Colony American Finance, LLC vs. Ali El Wakeel

Opposition

Cal. Super. - 4th Dist.March 14, 2016

© 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O FORD & DIULIO PC Kristopher P. Diulio (Bar No. 229399) Brendan M. Ford (Bar No. 224333) Jessica A. Diulio (Bar No. 240575) Tyler E. Sanchez (Bar No. 299131) kdiulio@FordDiulio.com 695 Town Center Drive, Suite 700 Costa Mesa, California 92626 Telephone: (714) 384-5540 ELECTRONICALLY FILED Superior Court of California, County of Orange 07272016 at 03:14:00 Pi Clerk of the Superior Court By & Clerk, Deputy Clerk Attorneys for Cross-Complainants ALI ELWAKEEL and SUMMER MARTINEZ SUPERIOR COURT OF CALIFORNIA COUNTY OF ORANGE CENTRAL JUDICIAL DISTRICT COLONY AMERICAN FINANCE, LLC, Plaintiff, Vv. ALI ELWAKEEL, SUMMER MARTINEZ, and DOES 1 through 10, inclusive, Defendants. ALI ELWAKEEL and SUMMER MARTINEZ, Cross-Complainants, V. COLONY AMERICAN FINANCE, LLC; ELIZABETH O’BRIEN; and DOES 1 through 10, inclusive, Cross-Defendants. Case No. 30-2016-00840544-CU-BC- CJC Assigned to Hon. Martha K. Gooding CROSS-COMPLAINANTS’ OPPOSITION TO CROSS- DEFENDANTS’ MOTION TO COMPEL ARBITRATION Hearing Date: July 25, 2016 Time: 1:30 p.m. Dept.: C34 Action Filed: March 14, 2016 Trial Date: None Set MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O LI II. III. TABLE OF CONTENTS Page INTRODUCTION ...c.utiitiitiiteitet etait ete eesti eee sabe eae she sbeebs sabe saa sbae suas saees I TES CT T S TININ rcs tis t,t. TSX 55 HEE RG 8553 1 A.Cross-Defendant Waived Its Right to Arbitrate Because it Engaged in Discovery......... 1 B. Arbitration is Improper Because the Cross Complaint Includes Claims Not Subject to ATDIITATION. «cette cette sees eect ee sabe ete s sbeebs tee sabe e tessa eae 3 C. Cross-Defendants’ Arbitration Agreement is Unconscionable ............cccoevvevivenieennnennne. 4 1. Courts Have Discretion To Invalidate Unconscionable Arbitration........................ 4 2. Arbitration Agreements Are Not Enforceable If They Are Procedurally................ 6 3 Cross-Defendant's Arbitration Provision Is Procedurally Unconscionable............. 6 4. The Arbitration Provision Is Also Substantively Unconscionable ........................ 10 5 The Arbitration Provision Is Permeated With Unconscionability And ................. 11 CC COINICILTLT SSI WIRY cvs mamma sm ooo, 15085 50 15 4 050, ASS 05 S058 30 12 1 MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BAA W N D = O 0 0 N D N R E W N = O TABLE OF AUTHORITIES g & © CASES American Express Co. v. Italian Colors Restaurant (2013) 570 U.S. __, 133 S.Ct. 2304, 2306, 186 LEA. 2d 417 ...coueeeeeeeeeet etcetera sete sate sate sateen 3 Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83......... passim AT&T Mobility LLC v. Concepcion (2011) 131S.Ct.1740 ....ooeveovieeieeiieie e eri 4,5 AT&T Technologies, Inc. v. Communications Workers of America (1986) 475 U.S. 643 ........ 3 Circuit City Stores, Inc. v. Mantor (9th Cir. 2003) 335 F.3d 1101 ....cooeeeniieeieeiiieeeeieen. 7,9 Doctor's Assocs., Inc. v. Casarotto (1996) 517 U.S. 681 .....oooueeeeeeieieieeeiieieieeeeeeeeeeeeeeeeeeeeeeanns 4 Ferguson v. Countrywide Credit Indus., Inc. (9th Cir. 2002) 298 F.3d 778 ......vvvveveeciiieeenns 4 Fitz v. NCR Corp. (2004) 118 Cal. APPA TOZ uns usesassas sss vs susssessas iss ss snsassrsss sis sss suasnsioss s 9,11 Hoover v. American Income Life Ins. Co. (2012) 206 Cal. App.4th 1193 .........cccceiiiiiennns 1,2 Marenca v. DirecTV LLC (2013) 233 Cal. App Ath 140009 .. cise susivessss ss sns assum sss san sosasssnss sss snss 3 Matthau v. Superior Court (2007) 151 Cal.APP.4T 593 .....vomiieeieeeeeeeeeeeeeee eee, 3 Mercuro v. Sup. Ct. (Countrywide Secur. Corp.) (2002) 96 Cal.App.4th 167............... 6,7, 10 Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 CAA NTP TAG ; uss. sm so sotcses cs sss es sso. 2, 083050 6,59 SEER 655 FAA 05 505 OSES SS S505 5 Molecular Analytical v. Ciphergen Biosystems, Inc., (2010) 186 Cal.App.4th 696, 705 ........ 3 Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal. App. 4th 1267 .....ccovceevriceiivcvieiiieeennen. 6 Ontiveros v. DHL Exp. (USA) Inc. (2008) 164 Cal. App.4th 494 ........cccooiiiiiiiiiiiieeiees 12 Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 CallAth 223 Leech she she shee shee she shee sa testes tesa estes 3 Samaniego v. Empire Today UC (2012) 205 Cal. App.4th 1138 .......cccoummmsmmsssssussossussosssasssns 7 Sparksv. Vista Del Mar Child & Family Services,(2012) 207 Cal. App.4" 1511, 1523......... 11 St. Agnes Medical Center v. Pacific Care of California,(2003) 31 Cal.4" 1187, 1196 ........... 2 Stir/in v. Supercuts, Inc. (1997) 51 Cal. App.4th 1519......coiiiiiiii eee, 10 ii. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O Seetela v. Discover Bank (2002) 97 Cal AppAth 1094: «cs sus sossmes on sos sus smasstisas soo sss sosames ss sssssns 7 Trivedi v. Curexo Technology Corp. (2010) 189 Cal. App.4th 387 ..ccovviiiriiiiiiiiiiieeieee 9 Viuioria v. Superior Court (1985) 40) Cal.3d "734: , cusses sco sonassmoses sus sun sssumosas san ssa ssesasans san ssn 3 Zullo v. Superior Court (2011) 197 Cal. App.4th 477 ...ccueveeiiiieeieee eee 9,10 STATUTES Cal. Civ. Proc. Code ("C.C.P.") § 1281 ..uueueieeeietiitte eee a sass assess annnns 4 Cal. Civ. Proc. Code ("C.C.P.") § 1670.5(2) .uvuvurururnunrnrereenrnteeeretnsssssssssssesssesnsnnnns 4 iii. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O MEMORANDUM OF POINTS AND AUTHORITIES Cross-Complainants Ali Elwakeel and Summer Martinez (collectively, "Cross- Complainants") hereby submit this Memorandum of Points and Authorities in Opposition to Cross-Defendant Colony American Finance, LLC, and Elizabeth O’Brien ("Cross- Defendants")'s Motion to Compel Arbitration and Dismiss Cross-Complainants' Complaint (the "Motion"). I. INTRODUCTION On March 14, 2016 Cross-Defendants filed suit in Orange County Superior Court against their former employee, asserting claims of arising from Cross-Complainants termination of employment including misappropriation of trade secrets and breach of contract. On April 14, 2016, Cross-Complainants filed a cross-complaint against their former employer arising from their employment, including, without limitation, interference with prospective economic advantage, interference with contractual relations, and wage and hour violations. On May 16, 2016, Cross-Defendants filed the Motion seeking to move this lawsuit to another forum, binding arbitration. The Motion should be denied for the following three reasons’: 1. Cross-Defendant waived its right to arbitrate when it engaged in discovery; 2. Arbitration is improper because some of the claims alleged in the Cross-Complaint are not subject to arbitration; and 3. The Motion should be denied because the arbitration provision upon which Cross- Defendants rely is procedurally and substantively unconscionable under well-settled California law. II. DISCUSSION A. Cross-Defendant Waived Its Right to Arbitrate Because it Engaged in Discovery. “A party seeking to prove waiver of a right to arbitration must demonstrate: © “(1) ! Cross-Defendants incorrectly claim that Cross-Complainants’ Opposition to the Motion is past due. This is not the case. Cross-Defendants have not cited a single case or statute in support of the proposition that a motion to compel arbitration is exempt from CCP 1005(b). As Cross-Complainants’ Opposition is filed and served in accordance with the same, the Opposition is not untimely. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing 2% 9% 9 right; and (3) prejudice to the party opposing arbitration. (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1203 (Hoover).) Waiver does not require a voluntary relinquishment of the right to arbitrate, and a party may waive the right without any intent to do so. (Ibid.) Although participating in the litigation of an arbitrable claim does not by itself waive a party’s right to later seek to arbitrate the matter, at some point continued litigation of the dispute justifies a finding of waiver. (Id. at p. 1204.) “The relevant factors establishing waiver include whether the party’s actions are inconsistent with the right to arbitrate; whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; whether a party delayed for a long period before seeking a stay; whether important intervening steps (e.g., taking advantage of judicial discovery procedures not available in arbitration) had taken place; and whether the delay affected, misled, or prejudiced the opposing party.” (Ibid.; accord, St. Agnes Medical Center v. Pacific Care of California,(2003) 31 Cal.4" 1187, 1196) “There is no fixed stage in a lawsuit beyond which further litigation waives the right to arbitrate. Rather, the court views the litigation as a whole in determining whether the parties’ conduct is inconsistent with a desire to arbitrate. (Hoover, supra, 206 Cal. App.4th at p. 1204.) Prejudice is a determinative issue. (Id. at p. 1205.) “Because of the strong policy favoring arbitration, prejudice typically is found only where the petitioning party has unreasonably delayed seeking arbitration or substantially impaired an opponent’s ability to use the benefits and efficiencies of arbitration. [Citations.] Prejudice is not found where the party opposing arbitration shows only that it incurred court costs and legal expenses in responding to an opponent’s pleadings and motions. [Citation.] Prejudice sufficient for waiver will be found where instead of seeking to compel arbitration, a party proceeds with extensive discovery that is unavailable in arbitration proceedings.” (Ibid.) Here, Cross-Defendants have engaged in litigation of the arbitable claims, and thus waived their right to arbitrate, by conducting extensive discovery. Cross-Defendants have used the power of this Court for months to compel discovery. (Declaration of Brendan M. Ford “Ford 2, MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O Decl.” 3) Cross Defendant served Cross-Complainants with multiple sets of Interrogatories, Requests for Production and Requests for Inspection seeking information regarding the claims they now seek to force Cross-Complainants to arbitrate. (/d.). Cross-Complainants have been prejudiced by Cross-Defendants conduct. Cross- Complainants have been forced to respond to Cross-Defendants’ discovery but have been denied the opportunity to utilize the same discovery process. Cross-Defendants’ have been improperly unresponsive to Cross-Complainants discovery requests by asserting their right to arbitrate and citing objections to improper forum for discovery. (Ford Decl. 4). Further, Cross-Defendants now seek to avail themselves of the arbitration agreement’s limitation of discovery to impede Cross-Complainants discovery. As such, Cross-Complainants have been unfairly prejudiced and denied fair opportunity for discovery. Based on the foregoing, Cross-Defendants have waived their right to Arbitration. B. Arbitration is Improper Because the Cross Complaint Includes Claims Not Subject to Arbitration. “There 1s no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate.””” (Victoria v. Superior Court (1985) 40 Cal.3d 734, 744; accord, American Express Co. v. Italian Colors Restaurant (2013) 570 U.S. __ [133 S.Ct. 2304, 2306, 186 L.Ed.2d 417 [it 1s an “overarching principle that arbitration is a matter of contract”]; AT&T Technologies, Inc. v. Communications Workers of America (1986) 475 U.S. 643, 658 [106 S.Ct. 1415, 89 L.Ed.2d 648] [““‘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’”’ LLC (2012) 55 Cal.4th 223, 236 (Pinnacle).) ]; see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), Cece Because arbitration is a matter of contract, generally “‘“one must be a party to an arbitration agreement to be bound by it or invoke it.”’” (Marenco v. DirecTV LLC (2015) 233 Cal.App.4th 1409, 1416; accord, Molecular Analytical v. Ciphergen Biosystems, Inc., (2010) 186 Cal. App.4th 696, 705; Matthau v. Superior Court (2007) 151 Cal. App.4" 593, 3. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O 598 [“right to arbitration depends on a contract, and a party can be compelled to submit a dispute to arbitration only if the party has agreed in writing to do s0”].) Here, Cross-Defendant Elizabeth O’Brien (hereinafter “O’Brien”) is not a party to any arbitration agreement with Cross-Complainants. Indeed the conduct at issue arose after Cross-Complainants employment with Cross-Defendants had been terminated. Thus, Cross- Complainants post-employment claim for defamation against O’Brien is not subject to arbitration. Cross-Defendants’ moving papers assert that arbitration should be ordered as an expeditious and economical method of resolution. (Mot. at 6). Because some claims in the instant action may be subject to arbitration and at least one claim is certainly not, this position is untenable. Having claims involving the similar parties, claims and events in two separate fora does not promote efficiency. Rather, it taxes the court further due to its inability to resolve all claims in a single proceeding. As such, all claims in this matter should remain before this Court. C. Cross-Defendants’ Arbitration Agreement is Unconscionable 1. Courts Have Discretion To Invalidate Unconscionable Arbitration Agreements Under Federal and California Law Arbitration agreements are contracts. See Cal. Civ. Proc. Code ("C.C.P.") § 1281 ("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.") When grounds "exist at law or in equity for the revocation of any contract," courts may decline to enforce such agreements. See Doctor's Assocs., Inc. v. Casarotto (1996) 517 U.S. 681, 683; Ferguson v. Countrywide Credit Indus., Inc. (9th Cir. 2002) 298 F.3d 778, 782. Under California law, "[i]f the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable 4. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BAA W N D = O 0 0 N D N R E W N = O result." C.C.P. § 1670.5(a). Even under federal law, because arbitration agreements under the Federal Arbitration Act ("FAA") are contracts, they are subject to the same defenses as any other contract which include fraud, duress, unconscionability or other general contract law defenses. See AT&T Mobility LLC v. Concepcion (2011) 131S.Ct.1740, 1745-46 ("Concepcion"). As a preliminary matter, in its moving papers, Cross-Defendants attempts to stretch and contort the United States Supreme Court's decision in Concepcion to broadly preempt the California Supreme Court's landmark decision in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 ("Armendariz"). Under Cross-Defendant's theory, all arbitration agreements are now enforceable in California under the FAA no matter how unconscionable they may be. (Mot. at 9.) Of course, this is not the law. The Concepcion Court simply addressed the narrow issue of whether consumer class action arbitration agreements were valid. In fact, the U.S. Supreme Court in Concepcion stated explicitly that "[t]he final phrase of§ 2 [of the FAA] however, permits arbitration agreements to be declared unenforceable 'upon such grounds as exist at law or in equity for the revocation of any contract.’ This saving clause permits agreements to arbitrate to be invalidated by 'generally acceptable contract defenses, such as fraud, duress, or unconscionability. "" 131 S.Ct. at 1746. Moreover, a California appellate court recently rejected this precise argument in Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal. App.4th 1146, 1158 n.4: We invited the parties to provide their comments on the recent United States Supreme Court case, AT&T Mobility LLC v. Concepcion (2011) ----U.S. ----- -, 31 S.Ct. 1740, 179 L.Ed.2d 742 (AT&T). Cross-Defendants appear to argue that AT&T essentially preempts all California law relating to unconscionability. We disagree, as the case simply does not go that far. General state law doctrine pertaining to unconscionability is preserved unless it involves a defense that applies "only to arbitration or that derive[s] [its] meaning from the fact that an agreement to arbitrate is at issue." (Id. at p. - -, 131 S.Ct. at p. 1746.) This simply does not apply here. Therefore, under current California law, "arbitration agreements are neither favored nor disfavored, but simply placed on an equal footing with other contracts." Armendariz, 24 Cal.4th at 127. 3. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BAA W N D = O 0 0 N D N R E W N = O 2. Arbitration Agreements Are Not Enforceable If They Are Procedurally And Substantively Unconscionable The California Supreme Court identified "minimum requirements" for arbitration of claims under the Fair Employment and Housing Act ("FEHA"), Cal. Gov. Code§ 12900, et seq., and determined that arbitration agreements must not be procedurally or substantively unconscionable. The Armendariz Court, in emphasizing its goal to "ensure that such agreements are not used as a means of effectively curtailing an employee's FEHA rights," held that: [Ulnconscionability has both a procedural’ and a 'substantive' element, the former focusing on 'oppression' or 'surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results. The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. But they need not be present in the same degree. Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves. In other words, 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. 24 Cal.4th at 114 (citations omitted). Procedural and substantive unconscionability need not be present in the same degree. See Mercuro v. Sup. Ct. (Countrywide Secur. Corp.) (2002) 96 Cal. App.4th 167, 174-75 (given employer's highly oppressive conduct in obtaining employee's consent to arbitration agreement, employee was required to make only minimal showing of substantive unconscionability). Here, there is substantial evidence of both procedural and substantive unconscionability in connection with Cross-Defendant's arbitration provision 3. Cross-Defendant's Arbitration Provision Is Procedurally Unconscionable Procedural unconscionability focuses on "oppression or surprise’ due to unequal bargaining power," and concerns the manner in which the contract was negotiated and the parties’ circumstances at that time. See Armendariz, 24 Cal.4th at 113-14. This element is generally satisfied if the agreement constitutes a contract of adhesion. See Nyulassy v. 6. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BAA W N D = O 0 0 N D N R E W N = O Lockheed Martin Corp. (2004) 120 Cal. App. 4th 1267, 1280. "The oppression component arises from an inequality of bargaining power ... and an absence of real negotiation or a meaningful choice on the part of the weaker party." Id. at 1281. "When the weaker party is presented the clause and told to 'take it or leave it' without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present." Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1100. See also Samaniego v. Empire Today UC (2012) 205 Cal.App.4th 1138, 1145-46 (finding procedural unconscionability where employee was presented arbitration provision as a condition of employment, with little time to review the contract, which did not include a copy of the relevant arbitration rules). A "meaningful opportunity" to negotiate or reject the terms of a contract requires, at a minimum, that a party have "reasonable notice of (the) opportunity to negotiate or reject the terms of a contract, and . . . an actual, meaningful, and reasonable choice to exercise that discretion." Circuit City Stores, Inc. v. Mantor (9th Cir. 2003) 335 F.3d 1101, 1106. a. Cross-Defendant's Arbitration Provision Is A Contract of Adhesion First, it is undisputed that the arbitration provision relied on by Cross-Defendants is buried in pre-printed, standardized contracts created by Cross-Defendant and imposed on Cross-Complainants and Cross-Defendants’ other employees, without any opportunity for discussion or negotiation. Cross-Defendants’ arbitration provision constitutes a per se contract of adhesion: "Procedural unconscionability turns on adhesiveness - a set of circumstances in which the weaker or 'adhering' party is presented a contract drafted by the stronger party on a take it or leave it basis." Mercuro v. Superior. Ct. (2002) 96 Cal. App.4th 167, 174. When an employee is required to consent to arbitration as a condition of employment with no opportunity to negotiate, the agreement is procedurally unconscionable. See Armendariz, 24 Cal.4th at 114-15. In Armendariz, the Court held that the arbitration agreements that Cross-Complainants had signed as a condition of employment were procedurally unconscionable: [I]n case of preemployment arbitration contracts, the economic pressure exerted by the employer on all but the most sought after employees may be particularly acute, for 7. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration agreement. Id. at 115. Here, the signing of the arbitration agreement was an implicit condition precedent to Cross-Complainants employment with Cross-Defendant. Each of the Cross-Complainants felt pressure to sign any agreements or documents that Cross-Defendant presented to them, prior to and during their employment. (Declaration of Ali EIWakeel ("ElWakeel Decl.") q 3; Declaration of Summer Martinez ("Martinez Decl.") {3.) Cross-Complainants were presented with numerous complex legal documents when they applied for employment and, later, during their employment. (E1Wakeel Decl. 4; Martinez Decl. 4.) When signing these documents, Cross-Complainants were never informed, nor were they aware, that they were signing an "arbitration agreement.” (ElWakeel Decl. | 4; Martinez Decl. {4.) None of the Cross-Complainants had any meaningful opportunity to review the documents, including the arbitration agreement, or to consult with an attorney prior to signing them. (EIWakeel Decl. | 5; Martinez Decl. | 5.) Each of the Cross-Complainants was told by Cross-Defendant that he or she was required to sign the documents in order to work for Cross-Defendant. (ElWakeel Decl. | 6; Martinez Decl. 6.) No one from Cross- Defendant explained the documents to Cross-Complainants; instead, Cross-Complainants were given only a few minutes to quickly sign the agreements without any time for questions or time to review the stack of documents. (EIWakeel Decl. 7; Martinez Decl. { 7.) Equally important is the fact that Cross-Defendant did not inform Cross-Complainants that they were waiving an important constitutional right - a right to a trial by jury. (ElWakeel Decl. { 8; Martinez Decl. { 8.) Nor did any of the Cross-Complainants have any opportunity or power to negotiate or reject any of the terms of the arbitration provision, which were buried in pre-printed, standard forms. (EIWakeel Decl. { 9; Martinez Decl. 9.) No form presented by Cross- Defendant in support of its Motion provides Cross-Complainants with any choice to reject 8. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BAA W N D = O 0 0 N D N R E W N = O arbitration. (E1Wakeel Decl. { 10; Martinez Decl. { 10.) As such, the arbitration agreements are adhesion contracts because they are part of standardized forms, drafted and imposed by a party of superior bargaining strength, and Cross-Complainants' only option was to sign these documents or reject them under risk of not being hired or losing their employment. (EIWakeel Decl. | 11; Martinez Decl. 11.) Courts have long held that a non-negotiable contract of adhesion in the employment context is procedurally unconscionable. Armendariz, supra, at 115. See Circuit City Stores, Inc. v. Adams (9th Cir. 2002) 279 F.3d 889, 893 (finding arbitration agreement procedurally unconscionable because it was a "take it or leave it" prerequisite to employment, and job applicants were not permitted to modify the agreement's terms). There is no question that such is the case here. b. Cross-Defendant's Failure to Provide Cross-Complainants with Copies of AAA's Rules Also Renders the Arbitration Provision Procedurally Unconscionable It is well settled that an employer's failure to provide a copy of the arbitration rules to which the employee will be bound supports a finding of procedural unconscionability. See Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 390-91; Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 722-23; Zullo v. Superior Court (2011) 197 Cal. App.4th 477, 485-86 (holding "it was oppressive to require the party to make an independent inquiry to find the applicable rules in order to fully understand what she was about to sign," and that the employer's failure to provide the applicable rules rendered the provision procedurally unconscionable). Here, at no time did Cross-Defendant ever provide any of the Cross-Complainants a copy of the arbitration rules to which each of them would be bound by the arbitration provision. (E1Wakeel Decl. { 12; Martinez Decl. { 12.) Cross-Complainants were never given an opportunity to review the rules that purport to govern the provision. (ElWakeel Decl. 13.) Thus, Cross-Complainants could not and did not determine what rights each was giving up by entering into Cross-Defendant's arbitration scheme. (E1Wakeel Decl. | 14; 9. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BAA W N D = O 0 0 N D N R E W N = O Martinez Decl. 14.) Courts routinely refuse to enforce such arbitration provisions that fail to provide a copy of the AAA rules. See, e.g., Fitz, 118 Cal. App.4th at 721 (refusing to enforce provision that incorporated the AAA rules without attaching them because this required the employees "to go to another source to learn the full ramifications of the arbitration agreement"); Trivedi, 189 Cal. App. 4th at 392-93 (refusing to enforce arbitration provision that was drafted by the employer, that was mandatory, and that did not attach a copy of the AAA rules referenced in the agreement); Zullo, 197 Cal.App.4th at 477 (concluding that the absence of the AAA rules was procedurally unconscionable). In sum, Cross-Defendant's arbitration provision is permeated with procedural unconscionability. 4. The Arbitration Provision Is Also Substantively Unconscionable Substantive unconscionability exists when a contract imposes unduly harsh, oppressive, or one-sided terms. Armendariz, 24 Cal.4th at 113. "[P]Jrovisions of arbitration agreements unduly advantageous to one party at the expense of the other will not be judicially enforced." Stir/in v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1541. Given the overwhelming evidence of procedural unconscionability, only a minimal showing of substantial unconscionability is required to invalidate the arbitration provision. See id. at 114 ("(T)he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa."); Mercuro, 96 Cal.App.4th at 174-75 (given employer's highly oppressive conduct in obtaining employee's consent to arbitration agreement, employee was required to make only minimal showing of substantive unconscionability). Here, Cross-Defendants’ arbitration provision is substantively unconscionable because the arbitration provision restricts Cross-Complainants' right to discovery. Specifically, the agreement allows only for the taking of a deposition of one individual and any expert witness designated by another party. Further, it remains silent as to the availability of other discovery such as interrogatories. In its moving papers, Cross-Defendant claims vaguely that the arbitration provision provides for "adequate discovery", which Cross- 10. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BAA W N D = O 0 0 N D N R E W N = O Defendant claims permits the “deposition of one individual and any expert witness designated by another party, as well as to make requests for production of documents and subpoena documents from third parties. Moreover, parties can make requests for additions discovery, and “[t]he Arbitrator shall grant an order for such requested additional discovery that the Arbitrator finds the party requires adequately arbitrate a claim.” (Mot. at p.11.) Rather than providing for discovery explicitly in the arbitration agreement, as required by Armendariz, 24 Cal.4th at 102, the provision hands over the scope of discovery entirely to the discretion of the arbitrator. In fact, AAA Rule 9 empowers the arbitrator to limit discovery to only that which the arbitrator "considers necessary to a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration." (See AAA Rule 9.) Needless to say, discovery at the discretion of an arbitrator differs substantially from a litigant's broad discovery rights in federal or state court. AAA Rule 9 grants the arbitrator the sole right and discretion to allow the breadth of depositions, interrogatories, document requests, requests for admissions, and subpoenas to which a party in federal or civil court would broadly be entitled. Courts have routinely held that the absence of the express provision for discovery rights renders arbitration agreements unconscionable. See Armendariz, 24 Cal.4th at 113; Sparks, 207 Cal.App.4th at 1523; Fitz, 118 Cal. App.4th at 715 ("Adequate discovery is essential for vindication of statutory claims."). Specifically, the Sparks court held that the arbitration provision was substantively unconscionable because, like here, the provision required the employee to relinquish statutory administrative and judicial rights, and because there was no express provision for discovery. See 207 Cal.App.4th at 1523. 5. The Arbitration Provision Is Permeated With Unconscionability And Cannot Be Cured Where, as here, an arbitration agreement that contains numerous unconscionable provisions, severance cannot save it. The Armendariz Court noted that a court's power to reform an arbitration agreement is "limited to instances in which parties make mistakes, not 11. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O to correct illegal provisions." 24 Cal.4th at 125. The Armendariz Court stated that "if the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced" since "multiple defects [in an agreement] indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage." Id. at 124. "The fact that an arbitration agreement contains more than one unlawful provision may indicate a systematic effort to impose arbitration on an employee ... as an inferior forum that works to the employer's advantage." Ontiveros v. DHL Exp. (USA) Inc. (2008) 164 Cal. App.4th 494, 515). Here, the number of unconscionable provisions permeating Cross-Defendant's arbitration provision, coupled with the high degree of established procedural and substantive unconscionability, clearly illustrates a systematic effort by Cross-Defendant to gain an advantage over Cross- Complainants through the arbitration provision. Accordingly, the arbitration provision is irreparably tainted, cannot be reformed by severing the numerous unconscionable provisions, and is therefore unenforceable. III. CONCLUSION For the foregoing reasons, Cross-Complainants respectfully request that the Court deny the Motion. Dated: July 12, 2016 FORD & DIULIO PC by ACFE \ Kristopher P. Diulio Brendan M. Ford Tyler E. Sanchez Attorneys for Cross-Complainants SUMMER MARTINEZ and ALI ELWAKEEL 12. MEMO. OF POINTS & AUTHORITES IN OPPOSITION TO MOTION TO COMPEL ARBITRATION © 00 3 O N Ln BA W N = N N N N N N N N N E e e m e m e m e m e m e d c o NN O N Ln BA W N Y D = O O 0 0 N N N R E W I N D = O CERTIFICATE OF SERVICE I, Kristopher P. Diulio hereby certify as follows: I am employed in the County of Orange, State of California; I am over the age of eighteen years and am not a party to this action; my business address is 695 Town Center Drive, Suite 700, Costa Mesa, California 92626. On July 12, 2016 I served the following: CROSS-COMPAINANTS’ MEMORANDUM OF POINTS & AUTHORITES IN OPPOSITION TO CROSS-DEFENDANTS’ MOTION TO COMPEL ARBITRATION on the interested parties in this action, by: Service by Mail: placing a true and correct copy thereof in an envelope addressed to the parties or its/their attorney(s) of record, addressed as follows: Timothy J. Long tjlong @orrick.com Valerie M. Goo vgoo@orrick.com Stephanie Gail Lee Stephanie.lee @orrick.com Orrick, Herrington & Sutcliffe LLLP 777 South Figueroa Street, Suite 3200 Los Angeles, CA 90017 Service by Email: by transmitting a true and correct copy electronically under Rule 2.260 of the California Rules of Court to the email addresses listed above from the email address kdiulio @forddiulio.com. I am "readily familiar" with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. postal service on that same day with postage thereon fully prepaid at Costa Mesa, California in the ordinary course of business. I certify under penalty of perjury that the foregoing is true and correct, that the foregoing document(s), and all copies made from same, were printed on recycled paper, and that this Certificate of Service was executed by me on July 12, 2016 at Costa Mesa, California. Kristopher P. Diulio