Lou v. MA Labs., Inc., C 12-05409 WHA
| Decision Date | 17 May 2013 |
| Docket Number | No. C 12-05409 WHA,C 12-05409 WHA |
| Parties | MICHELLE LOU, individually and on behalf of all others similarly situated, Plaintiff, v. MA LABORATORIES, INC., ABRAHAM MA, CHRISTINE RAO, and CHRISTY YEE, Defendants. |
| Court | U.S. District Court — Northern District of California |
In this FLSA and California labor action arising from plaintiff's employment, defendants move to compel arbitration and to dismiss, or in the alternative, to stay the proceedings. For the reasons below, defendants' motion is DENIED.
Plaintiff Xueou "Cher" Feng was employed as an account manager at defendant Ma Laboratories, Inc., from March 2010 until January 2013. During her employment she was asked to sign (and did) two employment agreements.
In particular, at the beginning of her employment as an account manager in March 2010, Feng signed a fourteen-page Employment, Confidential Information, and Invention Assignment Agreement . This Agreement contained a venue provision providing for in-court litigation (id. at ¶ 14(a)). Several months later in August 2010, Feng signed anine-page Supplement to Employment Agreement and General Release . The Supplement changed Feng's employment status to non-exempt, adopted new overtime policies, waived labor claims, and included a three-page mandatory mediation and arbitration agreement (id. at 4-12). The venue provision provided for state court for any non-arbitrable claim (id. at 6). Feng resigned in 2013.
The parties dispute the factual circumstances of Feng's signing of the employment agreements. Plaintiffs contend that Feng was pressured to sign the agreement by her supervisors and that she had to sign the agreement in order to keep her job (Dkt. No. 77-2). Defendants contend that there was no pressure to sign the agreements, that no employee was terminated for failing to sign the agreements, and that informational meetings were held regarding the agreements (Dkt. Nos. 89, 90). This order need not make any factual findings as to the circumstances of the signing of the agreements and assumes arguendo defendants' version of the facts for the purposes of this order.
In October 2012, plaintiff Michelle Lou commenced the instant action alleging that defendants violated the federal Fair Labor Standards Act, California labor laws, and California's Unfair Competition Law. On February 19, 2013, plaintiff filed a consent to join form signed by Feng, which made Feng a party to the FLSA claim (Dkt. No. 41).
This order responds to the motion to compel Feng to arbitration. The parties dispute whether other employees of defendants who signed arbitration clauses may be compelled to arbitrate, but this order limits its ruling to the arbitration agreement signed by Feng.
The parties have made numerous requests for judicial notice (Dkt. Nos. 31, 72, 79, 87). Defendants request that the Court take judicial notice of JAMS Comprehensive Arbitration Rules and Procedures effective October 2010 (Dkt. No. 72). Pursuant to Federal Rule of Evidence 201(b), defendants' request is GRANTED. This order also takes judicial notice of the JAMS Employment Arbitration Rules and Procedures and JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness pursuant to Rule 201(b). In so doing this order doesnot find that said rules were readily available to Feng. Because this order does not rely on any of the other documents, all other requests for judicial notice are DENIED.
Arbitration agreements in the employment context are governed by the Federal Arbitration Act. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 114 (2001). The parties do not dispute that the arbitration agreements at issue are governed by the FAA, but defendants contend that California unconscionability law set forth in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, 114 (2000), does not apply because the FAA governs (Reply 10). This order disagrees. Armendariz applies to determine if a California contract governed by the FAA is unconscionable. See, e.g., Kilgore v. Keybank, Nat'l Ass'n, Nos. 09-16703, 10-15934, 2013 WL 1458876, *3 (9th Cir. Apr. 11, 2013). The arbitration agreement did not choose a governing law, but plaintiff worked in California, both agreements were signed here, the agreements discuss California law, and plaintiffs bring California state-law claims. This order will apply California unconscionability law as set forth in Armendariz to determine unconscionability vel non.
Under California law, procedural and substantive unconscionability must both be present for an arbitration agreement to be unenforceable. Armendariz, 24 Cal. 4th at 114. To determine whether an arbitration agreement is unconscionable, courts 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.
Procedural unconscionability refers to oppression or surprise. Plaintiffs assert that the agreement was procedurally unconscionable, and this order agrees.
Contracts of adhesion are at least somewhat procedurally unconscionable under California law. Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1004(9th Cir. 2010); Ting v. AT&T, 319 F.3d 1126, 1148 (9th Cir. 2003); accord Gentry v. Superior Court, 42 Cal. 4th 443, 469 (2007); Vasquez v. Greene Motors, Inc., 214 Cal. App. 4th 1172, 1183 (2013). Even where reasonable alternatives exist, adhesion contracts are procedurally unconscionable, but the degree of unconscionability is minimal. Roman v. Superior Court, 172 Cal. App. 4th 1462, 1470-71 & n.2 (2009). "Under California law, [a] contract of adhesion is defined as a standardized contract, imposed upon the subscribing party without an opportunity to negotiate the terms." Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976, 983 (9th Cir. 2007) (quotations omitted).
Ma Laboratories' arbitration agreement was adhesive. It was take-it-or-leave-it standardized employment form (Reply 11). Assuming without deciding defendants' dubious contention that plaintiff did not have to sign the agreement is true, defendants still have not shown that the standardized form was negotiable. Defendants assert in a heading that the agreement was negotiable (Reply 14). The only possible support is that informational meetings about the agreement were held (ibid.). Defendants do not contend that Feng even attended an informational meeting. Even if she had attended, informational meetings do not suggest that the agreement's terms were negotiable. This order finds that Ma Laboratories' standardized arbitration agreement was adhesive and that the arbitration agreement was at least somewhat procedurally unconscionable.
The failure to provide the rules governing the arbitration was also procedurally unconscionable. See, e.g., Pokorny v. Quixtar, Inc., 601 F.3d 987, 997 (9th Cir. 2010); Sparks v. Vista del Mar Child and Family Servs., 207 Cal. App. 4th 1511, 1523 (2012); Zullo v. Superior Court, 197 Cal. App. 4th 477, 486 (2011). Defendants contend that failing to provide the rules is not unconscionable in employment agreements, but California authority contradicts this proposition. See, e.g., Sparks, 207 Cal. App. 4th at 1523; Zullo, 197 Cal. App. 4th at 486. Defendants proffer one contrary decision that found a general reference to AAA rules was not procedurally unconscionable, Ulbrich v. Overstock.com, Inc., 887 F. Supp. 2d 924, 932-33 (N.D. Cal. 2012) (Judge Yvonne Rogers). Ulbrich stated that the arbitration rules were incorporatedby reference and to contend otherwise would treat arbitration contracts differently than other contracts and contradict Supreme Court authority in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1747 (2011). Concepcion did not reach this issue and with supporting authority from California and our court of appeals, defendants' sole authority is unpersuasive.
Ma Laboratories' standardized form stated that "[t]he arbitration shall be administered either [sic] by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures" (Dkt. No. 69-2 Exh. A. at 9). This sentence is most problematic. First, it includes a grammatical error — the word "either" injected confusion. A lawyer or judge can look at it several times and then see that the word was likely an artifact from a prior draft and that the earlier draft probably referred to an alternative forum and that the word got left in even though the alternative forum was deleted. But the employees were not lawyers or sophisticated. For many, English was their second language. Were they supposed to figure out what "either" meant? To them the sentence would have been confusing. Second, how was the employee supposed to know what "JAMS" was? Again, lawyers and judges in California know what JAMS is but the employees in question would not. The contract nowhere clarified what JAMS was. Third, the arbitration rules referenced in the sentence were not provided to the employee, so it would have been unreasonable to expect that the employee understood to what she was obligating herself. The contract did not append the rules, and they were not otherwise provided by the employer.
In point of fact, those rules, now that they have been uncovered and examined in litigation, altered the employment agreement's allocation of costs. The employment agreement provided that the "[e]mployer shall advance and shall pay for all fees and costs of mandatory arbitration" but that the "arbitrator may, in the Arbitration Award, allocate all or part of the fees, costs and expenses of the prevailing party" ). The JAMS Comprehensive...
To continue reading
Request your trial