Preview
SUPERIOR COURT
COUNTY OF SAN BERNARDINO
247 West Third Street, Department 23
‘San Bernardino, California 92415 SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN BERNARDINO
SAN BERNARDINO DISTRICT
OCT 06 2023
¢
BY: Monica Real, Deputy
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN BERNARDINO
10
11 KIM LOZANO, an individual, ) Case No. CIVSB2224810
12
13 Plaintiff, RULING ON DEFENDANT’S MOTION TO
COMPEL ARBITRATION
14 vs.
15 RICHARD BARTON, RICHARD BARTON
ENTERPRISES dba CALIFORNIA PACKAGIN )
16 AND DISPLAY, a California Corporation; and )
17
DOES 1-10, inclusive, )
)
18 Defendant(s). )
19
20 This matter came before the Court for a hearing on Defendant’s motion to compel arbitration.
21 The Court has reviewed and considered the briefs of the parties, as well as the arguments of counsel
22 and issues its ruling as follows:
23
PROCEDURAL AND FACTUAL BACKGROUND
24
25 Plaintiff Kim Lozano was purportedly subjected to sexual harassment, discrimination,
26 retaliation, and then constructively discharged from her employment with defendants Richard Barton
27 Enterprises and Richard Barton. As a result, Lozano commenced suit against the former employers
28
on October 27, 2022. Lozano’s complaint contains claims for (1) sexual harassment, (2) sex/gender
=
discrimination, (3) retaliation, (4) failure to prevent harassment, discrimination, and retaliation, (5)
intentional infliction of emotional distress based on the harassment, (6) constructive discharge, and
(7) violation of Labor Code sections 1198.5 and 432, based on defendants’ failure to provide
personnel files upon request.
Defendants now move to compel arbitration on the grounds that Lozano signed an arbitration
agreement indicating the parties agreed “that binding arbitration shall be the exclusive remedy for all
claims between them.” (Arb. Agreement at § A.) The agreement also defined “covered claim,” as
“any claim,” except for non-arbitrable claims, including a non-exhaustive list that included violations
10 of the Labor Code in addition to claims for wrongful termination, discrimination, harassment, and
ll retaliation. The motion is supported by a declaration from attorney Alice Kwak; AAA’s Employment
12 Arbitration Rules; a declaration from defendants’ CFO, Patrice Jeffries; and the arbitration agreement
13
signed by Lozano, though she apparently is also known as “Kim Kosa.”
14
The motion is opposed by Lozano on the grounds that she has the ability to choose litigation
15
over arbitration under The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act
16
17 of 2021; the agreement in her file at the time she resigned was not signed by defendants and therefore
18 no valid contract exists; and the agreement is unconscionable. The opposition is supported by a
19 declaration from Lozano and her personnel file; a declaration from attorney Wendy Housman; and
20 the letter requesting the personnel records.
21
A reply has been filed by defendants along with a declaration from Maribel Herbert
22
(defendants’ HR Manager and Controller); a declaration from Kate Barton (a secretary); further
23
declarations from Patrice Jeffries and Alice Kwak; and, among other things, portions of the transcript
24
25 from Lozano’s deposition. The motion was set for hearing on August 21, 2023.'
26
27
28 "In Martin v. Richard Barton Enterprises, et al. (Case No. CIVSB2224809), the Court is also set to hear a similar motion
by the same defendants in a separate sexual harassment lawsuit that involves the same law firms.
-2-
DISCUSSION
An Overview of the Law Related to Motions to Compel Arbitration
Under Code of Civil Procedure section 1281.2, a party to an arbitration agreement may move
to compel arbitration if another party to the agreement refuses to arbitrate, and the court shall compel
arbitration if it determines that an agreement to arbitrate exists, unless, among other exceptions not
applicable here, it determines that:
(a) The right to compel arbitration has been waived by the petitioner; or
(b) Ground exists for the revocation of the agreement.
(c) A party to the arbitration agreement is also a party to a pending court action or
special proceeding with a third party, arising out of the same transaction or series
10 of related transactions and there is a possibility of conflicting rulings on a common
issue of law or fact.
11
The moving party may also seek a stay of pending litigation either by itself or in conjunction
12
with a petition to compel arbitration. A stay must be granted where a court has previously ordered
13
14 arbitration of the dispute or an application for such an order has been made but not ruled upon. (Code
15 Civ. Proc. § 1281.4.) California law favors the enforcement of valid arbitration agreements. Any
16 doubts to arbitration will be resolved against the party asserting a defense to arbitration, whether the
17
issue is construction of contract language, waiver, delay or any like defense to arbitrability. (Ericksen,
18
Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 320.)
19
A party petitioning to compel arbitration under California law must prove by a preponderance
20
21 of the evidence the existence of a valid arbitration agreement and that the controversy is covered by
22 that agreement. The burden then shifts to the party opposing arbitration to prove by a preponderance
23 of the evidence any grounds for denial of the petition. (Rosenthal v. Great Western Financial
24 Securities Corp. (1996) 14 Cal.4th 394, 413.) If the party opposing the petition raises a defense to
25
enforcement, then he bears the burden of producing evidence and proving by preponderance of the
26
evidence any fact necessary to the defense. (Rosenthal v. Great Western Fin. Sec. Corp. (1996) 14
27
Cal.4th 394, 413-414.)
28
-3-
The Federal Arbitration Act (FAA) also authorizes enforcement of arbitration clauses unless
grounds exist in law or equity for the revocation of any contract. (9 U.S.C. § 2.) The enforcement
language of the FAA is almost identical to Code of Civil Procedure section 1281. In situations
governed by the FAA, conflicting state law is preempted in either state or federal courts. (Volt Info.
Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 477
[“The FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to
occupy the entire field of arbitration ... But even when Congress has not completely displaced state
regulation in an area, state law may nonetheless be pre-empted to the extent that it actually conflicts
10 with federal law ...”].) To compel arbitration under the FAA, a finding must be made that an
11 agreement exists for arbitration between the parties and the agreement covers the dispute. (A7&7
12 Technologies, Inc. v. Communications Workers of America (1986) 475 U.S. 643, 648-49.)
13
The enforcement of an arbitration clause is a matter of ordinary state-law contract principles.
14
Arbitration agreements are on equal footing with other contracts and should be enforced according to
15
their terms. (AT&T Technologies, Inc. v. Communications Workers of America (1986) 475 U.S. 643
16
17 648-49.) The phrase in the FAA, that arbitration agreements can be declared unenforceable on
18 grounds of law or equity for revocation permits invalidating such an agreement on contract defenses
19 of fraud, duress, or unconscionability. (/bid.) State rules of procedure, including those governing
20
petitions to compel arbitration, apply in state court proceedings except where such rules would defeat
21
the purpose of the federal law. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th
22
349, 409-410.)
23
Whether the FAA Applies
24
25 The FAA applies to arbitration clauses involving interstate commerce. (9 U.S.C. § 2; Aviation
26 Data, Inc. v. American Express Travel Related Services Company, Inc. (2007) 152 Cal.App.4th 1522,
27 1534.) “Involving commerce” is the equivalent of the term “affecting commerce,” which is a term of
28
art that ordinary signals the broadest permissible exercise of Congress’s commerce clause power.
-4-
(Citizens Bank vy. Alafabco, Inc. (2003) 439 U.S. 52, 56.) The moving-defendant bears the burden of
demonstrating FAA coverage by declarations and other evidence. (Shepard v. Edward Mackay
Enterprises, Inc. (2007) 148 Cal.App.4th 1092, 1101.)
Here, the arbitration agreement has a choice of law provision indicating the FAA applies.
(Arb. Agreement at § E.) The declaration from Jeffries also shows that Richard Barton Enterprises is
a wholesale distributor with a warehouse out of state and some of the products are received from
manufacturers in other states. (Jeffries Decl. at § 3.) As a result, the agreement involves interstate
commerce. Lozano does not dispute the application of the FAA and, instead, relies upon the FAA for
10 purposes of pursuing the defense under The Ending Forced Arbitration of Sexual Assault and Sexual
11 Harassment Act of 2021.
12 Whether there is a Valid Delegation Clause
13
Under the FAA, two presumptions exist: (1) the court is presumed to be the intended decider
14
of disputes about arbitrability, and (2) the arbitrator is presumed to be the intended decider on the
1S
meaning and application of particular procedural preconditions for the use of arbitration. (BG Group
16
ple v. Republic of Arg. (2014) 572 U.S. 25, 34; Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th
17
18 233, 251-52, overruled on other grounds per Lamps Plus, Inc. v. Valera (2019) 139 S.Ct. 1407, 1413,
19 1418-19.) Under the California Arbitration Act (CAA), the same is also true, i.e., generally the court
20
determines whether an arbitration contract exists and is enforceable. (Dream Theater, Inc. v. Dream
21
Theater (2004) 124 Cal.App.4th 547, 553.)
22
Nevertheless, who decides an issue is usually a matter of party agreement under the FAA and
23
CAA. (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 943.) Thus, the starting point
24
25 on the issue is the parties’ agreement. (Sandquist, supra, | Cal.Sth at p. 243.) An arbitration agreement
26 must clearly and unmistakably delegate to the arbitrator the issues of arbitrability and enforceability.
27 (First Options, supra, 514 U.S. at p. 944; Ajamian v. CantrorCQ2e, L.P. (2012) 203 Cal.App.4th 771,
28
-5-
781-82.) In reviewing the delegation clause, California contract principles govern. (First Options,
supra, 514 U.S. at p. 944; Sandquist, supra, | Cal.Sth at pp. 243-44.)
Thus, one can challenge a delegation clause under general contract defenses, e.g., fraud,
duress, and unconscionability, but, the defense must be specific to the delegation clause because,
otherwise, a challenge to the arbitration agreement as a whole is for the arbitrator. (Rent-A-Center,
W., Inc. v. Jackson (2010) 561 U.S. 63, 68 and 72.) When the arbitration agreement contains a clear
and unmistakable delegation and no defense is raised or established, then “a court may not override
the contract. In those circumstances, a court possesses no power to decide the arbitrability issue...
10 [§] [A] court may not decide an arbitrability question that the parties have delegated to an arbitrator.”
11 (Henry Schein, Inc. v. Archer & White Sales, Inc. (2019) 139 S.Ct. 524, 529-30.)
12 Here, the arbitration agreement expressly incorporates AAA’s rules except where they conflict
13
with the agreement or state or federal law. (Arb. Agreement at § C.) AAA’s Employment Arbitration
14
Rules and Mediation Procedures provide that the “arbitrator shall have the power to rule on his or her
15
own jurisdiction, including any objections with respect to the existence, scope or validity of the
16
17 arbitration agreement.” (Ex. A to the Kwak’s Decl. at § 6a, p. 12.) When an arbitration provision
18 clearly provides for arbitration under AAA’s rules and those rules specify the arbitrator has the
19 authority to adjudicate the existence, scope, and validity of the arbitration agreement, then a clear and
20 unmistakable delegation clause exists. (Rodriguez v. American Technologies, Inc. (2006) 136
21
Cal.App.4th 1110, 1123; Brennan y. Opus Bank (9" Cir. 2015) 796 F.3d 1125, 1130.)
22
Lozano also does not raise any defense specific to the delegation clause. As a result, the
23
arbitrator should determine if there should be an arbitration as to each cause of action alleged.
24
25 However, the Court must first determine the gateway issue of whether a contract was formed.
26 (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.Sth 758, 776; Ahlstrom v. DHI Mortg. Co.,
27 L.P. (9th Cir. 2021) 21 F.4th 631, 635.)
28
6-
Whether there is an Arbitration Agreement Covering the Parties and the Pending Claims
As for the existence of a contract, Lozano acknowledges signing an arbitration agreement.
(Lozano Decl. at {§ 3-9.) While Lozano suggests she cannot recall whether the agreement she signed
had a missing section B, the reply evidence acknowledges the missing section, but nevertheless
indicates all the arbitration agreements misnumbered the paragraphs such that there was no “section
B.” (Jeffries Decl. at § 5.)
Lozano also notes that the agreement is not signed by a company representative, but “[j]ust as
with any written agreement signed by one party, an arbitration agreement can be specifically enforced
10 against the signing party regardless of whether the party seeking enforcement has also signed,
11 provided that the party seeking enforcement has performed or offered to do so. (Civ. Code, § 3388.)”
12
(Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 177.)
13
Lozano also appears to suggest that the incorporation of the AAA rules means there was no
14
agreement because those terms were unknown to her and thus there was no mutual assent. “It is, of
15
course, the law that the parties may incorporate by reference into their contract the terms of some
16
17 other document.” (Wolschlager v. Fidelity National Title Ins. Co. (2003) 111 Cal.App.4th 784, 790,
18 as modified (Aug. 27, 2003).) Lozano’s remaining arguments all relate to the unconscionability
19 defense, not the contract formation itself.
20 Finally, the agreement expressly applies to the corporate employer, identified through its dba
21
California Packaging, but the agreement does not expressly cover Richard Barton nor does it extend
22
to the company’s owners, officers, directors, managing agents, or employees. Nevertheless, a non-
23
party may enforce a signatory party to arbitration under the doctrine of equitable estoppel. State law
24
25 applies in making this determination. (Ford Motor Warranty Cases (2023) 89 Cal.App.Sth 1324, 306
26 Cal.Rptr.3d 611, 618.)
27 Equitable estoppel associated with a non-signatory arises as follows:
28
-7-
[A] nonsignatory defendant may invoke an arbitration clause to compel a signatory
plaintiff to arbitrate its claims when the causes of action against the nonsignatory are
“intimately founded in and intertwined” with the underlying contract obligations. By
relying on contract terms in a claim against a nonsignatory defendant, even if not
exclusively, a plaintiff may be equitably estopped from repudiating the arbitration
clause contained in that agreement. The focus is on the nature of the claims asserted
by the plaintiff against the nonsignatory defendant.... The fundamental point is that a
party may not make use of a contract containing an arbitration clause and then attempt
to avoid the duty to arbitrate by defining the forum in which the dispute will be
resolved. (Boucher v. Alliance Title Company (2005) 127 Cal.App.4th 262, 271-72
[internal citations omitted].)
In Garcia v. Pexco, LLC (2017) 11 Cal.App.Sth 782, 786, the court of appeal found an
allegation that two defendants were “joint employers” equitably estopped a plaintiff from refusing to
10 arbitrate claims against a non-signatory when the claims are “intimately founded in and intertwined”
1 with the underlying contract obligations and the claims are “based on the same facts and are inherently
12 inseparable” from arbitrable claims against signatory defendants. Thus, the plaintiff could not attempt
13
to link the purported joint-employer to the actual signatory-employer to hold it liable for alleged wage
14
and hour claims, while at the same time arguing the arbitration provision only applies to the signatory-
15
employer.
16
17 Here, there can be no dispute that the claims against Barton are intertwined and related to
18 Lozano’s employment. The complaint also identifies both defendants as her employer. (Compl. at §
19 20.) As a result, Barton can rely on the agreement to compel Lozano to arbitrate.
20 The Ending Forced Arbitration of Sexual Assault and Harassment Act
21
As for Lozano’s reliance upon The Ending the Forced Arbitration of Sexual Assault and
22
Harassment Act (“Act”), it provides “[n]otwithstanding any other provision of this title, at the election
23
of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, ...
24
25 no predispute arbitration agreement ... shall be valid or enforceable with respect to a case which is
26 filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual
27 harassment dispute. (9 U.S.C. §402(a).)
28
8-
Whether the Act applies is determined under federal law and, by statutory mandate, the court,
not the arbitrator, is to determine the validity and enforcement of a pre-dispute arbitration agreement
in association with a case involving sexual harassment or assault. (9 U.S.C. §402, subd. (b).) As a
result, and regardless of the delegation clause, this Court should determine if the Act precludes the
enforcement of the agreement in whole or in part.
The Act was adopted on March 3, 2022. Upon enactment, it became effective immediately.
(Murrey v. Superior Court (General Electric Company) (2023) 87 Cal.App.Sth 1223, 1235.) The
main dispute in this case is whether the prohibition against arbitration of sexual harassment cases
10 applies retroactively because Lozano alleges that her employment ended in January 2022 (Compl. at
11 {| 107), but she filed suit after the effective date of the Act.
12
There is a presumption that a newly adopted statute is not retroactive. (Landgraf v. USI Film
13
Products (1994) 511 U.S. 244, 265.) Nonetheless, a statute is not operating retrospectively because it
14
is applied to a case arising from conduct that occurred earlier than the statute’s enactment. (/d. at p.
15
269.) The Court must ask, “whether the new provision attaches new legal consequences to events
16
17 completed before its enactment.” (/d. at pp. 269-70.) If so, courts have declined to give retroactive
18 effect when the statute burdens private rights unless Congress made clear that was its intent. (/d. at
19 pp. 270 and 272.) The preclusion of applying the retroactive effect to statutes generally involves cases
20
affecting contractual or property rights. (/d. at p. 271.)
21
If a case implicates a federal statute enacted after the events in the lawsuit, the court’s first
22
task is to determine if Congress expressly prescribed for the statute to be applied retroactively; if not,
23
then the court must determine whether the new statute would have retroactive effect; and if it does,
24
25 then the presumption will provide that it not govern unless clear congressional intent favoring the
26 application. (Landgraf, supra, 511 U.S. at p. 280.)
27 Here, if the Act were applied to the arbitration agreement, it would preclude arbitration of at
28
least the harassment cause of action even though the parties had contractually agreed to arbitration.
-9-
From this perspective, application of the statute would be “retroactive,” but nothing in the Act’s two
adopted statutes expressly state a retroactive intent by Congress. (See 9 U.S.C. §§ 401 [definitions]
and 402 [substance].)
As for the legislative history, “there is some debate about whether it matters when the
underlying sexual harassment or assault took place” and the legislative history material appears
inconsistent. (Murrey v. Superior Court (2023) 87 Cal.App.Sth 1223, 1235.) For instance, a “marginal
note to the Act” states the “Act, and the amendments made by this Act, shall apply with respect to
any dispute or claim that arises or accrues on or after the date of enactment of this Act.”
10 (ibid. [citing Pub.L. No. 117-90, § 3, reprinted in notes foll. 9 U.S.C. § 401 and also noting that the
11 district court in Steinberg v. Capgemini Am., Inc. (E.D.Pa. Aug. 16, 2022, Civ. A. No. 22-489) 2022
12 WL 3371323 pp. *2-3, 2022 U.S.Dist. Lexis 146014 p. *6, relied upon the note in concluding the
13
dispute or claim must arise after March 3, 2022.) On the other hand, “[dJuring debate, Congress
14
clarified that the Act is retroactive ‘as to contracts currently signed,’ but not to ‘cases currently
15
pending.” (Murrey, supra, 87 Cal.App.Sth at p. 1235.)
16
17 However, the issue was not resolved in Murrey and several district courts resolving the issue
18 conclude that it applies to disputes or claims that arise or accrue on or after the Act’s date of enactment
19 based on the legislative history statements on its applicability. (See Walters v. Starbucks Corp.
20 (S.D.N.Y. 2022) -- F.Supp.3d ---, 2022 WL 3684901, at p. *2; Newcombe-Dierl v. Amgen (C.D.Cal.
21
2022) 2022 WL 3012211, at p. *5; Woodruff v. Dollar General Corporation (D.Del. 2022) 2022 WL
22
17752359, at p. *3; Steinberg v. Capgemini America, Inc. (E.D.Pa. 2022) 2022 WL 3371323, at p.
23
*2.)
24
25 As a result, the Act would not apply in this case since Lozano was terminated before the Act’s
26 enactment and there is no indication any of the harassment occurred afterward.
27
28 //1
-10-
The Unconscionability Defense
Finally, as for the unconscionability defense, “unless the employee challenged the delegation
clause specifically, the court must treat the delegation clause as valid under the FAA and enforce it,
leaving the employee’s unconscionability challenge to the validity of the arbitration agreement as a
whole for the arbitrator.” (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.Sth 748, 767 [citing
Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 71.) Again, the delegation clause was not
challenged in this case, so the defense must be decided by the arbitrator. For all these reasons, the
motion will be granted.
10 DISPOSITION
11 The Court will grant the motion, compel arbitration, and stay the litigation.
12 The FAA applies; a contract exists; the agreement covers the pending claims; Barton can
13
enforce the agreement as the alleged joint employer (Compl. § 20; Garcia v. Pexco, LLC (2017) 11
14
Cal.App.Sth 782, 786); and defendants’ failure to sign the agreement does not preclude enforcement.
15
(Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 177.)
16
17 The Ending the Forced Arbitration of Sexual Assault and Harassment Act does not apply since
18 Lozano quit, all the alleged misconduct predate the Act (Compl. at § 107), and the Act is not
19 retroactive. (See 9 U.S.C. §§ 401-402; Pub.L. No. 117-90, § 3, reprinted in notes foll. 9 U.S.C. § 401;
20
Steinberg v. Capgemini Am., Inc. (E.D.Pa. Aug. 16, 2022, Civ. A. No. 22-489) 2022 WL 3371323
21
pp. *2-3, 2022 U.S.Dist. Lexis 146014 p. *6; Newcombe-Dierl v. Amgen (C.D.Cal. 2022) 2022 WL
22
3012211, at p. *5.)
23
No challenges were made to the delegation clause so the unconscionability defense must be
24
25 left for the arbitrator. (Mendoza v. Trans Valley Ira sport (2022) 75 Cal.App.Sth 748, 767.)
)
26
Dated: _ (C2 6/73
27
Judge of the Superior Court
28
-ll-
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN BERNARDINO, SAN BERNARDINO JUSTICE CENTER
IN THE MATTER OF: KIM LOZANO, an individual, Plaintiff
vs.
RICHARD BARTON, RICHARD BARTON ENTERPRISES dba CALIFORNIA
PACKAGING AND DISPLAY, a California Corporation; and DOES 1-10,
inclusive, Defendant
CASE NO.: CIVSB2224810
PROOF OF SERVICE BY MAIL
The undersigned hereby declares: | am a citizen of the United States of America, over the age of eighteen years,
10 employed in the above-named county, and not a party to nor interested in this proceeding. My business address is
247 W. 3° St., San Bernardino, California 92415. | am a Deputy Clerk of said County and on the date shown below,
11 served a copy of the following:
12 RULING ON DEFENDANT'S MOTION TO COMEL ARBITRATION
13 Q Enclosed in a sealed envelope, first class postage prepaid in the U.S. mail at the location shown above,
mailed to the interested parties addressed as shown below:
14
oO By Hand Delivery, | caused such document to be served on all parties to this action to the interested parties
addressed as shown below:
15
16 NIXON PEABODY, LLP LAW OFFICES OF WENDY M. HOUSMAN, ESQ
Richard J. Frey Wendy M. Housman, Esq.
17 David M. Prager 28544 Old Town Front Street, Suite 301
Alice Kwak Temecula, Ca 92590
18 300 S. Grand Avenue, Suite 4100
Los Angeles, CA 90071-3151
19
At the time of mailing this notice there was regular communication between the place of mailing and the place(s) to
20 which this notice was addressed
21 | declare under penalty of perjury the foregoing to be true and correct
22
DATED: October 10, Q20a3 BY:
23 ullai istftive As:
24
25
26
27
28
1.
Preview
SUPERIOR COURT COUNTY OF SAN BERNARDINO 247 West Third Street, Department 23 ‘San Bernardino, California 92415 SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN BERNARDINO SAN BERNARDINO DISTRICT OCT 06 2023 ¢ BY: Monica Real, Deputy SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN BERNARDINO 10 11 KIM LOZANO, an individual, ) Case No. CIVSB2224810 12 13 Plaintiff, RULING ON DEFENDANT’S MOTION TO COMPEL ARBITRATION 14 vs. 15 RICHARD BARTON, RICHARD BARTON ENTERPRISES dba CALIFORNIA PACKAGIN ) 16 AND DISPLAY, a California Corporation; and ) 17 DOES 1-10, inclusive, ) ) 18 Defendant(s). ) 19 20 This matter came before the Court for a hearing on Defendant’s motion to compel arbitration. 21 The Court has reviewed and considered the briefs of the parties, as well as the arguments of counsel 22 and issues its ruling as follows: 23 PROCEDURAL AND FACTUAL BACKGROUND 24 25 Plaintiff Kim Lozano was purportedly subjected to sexual harassment, discrimination, 26 retaliation, and then constructively discharged from her employment with defendants Richard Barton 27 Enterprises and Richard Barton. As a result, Lozano commenced suit against the former employers 28 on October 27, 2022. Lozano’s complaint contains claims for (1) sexual harassment, (2) sex/gender = discrimination, (3) retaliation, (4) failure to prevent harassment, discrimination, and retaliation, (5) intentional infliction of emotional distress based on the harassment, (6) constructive discharge, and (7) violation of Labor Code sections 1198.5 and 432, based on defendants’ failure to provide personnel files upon request. Defendants now move to compel arbitration on the grounds that Lozano signed an arbitration agreement indicating the parties agreed “that binding arbitration shall be the exclusive remedy for all claims between them.” (Arb. Agreement at § A.) The agreement also defined “covered claim,” as “any claim,” except for non-arbitrable claims, including a non-exhaustive list that included violations 10 of the Labor Code in addition to claims for wrongful termination, discrimination, harassment, and ll retaliation. The motion is supported by a declaration from attorney Alice Kwak; AAA’s Employment 12 Arbitration Rules; a declaration from defendants’ CFO, Patrice Jeffries; and the arbitration agreement 13 signed by Lozano, though she apparently is also known as “Kim Kosa.” 14 The motion is opposed by Lozano on the grounds that she has the ability to choose litigation 15 over arbitration under The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act 16 17 of 2021; the agreement in her file at the time she resigned was not signed by defendants and therefore 18 no valid contract exists; and the agreement is unconscionable. The opposition is supported by a 19 declaration from Lozano and her personnel file; a declaration from attorney Wendy Housman; and 20 the letter requesting the personnel records. 21 A reply has been filed by defendants along with a declaration from Maribel Herbert 22 (defendants’ HR Manager and Controller); a declaration from Kate Barton (a secretary); further 23 declarations from Patrice Jeffries and Alice Kwak; and, among other things, portions of the transcript 24 25 from Lozano’s deposition. The motion was set for hearing on August 21, 2023.' 26 27 28 "In Martin v. Richard Barton Enterprises, et al. (Case No. CIVSB2224809), the Court is also set to hear a similar motion by the same defendants in a separate sexual harassment lawsuit that involves the same law firms. -2- DISCUSSION An Overview of the Law Related to Motions to Compel Arbitration Under Code of Civil Procedure section 1281.2, a party to an arbitration agreement may move to compel arbitration if another party to the agreement refuses to arbitrate, and the court shall compel arbitration if it determines that an agreement to arbitrate exists, unless, among other exceptions not applicable here, it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Ground exists for the revocation of the agreement. (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series 10 of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. 11 The moving party may also seek a stay of pending litigation either by itself or in conjunction 12 with a petition to compel arbitration. A stay must be granted where a court has previously ordered 13 14 arbitration of the dispute or an application for such an order has been made but not ruled upon. (Code 15 Civ. Proc. § 1281.4.) California law favors the enforcement of valid arbitration agreements. Any 16 doubts to arbitration will be resolved against the party asserting a defense to arbitration, whether the 17 issue is construction of contract language, waiver, delay or any like defense to arbitrability. (Ericksen, 18 Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 320.) 19 A party petitioning to compel arbitration under California law must prove by a preponderance 20 21 of the evidence the existence of a valid arbitration agreement and that the controversy is covered by 22 that agreement. The burden then shifts to the party opposing arbitration to prove by a preponderance 23 of the evidence any grounds for denial of the petition. (Rosenthal v. Great Western Financial 24 Securities Corp. (1996) 14 Cal.4th 394, 413.) If the party opposing the petition raises a defense to 25 enforcement, then he bears the burden of producing evidence and proving by preponderance of the 26 evidence any fact necessary to the defense. (Rosenthal v. Great Western Fin. Sec. Corp. (1996) 14 27 Cal.4th 394, 413-414.) 28 -3- The Federal Arbitration Act (FAA) also authorizes enforcement of arbitration clauses unless grounds exist in law or equity for the revocation of any contract. (9 U.S.C. § 2.) The enforcement language of the FAA is almost identical to Code of Civil Procedure section 1281. In situations governed by the FAA, conflicting state law is preempted in either state or federal courts. (Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 477 [“The FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration ... But even when Congress has not completely displaced state regulation in an area, state law may nonetheless be pre-empted to the extent that it actually conflicts 10 with federal law ...”].) To compel arbitration under the FAA, a finding must be made that an 11 agreement exists for arbitration between the parties and the agreement covers the dispute. (A7&7 12 Technologies, Inc. v. Communications Workers of America (1986) 475 U.S. 643, 648-49.) 13 The enforcement of an arbitration clause is a matter of ordinary state-law contract principles. 14 Arbitration agreements are on equal footing with other contracts and should be enforced according to 15 their terms. (AT&T Technologies, Inc. v. Communications Workers of America (1986) 475 U.S. 643 16 17 648-49.) The phrase in the FAA, that arbitration agreements can be declared unenforceable on 18 grounds of law or equity for revocation permits invalidating such an agreement on contract defenses 19 of fraud, duress, or unconscionability. (/bid.) State rules of procedure, including those governing 20 petitions to compel arbitration, apply in state court proceedings except where such rules would defeat 21 the purpose of the federal law. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 22 349, 409-410.) 23 Whether the FAA Applies 24 25 The FAA applies to arbitration clauses involving interstate commerce. (9 U.S.C. § 2; Aviation 26 Data, Inc. v. American Express Travel Related Services Company, Inc. (2007) 152 Cal.App.4th 1522, 27 1534.) “Involving commerce” is the equivalent of the term “affecting commerce,” which is a term of 28 art that ordinary signals the broadest permissible exercise of Congress’s commerce clause power. -4- (Citizens Bank vy. Alafabco, Inc. (2003) 439 U.S. 52, 56.) The moving-defendant bears the burden of demonstrating FAA coverage by declarations and other evidence. (Shepard v. Edward Mackay Enterprises, Inc. (2007) 148 Cal.App.4th 1092, 1101.) Here, the arbitration agreement has a choice of law provision indicating the FAA applies. (Arb. Agreement at § E.) The declaration from Jeffries also shows that Richard Barton Enterprises is a wholesale distributor with a warehouse out of state and some of the products are received from manufacturers in other states. (Jeffries Decl. at § 3.) As a result, the agreement involves interstate commerce. Lozano does not dispute the application of the FAA and, instead, relies upon the FAA for 10 purposes of pursuing the defense under The Ending Forced Arbitration of Sexual Assault and Sexual 11 Harassment Act of 2021. 12 Whether there is a Valid Delegation Clause 13 Under the FAA, two presumptions exist: (1) the court is presumed to be the intended decider 14 of disputes about arbitrability, and (2) the arbitrator is presumed to be the intended decider on the 1S meaning and application of particular procedural preconditions for the use of arbitration. (BG Group 16 ple v. Republic of Arg. (2014) 572 U.S. 25, 34; Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 17 18 233, 251-52, overruled on other grounds per Lamps Plus, Inc. v. Valera (2019) 139 S.Ct. 1407, 1413, 19 1418-19.) Under the California Arbitration Act (CAA), the same is also true, i.e., generally the court 20 determines whether an arbitration contract exists and is enforceable. (Dream Theater, Inc. v. Dream 21 Theater (2004) 124 Cal.App.4th 547, 553.) 22 Nevertheless, who decides an issue is usually a matter of party agreement under the FAA and 23 CAA. (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 943.) Thus, the starting point 24 25 on the issue is the parties’ agreement. (Sandquist, supra, | Cal.Sth at p. 243.) An arbitration agreement 26 must clearly and unmistakably delegate to the arbitrator the issues of arbitrability and enforceability. 27 (First Options, supra, 514 U.S. at p. 944; Ajamian v. CantrorCQ2e, L.P. (2012) 203 Cal.App.4th 771, 28 -5- 781-82.) In reviewing the delegation clause, California contract principles govern. (First Options, supra, 514 U.S. at p. 944; Sandquist, supra, | Cal.Sth at pp. 243-44.) Thus, one can challenge a delegation clause under general contract defenses, e.g., fraud, duress, and unconscionability, but, the defense must be specific to the delegation clause because, otherwise, a challenge to the arbitration agreement as a whole is for the arbitrator. (Rent-A-Center, W., Inc. v. Jackson (2010) 561 U.S. 63, 68 and 72.) When the arbitration agreement contains a clear and unmistakable delegation and no defense is raised or established, then “a court may not override the contract. In those circumstances, a court possesses no power to decide the arbitrability issue... 10 [§] [A] court may not decide an arbitrability question that the parties have delegated to an arbitrator.” 11 (Henry Schein, Inc. v. Archer & White Sales, Inc. (2019) 139 S.Ct. 524, 529-30.) 12 Here, the arbitration agreement expressly incorporates AAA’s rules except where they conflict 13 with the agreement or state or federal law. (Arb. Agreement at § C.) AAA’s Employment Arbitration 14 Rules and Mediation Procedures provide that the “arbitrator shall have the power to rule on his or her 15 own jurisdiction, including any objections with respect to the existence, scope or validity of the 16 17 arbitration agreement.” (Ex. A to the Kwak’s Decl. at § 6a, p. 12.) When an arbitration provision 18 clearly provides for arbitration under AAA’s rules and those rules specify the arbitrator has the 19 authority to adjudicate the existence, scope, and validity of the arbitration agreement, then a clear and 20 unmistakable delegation clause exists. (Rodriguez v. American Technologies, Inc. (2006) 136 21 Cal.App.4th 1110, 1123; Brennan y. Opus Bank (9" Cir. 2015) 796 F.3d 1125, 1130.) 22 Lozano also does not raise any defense specific to the delegation clause. As a result, the 23 arbitrator should determine if there should be an arbitration as to each cause of action alleged. 24 25 However, the Court must first determine the gateway issue of whether a contract was formed. 26 (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.Sth 758, 776; Ahlstrom v. DHI Mortg. Co., 27 L.P. (9th Cir. 2021) 21 F.4th 631, 635.) 28 6- Whether there is an Arbitration Agreement Covering the Parties and the Pending Claims As for the existence of a contract, Lozano acknowledges signing an arbitration agreement. (Lozano Decl. at {§ 3-9.) While Lozano suggests she cannot recall whether the agreement she signed had a missing section B, the reply evidence acknowledges the missing section, but nevertheless indicates all the arbitration agreements misnumbered the paragraphs such that there was no “section B.” (Jeffries Decl. at § 5.) Lozano also notes that the agreement is not signed by a company representative, but “[j]ust as with any written agreement signed by one party, an arbitration agreement can be specifically enforced 10 against the signing party regardless of whether the party seeking enforcement has also signed, 11 provided that the party seeking enforcement has performed or offered to do so. (Civ. Code, § 3388.)” 12 (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 177.) 13 Lozano also appears to suggest that the incorporation of the AAA rules means there was no 14 agreement because those terms were unknown to her and thus there was no mutual assent. “It is, of 15 course, the law that the parties may incorporate by reference into their contract the terms of some 16 17 other document.” (Wolschlager v. Fidelity National Title Ins. Co. (2003) 111 Cal.App.4th 784, 790, 18 as modified (Aug. 27, 2003).) Lozano’s remaining arguments all relate to the unconscionability 19 defense, not the contract formation itself. 20 Finally, the agreement expressly applies to the corporate employer, identified through its dba 21 California Packaging, but the agreement does not expressly cover Richard Barton nor does it extend 22 to the company’s owners, officers, directors, managing agents, or employees. Nevertheless, a non- 23 party may enforce a signatory party to arbitration under the doctrine of equitable estoppel. State law 24 25 applies in making this determination. (Ford Motor Warranty Cases (2023) 89 Cal.App.Sth 1324, 306 26 Cal.Rptr.3d 611, 618.) 27 Equitable estoppel associated with a non-signatory arises as follows: 28 -7- [A] nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are “intimately founded in and intertwined” with the underlying contract obligations. By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement. The focus is on the nature of the claims asserted by the plaintiff against the nonsignatory defendant.... The fundamental point is that a party may not make use of a contract containing an arbitration clause and then attempt to avoid the duty to arbitrate by defining the forum in which the dispute will be resolved. (Boucher v. Alliance Title Company (2005) 127 Cal.App.4th 262, 271-72 [internal citations omitted].) In Garcia v. Pexco, LLC (2017) 11 Cal.App.Sth 782, 786, the court of appeal found an allegation that two defendants were “joint employers” equitably estopped a plaintiff from refusing to 10 arbitrate claims against a non-signatory when the claims are “intimately founded in and intertwined” 1 with the underlying contract obligations and the claims are “based on the same facts and are inherently 12 inseparable” from arbitrable claims against signatory defendants. Thus, the plaintiff could not attempt 13 to link the purported joint-employer to the actual signatory-employer to hold it liable for alleged wage 14 and hour claims, while at the same time arguing the arbitration provision only applies to the signatory- 15 employer. 16 17 Here, there can be no dispute that the claims against Barton are intertwined and related to 18 Lozano’s employment. The complaint also identifies both defendants as her employer. (Compl. at § 19 20.) As a result, Barton can rely on the agreement to compel Lozano to arbitrate. 20 The Ending Forced Arbitration of Sexual Assault and Harassment Act 21 As for Lozano’s reliance upon The Ending the Forced Arbitration of Sexual Assault and 22 Harassment Act (“Act”), it provides “[n]otwithstanding any other provision of this title, at the election 23 of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, ... 24 25 no predispute arbitration agreement ... shall be valid or enforceable with respect to a case which is 26 filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual 27 harassment dispute. (9 U.S.C. §402(a).) 28 8- Whether the Act applies is determined under federal law and, by statutory mandate, the court, not the arbitrator, is to determine the validity and enforcement of a pre-dispute arbitration agreement in association with a case involving sexual harassment or assault. (9 U.S.C. §402, subd. (b).) As a result, and regardless of the delegation clause, this Court should determine if the Act precludes the enforcement of the agreement in whole or in part. The Act was adopted on March 3, 2022. Upon enactment, it became effective immediately. (Murrey v. Superior Court (General Electric Company) (2023) 87 Cal.App.Sth 1223, 1235.) The main dispute in this case is whether the prohibition against arbitration of sexual harassment cases 10 applies retroactively because Lozano alleges that her employment ended in January 2022 (Compl. at 11 {| 107), but she filed suit after the effective date of the Act. 12 There is a presumption that a newly adopted statute is not retroactive. (Landgraf v. USI Film 13 Products (1994) 511 U.S. 244, 265.) Nonetheless, a statute is not operating retrospectively because it 14 is applied to a case arising from conduct that occurred earlier than the statute’s enactment. (/d. at p. 15 269.) The Court must ask, “whether the new provision attaches new legal consequences to events 16 17 completed before its enactment.” (/d. at pp. 269-70.) If so, courts have declined to give retroactive 18 effect when the statute burdens private rights unless Congress made clear that was its intent. (/d. at 19 pp. 270 and 272.) The preclusion of applying the retroactive effect to statutes generally involves cases 20 affecting contractual or property rights. (/d. at p. 271.) 21 If a case implicates a federal statute enacted after the events in the lawsuit, the court’s first 22 task is to determine if Congress expressly prescribed for the statute to be applied retroactively; if not, 23 then the court must determine whether the new statute would have retroactive effect; and if it does, 24 25 then the presumption will provide that it not govern unless clear congressional intent favoring the 26 application. (Landgraf, supra, 511 U.S. at p. 280.) 27 Here, if the Act were applied to the arbitration agreement, it would preclude arbitration of at 28 least the harassment cause of action even though the parties had contractually agreed to arbitration. -9- From this perspective, application of the statute would be “retroactive,” but nothing in the Act’s two adopted statutes expressly state a retroactive intent by Congress. (See 9 U.S.C. §§ 401 [definitions] and 402 [substance].) As for the legislative history, “there is some debate about whether it matters when the underlying sexual harassment or assault took place” and the legislative history material appears inconsistent. (Murrey v. Superior Court (2023) 87 Cal.App.Sth 1223, 1235.) For instance, a “marginal note to the Act” states the “Act, and the amendments made by this Act, shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” 10 (ibid. [citing Pub.L. No. 117-90, § 3, reprinted in notes foll. 9 U.S.C. § 401 and also noting that the 11 district court in Steinberg v. Capgemini Am., Inc. (E.D.Pa. Aug. 16, 2022, Civ. A. No. 22-489) 2022 12 WL 3371323 pp. *2-3, 2022 U.S.Dist. Lexis 146014 p. *6, relied upon the note in concluding the 13 dispute or claim must arise after March 3, 2022.) On the other hand, “[dJuring debate, Congress 14 clarified that the Act is retroactive ‘as to contracts currently signed,’ but not to ‘cases currently 15 pending.” (Murrey, supra, 87 Cal.App.Sth at p. 1235.) 16 17 However, the issue was not resolved in Murrey and several district courts resolving the issue 18 conclude that it applies to disputes or claims that arise or accrue on or after the Act’s date of enactment 19 based on the legislative history statements on its applicability. (See Walters v. Starbucks Corp. 20 (S.D.N.Y. 2022) -- F.Supp.3d ---, 2022 WL 3684901, at p. *2; Newcombe-Dierl v. Amgen (C.D.Cal. 21 2022) 2022 WL 3012211, at p. *5; Woodruff v. Dollar General Corporation (D.Del. 2022) 2022 WL 22 17752359, at p. *3; Steinberg v. Capgemini America, Inc. (E.D.Pa. 2022) 2022 WL 3371323, at p. 23 *2.) 24 25 As a result, the Act would not apply in this case since Lozano was terminated before the Act’s 26 enactment and there is no indication any of the harassment occurred afterward. 27 28 //1 -10- The Unconscionability Defense Finally, as for the unconscionability defense, “unless the employee challenged the delegation clause specifically, the court must treat the delegation clause as valid under the FAA and enforce it, leaving the employee’s unconscionability challenge to the validity of the arbitration agreement as a whole for the arbitrator.” (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.Sth 748, 767 [citing Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 71.) Again, the delegation clause was not challenged in this case, so the defense must be decided by the arbitrator. For all these reasons, the motion will be granted. 10 DISPOSITION 11 The Court will grant the motion, compel arbitration, and stay the litigation. 12 The FAA applies; a contract exists; the agreement covers the pending claims; Barton can 13 enforce the agreement as the alleged joint employer (Compl. § 20; Garcia v. Pexco, LLC (2017) 11 14 Cal.App.Sth 782, 786); and defendants’ failure to sign the agreement does not preclude enforcement. 15 (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 177.) 16 17 The Ending the Forced Arbitration of Sexual Assault and Harassment Act does not apply since 18 Lozano quit, all the alleged misconduct predate the Act (Compl. at § 107), and the Act is not 19 retroactive. (See 9 U.S.C. §§ 401-402; Pub.L. No. 117-90, § 3, reprinted in notes foll. 9 U.S.C. § 401; 20 Steinberg v. Capgemini Am., Inc. (E.D.Pa. Aug. 16, 2022, Civ. A. No. 22-489) 2022 WL 3371323 21 pp. *2-3, 2022 U.S.Dist. Lexis 146014 p. *6; Newcombe-Dierl v. Amgen (C.D.Cal. 2022) 2022 WL 22 3012211, at p. *5.) 23 No challenges were made to the delegation clause so the unconscionability defense must be 24 25 left for the arbitrator. (Mendoza v. Trans Valley Ira sport (2022) 75 Cal.App.Sth 748, 767.) ) 26 Dated: _ (C2 6/73 27 Judge of the Superior Court 28 -ll- SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN BERNARDINO, SAN BERNARDINO JUSTICE CENTER IN THE MATTER OF: KIM LOZANO, an individual, Plaintiff vs. RICHARD BARTON, RICHARD BARTON ENTERPRISES dba CALIFORNIA PACKAGING AND DISPLAY, a California Corporation; and DOES 1-10, inclusive, Defendant CASE NO.: CIVSB2224810 PROOF OF SERVICE BY MAIL The undersigned hereby declares: | am a citizen of the United States of America, over the age of eighteen years, 10 employed in the above-named county, and not a party to nor interested in this proceeding. My business address is 247 W. 3° St., San Bernardino, California 92415. | am a Deputy Clerk of said County and on the date shown below, 11 served a copy of the following: 12 RULING ON DEFENDANT'S MOTION TO COMEL ARBITRATION 13 Q Enclosed in a sealed envelope, first class postage prepaid in the U.S. mail at the location shown above, mailed to the interested parties addressed as shown below: 14 oO By Hand Delivery, | caused such document to be served on all parties to this action to the interested parties addressed as shown below: 15 16 NIXON PEABODY, LLP LAW OFFICES OF WENDY M. HOUSMAN, ESQ Richard J. Frey Wendy M. Housman, Esq. 17 David M. Prager 28544 Old Town Front Street, Suite 301 Alice Kwak Temecula, Ca 92590 18 300 S. Grand Avenue, Suite 4100 Los Angeles, CA 90071-3151 19 At the time of mailing this notice there was regular communication between the place of mailing and the place(s) to 20 which this notice was addressed 21 | declare under penalty of perjury the foregoing to be true and correct 22 DATED: October 10, Q20a3 BY: 23 ullai istftive As: 24 25 26 27 28 1.