Stephen Ball vs. Cig Financial, LLC

Opposition

Cal. Super. - 4th Dist.September 2, 2016

Oo 0 N N nn W N N O N O N N N N N N N mm e m e m e m em e m e t p m pe d QW ~~ a N hh BR W N = O N O N a N R w ND e o AEGIS LAW FIRM, PC KASHIF HAQUE, State Bar No. 218672 ALI S. CARLSEN, State Bar No. 289964 FAHEEM A. TUKHI, State Bar No. 310249 9811 Irvine Center Drive, Suite 100 Irvine, California 92618 Telephone: (949) 379-6250 Facsimile: (949) 379-6251 khaque@aegislawfirm.com acarlsen(@aegislawfirm.com ftukhi@acgislawfirm.com Attorneys for Plaintiff, STEPHEN BALL ELECTRONICALLY FILED Superior Court of California, County of Orange 01/25/2017 at 04:52:00 Pi Clerk of the Superior Court By & Clerk, Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA ORANGE COUNTY - CENTRAL JUSTICE CENTER STEPHEN BALL, an individual, Plaintiff, VS. CIG FINANCIAL, LLC, a California limited liability company; and DOES 1 through 20 inclusive, Defendants. CASE NO.: 30-2016-00872855-CU-OE-CJC Assigned for all purposes to: the Honorable John C. Gastelum., Dept. C13 PLAINTIFF’S OPPOSITION TO DEFENDANT CIG FINANCIAL, LLC’S MOTION TO COMPEL ARBITRATION AND STAY THE PROCEEDINGS PENDING ARBITRATION [Filed concurrently with Declaration of Stephen Ball] Date: February 7, 2016 Time: 2:00 p.m. Department: C13 Action Filed: September 2, 2016 Trial Date: Not yet set Plaintiff STEPHEN BALL (“Plaintiff” or “Mr. Ball”), submits this Opposition to Defendant CIG FINANCIAL, LLC’S (“Defendant”) Motion to Compel Arbitration ( “Motion™). 1 1 PLAINTIFF’S OPPOSITION TO DEFENDANT’S MOTION TO COMPEL ARBITRATION Ow 0 ~~ ON Wn ke W N N O N O N N N N N N N = mm e m mt e m mm e d e d p d e m C o ~ ~ ] O N Wn BA W O N = O O 0 N N N R e w N = , I. INTRODUCTION Defendant seeks to enforce multiple purported arbitration agreements that were buried in acknowledgments of other documents and superseded on a yearly basis, rendering the previous agreements void. Since the commencement of Mr. Ball’s employment in 2009, Defendant required him to sign - on an adhesive “take-it-or-leave-it” basis - annual acknowledgments regarding receipt of Defendant’s employee handbook and receipt of new sales/bonus policies. The employee handbooks and sales/bonus policies each contained inconspicuously short and undetailed paragraphs regarding arbitration. In 2013, Defendant required Mr. Ball to sign yet another acknowledgement of receipt of Defendant’s employee handbook. Defendant touts this document as being a valid arbitration agreement, despite the fact that it was superseded in 2014, and again in 2015; and the contents of the agreement renders it unconscionable and invalid under California law. II. SUMMARY OF RELEVANT FACTS Mr. Ball began his employment with Defendant on or about December 1, 2009 and based on his excellent performance, was quickly promoted to Vice President, Director of Credit. Throughout Mr. Ball’s employment, Defendant engaged in a systematic pattern of requiring Mr. Ball to sign, on an annual basis, various acknowledgments and agreements, each of which superseded the last and modified the essential terms of his employment. As explained infra, Defendant attempted to validate a different arbitration agreement every year, only to supersede and invalidate it the following year. Defendant’s purported arbitration agreement that is the subject of this motion - purportedly signed by Mr. Ball in 2013 - was ultimately superseded and rendered void by subsequent agreements Defendant required Mr. Ball to sign in 2014 and 2015. On the date of his hire, Mr. Ball signed a document acknowledging his receipt of Defendant’s employee handbook, but neither this document nor the employee handbook contained an arbitration agreement. (See Exhibit “A” attached to the Declaration of Stephen Ball “Ball Decl.”.) On May 1, 2011, Defendant required Mr. Ball to sign another document titled “Agreement regarding Sale Bonus” that “set forth the terms and conditions of [Mr. Ball’s] Sale Bonus in 2 PLAINTIFF’S OPPOSITION TO DEFENDANT’S MOTION TO COMPEL ARBITRATION Oo 0 N N N nn R W N D N O N RN O N O N N O N O N m m o m em em hm em em a pm 2 J B E B R B I R R B E B TS 3 2a a d r 3 0 2 5 connection with [his] continued employment with CIG Financial.” That document detailed the terms and conditions of the sale bonus, while the seventh and final paragraph of that document - comprised of just two (2) sentences - addressed “Mediation and Arbitration” of “any controversy or claim arising out of or relating to this Agreement or your employment with Company...in accordance with the rules of commercial arbitration of JAMS Endispute.” (See Exhibit “B” attached to Ball Decl.) On May 16, 2013, Defendant again required Mr. Ball to sign another document titled “Employee Acknowledgement and Agreement” that “acknowledges that [Mr. Ball] received a copy of the CIG Financial, LLC Employee Handbook.” (See Exhibit “C” attached to Ball Decl.) Because this document contains additional language regarding the arbitration of disputes, Defendant contends that this document (hereinafter, “Agreement”) is the arbitration agreement that Mr. Ball should be bound to. Page 21 of Defendant’s 2013 Employee Handbook that Mr. Ball acknowledged receiving, states, “Employees will be asked to sign a separate agreement acknowledging the arbitration policy.” (See Exhibit “D” attached to Ball Decl.) That page contains a single paragraph regarding arbitration, sandwiched between two paragraphs regarding “POLICIES” and “Code of Conduct.” Mr. Ball never signed such a separate agreement. In early 2014, Defendants executives expressed to Mr. Ball their concerns that management was “middle aged” and they sought to make changes. As a person over 50 years old, Mr. Ball felt these comments were directed toward him. Soon after, in or about April 2014, Defendant replaced Mr. Ball’s position with a less-experienced employee who was approximately 20 years younger, and forced Mr. Ball to accept a demotion and reduction in salary. On May 30, 2014, Defendant again required Mr. Ball to sign another acknowledgement of receipt of the employee handbook which states, in pertinent part, “I understand that the May 2014 Employee Handbook shall supersede any and all prior handbooks, written documents, or oral representation concerning Company policies and practices that contradict the at will nature of employment.” (Emphasis added.) (See Exhibit “E” attached to Ball Decl.) On August 21, 2015, Defendant required Mr. Ball - for the fifth time - to sign another document titled “Acknowledgment Receipt of Employee Handbook” which also stated “I 3 PLAINTIFF'S OPPOSITION TO DEFENDANT’S MOTION TO COMPEL ARBITRATION W N o e 1 O N wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 7 28 understand that the July 2015 Employee Handbook shall supersede any and all prior handbooks, written documents or oral representation concerning Company policies and practices that contradict the At-Will nature of employment.” (Emphasis added.) (See Exhibit “F> attached to Ball Decl.) Again, page 18 of the July 2015 issue of Defendant’s Employee Handbook states (again sandwiched between Defendant’s “POLICIES” and “Code of Conduct”), “Employees will be asked to sign a separate agreement acknowledging the Arbitration Policy.” (See Exhibit “G™ attached to Ball Decl.) Again, Mr. Ball never signed such a separate agreement. Even if Defendant had presented an arbitration agreement to Mr. Ball, Mr. Ball would not have signed the agreement. (See Ball Decl. 913.) Defendant terminated Mr. Ball’s employment on or about December 24, 2015, citing to a purported “restructuring” to justify his wrongful termination, despite Mr. Ball’s excellent performance. At the time of his termination, Mr, Ball was 55 years old. Defendant has now filed the instant motion to compel arbitration on the erroneous ground that Plaintiff signed an enforceable arbitration agreement. Contrary to Defendant’s position, and in addition to the fact that Mr. Ball never agreed to or signed an arbitration agreement, Defendants purported Agreement is both invalid and unconscionable under California law. III. LAW AND ARGUMENT A. Defendant Fails to Establish a Valid Arbitration Agreement “Absent a clear agreement to submit disputes to arbitration, courts will not infer that the right to a jury trial has been waived.” Esparza v. Sand & Sea, Inc.,2 Cal. App. 5th 781, 790 (2016). “The party seeking to compel arbitration bears the burden to prove the existence of a valid agreement to arbitrate.” Engalla v. Permanente Medical Group, Inc., 15 Cal. 4th 951, 972 (1997). California contract law applies to determine whether the parties formed a valid agreement to arbitrate [and] arbitration will not be compelled where there was no agreement to do so. Mitri v. Arnel Management Co., 157 Cal. App. 4th 1164, 1170 (2007). “A party is not obligated to arbitrate unless he or she has expressly agreed to do so by entering into a valid and enforceable written contract with the party who seeks arbitration.” Grey v. American Management Services, 204 Cal. App. 4th 803, 804 (2012). 4 PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION TO COMPEL ARBITRATION Oo 0 N N n t BR W N e s b a ho NN ND No No - - - - - -_ - -_ - - In Grey, the employer required all its employees to first fill out an application packet that contained an Issue Resolution Agreement (“IRA”). Id. at 805. The IRA contained an arbitration clause requiring claims or controversies regarding employment to be arbitrated. Id. Later, the employer required plaintiff to sign another document known as the “employment contract”, which modified what is subject to arbitration and contained a provision that this new agreement “supersedes all prior contemporaneous discussions and understandings.” Id. When the plaintiff filed a lawsuit against the employer for, infer alia, employment discrimination, the employer petitioned the court to compel arbitration of plaintiff's claims pursuant to the earlier IRA. Id. at 806. The court determined that the contents of the employment contract were different from the terms contained in the IRA. Id. at 808. The court in Grey held that the plaintiff could not be forced to arbitrate his claims “unless he or she has expressly agreed to do so by entering into a valid and enforceable written contract with the party who seeks arbitration” because the IRA predated the employment contract, and the employment contract expressly superseded the IRA. Id. at 808. “Since the clause then says it supersedes all prior understandings, when read in the context of the clause as a whole, ‘understandings’ means all prior agreements. We find the clause’s express language that it is the ‘entire agreement’ and supersedes all prior ‘understandings’ to mean that the parties intended the [employment] contract to be the final and exclusive embodiment of their agreement.” 1d. Similarly, when Mr. Ball originally began his employment with Defendant in 2009, he was never presented with nor did he sign any type of arbitration agreement. A semblance of an arbitration agreement appeared in 2011, when Defendant presented Mr. Ball with an agreement regarding his sale bonuses, containing a single paragraph comprised of two (2) sentences relating to “mediation and arbitration.” Later, in 2013, Defendant required Mr. Ball to sign an acknowledgement of receipt of their employee handbook, which also contained an arbitration clause. In 2014 and 2015, however, Defendant provided other documents that each superseded the previous agreement, respectively, rendering them void. Consequently, and similar to the plaintiff in Grey, Mr. Ball cannot be compelled to arbitrate his claims because he never expressly agreed to do so nor did he into a valid and enforceable written contract to arbitrate with Defendant. 5 PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION TO COMPEL ARBITRATION wn RB W N oO 0 3 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. An Arbitration Provision in an Employee Handbook is Not Enforceable An employee handbook and its policy acknowledgement is insufficient to meet defendant’s burden to demonstrate an agreement to arbitrate. Esparza, supra, at 792. “To support a conclusion that an employee has relinquished his or her right to assert an employment- related claim in court, there must be more than a boilerplate arbitration clause buried in a lengthy employee handbook given to new employees. At a minimum, there should be a specific reference to the duty to arbitrate employment-related disputes in the acknowledgment of receipt form signed by the employee at commencement of employment.” Id. at 791 (emphasis added). The defendant in Esparza argued that because the policy acknowledgment referenced the arbitration agreement, it was binding on the plaintiff. /d. The Esparza court held that “[c]Joupled with the language acknowledging that Esparza had not read the handbook yet (and therefore had not read the arbitration provision), the policy acknowledgement does not support defendants’ argument that Esparza agreed to the arbitration provision when she signed the policy acknowledgment. Id. (Emphasis added.) Similarly, and on numerous occasions, Defendant buried a boilerplate arbitration clause in either a lengthy employee handbook or in the employee’s acknowledgement agreement of it. (See Exhibits “A” through “G”, attached hereto.) Defendant’s purported arbitration Agreement suffers from the same deficiencies prohibited by Esparza because it was buried in a lengthy employee acknowledgement and it was not presented to Mr. Ball at the commencement of his employment. Furthermore, the first line of the purportedly controlling 2013 arbitration agreement contains language prohibited by the Esparza court (“language acknowledging that [the employee] had not yet read the handbook yet”). “By signing below, this acknowledges that I have received a copy of the CIG Financial, LLC (“Company”) Employee Handbook and I will familiarize myself with its contents.” (Emphasis added; see Exhibit “C”.) Presumably, therefore, Mr. Ball would not know the contents of the handbook or the arbitration provision at the time he signed the form, so there is no basis to assume that he agreed to be bound by something he has not read. Id. at 790. Consequently, Defendant’s purported arbitration Agreement is unenforceable, and their Motion should be denied in its entirety. 6 PLAINTIFF'S OPPOSITION TO DEFENDANT’S MOTION TO COMPEL ARBITRATION vO 0 3 a N nh RR W N N O N N N N N N N N m m e m mm e m e m mt md e d e d C 0 ~~ A N Wn Bm W N = O Y R N N nN R W N = OD C. The Purported Arbitration Agreement has been Superseded Where an employment contract contains an integration clause superseding an earlier agreement that the employee had signed, the employer, in seeking to compel arbitration, cannot use the earlier agreement to be the sole agreement because it contradicts the plain terms of the CORRES integration clause. Grey, supra, at 804. “Under state law, the terms of a final, integrated contract ‘may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement.” (Code Civ. Proc., § 1856, subd. (a).)” Id. at 807. The court in Grey held that because the plaintiff had signed multiple employment agreements, each of which had an integration clause, the later in time agreements controlled because they superseded the previous agreements. “Because the contract says it is the entire agreement, common sense dictates that it supersedes other prior agreements related to Grey’s employment... We find the clause’s express language that it is the ‘entire agreement’ and supersedes all prior ‘understandings’ to mean that the parties intended the contract to be the final an exclusive embodiment of their agreement.” Id. at 807-08. In 2011, Defendant required Mr. Ball to sign an agreement that contained a “Mediation and Arbitration” and integration clause titled “Entire Agreement”. (Exhibit “B”.) In 2013, Defendant required Mr. Ball to sign the purported arbitration Agreement which also contained an integration clause that it “is the entire agreement” and it “supersedes any and all prior agreements.” (Exhibit “C”.) In 2014, Defendant again required Mr. Ball to sign another acknowledgment of receipt that “supersedef[s] any and all prior handbooks, written documents or oral representation concerning Company policies and practices that contradict the at will nature of employment.” (Exhibit “E”.) The exact same language is in the acknowledgement of receipt Mr. Ball signed in 2015. (Exhibit “F”.) The 2014 and 2015 acknowledgments did not contain or make any reference to an arbitration agreement, nor did Mr. Ball sign any arbitration agreements after these dates. Considering that Defendant’s purported arbitration Agreement (2013) is superseded by two subsequent agreements (2014 and 2015, respectively), neither of which contain or reference an arbitration agreement; and reconciling it with California law and basic contract principles, this Court should rule that the purported arbitration Agreement has been superseded and is void. 7 PLAINTIFE’S OPPOSITION TO DEFENDANT’S MOTION TO COMPEL ARBITRATION O e YN Wn BR W N N S N N N N N N N O N m = e k e m e m e m e m e m e m e m pe 0 ~~ S N nn RAR W N == D O 0 N N i B R E W ee © D. Defendant’s Arbitration Agreement is Unconscionable and Void as a Matter of Law 1. Defendant’s Arbitration Agreement is Procedurally Unconscionable a. The Arbitration Agreement is a Contract of Adhesion “Procedural unconscionability, and in particular ‘oppression,’ generally entails a contract of adhesion; that is, ‘a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” The McCaffrey Group., Inc. v. Superior Court, 224 Cal. App. 4th 1330, 1349 (2014). “Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice.” Carbajal v. CWPSC, Inc., 245 Cal. App. 4th 227, 243 (2016) “It is well settled that adhesion contracts in the employment context, that is, those contracts offered to employees on a take-it-or-leave-it basis, typically contain some aspects of procedural unconscionability.” Serpa v. California Surety Investigations, Inc. 215 Cal. App. 4th 695, 704 (2013). “The adhesive nature of the contract is sufficient to establish some degree of procedural unconscionability.” Sanchez v. Valencia Holding Co., LLC 61 Cal. 4th 899, 915 (2015). Defendant’s Agreement and its arbitration provision are therefore procedurally unconscionable because they are contracts of adhesion. Defendant is an employer with superior bargaining power and the Agreement is part of a standardized, preprinted form that Defendant requires all of its employees to sign (Ball Decl. § 12). Mr. Ball had no choice but to sign the Agreement so that he could continue his employment (Ball Decl. § 13). b. The Arbitration Agreement Fails to Provide the Arbitration Rules, Thereby Rendering it Procedurally Unconscionable “Numerous cases have held that the failure to provide a copy of the arbitration rules to which the employee would be bound supported a finding of procedural unconscionability [citations].” Carbajal, supra, at 244. “The failure to provide a copy of the governing rules ‘contributes to oppression because the employee is forced to go to another source to find out the full import of what he or she is about to sign - and must go to that effort prior to signing.”” Id. at 245. 8 PLAINTIFF'S OPPOSITION TO DEFENDANTS MOTION TO COMPEL ARBITRATION Oo wo 3 nn BR W N N O N N N N N N N N e m mm e m e e e e e s e m 0 N N Wn BR W N , O Y ” N N B W N = Oo Defendant’s purported arbitration agreement states that “any claim, dispute, and/or controversy...shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act, in conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec 1280 et seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights to discovery”, with nothing more. Defendant failed to include, attach, or provide a copy of the arbitration rules to which Mr. Ball would be bound. Defendant’s failure to do so therefore contributes to the oppressive and procedurally unconscionable nature of Defendant’s purported arbitration agreement. 2. Defendant’s Arbitration Agreement is Substantively Unconscionable “The substantive element of unconscionability ‘pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided.” Id. at 247. While both substantive and procedural unconscionability need to be present to invalidate a contract for unconscionability, they need not be present in the same degree. “Essentially a sliding scale is invoked...the more substantively oppressive, the less evidence of procedural unconscionability is required...and vice versa.” Armendariz v. Found. Health Psychcare Services, Inc., 24 Cal. 4th 83, 114 (2000). As a matter of California law, unconscionability is determined at the time the agreement is entered into. Civil Code § 1670.5(a) provides that a judicial determination of unconscionability focuses on whether the contract or any one of its provisions were “unconscionable at the time it was made.” Therefore, under the sliding scale approach, minimal substantive unconscionability is required as the agreement contains undisputable and substantial procedural unconscionability. Consequently, Defendant’s purported arbitration Agreement is procedurally and substantively unconscionable, rendering it completely void as a matter of law. E. The Court Should Not Sever the Unconscionable Portions, Which Permeates the Purported Arbitration Agreement “Because illegality and unconscionability permeate the agreement, its objectionable terms cannot be severed. As a result, the entire arbitration agreement is void and unenforceable.” Abramson v. Juniper Networks, Inc., 115 Cal. App. 4th 638, 668 (2004). “One relevant factor in 9 PLAINTIFF'S OPPOSITION TO DEFENDANTS MOTION TO COMPEL ARBITRATION NO 0 N N Un RAR W N N O N N S = = e m e m e m e m e m e t e m assessing severability is whether the agreement contains more than one objectionable term.” Id. at 666. Defendant’s purported arbitration agreement contains at least two objectionable terms ~ its adhesive nature and the omission of the applicable rules of arbitration. The purported arbitration agreement is unconscionable because it was signed by Mr. Ball in an adhesive circumstance; and, in an ordinary contractual analysis, it was superseded by other agreements that varied and superseded the arbitration’s terms. “Another consideration weighing against severance in this case is the fact that ‘there is no single provision [we] can strike or restrict in order to remove the unconscionable [or illegal] taint from the agreement. [Citation.] We cannot save the contract by simply hacking off the provisions governing what claims are arbitrable [and] how fees and costs will be allocated... If we did so there would be virtually nothing of substance left to the contract.” Id. at 666-67. Where, as here, an arbitration agreement contains numerous unconscionable provisions, severance cannot save it. The number of unconscionable provisions in Defendant’s purported arbitration agreement illustrates a systematic effort by Defendant to gain an advantage over employees. The unconscionability of the entire agreement also renders the contract void and unenforceable as a matter of law. IV. CONCLUSION For the reasons set forth herein, Plaintiff respectfully requests the Court to deny Defendant’s Motion in its entirety. Dated: January 25, 2017 AEGIS LAW FIRM, PC - By: Kashif Haque Ali S. Carlsen Faheem A. Tukhi Attorneys for Plaintiff STEPHEN BALL 10 PLAINTIFF'S OPPOSITION TO DEFENDANTS MOTION TO COMPEL ARBITRATION OO 0 3 O N Wn Bs W N ee N O N O N D N N N N DN DN mm e e e e e m e e e m p m e m e m 0 3 O N Wh B R O W N R O 0 E N O N Nn R W NN = O CERTIFICATE OF SERVICE I, the undersigned, am employed in the County of Orange, State of California. I am over the age of 18 and not a party to the within action; am employed with Aegis Law Firm PC and my business address is 9811 Irvine Center Drive, Suite 100, Irvine, California 92618. On January 25, 2017, I served the foregoing document entitled: . PLAINTIFF’S OPPOSITION TO DEFENDANT CIG FINANCIAL, LLC’S MOTION TO COMPEL ARBITRATION AND STAY THE PROCEEDINGS PENDING ARBITRATION on all the appearing and/or interested parties in this action by placing [_] the original [X] a true copy thereof enclosed in sealed envelope(s) addressed as follows: James J. McDonald Jr. Caroline A. Pham Fisher & Phillips LLP 2050 Main Street, Suite 1000 Irvine, CA 92614 Attorneys for Defendant: CIG Financial, LLC [] (BY MAIL) 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 Irvine, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postage cancellation date or postage meter date is more than one day after date of deposit for mailing this affidavit. (Cal Code Civ. Proc. § 1013(a); Fed. R. Civ. Proc. 5(a); Fed R. Civ. Proc. 5(c).) X (BY OVERNIGHT MAIL) I am personally and readily familiar with the business practice of Aegis Law Firm PC for collection and processing correspondence for overnight delivery, and I caused such document(s) described herein to be deposited for delivery to a facility regularly maintained Federal Express for overnight delivery. (Cal Code Civ. Proc. § 1013(c); Fed. R. Civ. Proc. 5(c).) [] (BY ELECTRONIC TRANSMISSION) I caused said document(s) to be served via electronic transmission to the addressee(s) listed above on the date below. (Cal. Code Civ. Proc. § 1010.6(6); Fed. R. Civ. Proc. 5(b)(2)(E); Fed. R. Civ. Proc. 5(b)(3).) [] (BY PERSONAL SERVICE) I delivered the foregoing document by hand delivery to the addressed named above. (Cal Code Civ. Proc. § 1011; Fed. R. Civ. Proc. S(b)2)(A)) I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on January 25, 2017, at Irvine, California. Kathyhn Alvarez CERTIFICATE OF SERVICE