Cook v. Univ. of S. Cal.

321 Cal.Rptr.3d 336

Pamela COOK, Plaintiff and Respondent,

v.UNIVERSITY OF SOUTHERN CALIFORNIA et al., Defendants and Appellants.

B330640

Court of Appeal, Second District, Division 4.

Filed May 24, 2024

APPEAL from a judgment of the Superior Court of Los Angeles County, Anne Richardson, Judge. Affirmed. (Los Angeles County Super. Ct. No. 22STCV21534)

CDF Labor Law, Wanja S. Guy and John R. Giovannone, Los Angeles, for Defendants and Appellants.

Cummings & Franck, Scott O. Cummings and Lee Franck, Gardena, for Plaintiff and Respondent.

ZUKIN, J.

INTRODUCTION

An arbitration agreement of infinite duration requires an employee to arbitrate all claims against the employer, its agents, affiliates, and employees irrespective of whether they arise from the employment relationship. We hold such an arbitration agreement is unconscionable. Plaintiff filed a lawsuit against her employer and two coworkers alleging discrimination and harassment in the course of her employment. The defendants collectively moved to compel arbitration under an arbitration agreement signed by the plaintiff as a condition of employment. The trial court denied the motion to compel arbitration, finding the arbitration agreement was per- meated by unconscionability, which could not be severed from the agreement. The defendants appeal the trial court’s denial of their motion to compel arbitration. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. Cook’s Complaint

On July 1, 2022, plaintiff and respondent Pamela Cook (Cook) filed a complaint against defendants and appellants the University of Southern California (USC), Fatima Manuao, and "Lorena (Last Name Unknown)" (collectively USC). Cook’s complaint asserts 18 causes of action, all of which arise from her employment with USC. Cook alleges she was subjected to disparate treatment by USC based on her race. Cook also alleges USC failed to accommodate a variety of health-related time-off requests. She also alleges she was subjected to retaliatory harassment when she reported the discrimination and failure to accommodate her disabilities. She asserts she was "actually and/or constructively" terminated from her employment on August 24, 2021.

B. Motion to Compel Arbitration

On October 24, 2022, USC filed a motion to compel all of Cook’s claims to arbitration. USC claimed Cook’s employment "offer was contingent upon Plaintiff executing an employment agreement and arbitration agreement."

The arbitration agreement attached to the motion states in pertinent part: "Therefore, the University and the faculty or staff member named below (‘Employee’) agree to the resolution by arbitration of all claims, whether or not arising out of Employee’s University employment, remuneration or termination, that Employee may have against the University or any of its related entities, including but not limited to faculty practice plans, or its or their officers, trustees, administrators, employees or agents, in their capacity as such or otherwise; and all claims that the University may have against Employee…. The claims covered by this Agreement include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); claims for personal, physical, or emotional injury, or for any tort; claims for discrimination or harassment (including, but not limited to, race, sex, religion, national origin, age, marital status, sexual orientation, gender identity or expression, military and veteran status, or medical condition or disability); claims for ‘whistleblowing’ or retaliation; and claims for violation of any federal, state or other governmental law, statute, regulation, or ordinance." The arbitration agreement also provides that it "supersedes any prior or contemporaneous agreement on the subject, shall survive the termination of Employee’s employment, and may only be revoked or modified in a written document that expressly refers to the ‘Agreement to Arbitrate Claims’ and is signed by the President of the University." USC stated Cook electronically signed this stand-alone arbitration agreement on or about May 7, 2021.

USC argued the claims in Cook’s complaint all fell within the scope of the agreement. In asserting the agreement was not substantively unconscionable, USC claimed the agreement was not "one-sided in favor of the employer without sufficient justification." It also argued the agreement was mutual and afforded Cook the same rights and remedies that would be available to her in court proceedings.

In opposition, Cook argued USC did not establish she electronically signed the arbitration agreement. Cook also asserted that many of her claims were not subject to arbitration. Cook argued the arbitration agreement was procedurally unconscionable because it was a contract of adhesion that was made a condition of her employment. She also alleged the agreement was substantively unconscionable because it contained an infinite scope that covered her claims regardless of whether they related to her employment relationship with USC and survived the termination of that relationship for an indefinite period.

In its reply, USC submitted a supplemental declaration to support the claim that Cook electronically signed the agreement. It also argued none of Cook’s claims were exempt from arbitration. USC contested Cook’s claims of procedural and substantive unconscionability. However, USC did not address the infinite duration of the agreement.

On April 18, 2023, the trial court issued a comprehensive and well-reasoned order denying the motion to compel arbitration. The court determined USC had demonstrated the existence of an agreement to arbitrate that was electronically signed by Cook on May 7, 2021. The trial court rejected Cook’s claims that certain of her causes of action were not subject to arbitration as a matter of law and found "the arbitration agreement encompasses all eighteen claims advanced by Plaintiff Cook."

Turning to Cook’s argument of unconscionability, the trial court determined the arbitration agreement "exhibits some procedural unconscionability" due to the "adhesive and non-negotiable nature of the arbitration agreement as a condition of employment with USC." The court also found the agreement was substantively unconscionable because it was infinite in scope and duration. The agreement specifically provides that it would survive the termination of Cook’s employment and could only be revoked in a writing signed by Cook and the president of USC. It also applied to "all" of Cook’s claims regardless of whether they arose from her employment. The trial court noted that "for the rest of her life, if Plaintiff were to suffer an injury related to USC or its related entities, Plaintiff could be ordered to arbitrate such claims." The court found this would include claims completely unrelated to her employment, stating that if Cook was "the victim of a botched surgery in a USC hospital in 15 years, her claims could be subject to the arbitration agreement."

The trial court also held the agreement lacked mutuality because it required Cook to arbitrate her claims against USC and all of USC’s "related entities" including officers, trustees, administrators, employees, and agents. However, in contrast, the agreement only required USC to arbitrate its claims against Cook but did not require USC’s "related entities" to arbitrate their claims against Cook. The trial court concluded "This lack of mutuality renders the arbitration agreement substantively unconscionable because it provides the employer more rights and greater remedies than would otherwise be available and concomitantly deprives Plaintiff of significant rights and remedies that she would normally enjoy, for example, in a judicial forum. … [¶] Overall, the Court thus finds that the wide scope of the arbitration agreement (all claims between the parties), its duration (surviving termination of employment and applicable unless rescinded by both parties), and its lack of mutuality (claims that can be petitioned for arbitration) support a finding that substantial substantive unconscionability exists in the terms of the arbitration agreement."

The trial court determined the unconscionable terms could not be severed from the agreement. The court found the agreement was "permeated by unconscionability and cannot, in the interests of justice, be severed." The court noted that to cure the unconscionability by making the agreement mutual to both parties, it would need to rewrite the scope of the agreement, redefine the duration, and enlarge the scope of claims that Cook could compel to arbitration. The court found these revisions "would substantially alter the nature and character of the agreement entered by the parties." The trial court also held that severing the unconscionable provisions would favor USC by giving it "the possible windfall of drafting an unconscionable contract but nevertheless still receiving the benefit of arbitration through severance."

The court denied the motion to compel, finding Cook successfully raised the defense of unconscionability.

C. Appeal

USC filed a timely appeal of the court’s denial of its motion to compel arbitration. On appeal, it argues the trial court erred in finding the arbitration agreement unconscionable and unenforceable.

DISCUSSION

A. Legal Standards

[1, 2] A written agreement to submit a controversy to arbitration is valid and enforceable, absent a reason under state law, such as unconscionability, that would render any contract revocable. (Code Civ. Proc., § 1281; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 (Armendariz); Sandoval-Ryan v. Oleander Holdings LLC (2020) 58 Cal. App.5th 217, 222, 272 Cal.Rptr.3d 314.) "The party seeking to compel arbitration bears the burden of proving the existence of an arbitration agreement." (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 890, 221 Cal.Rptr.3d...