Ramirez v. Pac. Bay Masonry, Inc., A163316

• Court: California Court of Appeals
• Writing for the Court: MAYFIELD, J.
• Parties: JUAN RAMIREZ, Plaintiff and Respondent, v. PACIFIC BAY MASONRY, INC., Defendant and Appellant.
• Docket Number: A163316
• Decision Date: 27 June 2022

JUAN RAMIREZ, Plaintiff and Respondent,
v.
PACIFIC BAY MASONRY, INC., Defendant and Appellant.

A163316

California Court of Appeals, First District, Second Division

June 27, 2022

NOT TO BE PUBLISHED

(Alameda County Super. Ct. No. HG21093508)

MAYFIELD, J. ^[*]

Plaintiff Juan Ramirez and his son Juan Naranjo filed a class action lawsuit alleging various wage-and-hour claims and violations of California's Unfair Competition Law against their former employer Pacific Bay Masonry, Inc. (Pacific Bay). Pacific Bay moved to compel arbitration pursuant to the arbitration provision contained in the plaintiffs' employment agreements. The trial court granted the motion as to Naranjo only.^[1] In denying the motion as to Ramirez, the trial court found that the arbitration provision contained "minimal" substantive unconscionability, but "significant" procedural unconscionability.

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In this appeal, Pacific Bay challenges the denial of its motion to compel arbitration as to Ramirez. Ramirez responds by abandoning the substantive unconscionability argument accepted by the trial court, and instead contending that the agreement was unconscionable because it (1) compels arbitration of administrative wage claims; (2) bars claims under the Labor Code Private Attorneys General Act of 2004 (§ 2698 et seq.) (PAGA); and (3) bars class claims. We reject these arguments and conclude that Ramirez failed to satisfy his burden to show the arbitration agreement was substantively unconscionable. We reverse on this basis and remand for further proceedings consistent with this opinion.

BACKGROUND

Ramirez worked as a mason for Pacific Bay from 2017 to 2019. Naranjo also worked for Pacific Bay during the same time period as a hod carrier.

A. Arbitration Agreement

At the start of their employment, Ramirez and Naranjo each signed an "Employment, Confidential Information, and Arbitration Agreement" (Agreement). Section 9 of the Agreement is entitled "Arbitration and Equitable Relief" and provides, in relevant part: "COMPANY AND I BOTH AGREE THAT ANY AND ALL DISPUTES, CLAIMS, OR CAUSES OF ACTION, IN LAW OR EQUITY, ARISING FROM OR RELATING TO THE ENFORCEMENT, BREACH, PERFORMANCE . . . OF THIS AGREEMENT, OUR EMPLOYMENT RELATIONSHIP, OR THE TERMINATION OF OUR EMPLOYMENT RELATIONSHIP SHALL BE RESOLVED, TO THE FULLEST EXTENT PERMITTED BY LAW, BY FINAL, BINDING AND CONFIDENTIAL ARBITRATION IN SANTA CLARA COUNTY, CALIFORNIA CONDUCTED BEFORE A SINGLE ARBITRATOR BY JAMS, INC. ('JAMS') OR ITS SUCCESSOR, UNDER THE

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THEN APPLICABLE JAMS RULES." It continues: "BY AGREEING TO THIS ARBITRATION PROCEDURE, BOTH PARTIES WAIVE THE RIGHT TO RESOLVE ANY SUCH DISPUTE THROUGH A TRIAL BY JURY OR JUDGE OR BY ADMINISTRATIVE PROCEEDING."

The Agreement states that the arbitration provision applies to "THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP TO THE GREATEST EXTENT PERMITTED BY LAW, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING CLAIMS[.]" It then lists three categories of claims, including (1) claims for wrongful discharge of employment, breach of contract, breach of the covenant of good faith and fair dealing, infliction of emotional distress, misrepresentation, interference with contract or prospective economic advantage, and defamation; (2) claims for violation of any federal, state, or municipal statute; and (3) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination.

B. Class Action Complaint

Ramirez and Naranjo filed a class action lawsuit against Pacific Bay in March 2020. They asserted causes of action for (1) failure to pay all wages owed semi-monthly (Lab. Code, § 204); (2) failure to pay overtime compensation (id. §§ 510, 1194, 1198); (3) failure to reimburse all business expenses (id. § 2802); (4) failure to pay minimum wage (id. § 1194 et seq.); (5) failure to provide accurate itemized statements (id. § 226); (6) waiting time penalties (id. §§ 201-203); (7) failure to provide meal breaks (id. §§ 226.7 & 512); (8) failure to provide rest periods (id. §§ 226.7 & 512; Cal. Code Regs., tit. 8, § 11010); and (9) violations of California's Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.).

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C. Motion to Compel Arbitration

Pacific Bay moved to compel the plaintiffs to arbitration and strike the class claims pursuant to the California Arbitration Act (Code Civ. Proc. § 1280 et seq.). It submitted a declaration from Kristine Auerbach, the secretary, treasurer, and human resources manager for Pacific Bay. The declaration attached copies of the Agreement signed by Ramirez and Naranjo. Auerbach had also signed both copies. As for the class claims, Pacific Bay argued that the "plain language" of the Agreement "does not provide for class arbitration" and "cannot be read as permitting their class claims to survive arbitration."

Plaintiffs opposed the motion to compel arbitration on the grounds that the Agreement was procedurally and substantively unconscionable. On procedural unconscionability, plaintiffs argued that the Agreement was oppressive because (1) it was a contract of adhesion, (2) they were not given adequate time to review the Agreement, (3) Ramirez did not read or speak English, and (4) it referenced JAMS rules without explanation or attachment. On substantive unconscionability, plaintiffs argued that the Agreement was one-sided and lacked mutuality because the three categories of claims listed in Section 9 of the Agreement "appear[] to emphasize its application to claims that employees bring to employers but not . . . claims employers bring to employees." Plaintiffs also argued that the purported class action waiver, as claimed by Pacific Bay, "only infringes on the employee's rights, and is yet another one-sided provision meant to tip the scales in defendant's favor."

Ramirez and Naranjo each submitted a declaration in opposition to the motion. Ramirez declared that his "main language" was Spanish. He had "an extremely limited understanding of English" and did not have "even the minimum ability to read or speak English." He requires an interpreter

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"when communicating with English speakers regarding anything but the most basic communications" and "cannot read or write English with competence for myself." Ramirez declared that he was given several documents to sign at the beginning of his employment, but was not aware of their contents. He was not given any copies in Spanish, and no one discussed the content of the documents in English or Spanish. He was told to "sign them and return them immediately." He signed the documents because he "thought it was a condition of [his] employment." To his knowledge, he never received a copy of the JAMS rules.

Naranjo declared that he completed tenth grade of high school and began working at Pacific Bay when he was 19 years old. He declared that he was given documents to sign at the beginning of his employment in an office while Auerbach was present along with 10-15 other workers. The entire process took an hour to an hour and a half, where Auerbach spent a few minutes talking about each document. She explained details "about the 401(k) plan, health benefits, and jobsite details." To his knowledge, Auerbach never mentioned or explained the arbitration policy.

On reply, Pacific Bay submitted a supplemental declaration from Auerbach. Auerbach declared that she had an onboarding meeting on May 30, 2017 with 10 to 12 employees, including both Ramirez and Naranjo. She declared that she spent an hour going through each page of the employment documents, explaining them in both English and Spanish.

D. Trial Court's Ruling

The trial court granted the motion as to Naranjo and denied the motion as to Ramirez. It first noted the general rule that all material evidence must be submitted on the motion with the opening brief and new evidence is not permitted on reply. While courts retain discretion to consider reply evidence

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where it fills gaps in the original evidence, it determined that the supplemental Auerbach declaration did more than just fill in gaps; it was Pacific Bay's sole evidence regarding procedural unconscionability. The trial court thus concluded that it would consider the supplemental Auerbach declaration, but give "little weight to the new evidence that defendant presented in reply." It specified that this was "not a reflection on Ms. Auerbach personally." The trial court then determined it would decide whether the arbitration agreement was enforceable because there was "no 'clear and unmistakable' evidence that the parties intended to delegate the issue to the arbitrator."^[2]

On procedural unconscionability, the trial court found "some procedural unconscionability regarding Naranjo and significant procedural unconscionability regarding Ramirez." The Agreement was a "take it or leave it agreement," indicating some procedural unconscionability. The trial court credited the plaintiffs' declarations in finding that (1) the Agreement was presented in a meeting where Pacific Bay did not go over or explain the arbitration provision; and (2) Pacific Bay knew that many employees were Spanish speakers, but presented the Agreement in English only and did not explain it in Spanish. It also found that the failure to provide the JAMS rules was a factor supporting procedural unconscionability.

On substantive unconscionability, the trial court stated: "The primary argument for substantive unconscionability is that employees are more likely to have claims against employers than the other way around. This is a weak basis for substantive unconscionability." It concluded, however, that there was "minimal" substantive unconscionability in the arbitration provision of the Agreement.

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Given there was only "some" procedural unconscionability regarding Naranjo and "minimal" substantive unconscionability, it...