) “Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 247.) Circumstances relevant to establishing oppression include: the amount of time the party is given to consider the agreement; the amount and type of pressure exerted on them to sign; the length of the proposed contract and the length and complexity of the challenged provision; the education and experience of the party; and whether the party’s review of the agreement was aided by an attorney. (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348.) In pre-hiring settings, such as the one at bar, courts must be “particularly attuned” to the danger of oppression and overreaching. (Armendariz, supra, at 115.)
Here, while Plaintiff makes the aforementioned claims regarding procedural unconscionability, he offers no evidence of the same, as is his burden. (See Sanchez v. Valencia Holding Co., LLC, supra 61 Cal.4th at 911.) Further, the Court does not find persuasive his assertion that the Arbitration Provision was “strategically blended” into Plaintiff’s offer letter of employment and was preceded by the deceptive heading, “Signature Acknowledgment.” The language is not deceptive as it emphasizes that the signee should be sure to note what his or her signature is acknowledging, and it is plain, not legally complex, and contained in a short, three-page document. Finally, the Court is aware of no authority, and Plaintiff cites none, which provides that the failure to include a copy of the AAA rules renders an agreement to arbitrate procedurally unconscionable.
Given the foregoing, the Court finds that Plaintiff has failed to establish that the Arbitration Provision is procedurally unconscionable. Because both procedural and substantive unconscionability must be present in order for the Court to invalidate the Arbitration Provision (see Armendariz, supra, 24 Cal.4th at p. 114; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174), the Court concludes that the provision is enforceable.
2. Substantive Unconscionability
Given its conclusion that the Arbitration Provision is not procedurally unconscionable, the Court need not evaluate the merits of Plaintiff’s assertions regarding substantive unconscionability. However, even if it did, the Court finds that Plaintiff has not established the presence of such 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, 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.) Terms that in the abstract might not support a finding of unconscionability “take on greater weight when imposed by a procedure that is demonstratively oppressive.” (OTO, LLC, 8 Cal.5th at 130.)
Plaintiff maintains that the Arbitration Provision is substantively unconscionable because it does not include any of the minimum enforceability requirements set forth in Armendariz, supra, including the parties’ rights with respect to discovery, and which party is to bear the costs of arbitration. This argument is unavailing because as Defendants note, silence about costs in an arbitration agreement is not grounds for denying a motion to compel arbitration. (See Little v. auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1084.) In any event, absent express language, employers implicitly agree to cover costs unique to arbitration. (Armendariz, 24 Cal.4th at 106, 113.) In sum, there is no procedural unconscionability in the Arbitration Provision which renders it unenforceable.
D. Possible Exemption of PAGA Claims
Finally, Plaintiff insists that the Arbitration Provision exempts PAGA claims because at the time that it was signed, Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 358 disallowed compelling PAGA claims to arbitration. Plaintiff does not dispute that this holding by the California Supreme Court was subsequently abrogated by the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___ [142 S. Ct. 1906, 2022 U.S. LEXIS 2940], but maintains that the Court must look to the state of the law at the time the Agreement was executed. This assertion is unavailing as Plaintiff tellingly cites no authority in support which provides that the Court must follow an abrogated holding that was in effect when the agreement at issue was executed.
DIRECTV, Inc. v. Inburgia (2015) 577 U.S. 47, is instructive in this regard. In that case, the plaintiff and its customers entered into a service agreement that included a binding arbitration provision with a class-arbitration waiver and a clause which provided that if the “law of your state” made class-arbitration waivers unenforceable, the entire arbitration provision was unenforceable. At the time the agreement was executed, California law made class-arbitration waivers unenforceable (see Discover Bank v. Superior Court (2005) 36 Cal.4th 148) but a subsequent decision by the U.S. Supreme Court held that the foregoing rule was preempted by the FAA. The Court in DIRECTV overruled the California Court of Appeal’s decision that the entire arbitration agreement was unenforceable because California law would render class-arbitration waivers unenforceable, and expressed disapproval with the lower’s court’s view that state law “retains independent force even if it has been authoritatively invalidated” by the U.S. Supreme Court. Given this opinion and the absence of any authority which supports Plaintiff’s position, the Court must conclude that PAGA claims are not exempt from the scope of the Arbitration Provision based on the U.S. Supreme Court’s holding in Viking River Cruises, Inc., supra.
III. CONCLUSION
In accordance with foregoing, Defendants’ motion to compel arbitration is GRANTED. Under the guidance recently issued by the California Supreme Court’s in Adolph Uber Technologies, Inc., supra, Plaintiff’s representative PAGA claim is stayed pending the outcome of his individual claim pursuant to Code of Civil Procedure section 1281.4.
Defendants’ alternative request to stay this entire action pending resolution of Aguilar I is DENIED.
The Court will prepare the order.
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LAW AND MOTION HEARING PROCEDURES
Parties may appear in person or remotely. Remote appearances must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating or listening in a hearing remotely. 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 can either be in person or appear remotely.
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Case Name: Alexis Lakey v. Poshmark, Inc.
Case No.: 22CV395084
This is a putative class and Private Attorneys General Act (PAGA) action. Plaintiff alleges that Defendant Poshmark, Inc. failed to pay overtime wages due to its rounding policy, failed to provide compliant meal periods or pay associated premiums, and improperly listed a biweekly pay rate on wage statements.
The parties reached a settlement, which the Court preliminarily approved in an order filed on March 24, 2023. The factual and procedural background of the action and the Court’s analysis of the settlement and settlement class are set forth in that order.
Before the Court is Plaintiff’s motion for final approval of the settlement and for approval of their attorney fees, costs, and incentive award for the named plaintiff. Plaintiff’s motion is unopposed. As discussed below, the Court GRANTS final approval but reduces the requested enhancement award to $5,000.
I. LEGAL STANDARDS FOR SETTLEMENT APPROVAL
A. Class Action
Generally, “questions whether a [class action] settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion. [Citation.]” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235 (Wershba), disapproved on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.
(Wershba, supra, 91 Cal.App.4th at pp. 244-245, internal citations and quotation marks omitted.)
In general, the most important factor is the strength of the plaintiff’s case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).) But the trial court is free to engage in a balancing and weighing of relevant factors, depending on the circumstances of each case. (Wershba, supra, 91 Cal.App.4th at p. 245.) The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., citation and internal quotation marks omitted.) The trial court also must independently confirm that “the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Kullar, supra, 168 Cal.App.4th at p. 129.) Of course, before performing its analysis the trial court must be “provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Id. at pp. 130, 133.)
B. PAGA
Labor Code section 2699, subdivision (l)(2) provides that “[t]he superior court shall review and approve any settlement of any civil action filed pursuant to” PAGA. The court’s review “ensur[es] that any negotiated resolution is fair to those affected. [Citation.]” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.) Seventy-five percent of any penalties recovered under PAGA go to the Labor and Workforce Development Agency (LWDA), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380, overruled on other grounds by Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___, 2022 U.S. LEXIS 2940.)
Similar to its review of class action settlements, the Court must “determine independently whether a PAGA settlement is fair and reasonable” to protect “the interests of the public and the LWDA in the enforcement of state labor laws[.]” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76-77.) It must make this assessment “in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws. [Citations.]” (Id. at p. 77; see also Haralson, supra, 383 F.Supp.3d at p. 971 [“[W]hen a PAGA claim is settled, the relief provided for under the PAGA [should] be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public[.]”], quoting LWDA guidance discussed in O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110, 1133 (O’Connor).)
The settlement must be reasonable in light of the potential verdict value. (See O’Connor, supra, 201 F.Supp.3d at p. 1135 [rejecting settlement of less than one percent of the potential verdict].) But a permissible settlement may be substantially discounted, given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds at trial. (See Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) 2016 WL 5907869, at *8-9.)
II. TERMS AND ADMINISTRATION OF SETTLEMENT
The non-reversionary gross settlement amount is $450,000. Attorney fees of $150,000 (one-third of the gross settlement), litigation costs of $10,631.42,[7] and $9,500 in administration costs will be paid from the gross settlement. $25,000 will be allocated to PAGA penalties, 75 percent of which ($18,750) will be paid to the LWDA. The named plaintiff seeks an incentive award of $10,000.
The net settlement of $249,868.58[8] will be allocated to class members proportionally based on their pay periods during the class and PAGA periods. Class members will not be required to submit a claim to receive their payments. For tax purposes, settlement payments will be allocated 10 percent to wages and 90 percent to penalties and interest. The employer’s share of payroll taxes and other required withholdings will be paid separately from and in addition to the gross settlement. Funds associated with checks uncashed after 180 days will be paid to Legal Aid at Work.
Per the amended settlement agreement, class members who do not opt out will release all claims “based on facts alleged in the Action, or reasonably could have been alleged based on the facts alleged in the Action based on the allegations of the original and amended Complaints and the PAGA Notice Letters,” including specified wage and hour claims. The PAGA release is limited to all claims for PAGA penalties “that were alleged or that could have been alleged based on the facts asserted in the Action as well as in the PAGA Notice Letters[.]” Consistent with the statute, aggrieved employees will not be able to opt out of the PAGA portion of the settlement.
The notice process has now been completed. There were no objections to the settlement and no requests for exclusion from the class. Of the 429 total notices mailed by the administrator, 9 notices were returned, 9 notices were re-mailed to updated addresses, and no notices were ultimately undeliverable. The administrator estimates that the average payment to Participating Class Members will be $570.79, with a high payment of $1,595.66 and a low payment of $0.86. For the 310 PAGA class members, the highest individual PAGA payment was approximately $32.36 and the average payment was $20.16.
Pursuant to the order granting preliminary approval, Plaintiff lodged her confidential individual settlement agreement with Defendant settling her claims in case number 22CV397843, which the Court has reviewed. Plaintiff’s individual claims are distinct from the class claims and the individual settlement agreement appears to cover alleged conduct by Defendant that is specific to Plaintiff. There are no indications of collusion or threats of conflict since the individual settlement agreement does not predicate the release of the individual claims on approval of the class settlement. At preliminary approval, the Court found that the settlement is a fair and reasonable compromise of the class claims. It finds no reason to deviate from this finding now, especially considering that there are no objections. The Court thus finds that the settlement is fair and reasonable for purposes of final approval.
III. ATTORNEY FEES, COSTS, AND ENHANCEMENT AWARD
Plaintiff’s counsel seeks a fee award of $150,000, or one-third of the gross settlement, which is not an uncommon contingency fee allocation in a wage and hour class action.[9] This award is facially reasonable under the “common fund” doctrine, which allows a party recovering a fund for the benefit of others to recover attorney fees from the fund itself. Plaintiff also provides a combined lodestar figure of $200,635 based on 265.8 total hours spent or expected to be spent on the case by counsel billing at hourly rates of $450 to 850 per hour.[10] Plaintiff’s request results in a negative multiplier of 0.748. The lodestar cross-check supports the percentage fee requested, particularly given the lack of objections to the attorney fee request. (See Laffitte v. Robert Half Intern. Inc. (2016) 1 Cal.5th 480, 488, 503-504 [trial court did not abuse its discretion in approving fee award of 1/3 of the common fund, cross-checked against a lodestar resulting in a multiplier of 2.03 to 2.13].)
Plaintiff’s counsel also requests $10,631.42 in litigation costs, below the amount estimated at preliminary approval. Plaintiff’s costs appear reasonable based on the summary provided and are approved. The $9,500 in administrative costs are also approved.
Finally, the named plaintiff seeks an enhancement award of $10,000. To support this request, she submits a declaration describing her efforts on the case. (See Declaration of Alexis Lakey (Lakey Declaration).) The rationale for such awards in class actions is that named plaintiffs “should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class[,]” considering “1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation.” (Cellphone Termination Fee Cases (2010) 186 Cal.App.4th 1380, 1394-1395 (Cellphone), internal citations and quotation marks omitted.)
Here, the Lakey Declaration does not state that the named plaintiff experienced notoriety and personal difficulties as a result of their participation in this case, nor does it contain any information about the risks undertaken by the named plaintiff in commencing suit. (Cellphone, supra, 186 Cal.App.4th at p. 1394.) The duration of this litigation was not long and there is no indication that the named plaintiff was subject to depositions or interrogatories. (Id. at pp. 1394-1395.) While the Court considers the benefit to the LWDA and the public generally as well as the benefit to the class members, a $10,000 enhancement award constitutes 2.2 percent of the total settlement amount in this case. In Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, the proposed total enhancement award was too high even though it comprised only 2.5 percent of the total settlement amount. (175 Cal.App.4th at p. 789.) Applying the relevant factors, the Court finds that the proposed enhancement award of $10,000 is not warranted and believes that an enhancement award of $5,000 is adequate.
IV. ORDER AND JUDGMENT
In accordance with the above, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT:
The motion for final approval of the settlement, attorney fees, costs, and incentive award is GRANTED as provided above. The following class is certified for settlement purposes:
all current and former non-exempt employees of Defendant who worked more than five hours in any work shift during the Class Settlement Period [(March 8, 2018, through March 1, 2023])
No one otherwise included in this definition is excluded from the class.
Judgment shall be entered through the filing of this order and judgment. (Code Civ. Proc., § 668.5.) Plaintiff and the members of the class shall take from their operative complaint only the relief set forth in the named Plaintiff’s individual settlement agreement, amended class settlement agreement, and this order and judgment. Pursuant to Rule 3.769(h) of the California Rules of Court, the Court retains jurisdiction over the parties to enforce the terms of the settlement agreement and the final order and judgment.
The Court sets a compliance hearing for February 8, 2024 at 2:30 p.m. in Department 1. At least ten court days before the hearing, class counsel, and the settlement administrator shall submit a summary accounting of the net settlement fund identifying distributions made as ordered herein; the number and value of any uncashed checks; amounts remitted to Legal Aid at Work; the status of any unresolved issues; and any other matters appropriate to bring to the Court’s attention. Counsel shall also submit an amended judgment as described in Code of Civil Procedure section 384, subdivision (b). Counsel may appear at the compliance hearing remotely.
The Court will prepare the order and judgment.
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LAW AND MOTION HEARING PROCEDURES
Parties may appear in person or remotely. Remote appearances must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating or listening in a hearing remotely. 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 can either be in person or appear remotely.
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Case Name: Loera, et al. v. Cellco Partnership, et al.
Case No.: 21CV386962
Before the Court is the motion to intervene by proposed intervenors Ricardo Contreras (“Contreras”) and Sergio Navarro (“Navarro”) (collectively, “Proposed Intervenors”). The motion is opposed by plaintiffs John Loera (“Loera”) and Manuel Nieto (“Nieto”) (collectively, “Plaintiffs”) and defendant Cellco Partnership (“Cellco” or “Defendant”).
For reasons discussed below, the motion to intervene is DENIED.
I. Background
This is an action for various violations of the California Labor Code. On January 20, 2021, plaintiff Nieto filed a representative action in Santa Cruz Superior Court (the “Nieto Action”) pursuant to the Private Attorney General Act (“PAGA”) against Cellco. He alleged Cellco violated various Labor Code provisions relating to the alleged failure to provide overtime pay, minimum wage, meal and rest breaks, accurate pay stubs, and business reimbursements. Sixth months later, plaintiff Loera filed his own PAGA action (the “Loera PAGA Action”) and the instant action (the “Loera Class Action”) against Cellco, alleging violations of similar provisions, on behalf of himself and other similarly situated current and former non-exempt employees.
On September 1, 2022, the Proposed Intervenors filed their class action, which included a PAGA claim (the “Contreras Action”). They brought the case on behalf of themselves and all current and former non-exempt hourly paid employees who worked for Defendant from September 1, 2018 to final judgment. On November 28, 2022, they filed their first amended class and representative action complaint on behalf of the same class.
In October 2022, the parties in the Loera Action and Nieto Action attended a mediation with Defendant, however, they were unable to come to an agreement. On March 13, 2023, Loera filed his second amended complaint and added Nieto as a named plaintiff and putative class representative to the Loera Class Action. Plaintiffs seek to represent all individuals who were employed by Cellco as non-exempt retail employees and performed work in California during the class period.[11]
On April 14, 2023, the parties in the Loera Action and Nieto Action reached a settlement in principle with Cellco. The same day, Proposed Intervenors were informed that Plaintiffs and Defendant had reached an agreement.
On April 19, 2023, the Court denied Proposed Intervenors’ ex parte application to intervene.
On June 7, the existing parties filed their joint notice of settlement.
On June 26, 2023, Proposed Intervenors filed the instant motion. On July 10, 2023, the existing parties filed their respective oppositions. On July 20, 2023, Proposed Intervenors filed their reply.
II. Motion to Intervene
Proposed Intervenors move for leave to intervene in this action.
A. Legal Standard
Code of Civil Procedure section 387 (“Section 387”) governs intervention and provides mandatory terms under which the Court “shall” permit intervention where the proposed intervenor demonstrates in a “timely application” that “[a] provision of law confers an unconditional right to intervene” or “[t]he person seeking intervention claims an interest relating to the property or transaction that is the subject of the action and that person is so situated that the disposition of the action may impair or impede that person’s ability to protect that interest, unless that person’s interest is adequately represented by one or more of the existing parties.” (Code Civ. Proc. § 387, subd. (d)(1).) Where the would-be intervenor “meets the qualifications for mandatory intervention…, the fact that such intervention would add to the complexity of the action, create delay, or adversely affect the original parties is of no moment.” (California Physicians’ Service v. Superior Court (Gilmore) (1980) 102 Cal.App.3d 91, 96 (California Physicians’ Service).)
Section 387, subdivision (d)(2), pertains to permissive intervention. “[F]or permissive intervention, three factors must be established ‘the intervenor must have a direct interest in the lawsuit, the intervenor must not enlarge the issues raised by the original parties, and the intervenor must not tread on the rights of the original parties to conduct their own lawsuit.’” (Lincoln National Life Ins. Co. v. State Bd. Of Equalization (1994) 30 Cal.App.4th 1411, 1422 (Lincoln National Life Ins.).) “[T]he intervenor’s interest in the litigation must be direct and immediate rather than consequential, the issues must not be enlarged by the intervention and the reasons for intervention must outweigh the rights of the original parties to litigate in their own way.” (California Physicians’ Service, supra, 102 Cal.App.3d at pp. 95-96.) “One cardinal rule which is established by the cases is that an intervenor’s interest must be more direct and immediate than that of a simple creditor of one of the parties.” (Ibid.) “The purpose of allowing intervention is to protect others potentially affected by a judgment, thus obviating delay and multiplicity of suits.” (Catello v. I.T.T. General Controls (1984) 152 Cal.App.3d 1009, 1013.)
B. Analysis
Proposed Intervenors argue they are entitled to mandatory and permissive intervention.
1. Mandatory Intervention
a. Timeliness
Proposed Intervenors argue their application is timely because they were just informed on April 14, 2023, that the parties had reached a settlement in principle, which would extinguish their claims. In opposition, Plaintiffs argue on November 18, 2022, Proposed Intervenors were informed about Plaintiffs’ earlier filed cases, their substantial overlap with the claims asserted by Proposed Intervenors, and that Defendants were actively engaged in settlement discussions.
“Timeliness is measured from ‘the date the proposed intervenors knew or should have known their interests in the litigation were not being adequately represented.” (Lofton v. Wells Fargo Home Mortgage (2018) 27 Cal.App.5th 1001, 1013.)
Here, Proposed Intervenors state they did not know until April 14, 2023 that their interests were not being adequately represented because they found out their claims would be extinguished by the settlement in the Loera Class Action. (See Ziana Homeowners Assn. v. Brookefield Ziani LLC (2015) 243 Cal.App.4th 274, 282 (Ziana) [timeliness is measured not from the time the intervenor becomes aware of the case, but from when he knows or reasonably should know his interests are not adequately represented in the case].) Thus, the motion is timely.
b. Interest Relating to the Property or Transaction
Proposed Intervenors argue they have an interest in the claims made in the Loera Class Action because if the settlement is approved, the claims in the Contreras action will be extinguished. In opposition, Plaintiffs argue Proposed Intervenors fail to show they have any interest under Section 387 or the PAGA claim because PAGA claims belong to the State.
Currently, there is a split of authority as to whether a plaintiff in a representative PAGA action has the right to intervene or object to a judgment in a related action that purports to settle the claims brought on behalf of the State.
In Turrieta v. Lyft, Inc. (2021) 69 Cal.App.5th 955 (Turrieta), three individuals filed separate representative actions against the defendant alleging violations of the Labor Code. One of the individuals settled with the defendant. The other two individuals moved to intervene in the matter and object to the settlement. The trial court rejected their requests to intervene and approved the settlement after finding it to be fair and adequate. It also denied their subsequent motions to vacate the judgment under Code of Civil Procedure section 663. The Court of Appeal affirmed the denial of the appellant’s motion to intervene because the appellants could not show they had a direct and immediate interest in the settlement. The Court of Appeal reasoned the fact that the appellants were PAGA plaintiffs in a different PAGA action did not create a direct interest in the case because they were not the real parties in interest, the State was the real party in interest. Although the California Supreme Court has granted review for Turrieta regarding whether a plaintiff in a representative action under PAGA has the right to intervene, object to, or move to vacate a judgment in a related action that purports to settle the claims that plaintiff brought on behalf of the State, Turrieta may be relied on not only for its persuasive value, but also for “the limited purpose of establishing the existence of a conflict in authority that would in turn allow trial courts to exercise discretion under Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456, to choose between sides of any such conflict.” (See Turrieta v. Lyft, Inc.; SEIFU, 502 P3d 3; Cal. Rules of Court, rule 8.1115(e)(3) [“at any time after granting review or after decision on review, the Supreme Court may order that all or part of an opinion covered by (1) or (2) is not citable or has a binding or precedential effect different from that specified in (1) or (2) (emphasis added)].)
In opposition, Proposed Intervenors rely on Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 73 (Moniz) and Uribe v. Crown Building Maintenance Co. (2021) 70 Cal.App.5th 986, 999-1000 (Uribe). In Moniz, two individuals filed separate PAGA representative actions against the defendant. One of the individuals reached a settlement, which was approved by the trial court. The other individuals appealed on the basis that the settlement process and approval was deficient. The Court of Appeal reversed the judgment because it could not infer that the trial court assessed the fairness of the settlement’s allocation of civil penalties between affected aggrieved employees or whether such allocation comports with PAGA. The Court of Appeal stated “where two PAGA actions involve overlapping PAGA claims and a settlement of one is purportedly unfair, it follows that the PAGA representative in the separate action may seek to become a party to the settling action and appeal to the fairness of the settlement as party of [their] role as an effective advocate for the state.” (Id. at p. 73.) This is distinguishable from the matter at hand because in Moniz, the settlement included a release and waiver of rights. Moreover, Moniz addressed standing in the context of an appeal and whether the other PAGA plaintiff could challenge the fairness of the settlement in another PAGA matter, as their role as an advocate for the State. Here, there is no proposed settlement before the Court at this time so there is no information as to the fairness of settlement between Plaintiffs and Defendant.
In Uribe¸ the intervenor who opted out of the settlement appealed from the trial court’s entry of judgment after the plaintiff reached a settlement with the defendant. The intervenor was allowed to intervene in the matter to oppose the settlement. The defendant filed a motion to dismiss the intervenors appeal for lack of standing. The Court of Appeal denied the motion and stated, “with her own PAGA cause of action in this action precluded if [plaintiff’s] PAGA settlement stands, [intervenor] has standing to at least challenge the PAGA notice in an attempt to overturn the judgement.” (Id. at p. 1002.) However, in Uribe, the Court of Appeal distinguished Turrieta on the basis that unlike in Turrieta, the intervenor’s motion for leave to file a complaint in intervention was granted by the trial court. Here, on April 19, 2023, the Court denied Proposed Intervenors ex parte application to intervene.
The cases cited by Proposed Intervenors are distinguishable because they both pertain to situations after approval of the settlement and in the context of an appeal. They do not offer any analysis as to whether a motion to intervene should be granted before settlement is before the Court. Moreover, the Court is persuaded by the reasoning in Turrieta that there Proposed Intervenors do not possess a direct and immediate interest in this action. Therefore, Proposed Intervenors are not entitled to mandatory intervention.
2. Permissive Intervention
Proposed Intervenors argue they are entitled to permissive intervention because they have a direct and immediate interest in the Loera Class Action, their claims substantially overlap with the claims in the instant matter, and their interest in testing the overall fairness of any proposed settlement outweighs the existing parties’ interest in defending a settlement that may be inadequate or unfair.
Permissive intervention will generally be permitted if: “(1) the proper procedures have been followed, (2) the nonparty has a direct and immediate interest in the action, (3) the intervention will not enlarge the issues in the litigation, and (4) the reasons for the intervention outweigh any opposition by the parties presently in the action.” (City and County of San Francisco v. State of California (2005) 128 Cal.App.4th 1030, 1036 (City and County of San Francisco).) Permissive intervention requires “balanc[ing] the interests of [nonparties] affected by a judgment against the interests of the original parties in pursuing their case unburdened by others.” (South Coast Air Quality Management Dist. v. City of Los Angeles (2021) 71 Cal.App.5th 314, 320.)
a. Direct and Immediate Interest
The requirement of a direct and immediate interest means that the interest must be of such a direct and immediate nature that the moving party “will either gain or lose by the direct legal operation and effect of the judgment.” (City and County of San Francisco, supra, 128 Cal.App.4th at p. 1037.)
The parties rely on the same arguments regarding Proposed Intervenors’ interest. As the Court stated above, Proposed Intervenors have not demonstrated they possess a direct and immediate interest here. (City and County of San Francisco, 128 Cal.App.4th at p. 1036.)
Accordingly, Proposed Intervenors are not entitled to permissive intervention.
III. Conclusion
The motion to intervene is DENIED.
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LAW AND MOTION HEARING PROCEDURES
Parties may appear in person or remotely. Remote appearances must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating or listening in a hearing remotely. 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 can either be in person or appear remotely.
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Case Name:
Case No.:
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Case Name: Hecker v. Mathew Enterprise, Inc.
Case No.: 22CV405334
INTRODUCTION
This case is a putative class and Private Attorney General Act (“PAGA”) action seeking, inter alia, recovery of unpaid wages. Plaintiff Karen Hecker (“Plaintiff”) alleges that she was employed by Mathew Enterprise, Inc. (“Defendant”) as an hourly travelling nurse. P laintiff alleges that Defendant failed to pay overtime, failed to pay for time spent on call or on standby, failed to pay sick pay at the proper rate, and failed to provide accurate itemized wage statements, in addition to other wage and hour violations. As a result of these violations, the First Amended Complaint includes causes of action for: (1) failure to pay minimum wage; (2) failure to pay overtime wages; (3) failure to provide meal periods; (4) failure to permit rest breaks; (5) failure to reimburse business expenses; (6) failure to provide accurate, itemized wage statements; (7) failure to pay wages timely during employment; (8) failure to pay all wages due upon separation of employment; (9) violation of Business and Professions Code section 17200, et seq.; and (10) PAGA violation (Labor Code section 2698, et seq.).
Now before the Court is a petition by Defendant to compel arbitration of all of Plaintiff’s claims and to dismiss Plaintiff’s representative PAGA claims, or, alternatively, stay the representative PAGA claims. As explained below, the Court DENIES Defendant’s petition because it finds that Defendant has failed to prove the existence of an arbitration agreement that inures to Defendant’s benefit and, even assuming the existence of such an agreement, the Court finds the agreements Defendant has proffered to be unconscionable.
DISCUSSION
Defendant moves to compel arbitration under the California Arbitration Act (Code Civ. Proc. § 1281, et seq.). It further moves to dismiss the representative PAGA claim because Plaintiff has waived the right to pursue such a claim or, alternatively, to stay the representative PAGA claim pending arbitration or pending the outcome of the California Supreme Court’s decision in Adolph v. Uber Techs. (July 17, 2023, No. S274671) ___Cal.5th___ [2023 Cal. LEXIS 4099] (Adolph). In its reply, Defendant acknowledges that Adolph holds that the representative PAGA claims would survive the petition to compel arbitration and asks that the Court stay the representative PAGA claims pursuant to that authority.
IV. Defendant’s Request to Stay the PAGA Claims Pending the Adolph Decision
As mentioned above, Defendant requests that this court stay the PAGA claims pending the California Supreme Court’s Adolph decision. In light of the fact that Adolph has been decided, the Court finds Defendant’s request to stay the representative portion of the PAGA claim pending the outcome of Adolph to be moot.
V. Legal Standard
In ruling on such petition, the Court must inquire as to (1) whether there is a valid agreement to arbitrate, and (2) if so, whether the scope of the agreement covers the claims alleged. (See Howsan v. Dean Witter Reynolds (2002) 537 U.S. 79, 84.) “Under both federal and state law, the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate. [Citations.] The threshold question requires a response because if such an agreement exists, then the court is statutorily required to order the matter to arbitration.” (Fleming v. Oliphant Financial, LLC (2023) 88 Cal.App.5th 13, 19 (Fleming), internal quotation marks omitted.)[12]
Under California law, “[a] written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.) “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for the revocation of the agreement.” (Code Civ. Proc., § 1281.2, subds. (a), (b).) “This initial issue also reflects the very plain principle that you cannot compel individuals or entities to arbitrate a dispute when they did not agree to do so.” (Fleming, supra, 88 Cal.App.5th at p. 19.)
“Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement--either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see [Code Civ. Proc., § 1281.2, subds. (a), (b))--that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense. [Citation.]
(Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) If the proponent of arbitration has shown the existence of an arbitration provision governing the claims at issue by a preponderance of the evidence, the burden then shifts to the resisting party to prove a ground for denial. (Ibid.)
“Federal law is wholly congruent with these principles. As the United States Supreme Court observed two decades ago: ‘Because the FAA is “at bottom a policy guaranteeing the enforcement of private contractual arrangements,” [citation] we look first to whether the parties agreed to arbitrate a dispute, not to general policy goals, to determine the scope of the agreement.’ (EEOC v. Waffle House, Inc. (2002) 534 U.S. 279, 294 [].) ‘For arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ (United Steelworkers of America v. Warrior & Gulf Navigation Co. (1960) 363 U.S. 574, 582.)” (Fleming, supra, 88 Cal.App.5th at pp. 19-20.) “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle).) “If no agreement to arbitrate was formed, then there is no basis upon which to compel arbitration.” (Ahlstrom v. DHI Mortgage Co., L.P. (9th Cir. 2021) 21 F.4th 631, 635.)
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 party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” (Pinnacle, supra, 55 Cal.4th at p. 236.)
“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, supra, 55 Cal.4th at p. 236.)
VI. Merits of the Motion
A. Existence of an Agreement to Arbitrate
The first step in ruling on a petition to compel arbitration is to determine whether an agreement exists. (See Code Civ. Proc., § 1281.2.) Defendant has provided the declaration of its counsel, Ali R. Mirhosseini, who states that Plaintiff and Defendant entered into an arbitration agreement on or about February 2, 2018. (Declaration of Ali R. Mirhosseini, ¶2 (“Mirhosseini Decl.”).)[13] This is contradicted by Defendant’s memorandum of points and authorities in which it states that the parties entered into the agreement on June 13, 2018 and the agreement attached to the declaration, which is also dated June 13, 2018. (Mirhosseini Decl., Ex. A.)
The first page of the document attached to Mr. Mirhosseini’s declaration is labelled “EMPLOYEE ACKNOWLEGEMENT AND AGREEMENT[.]” (Mirhosseini Decl., Ex. A.) It does not state the name of the employer but merely refers to the other party to the agreement as “the Company”. The third page of the agreement is labelled “AGREEMENTS” and it indicates that it is between “SERRAMONTE SUBARU ‘Company’ ” and Plaintiff. (Ibid.) The seventh page lists the “Store” as “SERRAMONTE SUBARU”. Nowhere in the attached document is Defendant Mathew Enterprise, Inc. so much as mentioned. Defendant makes no attempt to
explain how it is a party to the agreement or to explain its relationship with Serramonte Subaru.[14]
Under the circumstances, the Court cannot find an arbitration agreement enforceable by Defendant. As mentioned above, the party seeking to compel arbitration must prove the existence of the agreement by a preponderance of the evidence. Here, Defendant has not done so. The Court acknowledges that 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 [noting theories recognized under both federal and California law].) Defendant has presented no such theory to the Court.
However, Plaintiff does not assert that no agreement to arbitrate exists nor does she argue that Defendant was not a party to the agreement attached to Mr. Mirhosseini’s declaration. Instead, she argues that the arbitration agreement is unenforceable because it is unconscionable. Accordingly, the Court will go on to discuss unconscionability.
B. Unconscionability
“A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. [Citation.]” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (OTO).) 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).
i. 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 (Davis), internal citation and quotation marks omitted.)
Plaintiff asserts that the arbitration agreement in this case is nearly identical to the one found procedurally unconscionable in Davis. The similarities between the agreement in Davis and the agreement in the instant case are undeniable. In Davis, the Court of Appeal noted, inter alia, the extremely small font, block text, prolixity, and use of legalese that would be incomprehensible to a lay person. (Davis, supra, 41 Cal.App.5th at p. 671; see also OTO, supra, 14 Cal.App.5th at pp. 708-709, fn. omitted.) Here, all of these issues are present in the agreements signed by Plaintiff.
Defendant argues that the font size of the agreements in this case are not small and are a “standard” size. However, Defendant does not state what size the font is and the court perceives the font size to be on the smaller side, especially on page three of the documents attached to Mr. Mirhosseini’s declaration. Further, the agreements each contain arbitration provisions as one massive paragraph.
The court notes that the documents attached to Mr. Mirhosseini’s declaration are grainy and difficult to read. Attached to Defendant’s reply is a much clearer, color copy of what appears to be the same documents. No supporting declaration providing any authentication or foundation for these documents is present. Given these two varying versions of the documents at issue, it is not clear how the documents would have appeared to Plaintiff at the time she signed them. Even the clearer version of the documents appears grainy and difficult to read.
In this case, there are, what Plaintiff refers to as two arbitration agreements. The first, labelled “EMPLOYEE ACKNOWLEDGMENT AND AGREEMENT[,]” confusingly states that it “is the entire Agreement between the Company and I regarding dispute resolution . . . .” Nonetheless the documents provided by Defendant also include an additional arbitration agreement labelled “AGREEMENTS[.]” Although these agreements contain many of the same terms they are not identical, lending further confusion as to the terms Plaintiff consented to.
The dense text of the agreements contains references to multiple laws a layperson may not be familiar with, which supports a finding of surprise. (Davis, supra, 41 Cal.App.5th at p. 672; OTO, supra, 14 Cal.App.5th at p. 128.) As stated in OTO, supra, 8 Cal.5th at p. 128,
The sentences are complex, filled with statutory references and legal jargon. The second sentence alone is 12 lines long. The arbitration paragraph refers to: the California Fair Employment and Housing Act (Gov. Code, § 12900 et seq.); title VII of the Civil Rights Act of 1964 (Pub.L. No. 88-352 (July 2, 1964) 78 Stat. 241); other unspecified ‘local, state or federal laws or regulations’; the National Labor Relations Act (29 U.S.C. § 151 et seq.); the California Workers' Compensation Act; ‘California Small Claims’ actions; the Department of Fair Employment and Housing; the Employment Development Department; the ‘Equal Opportunity Commission’; the federal and California arbitration acts; and six different sections of California’s Civil Code and Code of Civil Procedure. A layperson trying to navigate this block text, printed in tiny font, would not have an easy journey.
Additionally, in both Davis and OTO, the higher courts criticized the inclusion of the references to Code of Civil Procedure section 1284.2, portions of the Federal Arbitration Act, and use the term “Act” without defining it. The arbitration agreement in this case contains the following language at issue in both Davis and OTO: “ ‘If CCP § 1284.2 conflicts with other substantive statutory provisions or controlling case law, the allocation of costs and arbitrator fees shall be governed by said statutory provisions or controlling case law instead of CCP § 1284.2.’ ” (OTO, supra, 8 Cal.5th at p. 128; Davis, supra, 41 Cal.App.5th at p. 666.) In OTO, the court explained
Code of Civil Procedure section 1284.2 states a default rule that, unless the agreement specifies otherwise, parties to an arbitration will bear their own expenses. However, Armendariz created an exception to this general rule for arbitrations of employment-related disputes. (See Armendariz, supra, 24 Cal.4th at pp. 110-111.) Although the agreement anticipates that the ‘controlling case law’ of Armendariz would prevail over the statutory default rule, One Toyota’s obligation to pay arbitration-related costs would not be evident to anyone without legal knowledge or access to the relevant authorities. It is difficult to envision that Kho would have had any idea what the cited code section says or that a 13-year-old case creates a relevant exception to it. This example illustrates the difficulty a layperson would have in deciphering key terms. It would have been nearly impossible to understand the contract’s meaning without legal training and access to the many statutes it references.
(OTO, supra, 8 Cal.5th at pp. 128-129, fn. omitted.) The Davis court also noted
[T]he referenced ‘CCP § 1284.2’ is nowhere referred to earlier and the reference is, to say the least, confusing. So too is the reference to ‘Federal Arbitration Act (9 U.S.C. §§ 3-4),’ as those sections have nothing to do with the rules or procedures that would govern an arbitration: section 3 states that a trial will be stayed pending arbitration; section 4 permits a party to petition the court to order arbitration if the other party refuses to arbitrate. And to add even more confusion, the paragraph references the ‘Act’ throughout, but ‘Act’ is not defined anywhere, and it is unclear if the word ‘Act’ refers to the Federal Arbitration Act, the California Arbitration Act, or some other statute.
(Davis, supra, 41 Cal.App.5th at p. 666, fn. 1.) The same portions of the Federal Arbitration Act are references in the agreements in this case and the term “Act” is similarly used without definition.
Further, although the Court has no evidence regarding what Plaintiff may have been told when she was presented with the agreements to sign, the agreements themselves suggest a contract of adhesion in which consent to arbitration was a condition of employment.
An adhesive contract is standardized, generally on a preprinted form, and offered by the party with superior bargaining power on a take-it-or-leave-it basis. [Citations.] Arbitration contracts imposed as a condition of employment are typically adhesive [citations], and the agreement here is no exception. The pertinent question, then, is whether circumstances of the contract’s formation created such oppression or surprise that closer scrutiny of its overall fairness is required. [Citations.] Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form. [Citations.]
(OTO, supra, 8 Cal.5th at p. 126, internal quotation marks omitted.)
Here, the arbitration agreement is part of Plaintiff’s new hire paperwork and arbitration is professed to be “mandatory” suggesting that it is a condition of employment. And, each of the paragraphs related to arbitration is contained on the same page as provisions relating to employment generally. The first arbitration agreement is contained on the same page as an acknowledgment of receipt of an employee handbook and the second arbitration agreement is contained on the same page as an at will employment agreement. The arbitration agreements contain no provision allowing the employee to opt out. A contract of adhesion in the employment context adds a modest amount of procedural unconscionability and, the amount of procedurally unconscionability is increased when the fact of an adhesion contract is combined with the other issues identified above. (See Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248.)
The Court finds that the high degree of unconscionability present in OTO and Davis is also present in this case. Although OTO involved additional facts relating to the employee’s need to sign the contract quickly that are not present in this case, see OTO, supra, 8 Cal.5th at pp. 127-128, the facts that rendered the contract itself procedurally unconscionable in OTO are also present in this case.
ii. 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, 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.)
“Substantive unconscionability examines the fairness of a contract’s terms. This analysis ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as overly harsh, unduly oppressive, so one-sided as to shock the conscience, or unfairly one-sided. All of these formulations point to the central idea that the unconscionability doctrine is concerned not with a simple old-fashioned bad bargain, but with terms that are unreasonably favorable to the more powerful party.” (OTO, supra, 8 Cal.5th at pp. 129-130, internal citation and quotations omitted.)
Plaintiff asserts that the arbitration agreement is substantively unconscionable because it is similar to the agreement found substantively unconscionable in Davis. She points to five specific issues the Davis court held rendered the agreement in that case substantively unconscionable including the size of the font, a lack of mutuality, the existence of multiple agreements to arbitrate, terms allowing only the defendant to change the terms of the arbitration agreement, and the presence of a clause that would arguably cause the plaintiff to waive her ability to bring a PAGA action.
The size of the font and existence of multiple agreements might be properly considered under the rubric of procedural unconscionability. (See Fuentes v. Empire Nissan, Inc. (2023) 90 Cal.App.5th 919, 928 (Fuentes) [“Font size and readability thus are logically pertinent to procedural unconscionability and not to substantive unconscionability.”].) These arguments have been addressed above.
Plaintiff also argues that the arbitration provision is substantively unconscionable because it requires him waive his representative claim under PAGA. Defendant appears to agree that the arbitration agreement purports to waive any PAGA claims. Specifically, Defendant point to a provision of the arbitration agreements that states,
. . . I and the Company both agree that any claim, dispute, and/or controversy that either party may have against one another (including, but not limited to, any claims of discrimination and harassment, whether they be based on the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, as amended, as well as all other applicable state or federal laws or regulations) which would otherwise require or allow resort to any court or other government dispute resolution forum between myself and the Company . . . arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company . . . shall be submitted to an determined exclusively by binding arbitration.
Plaintiff, on the other hand points to a provision of the agreements, mirroring the one held to violate the prohibition on PAGA waivers in Davis. In the agreements at issue in this case, the provision reads
This means that an arbitrator will hear only my individual claims and does not have the authority to fashion a proceeding as a class or collective action or-to award relief to a group of employees in one proceeding. Thus, the Company has the right to defeat any attempt by me to file or join other employees in a class, collective, representative, or joint action lawsuit or arbitration (collectively ‘class claims’).
In Davis, the court explained that
[T]he presence of provisions that: (1) ‘the arbitrator will hear only … individual claims and does not have the authority to fashion a proceeding as a class or collective action …’, and (2) ‘the Company has the right to defeat any attempt by [the Davises] to file or join other employees in a class, collective or joint action or arbitration … .’ Such broad language could be read to preclude Labor Code Private Attorneys General Act (PAGA; Lab. Code, § 2698 et seq.) representative actions, a violation of public policy.
(Davis, supra, 41 Cal.App.5th at p. 675.) The Davis court based its holding on Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360 (Iskanian), in which the California Supreme Court held that “an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”
The United States Supreme Court recently partially overruled Iskanian in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. ___ [213 L. Ed. 2d 179, 142 S.Ct. 1906] (Viking River). As explained in Adolph, supra, [2023 Cal. LEXIS 4099, at *11],
In Iskanian, we held that a predispute categorical waiver of the right to bring a – action is unenforceable (Iskanian, supra, 59 Cal.4th at pp. 382-383)—a rule that Viking River left undisturbed (see Viking River, supra, 596 U.S. at pp. ___–___, ___– ___ [142 S.Ct. at pp. 1922–1923, 1924–1925] [the FAA does not preempt this rule])
Thus, the prohibition against categorical predispute PAGA waivers remains good law. And, the language that rendered the agreement substantively unconscionable on this point in Davis is substantially similar, if not identical, to language contained in the arbitration agreements in this case.[15]
Plaintiff also points to the fact that the contract is not signed by Defendant, suggesting a lack of mutuality. (See Davis, supra, 41 Cal.App.5th at p. 674.) But, the Court finds this argument unpersuasive and agrees with Fuentes on this point. The “Company” that presented the agreements to Plaintiff for signature clearly assented to the agreements because it drafted the agreement and required Plaintiff to sign it. (See Fuentes v. Empire Nissan, Inc. (2023) 90 Cal.App.5th 919, 933.) Additionally, the agreements contain language that binds the “Company” as well as Plaintiff suggesting that the “Company” agreed to be bound by the arbitration agreements.
Plaintiff’s next argument is that the agreement is procedurally unconscionable because the agreement contains terms indicating that only Defendant may change the arbitration agreements. The Davis court found the following provision substantively unconscionable, “ ‘[t]he Company retains the right to add, change or delete wages, benefits, policies and all other working conditions at any time (except the policy of “at-will employment” and Arbitration Agreement, which may not be changed, altered, revised or modified without a writing signed by the President of the Company)[.]’ ” (Davis, supra, 41 Cal.App.5th at p. 674.)
Nearly the exact same provision is found in the agreements in this case: “The Company retains the right to add, change or delete wages, benefits, policies and all other working conditions at any time (except the policy of ‘at-will employment’ and Arbitration Agreement, which may not be changed, altered, revised or modified without a writing signed by the Corporate· Officer of the Company).” Inexplicably, Defendant asserts that the agreements in this case do not contain such language. (Reply, p. 4, ln. 27.) But, the versions of the agreement Defendant itself provided to the Court contains the language quoted above, which is nearly identical to the language at issue in Davis. Defendant also contends that language allowing Plaintiff to terminate her at will employment removes the one-sidedness of the language related to the arbitration agreement. But, the issue with the language as identified in Davis is that it grants the defendant unilateral authority to change the arbitration agreement.
Again, Fuentes, which neither party cites, rejected this same argument holding that the weight of authority supported the opposite conclusion:
Case law counters Davis. (See Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1473 [‘the Agreement’s unilateral modification provision is not substantively unconscionable’]; 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1214 [‘the modification provision does not render the contract illusory’]; Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 706 [‘it has long been the rule that a provision in an agreement permitting one party to modify contract terms does not, standing alone, render a contract illusory because the party with that authority may not change the agreement in such a manner as to frustrate the purpose of the contract’]; Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 389; Avery Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 61 [“An arbitration agreement between an employer and an employee may reserve to the employer the unilateral right to modify the agreement.”]; see generally Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 16 [employer’s unilateral right to modify employment agreement does not make agreement illusory]; cf. Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425, 1433 [‘If a modification provision is restricted—by express language or by terms implied under the covenant of good faith and fair dealing—so that it exempts all claims, accrued or known, from a contract change, the arbitration contract is not illusory.’ (italics omitted)].)
(Fuentes, supra, 90 Cal.App.5th at pp. 934-935.)
In light of the weight of authority holding to the contrary, the Court declines to follow Davis on this point. Nonetheless, the Court has already found the provision of the agreements amounting to a PAGA waiver is unconscionable.
Although the PAGA waiver is only minimally unconscionable, “ ‘given the substantial procedural unconscionability here, even a relatively low degree of substantive unconscionability may suffice to render the agreement unenforceable.’ [Citation.]” (Davis, supra, 41 Cal.App.5th at p. 674, quoting OTO, supra, 8 Cal.5th at p. 130.) The Court finds the arbitration agreement unconscionable and unenforceable.
CONCLUSION
The petition to compel arbitration is DENIED. Defendant’s request to dismiss or stay the representative PAGA claim is also DENIED.
***
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[1] The Court notes that Defendant also argues that some products came in cardboard boxes that might obscure the challenged claims but the box proofs Plaintiff has provided show that the challenged statements are also made on the outside of the boxes and in depictions of the bottle packaging on the outside of the boxes. (See Ho Decl., Exhibit E.) Accordingly, the Court does not find that classwide exposure to the statements cannot be presumed merely due to the fact that the bottles of product were contained in cardboard boxes.
[2] Defendant does not assert that Plaintiff’s injunction claims require similar exposure. Instead, Defendant recognizes that the injunction claims require that members of the public are likely to be deceived by the challenged statements.
[3] Plaintiffs’ briefing indicates that they will seeking to amend their first amended complaint to add an additional challenged statement.
[4] In their notice of motion, Defendants request that the Court compel arbitration of Plaintiff’s individual claim, dismiss his representative claim under PAGA, and stay the remainder of the proceeding under Code of Civil Procedure section 1284.1. However, between Plaintiff’s filing of his opposition to Defendants’ motion and the deadline for Defendants to file their reply, the California Supreme Court decided Adolph v. Uber Technologies, Inc. (Adolph), holding that where a plaintiff has brought a PAGA action comprising of individual and non-individual claims, an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees. In light of this decision, Defendants request that the Court follow the guidance of the California Supreme Court and, if it determines that Plaintiff’s individual claims are subject to arbitration, stay the non-individual PAGA claims pending the outcome of that arbitration. Defendants still request in the alternative that this entire action be stayed pending resolution of Aguilar I.
[5] Both sides submit requests for judicial notice. Defendants’ request for judicial notice of court documents pertaining to Aguilar I is GRANTED. (Evid. Code, § 452, subd. (d).) Plaintiff’s request for judicial notice of the California Supreme Court’s decision in Adolph is GRANTED. (Evid. Code, 452, subds. (a) and (d).)
[6] BD is not a signatory to the Agreement, but Defendants persuasively argue that it is entitled to enforce its terms based on the theories of equitable estoppel and agency. (See Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271 [“A nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are ‘intimately founded in and intertwined’ with the underlying contractual obligations.”]; see Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 787-788 [plaintiff bound to arbitrate all claims against staffing agency and agency’s client that he worked for pursuant to arbitration agreement with staffing agency because claims against the two were based on the same facts and were “intimately founded in and intertwined.”].)
[7] This is based on $10,017.79 in costs spent by the Law Offices of Choi & Associates, APLC and $613.63 in costs spent by Diversity Law Group, APC.
[8] The $244,868.58 reflected in paragraph 13 of the settlement administrator’s declaration (Declaration of Taylor Mitzner []) includes the proposed $10,000 enhancement award to the named plaintiff. Since the Court awards a $5,000 enhancement award instead, the net settlement amount increases to $249,868.58. Per § III.11 of the amended settlement agreement (Supplemental Declaration of Edward W. Choi in Support of Motion for Preliminary Approval of Class Action Settlement, Exhibit 1 at p. 15), “[a]ny amount requested by Plaintiff for the Class Representative Enhancement Award and not granted by the Court shall return to the Net Settlement Amount and be distributed to Participating Class Members as provided in this Agreement.”
[9] The fee award will be distributed 45 percent to the Law Offices of Choi & Associates; 35 percent to the Diversity Law Group; 10 percent to Brandon Banks Law, APC; and 10 percent to David Lee Law, APC. (Declaration of David J. Lee [] at ¶ 12.)
[10] The breakdown for individual attorneys is as follows: Edward W. Choi (116.7 hours spent, 5 hours expected to be spent; $850/hour; $103,445 expected total); Larry W. Lee (72.3 hours spent, 5 hours expected to be spent; $850/hour; $65,705 expected total); Brandon M. Banks (38.3 hours spent; $450/hour; $17,235 total); David J. Lee (28.5 hours spent; $500/hour; $14,250 total).
[11] The class period is four years preceding the filing of the complaint until the final judgment.
[12] Although Defendant does not argue that it is petitioning the Court to compel arbitration under the Federal Arbitration Act (“FAA”), the Court discusses federal law because the arbitration agreement itself provides that the FAA applies.
[13] Mr. Mirhosseini does not indicate how he might have personal knowledge of the agreement, nor does he indicate how he obtained the agreement. But, Plaintiff raised no objections to Defendant’s evidence.
[14] The Court notes that the Complaint does not mention Serramonte Subaru or otherwise make clear the relationship between that entity and Defendant. And, this motion to compel arbitration is Defendant’s first pleading in this case. Accordingly, nothing in the history of this case clarifies this issue.
[15] The Court notes that this argument was rejected in Fuentes, supra, 90 Cal.App.5th at p. 935, a case which neither party mentions and which roundly criticized Davis for its substantive unconscionability discussion. The Fuentes court stated
Davis found substantive unconscionability because the agreement’s ‘broad language could be read to preclude Labor Code Private Attorneys General Act (PAGA; Lab. Code, § 2698 et seq.) representative actions, a violation of public policy.’ (Davis, supra, 41 Cal.App.5th at pp. 675-676.) As support, Davis cited Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 383. (Davis, at p. 676.) The Supreme Court of the United States, however, ruled that the Federal Arbitration Act “preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and nonindividual claims through an agreement to arbitrate.’ (Viking, supra, 596 U.S. at p. ___ [142 S.Ct. at p. 1924].)
But, as explained in Adolph, Viking River left the portion of Iskanian Davis relied on intact. For this reason, the Court chooses to follow Davis on this point. (See McCallum v. McCallum (1987) 190 Cal.App.3d 308, 316, fn. 4 [“As a practical matter, a superior court ordinarily will follow an appellate opinion emanating from its own district even though it is not bound to do so. Superior courts in other appellate districts may pick and choose between conflicting lines of authority.”].)
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