Najarro v. Superior Court

70 Cal.App.5th 871

285 Cal.Rptr.3d 700

Yeni NAJARRO et al., Petitioners,

v.The SUPERIOR COURT OF SAN BERNARDINO COUNTY, Respondent;

Horizon Personnel Services, Inc., et al., Real Parties in Interest.

E076328

Court of Appeal, Fourth District, Division 2, California.

Filed September 23, 2021

As Modified October 22, 2021

Milon Pluas, Joshua Milon, Pasadena, Angel D. Pluas ; Hannemann Law Firm and Brian G. Hannemann ; Law Offices of Marc D. Mabile and Marc D. Mabile, San Diego, for Petitioners.

No appearance for Respondent.

Gordon Rees Scully Mansukhani, Roger M. Mansukhani, Los Angeles, Carrie A. Stringham and Andrew S. Wellman, San Diego, for Real Parties in Interest Horizon Personnel Services, Inc., and Stay Safe Staffing, Inc.

Epstein Becker & Green, Richard J. Frey, David M. Prager and Devin S. Lindsay, Los Angeles, for Real Party in Interest J & J Snack Foods Corp. of California.

OPINION

RAPHAEL, J.

In this employment dispute, the trial court granted motions to compel arbitration for eight employees, each of whom signed one of two versions of arbitration agreements. The ruling was based primarily on a finding that clear and unmistakable delegation clauses foreclosed the court from ruling on either agreement's validity. After the employees filed a writ petition in this court, we issued an order to show cause.

Given the differences between the two arbitration agreements as well as the factual circumstances each employee describes, we grant the petition in part, deny in part, and hold as follows. The first version does not clearly and unmistakably delegate questions of arbitrability to the arbitrator, so we grant the writ petition as to the employees who signed that version. As to two of these employees, the trial court must decide whether this first version is unconscionable, guided by our discussion below. As to the other two employees who signed this version, we find that the arbitration agreement is unenforceable for the separate reason of fraud in the execution.

Fraud in the execution also voids the agreement for two of the employees who signed the other, second version of the arbitration agreement. Because the second version has a clear and unmistakable delegation clause that petitioners have not specifically challenged, however, we deny the petition as to the remaining two employees who signed the second version.

I. FACTUAL AND PROCEDURAL HISTORY

In August 2019, petitioners filed suit against real parties in interest Horizon Personnel Services, Inc. (Horizon), Stay Safe Staffing, Inc. (Stay Safe), J & J Snack Foods Corp. of California (J & J), Raul Perez, and Crisanto Vargas, among other defendants, alleging 18 employment-related causes of action.¹

In January 2020, Horizon, Stay Safe, Perez, and Vargas moved to compel petitioners' cases to arbitration. J & J filed notices of joinders to the motions. The motions were based on two versions of arbitration agreements each of the petitioners had signed. The first version, which we will refer to as Version One, was signed by Najarro, Serrano, Mendivar, and Munoz.

The other version, which we will refer to as Version Two, was signed by Urias, Velasco, Sanchez, and Rios. Each petitioner signed either Version One or Version Two when they were hired.² Seven of the eight petitioners signed Spanish versions of Version One or Version Two; Urias signed an English version of Version Two.³

Version One contains the following provisions:

"Binding Arbitration. [¶] ... [¶] This [a]greement is governed by and enforceable under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et. seq. [¶] ... [¶]

"Arbitrator's Authority.... Except as expressly provided for above with respect to group, collective, or representative actions, the arbitrator shall have the exclusive power to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this [a]greement, including but not limited to the assumption that any section of this [a]greement is unenforceable, null or void. [¶] ... [¶]

"Severability. Except as expressly provided above in relation to class, group, or representative actions, if the arbitrator or any judge of competent jurisdiction determines that any provision of the JAMS Rules or this [a]greement is illegal, invalid, or unenforceable, such provisions shall be severed or modified so that the remainder of the [a]greement shall apply to the fullest extent permitted by law." (Bolding and italics omitted.)

Version Two contains the following provisions:

"Arbitrator's Authority. Except as expressly provided for above with respect to group, collective, or representative actions, the arbitrator shall have the exclusive power to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this [a]greement, including the assumption that this [a]greement is unenforceable. [¶] ... [¶]

"Severability. In the event that any provision of the [applicable arbitration rules or standards] or this [a]greement is held to be unenforceable, such provision shall be eliminated or modified without affecting the enforceability of the remaining provisions in the [a]greement. [¶] ... [¶]

"Applicable Legislation. The interpretation and execution of this [a]greement shall be governed by the Federal Arbitration Act." (Bolding omitted.)

In their oppositions, petitioners contended that real parties in interest used coercive tactics to get petitioners to sign the arbitration agreements, including by physically covering the words of the agreements with their hands, stating that the agreements were conditions of employment, pressuring petitioners to sign quickly, refusing to allow petitioners to remove the documents from the work facility, and misrepresenting that the documents related to health and insurance.

The trial court granted the motions. It determined that the agreements' enforceability must be determined by the arbitrator under the delegation clause and found, in the alternative, that the agreements were not substantively unconscionable. This writ proceeding followed.

II. DISCUSSION

The differences in terms between Version One and Version Two—as well as the factual circumstances alleged by each employee—means that our analysis for each takes different paths, but we summarize our discussion below as follows.

Petitioners contend that both versions are unenforceable, unconscionable contracts and that the court is empowered to rule as such. Real parties in interest, on the other hand, argue that both contracts specify that it is the arbitrator alone who is empowered to determine whether the contracts are enforceable. In other words, real parties in interest argue that there is a valid delegation clause in each of the agreements. But even if the court could rule on either or both agreements' enforceability, real parties in interest contend that the agreements are enforceable.

Version One does not contain a valid delegation clause because its terms do not clearly and unmistakably provide that only the arbitrator may decide enforceability. The court is therefore empowered to determine whether the agreements are enforceable. Here, the trial court held that neither of the agreements were unconscionable because neither showed substantive unconscionability. Petitioners successfully demonstrate, however, that Version One contains at least some substantively unconscionable elements. With regard to procedural unconscionability, the trial court did not resolve a key factual dispute—namely, whether agreement to Version One was a condition of employment—or otherwise determine the existence or degree of procedural unconscionability. We therefore grant the petition as to those petitioners who signed Version One and, with respect to two of them, remand for the trial court to resolve the factual dispute before ruling on Version One's enforceability. With regard to two of the petitioners who signed Version One, we grant the petition with directions to the trial court to deny the motion to compel arbitration on the basis that they have sufficiently demonstrated fraud in the execution.

Version Two, on the other hand, contains a delegation clause that clearly and unmistakably provides for the arbitrator to determine any issues regarding enforceability. Therefore, absent a specific challenge to the delegation clause, which petitioners have not made, we must enforce the delegation clause unless we conclude that no agreement between the contracting parties ever existed due to a lack of mutual assent. As to two of the petitioners who signed Version Two, we find that fraud in the execution has negated that mutual assent. But because there is no basis for us to so conclude for the other two petitioners who signed Version Two, we deny the petition as to them.

A. Version One

1. Delegation Clause

"[P]arties may agree to have an arbitrator decide not only the merits of a particular dispute but also ‘ "gateway" questions of "arbitrability," such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.’ " ( Henry Schein, Inc. v. Archer and White Sales, Inc. (2019) 586 U.S. ––––, 139 S.Ct. 524, 529, 202 L.Ed.2d 480.) But "[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clea[r] and unmistakabl[e]’ evidence that they did so." ( First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985.) This is a "heightened standard," and it "pertains to the parties' manifestation of intent, not the agreement's validity." ( Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 69, fn. 1, 130 S.Ct. 2772, 177 L.Ed.2d 403 ( Rent-A-Center ), italics removed.)

Courts have held that "there is no clear and unmistakable delegation to the arbitrator" to decide arbitrability where the contract "includes a severability clause stating a court of competent jurisdiction may excise an unconscionable provision." ( Dennison v. Rosland Capital LLC (2020) 47 Cal.App.5th 204, 209-210, ...