Folck v. Lennar Corporation et al

RESPONSE in Opposition re MOTION to Compel Arbitration and Dismiss the Action or Alternatively, Request for Jury Trial Regarding Existence of an Arbitration Agreement

S.D. Cal.November 1, 2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS EDLESON & REZZO Louis “Chip” Edleson (Bar No. 097195) ce@edrezlaw.com Joann F. Rezzo (Bar No. 185675) jr@edrezlaw.com 402 West Broadway, Suite 2700 San Diego, CA 92101-8567 Tel: 619-230-0836 Fax: 619-230-1839 Attorneys for Plaintiff UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA JEFFERY L. FOLCK, Plaintiff, v. LENNAR CORPORATION, et al., Defendants. CASE NO. 17-CV-00992-L-NLS OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION; ALTERNATIVELY, REQUEST FOR JURY TRIAL REGARDING EXISTENCE OF AN ARBITRATION AGREEMENT Date: Nov. 27, 2017 Time: None set Judge: Hon M. James Lorenz Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.259 Page 1 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS i TABLE OF CONTENTS INTRODUCTION…………………………………………………………..……………1 STATEMENT OF FACTS…………………………………………………………..…...2 1. The hiring documents………………………………………………………......…..2 2. The personnel file………………………………………………………………......2 3. The electronic acknowledgement first produced during litigation………………....3 4. Mr. Folck unequivocally denies any jury waiver or arbitration agreement…...........4 5. Lennar’s witnesses cannot authenticate any arbitration agreement…………..……4 LEGAL STANDARD…………………………………………………………………….8 DISCUSSION…………………………………………………………………………….9 I. DEFENDANTS WAIVED ANY RIGHT TO COMPEL ARBITRATION BY FAILING TO COMPLY WITH CALIFORNIA LABOR LAW REQUIRING THAT THEY MAINTAIN AND PRODUCE A COPY OF ANY SIGNED AGREEMENTS OR OTHER PERSONNEL DOCUMENTS UPON REQUEST………………………………………………………………………...9 II. DEFENDANTS FAIL TO CARRY THEIR BURDEN OF PROVING THAT THE PARTIES ENTERED INTO A VALID ARBITRATION AGREEMENT..10 A. Defendants fail to properly authenticate their arbitration document………....11 B. Defendants fail to establish mutual assent, ignoring their written agreement which expressly confirms that the parties are not waiving their right to a jury trial, and relying on a contradictory electronic acknowledgement with a mistitled arbitration agreement………………………………………..13 C. Alternatively, the issue of contract formation requires a jury trial…………...15 III. DEFENDANTS’ ARBITRATION POLICY IS UNENFORCEABLE BECAUSE PROCEDURALLY AND SUBSTANTIVELY UNCONSCIONABLE...........................................................................................16 A. Procedural Unconscionability………………………………………………..16 1. Oppression…………………………………………………………….16 2. Surprise………………………………………………………………..17 B. Substantive Unconscionability……………………………………………….17 1. Confidentiality………………………………………………………...18 2. Attorneys’ fees and arbitration costs………………………………….19 3. Discovery limitations………………………………………………....20 4. Missing rules………………………………………………………….21 5. Unilateral modification…………………………………………….....22 6. No class actions…………………………………………..……….…..23 7. The arbitration policy as a whole……………………………..….…...23 CONCLUSION……………………………………………………………..……..….…24 Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.260 Page 2 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS ii TABLE OF AUTHORITIES CASES Aral v. Earthlink, Inc., 134 Cal.App.4th 544 (2005)……………………………………..17 Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (2000)………………………………………………….16, 18, 19, 20 AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011)………………………….8, 15 AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643 (1986)……..13 Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (2016)…………………………...16, 20, 22 Bruni v. Didion, 160 Cal. App. 4th 1272 (2008)………………………………….……..17 Bustamante v. Intuit, Inc., 141 Cal.App.4th 199 (2006)………………………….……..13 Carbajal v. CWPSC, Inc., 245 Cal.App.4th 227 (2016)………………………………...24 Casas v. Carmax Auto Superstores Cal. LLC, 224 Cal.App.4th 1233 (2014)..………....22 Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126 (9th Cir. 2000)……......8 Circuit City Stores, Inc. v. Najd, 294 F.3d 1104 (9th Cir. 2002)…………………….…15 Cornejo v. Spenger's Fresh Fish Grotto, 2010 WL 1980236, (N.D. Cal. May 17, 2010)……………………………………………………….15 Cox v. Ocean View Hotel Corp., 533 F.3d 1114 (9th Cir. 2008)…………………….…10 Craft v. Campbell Soup Co., 117 F.3d 1083 (9th Cir. 1999)…………………………...10 Davis v. O'Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007)……………………….....16 DeHorney v. Bank of America Nat. Trust and Sav., 879 F.2d 459 (9th Cir.1989)……...14 Espejo v. S. Cal. Permanente Med. Group, 246 Cal. App. 4th 1047 (2016)……......11, 12 F.T.C. v. Publ'g Clearing House, Inc., 104 F.3d 1168 (9th Cir. 1997)…………..……..11 Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 788 (9th Cir. 2002)………..…..23 Fitz v. NCR Corp., 118 Cal. App. 4th 702 (2004)……………………………….….17, 24 Flores v. Transamerica HomeFirst, Inc., 93 Cal. App. 4th 846 (2001)…………….…..18 Gentry v. Superior Court, 42 Cal.4th 443…………………………………………....…15 Gorlach v. Sports Club Co., 209 Cal.App.4th 1497 (2012)…………………………....14 Graham v. Scissor-Tail, Inc., 28 Cal. 3d 807 (1981)…………………………….……..17 Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.261 Page 3 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS iii Haggard v. Kimberly Quality Care, Inc., 39 Cal.App.4th 508 (1995)…………..……..14 Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248 (10th Cir. 2012)……………..…….…10 Ingle v. Circuit City Stores, Inc., 328 F.3d at 1165 (2003)…………………….…...18, 22 Jacovides v. Future Foam, Inc., 2016 U.S. Dist. LEXIS 57530 (N.D. Cal. Apr. 25, 2016)…………………………………………………....….21 Kinney v. United Healthcare Services, 70 Cal. App. 4th 1322 (1999)…………..…16, 17 Martin v. Yasuda, 829 F.3d 1118 (9th Cir. 2016)………………………………..……....9 Martinez v. Master Protection Corp., 118 Cal.App.4th 107 (2004)……………………21 Maya Baxter v. Genworth North America Corp., 2017 WL 4837702 (Cal. Ct. App., Oct. 2, 2017)……………………………………………..…..….21 Mohamed v. Uber Techs., Inc., 109 F.Supp.3d 1185 (N.D. Cal. 2015)…………..…….22 Morris v. Ersnt & Young, LLP, 834 F.3d 975 (9th Cir. 2016)……………………….…23 Moule v. United Parcel Serv. Co., 2016 WL 3648961 (E.D. Cal. July 7, 2016)…………………………………………………………19 Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014)……………………….13 Patel v. Jack in the Box, Inc., 2017 WL 541532 (S.D. Cal.) (January 27, 2017)………11 Peleg v. Neiman Marcus Group, Inc., 204 Cal. App. 4th 1425 (2012)………………...22 Quevedo v. Macy's, Inc., 798 F. Supp. 2d 1122 (C.D. Cal. 2011)……………………..15 Ramirez-Baker v. Beazer Homes, 636 F. Supp. 2d 1008 (E.D. Cal. 2008)…………....22 Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010)…………………………………...8 Ridgeway v. Nabors Completion & Prod. Servs. Co., 139 F.Supp.3d 1084 (C.D. Cal. 2015)………………………………………………………………..22 Rockridge Trust v. Wells Fargo, N.A., 985 F.Supp.2d 1110 (N.D. Cal. 2013)…….…..13 Ross v. P.J. Pizza San Diego, LLC., 2017 WL 1957584 (S.D. Cal.) (May 11, 2017)…23 Ruiz v. Moss Bros. Auto Group, Inc., 232 Cal. App. 4th 836 (2014)……….….10, 11, 13 Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899 (2015)……………………….17 Scott v. Harris, 550 U.S. 372 (2007)………………………………………………..….11 Serafin v. Balco Properties Ltd., LLC, 235 Cal. App. 4th 165 (2015)………………….13 Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.262 Page 4 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS iv Serpa v. California Surety Investigations, Inc. 215 Cal.App.4th 695 (2013)………...20 Soltani v. W. & S. Life Ins. Co., 258 F.3d 1038 (9th Cir. 2001)……………………...17 Stirlen v. Supercuts, Inc., 51 Cal.App.4th 1519 (1997)…………………………..16, 17 Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010)………………..…8 Szetela v. Discover Bank, 97 Cal. App. 4th 1094 (Ct. App. 2002)………………..….18 Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003)………………………………………...18 Trivedi v. Curexo Tech. Corp, 189 Cal.App.4th 387 (2010)………………………….20 Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (1989)…………………………………………………………….8 Wherry v. Award, Inc., 192 Cal.App.4th 1242 (2011)………………………………..20 Yahoo! Inc. v. Iversen, 836 F.Supp.2d 1007 (N.D. Cal. 2011)………………………...8 Zullo v. Sup.Ct. (Inland Valley Pub. Co.), 197 Cal.App.4th 477 (2011)……………..22 STATUTES 9 U.S.C. § 2………………………………………………………………………….…8 9 U.S.C. § 4……………………………………………………………………….11, 15 Cal. Civ. Code § 1550……………………………………………………………...8, 13 Cal. Civ. Code § 1565………………………………………………………………...13 Cal. Civ. Code § 1580………………………………………………………………...13 Cal. Civ. Code § 1633.5…………………………………………………………..….11 Cal. Civ. Code § 1670.5(a)…………………………………………………………...24 Cal. Code Civ. Proc. § 1281………………………………………………………..….8 Cal. Gov. Code § 12965(b)…………………………………………………………...20 California Family Rights Act (“CFRA”)………………………………………….19-20 California Labor Code section 218.5…………………………………………………19 California's Uniform Electronic Transactions Act (“UETA”)……………………..…11 Fair Employment and Housing Act (“FEHA”)……………………………………….19 Federal Arbitration Act (“FAA”)……………………………………………..........8, 15 Fed.R.Evid. 901(a)…………………………………………………………………….11 Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.263 Page 5 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS v Fed.R.Evid. 901(b)(4)………………………………………………………………...11 Government Code Section 12940 (a), et seq…………………………………….…...19 Government Code Section 12945.2, et seq…………………………………….…….20 Labor Code § 432…………………………………………………………….……..1, 9 Labor Code § 1198.5………………………………………………………….…….1, 9 Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.264 Page 6 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 1 INTRODUCTION Jeffery Folck and Lennar agreed, in writing, in a document entitled “Certification and Agreement,” that he was not waiving his right to a jury trial in the event of a dispute between them. This occurred prior to his resigning from a good job with another company. During Mr. Folck’s three and a half years of employment, no one with Lennar ever discussed arbitration with him and he never signed any arbitration agreement. After firing Mr. Folck, Lennar failed to produce a copy of any signed or acknowledged arbitration agreement, despite California statutes requiring employers to maintain a copy of all documents signed by an employee and to provide a copy upon request. Then, magically, after getting sued, Lennar pulls a purported arbitration agreement out of its hat. Lennar claims that, despite Mr. Folck not signing an agreement, he clicked on a box in an electronic acknowledgement several years after starting work that contradicted his earlier agreement preserving his jury trial rights. Not only does Mr. Folck unequivocally deny signing or clicking electronically to agree to arbitration, and not only did Lennar fail to provide a copy of a signed or acknowledged arbitration agreement as required by California rules, but Lennar cannot properly authenticate the electronic acknowledgement it relies on because of password sharing and because others had access to the document, as well as because of an unexplained lengthy delay in creation of the purported document. Lennar witnesses admitted to these flaws when questioned in deposition. The Court should deny the motion to compel arbitration. Lennar’s request should be rejected out of hand because of its failure to follow California’s statutory labor rules. Specifically, upon request, Labor Code § 432 requires that employers give an employee a copy of anything he signed, and § 1198.5 requires that employers provide all personnel file records. Failure to do so is a waiver or estoppel. Moreover, Lennar does not carry its burden of proving that Mr. Folck entered into a contract waiving his right to a jury trial. To the contrary, the parties expressly agreed in writing that Mr. Folck was not waiving his right to a jury trial. In addition to these strong and decisive defenses, Lennar’s arbitration policy is unconscionable in several respects and, therefore, unenforceable. Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.265 Page 7 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 2 STATEMENT OF FACTS 1. The hiring documents. Lennar sent Mr. Folck an employment offer letter and compensation documents which he signed on April 11, 2013. (See the Decl. of Jeffery Folck, ¶¶ 2-3.) Lennar then sent an employment application, a drug test consent form, a screening release form, and an employment history form, all which Mr. Folck signed on April 14, 2013. (Folck Decl., ¶4.) After completing this paperwork, Mr. Folck resigned from his existing job and started work with Lennar the following month. (Folck Decl., ¶7.) The job application included a “Certification and Agreement” stating six specific Lennar employment policies and agreements. Mr. Folck signed the form and initialed his acceptance of five of the policies but not the sixth. (Folck Decl., ¶¶ 4-5, and Exhibit C.) The sixth policy stated: “Associate and Lennar both waive the right to any jury trial in any action, proceeding or counterclaim brought by either party against the other.” The Certification specifically stated, however, prior to this proposed agreement waiving a jury trial: “Does not apply to Associates employed in California.” (Folck Decl., ¶ 5.) After starting with Lennar, Mr. Folck received a manual called the “Associate Reference Guide” (“Guide” or “ARG”) consisting of 168 pages. It was left on his desk or handed to him in passing with no discussion. (Folck Decl., ¶ 8.) On May 6, 2013, Mr. Folck signed acknowledgements and notices regarding additional hiring papers, including one entitled “Receipt for Company Issued Items” that covered 19 items such as laptop, business cards, keys, name badge, and the ARG. (Folck Decl., ¶ 8, and Exhibit F.) The acknowledgement said nothing about agreement to any policies and nothing about arbitration. Mr. Folck signed nothing referencing arbitration or any dispute resolution process. (Folck Decl., ¶ 9.) 2. The personnel file. Lennar terminated Mr. Folck’s employment on October 15, 2016. (Folck Decl., ¶ 15.) He then consulted an attorney and wrote Lennar requesting a copy of his personnel file before making a decision to pursue litigation. (Folck Decl., ¶ 15.) On December 5, 2016, Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.266 Page 8 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 3 he e-mailed Nicole Olson in Lennar’s HR department requesting a copy of his personnel file. She sent him his “employment documents” on December 6, 2016. (Folck Decl., ¶ 15, and Exhibit M.) The personnel file documents sent by Lennar contained no signed arbitration agreement, no form of acknowledgement for arbitration, and nothing referencing arbitration. (Folck Decl., ¶ 16, Exhibit M; Rezzo Decl., ¶ 5; Edleson Decl., ¶ 2.) Ms. Olson agrees she sent nothing about arbitration even though personnel files are supposed to include any such agreements or acknowledgements. (Olson Depo., pp. 5:25- 6:8, 8:10-9:6, 10:10-11:24, 12:19-13:2.) Lennar’s HR manager, Dorothy Randle, similarly confirms that Mr. Folck’s personnel file contained nothing related to arbitration. (Randle Depo., p. 23:7-9.) Mr. Folck and his attorneys relied on the absence of an arbitration agreement in deciding to pursue litigation. (Edleson Decl., ¶ 3.) 3. The electronic acknowledgement first produced during litigation. Lennar relies on five exhibits in support of its motion to compel arbitration. These are: (1) Subsection 1.8 from its “Associate Reference Guide,” entitled “Dispute Resolution – Mediation & Arbitration Policy,” consisting of pages 16 to 18 out of Section 1 of the Guide, dated September 2011; (2) the “Receipt for Company Issued Items” signed by Mr. Folck dated May 6, 2013; (3) another 2014 version of Subsection 1.8 from a 183-page “Associate Reference Guide,” also entitled “Dispute Resolution – Mediation & Arbitration Policy,” consisting of pages 17 to 20 out of Section 1 of the Guide, this one dated November 2014; (4) three pages of electronic acknowledgements with dates in 2015 and 2016; and (5) the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (“AAA”). None of these exhibits were contained in the personnel documents Lennar sent to Mr. Folck when he requested his file following his termination, with the exception of the “Receipt for Company Issued Items.” (Folck Decl., ¶¶ 15-19, and Exhibit M.) The acknowledgements do not discuss whether the “Alternative Dispute Resolution Policy (ADR)” still “Does not apply to Associates employed in California” as stated in the “Certification and Agreement” given to Mr. Folck before he was hired. Also, the reference Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.267 Page 9 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 4 in the acknowledgement to the “Alternative Dispute Resolution Policy (ADR)” does not match the title of any policy stated in the “Associate Reference Guide (ARG)” which, instead, contains a policy entitled “Dispute Resolution – Mediation & Arbitration Policy.” 4. Mr. Folck unequivocally denies any jury waiver or arbitration agreement. Mr. Folck denies clicking electronically to agree to any arbitration policy. (Folck Decl., ¶ 14.) He states that he does not believe the acknowledgements relied upon by Lennar are authentic. (Folck Decl., ¶ 17.) Instead, he states that if he had been asked to sign a series of employment-related documents, including a jury waiver, after working for Lennar for almost two years, it would have upset him greatly, it would stand out in his memory, and he would definitely have called people to ask questions and challenge it. Further, he unequivocally states that he would never have agreed to give up his right to a jury trial because an employer had previously mistreated him as to promised compensation, because he mistrusted mediation/arbitration based on prior experiences, and because he felt he was too old to risk his retirement in that way. (Folck Decl., ¶ 12.) He also notes that the acknowledgements have inaccurate, non-sequentially numbered titles going from “1” and “2” then skipping to “9,” with a suspicious date of September 16, 2016, one-month before his termination. (Folck Decl., ¶ 17.) Mr. Folck categorically states that neither before his hiring nor at any time while he worked for Lennar did anyone discuss any company polices or procedures other than the health and ancillary benefits. No one discussed waiver of jury trial or arbitration. (Folck Decl., ¶¶ 10-11.) The topic of arbitration never came up in his presence, even though his job included hiring many employees. (Folck Decl., ¶ 11.) Instead, based on the documents he saw and signed on his first day at work, Mr. Folck always understood and believed that any waiver of jury trial did not apply to California employees. (Folck Decl., ¶ 11.) 5. Lennar’s witnesses cannot authenticate any arbitration agreement. Lennar relies entirely on a declaration from its HR manager, Dorothy Randle, to support its claim of an arbitration agreement. Folck has taken her deposition, as well as the depositions of Ms. Olson from HR and a Lennar spokesperson regarding electronically Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.268 Page 10 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 5 stored information and security, and based on this testimony he has filed objections to Randle’s declaration calling it speculative and lacking foundation. Randle has admitted in her deposition testimony that she made statements in her declaration which are false and lack foundation. (Randle Depo., pp. 7:9-21, 42:2-8, 42:13- 16; 43:17-44:16.) She admits the only arbitration-related document Mr. Folck signed stated that waiver of a right to jury trials does not apply to California employees. (Randle Depo., pp. 23:20-23:25, 24:14-25:14, 26:3-5.) She admits that Lennar’s Exhibit 4 is not authentic (Randle Depo., pp. 40:8-11, 40:18-20, 41:3-17) and the purported “acknowledgment” refers to a document that does not actually exist (Randle Depo., pp. 44:22-46:12). She admits that Lennar’s HR department was supposed to, but failed to get Mr. Folck’s signature agreeing to arbitration when he was first hired. (Randle Depo., pp. 9:2-20, 9:23- 25, 10:17-20, 11:12-15, 23:15-18, 47:3-7.) Her declaration stating that Mr. Folck agreed to arbitration relies on his receipt of the 183-page guide, even though the receipt does not mention the word “arbitration.” (Randle Depo., pp. 18:12-19:17, 21:9-14.) Further, Ms. Randle knows almost nothing about Mr. Folck’s purported agreement to arbitrate. She had no interaction with him at all on that topic or the topic of jury waiver, and knows of no one else at Lennar who did. (Randle Depo., pp. 26:14-25, 27:8-13.) Despite her status as one of Lennar’s most experienced HR professionals she does not know what the company’s conflicting arbitration-related and jury waiver exception documents mean, nor has Lennar ever explained it to any Lennar employee. (Randle Depo., pp. 24:24-25:3, 26:6-16, 27:22-28:15, 29:12-14, 30:3-5, 47:9-13.) More specifically as to the purported electronic acknowledgement, Ms. Randle admits that serious problems existed with their online acknowledgement system, including an approximate one-year period in 2013 when there was no functioning system at all. (Randle Depo., pp. 9:21-22, 10:21-11:15.) In fact, the electronic service provider Lennar used to secure purported employee “acknowledgements” was so unreliable that Lennar terminated the contract for breach of contract. (Randle Depo., pp. 38:2-24.) The system merely means that the employee had the opportunity to review the Guide. (Randle Depo., Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.269 Page 11 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 6 pp. 30:6-13, 30:14-31:11, 31:14-17.) Randle, admits that given deficiencies in the online system, it is entirely possible that someone other than Mr. Folck clicked on the acknowledgements. (Randle Depo., pp. 32:20-22, 33:3-5, 33:15-21, 34:1-6, 34:21-23, 35:15-36:19, 37:6-20, 39:3-11.) Randle’s co-worker in HR, Nicole Olson, similarly testified that when Mr. Folck was “on-boarded,” Lennar’s HR department failed to have him sign any documents pertaining to arbitration (Olson Depo., pp. 18:2-7, 18:12-19:2, 19:13-24, 23:23-24:14) and that the HR staff cannot tell whether Exhibit 4 to Lennar’s motion is authentic or whether it has been altered (Olson Depo., pp. 20:13-21, 22:17-23:11.) Lennar’s spokesperson on electronically stored information could not authenticate the proffered arbitration acknowledgement and confirmed some of the flaws in their system. The spokesperson, Joshua Marlin, was an unemployed day-trader of stocks prior to his hiring by Lennar four years ago. (Marlin Depo., p. 5:11-6:3.) His brother is President of Lennar International. (Marlin Depo., p. 7:8-14.) He received no formal training on how their system of authentication works. (Marlin Depo., pp. 18:25-19:3.) He did not help develop the login system and has no idea who did. (Marlin Depo., p. 19:12- 17.) Lennar did not write the program it uses for electronic acknowledgements, and has never examined the code for the program which it obtained from a third-party. (Marlin Depo., pp. 14:2-10, 15:22-16:6.) Mr. Marlin testified that Lennar’s normal procedure for completion of courses and for acknowledgements was to download documents and store them on a corporate file share. (Marlin Depo., p. 22:8-16.) He is “not aware” of and does “not know” how long after a person completes an acknowledgement Lennar normally downloaded and stored it. (Marlin Depo., pp. 22:17-23:1.) As to Mr. Folck, however, the date on Exhibit 4 at the bottom right of 9/16/16 is the date his acknowledgement file was created and stored on an internal Lennar corporate file share, more than nine months after Lennar now claims he actually clicked on the acknowledgements. (Marlin Depo., pp. 21:24-22:7.) He does not know why Exhibit 4 purporting to show acknowledgements from Mr. Folck was not Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.270 Page 12 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 7 created until September (Marlin Depo., pp. 64:10-22, 116:7-13), or why the document skips from question 2 to question 9 (Marlin Depo., p. 24:2-8), or who actually printed Exhibit 4 (Marlin Depo., p. 29:15-19). Mr. Marlin confirms that the acknowledgements have not been altered since September 16, 2016, but he cannot say what existed previously because no confirming document existed until September 16, 2016. (Marlin Depo., pp. 118:10-119:9.) He also does not know if Mr. Folck or other employees had to physically click something to check the box on an acknowledgement or if it resulted from reading through materials. (Marlin Depo., p. 46:4-18.) In addition, there is evidence that someone requested a new password for Mr. Folck in December of 2015. (Marlin Depo., pp. 66:11-67:15.) The passwords at Lennar expired every 90 days. (Marlin Depo., pp. 70:25-71:6.) And he admits it is commonplace for executives to at Lennar to share their e-mail password information with, and allow access to their email by secretaries and assistants. (Marlin Depo., p. 68:12-20.) Mr. Folck shared his login and password with his assistant. (Marlin Depo., p. 98:11-15.) Dorothy Randle could access the corporate file containing Exhibit 4, as could all system and enterprise administrators. (Marlin Depo., p. 32:1-19.) Administrators have access to every file and every folder in every system. (Marlin Depo., p. 51:18-24.) Mr. Marlin does not know if others in the HR department had direct access or could use Randle’s login information to gain access. (Marlin Depo., p. 33:3-15.) He conceded that “anyone can give anyone a password” and log in as someone else. (Marlin Depo., p. 35:2- 22.) He also admitted their e-mail system has been hacked. (Marlin Depo., p. 44:7-18.) He is sure someone could access and alter Exhibit 4, Folck’s electronic acknowledgement form. (Marlin Depo., pp. 51:22-52:4.) Lennar has methods to detect alterations to documents, and Mr. Marlin tested for it but only for the period subsequent to September 16, 2016, not whether anyone created or accessed Mr. Folck’s acknowledgements previously during the key relevant time frame. (Marlin Depo., pp. 52:18-53:12.) ///// ///// Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.271 Page 13 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 8 LEGAL STANDARD Under the Federal Arbitration Act (“FAA”), the Court need consider only two questions to determine whether to compel arbitration: (1) is there a valid agreement to arbitrate; and, if so (2) does the agreement cover the matter in dispute. (Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).) Plaintiff does not disagree that Lennar’s arbitration policy would cover the matters in dispute if binding. An agreement to arbitrate is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) The Court must apply California law in determining whether a valid arbitration agreement exists because Plaintiff is a resident there and Defendants seek to compel arbitration there. Under California law, the elements of a valid contract are (1) parties capable of contracting; (2) mutual consent; (3) a lawful object; and (4) consideration. (Cal. Civ. Code § 1550.) An arbitration agreement may be “invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” (AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 333 (2011); see also Cal. Code Civ. Proc. § 1281 (explaining an arbitration agreement may only be invalidated upon the same “grounds as exist for the revocation of any contract”).) Although the FAA strongly favors arbitration, the Act “does not confer a right to compel arbitration of any dispute at any time.” (Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 474 (1989).) Arbitration remains “a matter of consent, not coercion.” (Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 681 (2010) (quoting Volt Info. Scis., supra, 489 U.S. at 479; see also Yahoo! Inc. v. Iversen, 836 F.Supp.2d 1007, 1009 (N.D. Cal. 2011) (“Arbitration is a matter of contract, and the FAA places arbitration agreements ‘on an equal footing with other contracts.’”) (quoting Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010)). Accordingly, when deciding whether to enforce arbitration agreements, courts must “give effect to the contractual rights and expectations of the parties.” (Volt Info. Scis., supra, 489 U.S. at 479.) Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.272 Page 14 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 9 DISCUSSION Plaintiff contests arbitration on three grounds: (1) Defendants have waived the right to seek arbitration; (2) Defendants have failed to carry their affirmative burden of proving the parties entered into a valid arbitration agreement; and (3) Defendants’ arbitration policy is unconscionable. I. DEFENDANTS WAIVED ANY RIGHT TO COMPEL ARBITRATION BY FAILING TO COMPLY WITH CALIFORNIA LABOR LAW REQUIRING THAT THEY MAINTAIN AND PRODUCE A COPY OF ANY SIGNED AGREEMENTS OR OTHER PERSONNEL DOCUMENTS UPON REQUEST. It is clearly established law that the doctrine of waiver can defeat a motion to compel arbitration. (Martin v. Yasuda, 829 F.3d 1118, 1125 (9th Cir. 2016).) Here, California’s statutory employment laws required Lennar, upon the request made by Mr. Folck following his termination of employment and prior to his filing of litigation, to provide him with a copy of anything he had signed and with all his personnel records. Labor Code § 432 states in relevant part: “If an employee or applicant signs any instrument relating to the obtaining or holding of employment, he shall be given a copy of the instrument upon request.” Labor Code § 1198.5 states in relevant part that an “employer shall do all of the following: … (c) (3) (A) With regard to former employees, make a former employee's personnel records available for inspection, and, if requested by the employee or his or her representative, provide a copy” and explains: “(j) In enacting this section, it is the intent of the Legislature to establish minimum standards for the inspection and the receipt of a copy of personnel records by employees.” Despite these clear rules, Lennar failed to provide Mr. Folck with any arbitration agreement or information. Instead, in response to a clear and proper request, Lennar responded by sending all personnel records but with absolutely nothing referencing arbitration. (Folck Decl., ¶ 16, Exhibit M; Rezzo Decl., ¶ 5; Edleson Decl., ¶ 2; Olson Depo., pp. 5:25-6:8, 8:10-9:6, 10:10-11:24, 12:19-13:2; Randle Depo., p. 23:7-9.) Mr. Folck and his attorneys relied on this in pursuing litigation. (Edleson Decl., ¶ 3.) Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.273 Page 15 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 10 Lennar cannot now pull an arbitration agreement out of its hat. Defendants’ demand for arbitration must be rejected out of hand because they failed to follow California’s statutory rules. It would be unfair to allow an employer to mislead employees by giving no documentation regarding arbitration when asked for personnel records, then turn around to rely on a withheld arbitration agreement. In many instances, a terminated employee must decide whether to accept a severance proposal and waive legal rights. In many other instances employees must seek legal advice and decide whether to pursue litigation. A waiver of jury trial with a requirement of arbitration significantly impacts the value and cost of a potential employment lawsuit. (See the Decl. of Louis “Chip” Edleson.) Also, failure by an employer to give fair notice of an arbitration agreement results in unnecessary filing fees and many months of delay for resolution of a motion to compel arbitration. In sum, Lennar failed to follow the rules when Mr. Folck asked for a copy of his personnel file, consequently Lennar cannot now rely on a purported arbitration agreement it failed to produce. II. DEFENDANTS FAIL TO CARRY THEIR BURDEN OF PROVING THAT THE PARTIES ENTERED INTO A VALID ARBITRATION AGREEMENT. A motion to compel arbitration mirrors a motion for summary judgment. (Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (“denial of a motion to compel arbitration has the same effect as a grant of partial summary judgment”) (citing Craft v. Campbell Soup Co., 117 F.3d 1083 (9th Cir. 1999)); accord Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261 (10th Cir. 2012) (applying summary judgment standard to motion to compel).) The party seeking to enforce an arbitration agreement “bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Group, Inc., 232 Cal. App. 4th 836, 842 (2014) (“Ruiz”); Cox, 533 F.3d at 1119.) The Court will view the evidence in the light most favorable to the opposing party, (Cox, 533 F.3d at 1119), and where there are material questions of fact as to the “making of Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.274 Page 16 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 11 the arbitration agreement ... the court shall proceed summarily to the trial thereof.” (9 U.S.C. § 4.) “When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts” in assessing whether a genuine issue of material fact exists. Scott v. Harris, 550 U.S. 372, 380 (2007).) Furthermore, “[a] conclusory, self-serving affidavit, lacking detailed facts and any supporting evidence, is insufficient to create a genuine issue of material fact.” (F.T.C. v. Publ'g Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997).) A. Defendants fail to properly authenticate their arbitration document. A party seeking to compel arbitration must prove the existence of a valid arbitration agreement by a preponderance of the evidence. (See Patel v. Jack in the Box, Inc., No.: 3:16-cv-02561-H-JLB, 2017 WL 541532 (S.D. Cal.) (January 27, 2017). To do so, Defendants must prove the authenticity of their arbitration documents. (Espejo v. S. Cal. Permanente Med. Group, 246 Cal. App. 4th 1047, 1059 (2016) (“Espejo”).) Federal Rule of Evidence 901(a) instructs: “To satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is.” For example, “[t]he appearance, contents, substance, internal patterns, or other distinctive characteristics of the item, taken together with all the circumstances” may be used for the purpose of authentication. (See Fed.R.Evid. 901(b)(4).) For electronic documents, California's Uniform Electronic Transactions Act (“UETA”) provides that “[w]hether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct.” (Cal. Civ. Code § 1633.5.) In Ruiz, the court recognized that proper authentication of arbitration documents requires more than a declaration where it is “summarily asserted” that the employee signed an agreement. (Ruiz, supra, 232 Cal. App. 4th at 839.) There, the court denied a motion to compel arbitration based on the employer’s lack of authentication, rejecting a conclusory initial declaration as well as a reply declaration that failed to show only the Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.275 Page 17 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 12 plaintiff could have accessed the electronic form and performed the act which constituted the electronic signature, stating: “In the face of Ruiz's failure to recall signing the 2011 agreement, Moss Bros. had the burden of proving by a preponderance of the evidence that the electronic signature was authentic.” (Id. at 846.) Here, Defendants have submitted a declaration from Dorothy Randle, a Manager of Human Resources, stating that she has knowledge of operations and has access to personnel records, then concluding, with no explanation, that Plaintiff acknowledged in 2013 the alternative dispute policy and that in 2015 he submitted an electronic acknowledgement for an updated policy. This declaration is conclusory and self-serving. It conflicts with Plaintiff’s detailed declaration. Moreover, when deposed, Randle admitted she lacked any personal knowledge regarding Plaintiff. Her testimony, as summarized previously, completely undermines her declaration. As to the electronic acknowledgement, Defendants make no attempt to establish technology and procedures “such that only the plaintiff could have accessed the electronic form and performed the act which constituted the electronic signature.” (Espejo v. S. Cal. Permanente Med. Group, 246 Cal. App. 4th 1047, 1060 (2016) (burden met where defendant “detailed security precautions regarding transmission and use of an applicant's unique user name and password, as well as the steps an applicant would have to take to place his or her name on the signature line of the employment agreement....”).) It is very troubling Defendants failed to produce arbitration-related documents upon request prior to litigation. This, in itself, raises questions about authenticity. Other circumstances raise further doubts. The acknowledgement uses a mistitled reference to the arbitration policy contained in the Guide (i.e., Lennar’s only arbitration policy), referencing an “Alternative Dispute Resolution Policy (ADR)” when the Guide contains only a “Dispute Resolution – Mediation & Arbitration Policy.” Also, the date on the acknowledgement record of 9/16/16 raises an unanswered and troubling questions: Why would this get created many months after the supposed event of acknowledgement and just prior to Mr. Folck’s termination? Further, the page numbers and acknowledgement Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.276 Page 18 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 13 numbers clearly are inaccurate and modified; specifically, nine acknowledgements on nine separate pages actually existed for the new Guide, yet someone has altered the page numbers and thereby proven that the electronic acknowledgement can be and has been altered. (Edleson Decl., 5.) Defendants witnesses have no answers to these questions. By filing a conclusory declaration, Defendants fail to meet their initial burden of proof. As in Ruiz, the declarant did not explain how she came to the conclusion that Plaintiff’s signature was on the document. (Ruiz, supra, 232 Cal. App.4th at 843). For these reasons, Defendants have failed to meet their burden of proof. B. Defendants fail to establish mutual assent, ignoring their written agreement which expressly confirms that the parties are not waiving their right to a jury trial, and relying on a contradictory electronic acknowledgement with a mistitled arbitration agreement. Even if Defendants could prove the authenticity of their arbitration documents, they do not prove the “mutual assent” element required for formation of a valid contract. A “party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” (AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986).) “Contract formation requires mutual consent, which cannot exist unless the parties agree on the same thing in the same sense.” (Rockridge Trust v. Wells Fargo, N.A., 985 F.Supp.2d 1110, 1142 (N.D. Cal. 2013) (quoting Bustamante v. Intuit, Inc., 141 Cal.App.4th 199, 208 (2006) (quoting Cal. Civ. Code §§ 1580, 1550, 1565)).) “Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.” (Serafin v. Balco Properties Ltd., LLC, 235 Cal. App. 4th 165, 173 (2015), review denied (June 10, 2015) (citations omitted).) With the Internet and digital software, the Court must examine how the terms of an agreement were presented to a user, and how a user indicated his or her consent to the terms. (Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1176-77 (9th Cir. 2014).) Here, Defendants contend that Plaintiff accepted arbitration “expressly and implicitly.” They say he expressly accepted before starting work in 2013 by signing an acknowledgement for an Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.277 Page 19 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 14 Associate Reference Guide, and then “again by submitting his electronic acknowledgement” years later for a revised Associate Reference Guide. Both Guides contained an arbitration policy. They suggest he implicitly agreed to arbitration by continuing his employment rather than by quitting work. (Motion Ps&As at 8:22-26.) The full facts do not support these contentions. Defendants ignore their pre-hire “Certification and Agreement” signed by Plaintiff which states as to waiver of “the right to any jury trial” that the policy “Does not apply to Associates employed in California” such as Mr. Folck. Moreover, the parties never discussed the subsequent click through electronic acknowledgement or the policies it references or whether the exemption for California employees was meant to no longer apply. The electronic acknowledgement is ambiguous. It references an “Alternative Dispute Resolution Policy (ADR)” but there is no policy with this title; instead, the “Associate Reference Guide (ARG)” contains a policy entitled “Dispute Resolution – Mediation & Arbitration Policy.” And, more importantly, did Mr. Folck mean to agree that he was no longer exempt as a California employee, and would a reasonable California employee think so? These facts establish absence of any express mutual consent. Although Defendants also argue implied consent, their contention is misplaced. First and foremost, the express written agreement stating that jury waiver does not apply to California employees trumps any implied contradictory agreement. “There cannot be a valid express contract and an implied contract, each embracing the same subject, but requiring different results.” (Haggard v. Kimberly Quality Care, Inc., 39 Cal.App.4th 508, 521 (1995); DeHorney v. Bank of America Nat. Trust and Sav., 879 F.2d 459, 466 (9th Cir.1989).) Second, cases finding implied consent involve situations where the employee not only continued working but also failed to exercise an “opt-out” provision available with a proposed arbitration agreement. (Compare: Gorlach v. Sports Club Co., 209 Cal.App.4th 1497, 1509-1510 (2012) (employee’s continued employment after learning of employer’s dispute resolution program requiring binding arbitration of disputes did not create implied- in-fact contract where arbitration agreement not effective until employee signed it and employee never did so), with cases finding implied consent where opt-out provision Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.278 Page 20 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 15 available but not exercised Circuit City Stores, Inc. v. Najd, 294 F.3d 1104, 1106 (9th Cir. 2002); Gentry v. Superior Court, 42 Cal.4th 443, 468, abrogated on other grounds in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1746, (2011); Quevedo v. Macy's, Inc., 798 F. Supp. 2d 1122, 1133 (C.D. Cal. 2011).) C. Alternatively, the issue of contract formation requires a jury trial. As previously discussed, “on a motion to compel arbitration, if the court finds that disputes exist regarding material issues of fact, the court must allow a jury to determine whether a valid contract was created.” (Cornejo v. Spenger's Fresh Fish Grotto, No. C 09- 05564 MHP, 2010 WL 1980236, at *1–7 (N.D. Cal. May 17, 2010) not reported in F.Supp.2d, 109 Fair Empl.Prac.Cas. (BNA) 569.) A party resisting arbitration may demand that a jury determine the validity of the arbitration agreement, as expressly stated in the FAA: When a party brings a motion to compel arbitration under section 4 of the FAA, the court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.... If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue or issues to a jury in the manner provided by the Federal Rules of Civil Procedure, or may specially call a jury for that purpose. If the jury find that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder, the proceeding shall be dismissed. (9 USC § 4) (emphasis added) Given the contested factual record here, if for any reason the Court does not reject Defendants’ motion to compel arbitration, then, at minimum, the issue of contract Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.279 Page 21 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 16 formation raises a triable issue of fact requiring resolution by a jury (i.e., whether the parties mutually agreed to enter into a valid contract). III. DEFENDANTS’ ARBITRATION POLICY IS UNENFORCEABLE BECAUSE PROCEDURALLY AND SUBSTANTIVELY UNCONSCIONABLE. A contract “is unenforceable if it is both procedurally and substantively unconscionable.” (Davis v. O'Melveny & Myers, 485 F.3d 1066, 1072 (9th Cir. 2007).) Procedural unconscionability focuses on “oppression and surprise,” while substantive unconscionability focuses upon “overly harsh or one-sided results.” (Stirlen v. Supercuts, Inc., 51 Cal.App.4th 1519, 1532 (1997).) Unconscionability “refers to an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Baltazar v. Forever 21, Inc., 62 Cal.4th 1237, 1243 (2016).) Both forms of unconscionability must be present for a court to find a contract unenforceable, but it is not necessary that they be present in the same degree. (Davis, 485 F.3d at 1072; Stirlen, at 1532.) Consequently, “[c]ourts apply a sliding scale: ‘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.’” (Ibid. (quoting Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, 99 (2000)).) A. Procedural Unconscionability Procedural unconscionability focuses on the “manner in which the contract was negotiated and the circumstances of the party at the time.” (Kinney v. United Healthcare Servs., Inc., 70 Cal. App. 4th 1322, 1329 (1999).) The Court must consider both oppression and surprise “due to unequal bargaining power.” (Armendariz, 24 Cal. 4th at 114.) 1. Oppression Oppression derives from a lack of “real negotiation and an absence of meaningful choice.” (Bruni v. Didion, 160 Cal. App. 4th 1272, 1288 (2008); Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899, 911 (2015).) The issue “is whether the subject Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.280 Page 22 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 17 arbitration clause is part of a contract of adhesion.” (Stirlen, 51 Cal. App. 4th at 1532; see also Soltani v. W. & S. Life Ins. Co., 258 F.3d 1038, 1042 (9th Cir. 2001).) A contract of adhesion “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.” (Graham v. Scissor-Tail, Inc., 28 Cal. 3d 807, 817 (1981).) An arbitration clause on a “take it or leave it” basis demonstrates “quintessential procedural unconscionability.” (Aral v. Earthlink, Inc., 134 Cal.App.4th 544, 557 (2005).) Accordingly, the Court must examine “the manner in which the contract was negotiated and the circumstances of the parties at that time.” (Kinney v. United Healthcare Services, 70 Cal. App. 4th 1322, 1327 (1999).) Lennar freely admits that its arbitration policy was offered on a “take it or leave it” basis, giving employees no option but to waive their constitutional right to a jury trial or forfeit employment. Accordingly, the “oppression” element is satisfied. These take-it or leave-it circumstances present a “high degree of oppressiveness” supporting a finding of procedural unconscionability. (See Fitz v. NCR Corp., 118 Cal. App. 4th 702, 722 (2004).) 2. Surprise Plaintiff also contends the arbitration agreement was procedurally unconscionable as he was not even aware an arbitration provision existed other than with the express disclaimer that it did not apply to him or other California employees. This, combined with the absence of any clarifying discussions or written communications, shows “surprise.” Because both the “oppression” and “surprise” elements are present, the level of procedural unconscionability is heightened here. (See Stirlen, 51 Cal.App.4th at 1532 (directing the court to consider both “oppression and surprise”).) B. Substantive Unconscionability “Substantive unconscionability addresses the fairness of the term in dispute.” (Szetela v. Discover Bank, 97 Cal. App. 4th 1094, 1100 (Ct. App. 2002).) While “parties are free to contract for asymmetrical remedies and arbitration clauses of varying scope,” substantive unconscionability “limits the extent to which a stronger party may, through a Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.281 Page 23 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 18 contract of adhesion, impose the arbitration forum on the weaker party without accepting the forum for itself.” (Ting v. AT&T, 319 F.3d 1126, 1149 (9th Cir. 2003) (quoting Armendariz, 24 Cal. 4th at 118).) Thus, the focus of the Court's inquiry is whether an agreement is one-sided and will have an overly harsh effect on the party not given an opportunity to negotiate its terms. (Flores v. Transamerica HomeFirst, Inc., 93 Cal. App. 4th 846, 854 (2001).) The Ninth Circuit instructs courts to “look beyond facial neutrality and examine the actual effects of the challenged provision.” (Ting, 319 F.3d at 1149; see, e.g., Ingle v. Circuit City Stores, Inc., 328 F.3d at 1165, 1180 (2003).) Here, Plaintiff contends the agreement is substantively unconscionable because Lennar’s arbitration policy calls for confidentiality; purports to alter the law on attorneys’ fees and costs, places unfair limitations on discovery, references additional rules without providing them, gives the employer the right to unilaterally modify the rules in its sole discretion, and prohibits class actions. Courts have held each of these limitations substantively unconscionable. 1. Confidentiality Lennar’s arbitration policy requires that all claims “must be submitted to confidential binding arbitration” and also states that all “proceedings shall be confidential.” (See Exhibit 3, page 2.) In Ting v. AT&T, the Ninth Circuit examined a similar confidentiality clause that provided: “Any arbitration shall remain confidential.” (Ting, 319 F.3d at 1151, n.16.) The court observed that “confidentiality provisions usually favor companies over individuals,” explaining that a company could “place itself in a far superior legal posture by ensuring that none of its potential opponents have access to precedent while, at the same time, accumulates a wealth of knowledge on how to negotiate the terms of its own unilaterally crafted contract.” (Id. at 1151-52.) In addition, the court observed that “the unavailability of arbitral decisions may prevent potential plaintiffs from obtaining the information needed to build a case of intentional misconduct or unlawful discrimination.” (Id. at 1152.) ///// Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.282 Page 24 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 19 While courts have held that a confidentiality provision is not per se unconscionable so as to invalidate an entire arbitration agreement, such a provision is itself unconscionable, should be severed at minimum, and remains a factor for consideration for refusing enforcement of an agreement as a whole. (See Moule v. United Parcel Serv. Co., No. 1:16- CV-00102-JLT, 2016 WL 3648961, at *5–11 (E.D. Cal. July 7, 2016). 2. Attorneys’ fees and arbitration costs Lennar’s arbitration policy states: “The parties shall equally share the costs of mediation, unless the parties agree otherwise, and each party shall bear its/his/her own attorneys’ fees and costs;” and “The Associate will pay AAA's filing fee for disputes arising under "employer-promulgated plans" under the Arbitration Rules and bear his/her own attorney's fees and costs of preparing the case, unless the arbitrator awards such fees and costs. The arbitrator is empowered to award attorneys’ fees and costs to either party based on applicable law.” (See Exhibit 3, pages 2-3.) These provisions are improper. An arbitration agreement is substantively unconscionable where requiring an employee “to bear any type of expense that [he or she] would not be required to bear...in court.” (Armendariz, supra, 24 Cal. 4th at 110 (emphasis in original).) As to attorneys’ fees, under California Labor Code section 218.5, “[i]n any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney[s'] fees and costs to the prevailing party if any party to the action requests attorney[s'] fees and costs upon the initiation of the action.” Also, the statute prohibits fee awards to employers in most cases, stating that “if the prevailing party in the court action is not an employee, attorney fees and costs shall be awarded pursuant to this section only if the court finds that the employee brought the court action in bad faith.” (See Cal. Labor Code § 218.5 (West 2014) (emphasis added).) On discrimination claims such as Mr. Folck’s allegations of disability and age discrimination, and his claim for medical leave discrimination, California law provides for recovery of attorney fees by employees under the Fair Employment and Housing Act (“FEHA”), Government Code Section 12940 (a), et seq., and the California Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.283 Page 25 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 20 Family Rights Act (“CFRA”), Government Code Section 12945.2, et seq. (See Cal. Gov. Code § 12965(b).) Consequently, Lennar’s provision that limits the employee’s right to fees as the prevailing party is “contrary to public policy and unlawful.” (Armendariz, supra, 24 Cal.4th at 103-104; see Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 709-710 (provision in arbitration agreement requiring parties to bear their own attorney fees regardless of type of action unconscionable and unenforceable with respect to FEHA actions). Similarly, it is substantively unconscionable for an arbitration agreement to permit the arbitrator to award attorney fees to a prevailing employer and against a losing employee in an FEHA case without expressly limiting such awards to cases where the employee’s claims were “frivolous or filed in bad faith.” (See Wherry v. Award, Inc., 192 Cal.App.4th 1242, 1249 (2011); Trivedi v. Curexo Tech. Corp, 189 Cal.App.4th 387, 394-395 (2010) (disapproved on other grounds in Baltazar v. Forever 21, Inc. supra, 62 Cal.4th at 1248).) Here, Lennar’s arbitration policy purports to alter established employment law by requiring him to share added arbitration costs and by altering the rules for awards of attorney fees. Consequently, the policy is substantively unconscionable. 3. Discovery limitations Lennar’s arbitration policy significantly limits discovery compared to state and federal rules, stating: “Associate further understands that, notwithstanding anything to the contrary in the AAA Arbitration Rules, Associate and the Company agree that formal discovery in any arbitration proceeding shall be limited to four (4) depositions per side; fifteen (15) interrogatories per side; and requests for production of documents/things shall be limited to thirty (30) document categories per side. Provided, however, that the arbitrator shall have the power to increase the number of depositions, document requests and interrogatories upon a showing of good cause and substantial need and that the requested discovery is not duplicative or cumulative and cannot be obtained by less- intrusive, less burdensome, and less-expensive means.” (See Exhibit 3, pages 2-3.) Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.284 Page 26 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 21 Courts have held similar limitations on discovery unconscionable, and have further found that a discovery limitation evidenced one-sidedness of an arbitration agreement as a whole. (See Martinez v. Master Protection Corp., 118 Cal.App.4th 107, 118 (2004) (discretionary provision giving arbitrator authority to allow more than one deposition upon proof of “substantial need” held unconscionable); Fitz v. NCR Corp., supra, 118 Cal. App. 4th at 717 (limitation of two depositions held unconscionable despite provision granting arbitrator discretion to allow additional discovery upon finding of “a compelling need” because the burden of proving need for greater discovery was an “inadequate safety valve”); Maya Baxter v. Genworth North America Corp., 2017 WL 4837702 at 11-15 (Cal. Ct. App., Oct. 2, 2017) (limitation of two depositions held unconscionable despite provision granting arbitrator discretion to allow additional discovery upon finding of “good and sufficient cause”); compare Jacovides v. Future Foam, Inc., 2016 U.S. Dist. LEXIS 57530 at *31 (N.D. Cal. Apr. 25, 2016) (finding limitation of one deposition not substantively unconscionable where arbitrator had discretion to allow more discovery “without the limitation of a high standard such as … “substantial need”).) Here, the Lennar policy limits discovery absent a showing of “substantial need.” The provision is substantively unfair because employers control the documents and most all of the witnesses to an employment dispute. 4. Missing rules Lennar’s arbitration policy states: Arbitrations under this policy will be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and resolved by a neutral arbitrator in a binding arbitration administered by the American Arbitration Association ("AAA") under the arbitration-related portion of the AAA's Employment Arbitration Rules and Mediation Procedures (the "Arbitration Rules"), in effect on November 1, 2009, including indigency determination procedures. The Arbitration Rules are available at www.adr.org. In the case of a conflict between the AAA Rules and this policy, this policy shall control. (Exhibit 3, page 2.) Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.285 Page 27 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 22 Lennar’s arbitration policy has extensive “rules” but then also refers the employee to AAA’s website. This adds to the unconscionability of the agreement where the employee is forced to go to another source to learn the full ramifications of the arbitration agreement.” (See Baltazar, supra, 62 Cal.4th at 1246, 1248 (courts will more closely scrutinize substantive unconscionability of terms “artfully hidden” by incorporating them by reference); Zullo v. Sup.Ct. (Inland Valley Pub. Co.), 197 Cal.App.4th 477, 485-486 (2011) (oppressive to require employee to make independent inquiry to find rules in order to fully understand what employee was about to sign.) 5. Unilateral modification Lennar’s policy concludes by stating: “This Mediation and Arbitration Policy is subject to modification by the Company in its sole discretion. Any modifications shall be effective after thirty (30) days’ notice to Associates.” (See Exhibit 3, page 4.) When, as here, an arbitration agreement permits a company to make unilateral changes to the rules, even with notice, courts have held the provision substantively unconscionable. (See, e.g., Ingle, supra, 328 F.3d at 1179; Ramirez-Baker v. Beazer Homes, 636 F. Supp. 2d 1008, 1021-22 (E.D. Cal. 2008); Peleg v. Neiman Marcus Group, Inc., 204 Cal. App. 4th 1425, 1447 (2012) (applying Texas law). Some courts have avoided this conclusion by relying on the implied covenant of good faith and fair dealing to impose an implicit limitation on modification. (Casas v. Carmax Auto Superstores Cal. LLC, 224 Cal.App.4th 1233, 1237 (2014). Nevertheless, some federal district courts have continued to follow Ingle's holding that unilateral modification provisions are unconscionable. (See, e.g., Mohamed v. Uber Techs., Inc., 109 F.Supp.3d 1185, 1229 (N.D. Cal. 2015), rev'd in part on other grounds, 2016 WL 4651409, (9th Cir. 2016); Ridgeway v. Nabors Completion & Prod. Servs. Co., 139 F.Supp.3d 1084, 1092 (C.D. Cal. 2015).) As with other challenged terms, Lennar’s unilateral modification provision in its arbitration agreement is of questionable validity and, in any event, raises doubt about the over-all fairness and one-sidedness of the arbitration agreement as a whole, especially when combined cumulatively with other dubious terms. Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.286 Page 28 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 23 6. No class actions Lennar’s arbitration policy stresses that it permits no class or multi-party claims: Associate understands that, notwithstanding anything to the contrary in the AAA Arbitration Rules, and in consideration for the relaxed standards of evidence and speed of arbitration proceedings, Associate and the Company agree to arbitrate any claims individually and further agree there shall be no class actions, collective actions, multi-plaintiff arbitrations, or class arbitrations of any claims within the scope of this Arbitration Policy. The arbitrator shall not have power to treat any claim as a class, collective, multi-plaintiff, or consolidated claim. This means that arbitration may only proceed on an individual basis. (Exhibit 3, page 3.) Provisions in arbitration agreements purporting to waive class actions are invalid. (See Morris v. Ersnt & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted, 85 U.S.L.W. 3341 (U.S. Jan. 13, 2017) (No. 16–300); see also Ross v. P.J. Pizza San Diego, LLC., No.: 3:16-cv-02330-L-JMA, 2017 WL 1957584 (S.D. Cal.) (May 11, 2017). Here, the current action involves no class or multi-party claims. This invalid provision shows, however, the one-sided nature of Lennar’s arbitration policy. 7. The arbitration policy as a whole Courts often look to whether offending arbitration provisions “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; see also Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 787-88 (9th Cir. 2002) For example, the Ninth Circuit found an arbitration agreement was “permeated by unconscionable clauses” where there was a “lack of mutuality regarding the type of claims that must be arbitrated, the fee provision, and the discovery provision.” (Ferguson, 298 F.3d at 788.) Here, the provisions of Lennar’s arbitration policy together show a clear attempt by the employer to gain advantages rather than to provide an alternative forum. The Court should refuse to enforce it. California law provides: “If 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 Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.287 Page 29 of 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Opposition to Defendants’ Motion to Compel Arbitration 17-CV-00992-L-NLS 24 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 result.” (Cal. Civ. Code § 1670.5(a).) As in Fitz v. NCR Corp., supra, the employee here had no opportunity to negotiate the agreement and, according to the employer, would have lost his job outright had he refused to agree to arbitration, notwithstanding that he had already left a good position with another employer and worked for years with Lennar. This, combined with multiple unfair terms, makes the agreement as a whole unconscionable and unenforceable. (See Fitz, supra, 118 Cal.App.4th at 722; Carbajal v. CWPSC, Inc., 245 Cal.App.4th 227, 253-254 (2016) (severance not required if unconscionability permeates agreement).) CONCLUSION The Court should deny the motion to compel arbitration because Lennar cannot fail to follow statutory rules by withholding production of an arbitration agreement and then springing it on an employee later, because the parties expressly agreed in writing in pre- employment papers that the employee was not waiving the right to a jury trial and Lennar fails to authenticate any later subsequent contradictory modifying agreement, and finally because the arbitration policy is unconscionable. In the alternative, if for any reason the Court does not reject Defendants’ motion to compel arbitration, then, given the contested factual record here, the issue of contract formation raises a triable issue of fact requiring resolution by a jury, and Plaintiff has requested trial by jury of this arbitration issue. DATED: November 1, 2017 EDLESON & REZZO By: /s/ Louis “Chip” Edleson Louis “Chip” Edleson Joann F. Rezzo Attorneys for Plaintiff Case 3:17-cv-00992-L-NLS Document 23 Filed 11/01/17 PageID.288 Page 30 of 30