Memorandum of Points And Authorities In Opposition To Petition To Compel

Opposition

Cal. Super. - 4th Dist.February 5, 2018

N O N nm Rs W N x 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Edward W. Choi, Esq. SBN 211334 LAW OFFICES OF CHOI & ASSOCIATES, P.C. 515 S. Figueroa St., Suite 1250 Los Angeles, CA 90071 Telephone: (213) 381-1515 Facsimile: (213) 465-4885 Email: edward.choi@choiandassociates.com Dennis S. Hyun (State Bar No. 224240) HYUN LEGAL, APC 5515 S. Figueroa St., Suite 1250 Los Angeles, California 90071 (213) 488-6555 (213) 488-6554 facsimile Attorneys for PLAINTIFF and the CLASS ELECTRONICALLY FILED Superior Court of California, County of Orange 05/23/2018 at 02:03:00 PM Clerk of the Superior Court By & Clerk, Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE - COMPLEX ROWE ROBERTS, as an individual and on behalf of all others similarly situated, Plaintiff, A PSMG, INC. a California corporation; PACWEST SECURITY SERVICES, an unknown entity; and DOES 1 through 50, inclusive, Defendants. Case No. 30-2018-00971909-CU-OE-CXC [Assigned for all purposes to Hon. Randall J. Sherman, Dept. CX105] PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO PETITION TO COMPEL Date: July 27,2018 Time: 10:00 a.m. Dept.: CX105 PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT'S PETITION TO COMPEL ARBITRATION N O N O h BA W N 10 11 12 13 14 15 16 17 18 19 20 21 2 23 24 25 26 27 28 L INTRODUCTION Plainly put, Defendant PSMG, Inc. dba Pacwest Security Services’ (“Defendant”) Petition to Compel should be denied because the Arbitration Agreement is unconscionable. As an initial matter, the Arbitration Agreement is not mutual. In Armendariz v. Foundation Health Psychcare Serv., Inc., 24 Cal. 4th 83 (2000), the California Supreme Court held that for an arbitration agreement to be enforceable, the employer must be equally bound to arbitrate. Here, Defendant has expressly carved out claims for injunctive relief to protect Defendant’s trade secrets. Courts have held that such carve-outs render arbitration agreements unconscionable and unenforceable. The Arbitration Agreement also improperly exposes Plaintiff Rowe Roberts (“Plaintiff”) to liability which he would not face in court. Specifically, the Agreement provides that a prevailing party will be entitled to attorneys’ fees and costs. As this Court knows, the claims asserted by Plaintiff include only one-way fee provisions in favor of the employee (Labor Code §§ 2802(c) and 226(e) and Fair Employment and Housing Act (the “FEHA”), Gov’t Code § 12965(b)). Therefore, the improper fee-shifting provision is illegal and renders the Agreement unenforceable. However, if the Court is inclined to grant Defendant’s Petition, then the Court must have the Arbitrator decide class arbitrability pursuant to Sandquist v. Lebo Auto., Inc., 1 Cal. 5th 233 (2016). In Sandquist, the California Supreme Court held that class action allegations cannot be dismissed pursuant to a motion or petition to compel arbitration where the agreement does not contain a class action waiver. Here, the Arbitration Agreement does not contain such a waiver and, therefore, the Arbitrator must decide whether the Agreement permits class-wide arbitration. Lastly, Plaintiff’s Sixth Cause of Action for Violation of the Private Attorneys’ General Act (the “PAGA?”), Labor Code § 2698, ef seq., cannot be submitted to arbitration. If the Court is inclined to grant this Petition, then Plaintiff respectfully requests that this Court’s Order provide that Plaintiff's PAGA claim will not be subject to arbitration. IL DEFENDANT’S ARBITRATION AGREEMENT SHOULD NOT BE ENFORCED BECAUSE IT IS NOT MUTUAL For an arbitration agreement to be enforceable, it must pass the California Supreme Court’s test for unconscionability established in Armendariz v. Foundation Health Psychcare Serv., Inc., 24 Cal. 4th 1 PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT'S PETITION TO COMPEL ARBITRATION SA Ww NO 0 N Y O N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 83 (2000). Pursuant to Armendariz, for an arbitration agreement to survive, it must provide for (1) a neutral arbitrator, (2) adequate discovery, (3) a written award, (4) the availability of all of the types of relief that would otherwise be available in court, and (5) payment by the employer of any arbitration fees beyond what the employee would have to pay in court. Armendariz, 24 Cal. 4th at 102-114. Additionally, arbitration agreements must be “mutual” to be enforceable, such that the employer and employee are equally bound. Armendariz, 24 Cal. 4th at 120. As the California Supreme Court reiterated in Armendariz, 24 Cal. 4th at 120: “an arbitration agreement imposed in an adhesive context lacks basic fairness and mutuality if it requires one contracting party, but not the other, to arbitrate all claims arising out of the same transaction or occurrence or series of transactions or occurrences.” Id. (Emphasis added). The arbitration agreement in Armendariz provided that if the employee claimed her employment had been terminated wrongfully, the matter would be submitted to arbitration. The agreement, however, did not have an identical clause requiring the employer to also submit to arbitration. Id. at 92. The Armendariz Court held that this arbitration agreement was unenforceable because it lacked mutuality, given that it “require[d] the arbitration of employee-but not employer....” Id. at 120. Thus, the Court held that an arbitration agreement is unenforceable if it lacks a “modicum of bilaterality.” Id. Armendariz’s “modicum of bilaterality” rule has been repeatedly applied to refuse enforcement of employer arbitration agreements. See, e.g., Samaniego v. Empire Today LLC, 205 Cal. App. 4th 1138, 1150 (2012) (holding that arbitration agreement was unenforceable pursuant to Armendariz because the employer was not similarly bound by the agreement); Fitz v. NCR Corp., 118 Cal. App. 4th 702, 724-26 (2004) (same); Mercuro v. Superior Court, 96 Cal. App. 4th 167, 175-76 (2002) (same); Macias v. Excel Bldg. Services LLC, 767 F. Supp. 2d 1002, 1009-1010 (N.D. Cal. 2011) (holding that arbitration agreement was substantively unconscionable because it lacked mutuality; employee was required to arbitrate claims, but employer’s claims of unfair competition was exempt). The Court of Appeal’s holding in Zullo v. Superior Court, 197 Cal. App. 4th 477, 486 (2011), illustrates the “modicum of bilaterality” requirement. In Zullo, the Court of Appeal held that the employer’s arbitration agreement lacked the requisite mutuality: As to substantive unconscionability, the arbitration policy is one-sided and 13585736v.1 2 PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT'S PETITION TO COMPEL ARBITRATION N N ny sa W N oo 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 harsh. [The employer] insists that the policy imposes a mutual obligation to arbitrate but the argument does not square with the language of the policy.... Indeed, the arbitration policy adds a nonexclusive list of the statutes and laws to which it applies, all are of equal employment and nondiscrimination laws. Employees bring actions under these laws. Furthermore, what is implicit in the first paragraph of the arbitration policy is explicit in the second, where it states that “no other action will be brought by any employee,” that “Employees shall not have the right to raise any claim” other than by arbitration, and that “Employee agrees” to make a written request for arbitration within a year of when the dispute arises. And finally, in the acknowledgment of receipt the employee confirms that the handbook contains “an arbitration policy requiring me to submit any and all disputes” to arbitration and that “/ cannot pursue such claims before a judge or a jury.” There is nothing about the policy to support [the employer’s] contention that it would be bound to arbitrate any claim it might have against an employee. Id. at 486 (some emphasis added). Here, Defendant’s Arbitration Agreement improperly carves out claims for injunctive relief to protect Defendants trade secrets: The parties acknowledge that in the course of Employee's employment, Employee may be exposed to certain confidential information owned, controlled, or in the care of PACWEST. Exposure of such information to the public would cause irreparable harm to PACWEST and third parties (e.g. clients). In addition, there may be other situations in which either party's claims may cause irreparable harm if those claims were subject to this Agreement. Accordingly, the parties agree that either party is entitled to seek and obtain temporary injunctive relieve (and subsequent preliminary and permanent injunctive relief) from a court of competent jurisdiction under applicable law, and this Agreement will not apply to such right or relief. (Agreement at § 2 (emphasis added). Thus, Defendant is not bound by this Agreement and Defendant is free to protect its own trade secrets. In other words, the Agreement is worded to protect only Defendant, as opposed to being a true, bilateral agreement. Therefore, this Court should refused to enforce the Agreement. See, e.g., Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 784-85 (9th Cir. 2002) (holding that employer’s arbitration was not mutual because it exempted claims for workers’ compensation, unemployment, injunctive relief, and misappropriation of trade secrets from arbitration); Macias v. Excel Bldg. Services LLC, 767 F. Supp. 2d 1002, 1009-1010 (N.D. Cal. 2011) (holding that arbitration agreement was substantively unconscionable because it lacked mutuality; employee was required to arbitrate claims, but employer’s claims of unfair competition was exempt); Carlson v. Home Team Pest Def., Inc., 239 Cal. 13585736v.1 3 PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT'S PETITION TO COMPEL ARBITRATION NO 0 N N O N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 App. 4th 619, 635 (2015) (“The Company retains the right to file a lawsuit for purposes of preventing or stopping any unfair or unlawful competition or solicitation of its customers and employees, and/or misappropriation of its trade secrets.”); Carmona v. Lincoln Millennium Car Wash, Inc., 226 Cal. App. 4th 74, 86-87 (2014) (same). III. THE AGREEMENT IMPROPERLY EXPOSES PLAINTIFF TO LIABILITY WHICH HE WOULD NOT FACE IN COURT Courts have refused to enforce arbitration agreements where they expose the employee to attorneys’ fees which he would not have to pay in court. In Wherry v. Award, Inc., 192 Cal. App. 4th 1242, 1249 (2011), the Court of Appeal refused to enforce an arbitration agreement because it improperly granted the arbitrator the authority to award attorneys’ fees and costs to the prevailing party: In a FEHA case, unless it would be unjust, a prevailing plaintiff should recover attorney fees, but a prevailing defendant is awarded fees only if the case was frivolous or filed in bad faith. (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 985, 104 Cal.Rptr.3d 710, 224 P.3d 41.) Here, the agreements provide that the prevailing party is entitled to attorney fees, without any limitation for a frivolous action or one brought in bad faith. This violates Armendariz. (Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 394-395, 116 Cal.Rptr.3d 804.) Defendants argue this merely means the arbitrator has the authority to impose attorney fees in line with FEHA. But nothing in the agreement or the arbitration manual supports this claim. Moreover, the arbitration manual explicitly states that if the agreement provides for an award of attorney fees, they may be included as part of the award. Id. (Emphasis added). Here, the Agreement contains an identical provision: “if any party prevails in a statutory Claim that affords the prevailing party attorneys' fees, the arbitrator may award reasonable attorneys’ fees to the prevailing party in addition to any and all other remedies afforded by the relevant statute.” (Agreement at § 4). Pursuant to Armendariz, Defendants Agreement is unenforceable, as a matter of law. IV. IF THE COURT IS INCLINED TO GRANT THE PETITION, PURSUANT TO THE CALIFORNIA SUPREME COURT’S HOLDING IN SANDQUIST, PLAINTIFFS’ CLASS CLAIMS CANNOT BE DISMISSED In Sandquist, 1 Cal. 5th 233, the California Supreme Court held that no universal rule applies to the issue of who should decide whether class arbitration is permissible; rather, who decides is a matter of 13585736v.1 4 PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT'S PETITION TO COMPEL ARBITRATION EL ” a 8) o R N d 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the parties’ agreement. /d. at 248. Accordingly, the Supreme Court examined the language of the three arbitration agreements in question: All three arbitration provisions share the same basic structure and much of the same language. All three contain two inclusive clauses that define the range of disputes that must be -submitted to and determined exclusively by binding arbitration. Two of the three add an exclusive clause that sets out a specific, limited set of disputes, otherwise covered by the clause‘s inclusive language, that are nevertheless withdrawn from the arbitrator's purview. First, the provisions extend to -any claim, dispute, and/or controversy (including, but not limited to any [and all] claims of discrimination and harassment) which would otherwise require or allow resort to any court or other governmental dispute resolution forum, between [me/myself] and the Company. This language is comprehensive. If a dispute or controversy is between Sandquist and Lebo Automotive, as the one before us surely is, and if it might otherwise be permissibly submitted to a court, as the question whether class arbitration is available surely could be, this portion of the arbitration clause suggests a choice to have the decision made by an arbitrator. Second, the provisions extend to all claims -arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company, whether based on tort, contract, statutory, or equitable law, or otherwise.l (Italics added.) The underlying claims in the first amended complaint assert that Lebo Automotive harassed and discriminated against Sandquist on the basis of race in the course of his employment, created a hostile work environment, and ultimately constructively discharged him. They plainly arise from Sandquist’s employment with Lebo Automotive. The procedural question those claims present-whether Sandquist may pursue his claims on a class basis-directly arises from his underlying claims. Given that the provisions are intended to sweep in disputes -having any relationship or connection whatsoever with Sandquist’s employment, that the issue before us arises from a lawsuit over Sandquist’s employment would appear enough to satisfy this nexus requirement. Finally, both the Applicant's Statement & Agreement and the Employee Acknowledgement and Agreement (although not the Mandatory Arbitration Agreement) contain an additional clause identifying specific disputes otherwise within the broad inclusive clauses of the arbitration provisions but intended not to be arbitrable. Every dispute within those inclusive clauses is for the arbitrator, -with the sole exception of claims arising under the National Labor Relations Act which are brought before the 13585736v.1 5 PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT'S PETITION TO COMPEL ARBITRATION +S OO RX N3 9 O N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 National Labor Relations Board, claims for medical and disability benefits under the California Workers‘ Compensation Act, and Employment Development Department claims. The drafter of these agreements might well have specified other matters not for the arbitrator, such as the availability of class arbitration at issue here, but did not. Id. at 245-47 (emphasis added). In addition, the Supreme Court pointed to the presumption in favor of arbitrability - again weighing in favor of the argument that the question of whether class claims are arbitrable is itself a matter for arbitration. See id. at 260. Finally, the Supreme Court pointed to the longstanding rule of contract law that ambiguities should be construed against the drafter, in this case the defendant-employer. See id. at 245-47. Based on this analysis, the Supreme Court held that the arbitrator should decide the question of whether class claims are permissible in arbitration: “as a matter of state contract law, the parties’ arbitration provisions allocate the decision on the availability of class arbitration to the arbitrator, rather than reserving it for a court.” Id. at 248. Here, the Arbitration Agreement provides that “PACWEST and Employee mutually agree to the resolution by arbitration of all claims or controversies arising out of Employee's employment or its termination (collectively the "Claims") that either party may have against the other...” (Agreement at § 1). Pursuant to Sandquist, this Court should order that the arbitrator decide whether class claims are arbitrable. V. IF THE COURT IS INCLINED TO GRANT THE PETITION, PLAINTIFF'S PAGA CLAIMS CANNOT BE COMPELLED TO ARBITRATION As this Court knows, the California Supreme Court held in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348, 394 (2014), that PAGA claims are not subject to arbitration. On April 12, 2018, Plaintiff filed his First Amended Complaint, which added the Sixth Cause of Action for Violation of the PAGA. The PAGA claim cannot be compelled to arbitration. If this Court is inclined to grant Defendant’s Petition, then the PAGA claim cannot be compelled to arbitration and must remain in this Court. Vl. CONCLUSION Based on the foregoing, Defendant’s Motion to Compel Arbitration should be denied. If, however, the Court is inclined to grant the Motion, then Plaintiff’s class claims cannot be dismissed and 13585736v.1 6 PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT'S PETITION TO COMPEL ARBITRATION ~~ N 0 0 O N in 10 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff’s PAGA claims cannot be compelled to arbitration. DATED: May 23, 2018 HYUN LEGAL, APC By: S. Hyun Denn Attorneys for PLAINTIK] 13585736v.1 7 PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT'S PETITION TO COMPEL ARBITRATION F and the CLASS PROOF OF SERVICE I am employed in the County of Los Angeles; [ am over the age of 18 years and not a party to the within action; my business address is 515 S. Figueroa St., Suite 1250, Los Angeles, California 90071. On May 23, 2018, I served the foregoing document(s) described as: PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO PETITION TO COMPEL, on the interested parties in this action by placing a true copy thereof, in a sealed envelope(s) addressed as follows: David N. Shaver Dennis S. Hyun Law Offices of Bunt & Shaver, LLP HYUN LEGAL, APC 801 N. Parkcenter Dr., Suite 103 5515 S. Figueroa St., Suite 1250 Santa Ana, CA 92705 Los Angeles, California 90071 X BY MAIL X As follows: 1am “readily familiar” with the practice of Choi & Associates, Attorneys at Law for collection and processing of correspondence for mailing with the United States Postal Service and that correspondence placed in the outgoing mail tray in my office for collection would be deposited in the United States Mail that same day in the ordinary course of business. BY PERSONAL SERVICE I caused such envelope to be delivered by hand to the offices of the addressee. BY FACSIMILE TRANSMISSION ___X___ (State) (Federal) I caused a true and complete copy of the document(s) described above to be transmitted by facsimile transmission to the telephone number(s) of the person(s) set forth above. I declare under penalty of perjury that the foregoing is true and correct. I declare under penalty of perjury that the foregoing is true and correct, and that I am employed in the office of a member of the bar of this Court at whose direction the service was made. Executed on May 23, 2018, at Los Angeles, California. PROOF OF SERVICE