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1 Ryan L. Eddings, Bar No. 256519
reddings@littler.com
2 Samuel O. Munson, Bar No. 333317
smunson@littler.com
3 LITTLER MENDELSON, P.C.
5200 North Palm Avenue
4 Suite 302
Fresno, California 93704.2225
5 Telephone: 559.244.7500
Fax No.: 559.244.7525
6
7 Attorneys for Defendants
HOMER T. HAYWARD LUMBER CO.; UNITED
8 STAFFING ASSOCIATES, LLC
9
SUPERIOR COURT OF THE STATE OF CALIFORNIA
10
COUNTY OF SANTA BARBARA - SOUTH COUNTY (ANACAPA)
11
12
CEDRIC A. BEATY, and on behalf of the State of Case No. 22CV04265
13 California and aggrieved persons, [related to Case No. 22CV04267]
14 Plaintiff,
DEFENDANTS’ REPLY TO
15 v. PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ MOTION TO COMPEL
16 HOMER T. HAYWARD LUMBER CO., a ARBITRATION AND TO STAY
California corporation; UNITED STAFFING PROCEEDINGS
17 ASSOCIATES, LLC, a California limited liability
company; and DOES 1 through 10, inclusive, ASSIGNED FOR ALL PURPOSES TO
18 JUDGE DONNA D. GECK
Defendants.
19 Date: May 24, 2024
Time: 10:00 a.m.
20 Dept: 4
21 Trial Date: TBD
Complaint Filed: October 28, 2022
22
23
24
25
26
27
LITTLER 28
MENDELSON, P.C.
5200 North Palm
Avenue
Suite 302
Fresno, CA DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
93704.2225 ARBITRATION AND TO STAY PROCEEDINGS
559.244.7500
1 I. INTRODUCTION
2 Defendants HOMER T. HAYWARD LUMBER CO. (“HLC”) and UNITED
3 STAFFING ASSOCIATES, LLC (“USA”), (collectively “Defendants”) hereby submit this Reply in
4 support of their Motion to Compel Arbitration and Stay Proceedings, in the Private Attorneys General
5 Act (“PAGA”) case concerning the parties. Plaintiffs’ opposition to Defendants’ Motion to Compel
6 Arbitration (“Opposition”) is replete with legal misstatements and ignorance of the plain terms of the
7 Plaintiff Beaty’s Dispute Resolution Agreement (“DRA”). First, despite noting the five factors
8 analyzed to determine whether a party waives the right to arbitrate, Plaintiffs provides only a self-
9 serving analysis of one of the holistically considered factors. Considering the factors in totality, in no
10 way have Defendants waived their contractual rights to arbitrate. Second, Plaintiff’s insistence that the
11 FAA does not apply to the dispute runs afoul of the first sentence of the DRA and the clear intent of
12 the Parties. Third, the DRA is not procedurally or substantively unconscionable and even if any term
13 were deemed unconscionable the term is severable. Fourth, Plaintiff Valdovinos in the class action
14 case is not a party in the PAGA action and for that reason, a stay of claims against the Defendants is
15 proper.
16 II. DEFENDANTS DID NOT WAIVE THEIR RIGHT TO ARBITRATION
17 A. Analysis of All Five Waiver Factors Demonstrates Defendants Have Not Waived
the Right to Arbitrate
18
19 The DRA explicitly states the “Agreement is governed by the Federal Arbitration Act,
20 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce.” (See Declaration of Shawnte
21 Priest (“Priest Decl.”) ¶ 6, Ex. A at Section 1.) Accordingly, the question of waiver of the right to
22 arbitrate is a question for federal law. (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 963
23 (“Courts have recognized that where the FAA applies, whether a party has waived a right to arbitrate
24 is a matter of federal, not state, law.”) Following the United States Supreme Court’s decision in
25 Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022), the applicable federal waiver test includes the
26 factors articulated in St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 (St.
27 Agnes), minus the prejudice factor: (1) whether the party’s actions are inconsistent with the right to
LITTLER MENDELSON,
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5200 North Palm Avenue
Suite 302
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Fresno, CA 93704.2225
559.244.7500
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 arbitrate; (2) whether “the litigation machinery has been substantially invoked” and the parties “were
2 well into preparation of a lawsuit” before the party notified the opposing party of an intent to arbitrate;
3 (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long
4 period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without
5 asking for a stay of the proceedings; (5) “whether important intervening steps [e.g., taking advantage
6 of judicial discovery procedures not available in arbitration] had taken place” (St. Agnes. at p. 1196.)
7 The party claiming that the other has waived the right to arbitrate “bears a heavy burden of proof.”
8 (Id. at p. 1195.)
9 Plaintiff fails to meet their heavy burden of proof by conducting an incomplete and
10 selective analysis of the St. Agnes factors in his Opposition. While Plaintiff mentions that courts
11 consider five factors in ruling on waiver, Plaintiffs emphasize ‘delay.’ While alleged delay is
12 considered, it has no greater force or weight than the other five factors. (Garcia v. Haralambos
13 Beverage Co., 59 Cal.App.5th 534, 541 (Cal. Ct. App. 2021) (“No one of these factors predominates
14 and each case must be examined in context.”); Burton v. Cruise, 190 Cal.App.4th 939, 944-45 (Cal.
15 Ct. App. 2011) (“waiver is not a mechanical process, and no one factor is predominant”); Lewis v.
16 Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 444.) Thus, the Court should look to
17 the each of the St. Agnes factors to find there has clearly been no waiver.
18 1. At All Times Defendants Acted in Consistently with Their Right to
Arbitrate, Including by Plaintiffs’ Own Admissions
19
20 The first factor, whether the party’s actions are inconsistent with the right to arbitrate
21 balances for Defendants because of Defendants’ consistent assertion of its right. Plaintiff admits
22 Defendants took the following actions:
23
“On February 13, 2023, Defendants filed their General Denial and expressly referenced the
24 purported arbitration agreement in their Thirty-Seventh Affirmative Defense.” Plaintiff’s
Opposition to Defendants’ Motion to Compel Arbitration (“Opp.”) at 7:23-24.
25 “On April 4, 2023, Defendants served written responses to Plaintiffs’ first set of discovery,
without substantive responses and only asserting the improper objection that the DRA
26 voids any discovery outside of arbitration.” Opp. at 8:3-5.
27 Contrary to Plaintiff’s authorities, the facts here suggest no waiver. (See Gloster v. Sonic Automotive,
LITTLER MENDELSON,
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5200 North Palm Avenue
Suite 302
2
Fresno, CA 93704.2225
559.244.7500
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 Inc. (2014) 226 Cal.App.4th 438 449–50 [defendants, who filed their motion to compel arbitration one
2 year after complaint filed, did not waive right to arbitrate by filing a procedural motion for summary
3 judgment and responding to discovery because they had consistently asserted their intention to
4 arbitrate by “insisting on the requirement of arbitration in communications with [the plaintiff] and his
5 counsel.”]; compare with Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 558 [finding
6 petitioner acted inconsistent with the right to arbitrate where the defendant: responded to plaintiff’s
7 discovery without objecting on the basis of arbitration, cross examined third party witnesses at
8 depositions, and took “full advantage of the opportunity to test the validity of Guess’s claims both
9 legally and factually.”] compare with Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443,
10 1451 [finding petitioner acted inconsistent with the right to arbitrate where petitioner filed two
11 demurrers, engaged in efforts to schedule discovery, and omitted to mark or assert arbitration in its
12 case management statement].) Given these examples, Defendants have taken no action inconsistent
13 with their right to compel arbitration. Defendants’ continually asserted their intent to arbitrate at all
14 times besides those mentioned by Plaintiffs:
15
On June 15, 2023, Defendants filed a Case Management Statement indicating the
16 scheduled mediation and repeatedly mentioning the intent to arbitrate. Munson Supp. Decl.
at ¶ 3, Ex. A.
17 On September 21, 2023, Defendants again filed a form CM-110 Case Management
Statement demonstrating the intent to arbitrate. Munson Supp. Decl. at ¶ 4, Ex. B.
18 On January 11, 2024, Defendants filed another form CM-110 Case Management Statement
19 reiterating the intent to arbitrate. Munson Supp. Decl. at ¶ 5, Ex. C.
On February 28, 2024, Defendants requested Plaintiff stipulate to arbitration and
20 consolidation of the PAGA matter. Munson Supp. Decl. at ¶ 6, Ex. D.
On March 14, 2024, Defendants filed the present Motion to Compel Arbitration and Stay
21 or Dismiss Judicial Proceedings. Munson Supp. Decl. at ¶ 7.
22 The parties stipulated to mediation in May 2023 and mediation was held in September
2023. During this time, the parties engaged in efforts to prepare for mediation. While
23 Defendant did not file its motion to compel arbitration during this time, it always
maintained its right to do so if mediation was unsuccessful. Munson Decl. at ¶ 2; Munson
24 Supp. Decl. at ¶ 2.
25 Each of the events above, in addition to those mentioned by Plaintiff demonstrate that Defendants
26 have acted consistently with their right to arbitrate.
27 2. “Litigation Machinery” has not been Substantially Invoked Because of
LITTLER MENDELSON,
Defendants Continued Assertion of the Right to Arbitrate, and
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DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 Defendants’ Minimal Participation in Litigation
2 Plaintiff omits meaningful analysis of the second St. Agnes factor, whether, “the
3 litigation machinery has been substantially invoked.” In determining this courts look to factors such
4 as whether: the petitioning party raised arbitration as an affirmative defense, the petitioning party made
5 the opposition aware of the intent to arbitrate early in litigation, the petitioning party filed dispositive
6 motions, the petitioning party propounded discovery, and whether the petitioning party took any
7 depositions. (See Spracher v. Paul M. Zagaris, Inc. (2019) 39 Cal.App.5th 1135 [holding petitioning
8 party substantially invoked the litigation machinery by failing to mention arbitration until two years
9 into litigation, failing to list arbitration as an affirmative defense, propounding extensive discovery,
10 deposing the plaintiff, filing multiple demurrers, and filing a motion for summary judgment]; see also
11 Law Offices of Dixon R. Howell v. Valley (2005) 129 Cal.App.4th 1076, 1099-1100 [holding “litigation
12 machine” substantially invoked where defendant made summary judgment motion, participated in
13 mandatory settlement conference, propounded discovery, and conducted multiple depositions].)
14 Litigation machinery has not been substantially invoked, let alone invoked. Defendants have not filed
15 a demurrer, propounded discovery, filed for summary judgment, or taken any depositions. (Munson
16 Supp. Decl. ¶ 8) Defendants have taken pains to make Plaintiff aware of their right to and intent to
17 arbitrate this dispute, as previously outlined. Defendants have at-all-times maintained that they would
18 seek to submit Plaintiff’s claims to arbitration should negotiations provide unsuccessful. (Munson
19 Supp. Decl. at ¶ 3-9.) For this reason, Defendants have at all times maintained their right to invoke
20 the arbitration agreement and have not substantially invoked the litigation machinery. (id.)
21 3. Any Alleged Delay in Bringing This Motion is Reasonable Given the
Parties’ Ongoing Mediation Efforts
22
23 The third St. Agnes factor considers whether a party either requested arbitration
24 enforcement close to the trial date or delayed for a long period before seeking a stay. A trial date has
25 not been set in this case. (Munson Supp. Decl. ¶ 9). Defendants cannot request arbitration close to a
26 date that has not yet been determined.
27 As for delay, the relevant question is whether any delay was reasonable. (Davis, supra,
LITTLER MENDELSON,
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5200 North Palm Avenue
Suite 302
4
Fresno, CA 93704.2225
559.244.7500
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 84 Cal.App.5th 956, 969.) Defendants filed their general denial on February 13, 2023, asserting
2 arbitration as an affirmative defense. (Opp. at 7:25-26.) After meeting and conferring on multiple
3 occasions following the answer to Plaintiffs’ complaint, the parties agreed to engage in mediation in
4 May 2023. (Munson Supp. Decl. ¶ 2.) The parties mediated the dispute on September 19, 2023.
5 Immediately following the mediation for several months, and continuing to this day, the parties remain
6 engaged in discussions with the mediator regarding settlement. On April 11, 2024, Defendants
7 received communication from the mediator demonstrating Plaintiffs’ willingness to continue post-
8 mediation settlement discussions through the mediator. (Munson Supp. Decl. ¶ 9.) To the extent
9 Defendants have delayed in filing the present motion they did so to facilitate and complete the
10 mediation process. Further, contrary to Plaintiffs’ contention that Defendants, “did not advise the
11 Court of their intent to prioritize mediation ahead of arbitration as “prophylactic clarification for
12 delay,” Defendants notified the court and Plaintiffs of Defendants’ desire to arbitrate should mediation
13 fail in its Case Management Statements filed on June 15, 2023, September 21, 2023, and January 11,
14 2024, as explained in earlier analysis. At all times Defendants asserted their rights and explained to
15 the court and Plaintiff that it would pursue this motion should mediation fail. Participation in mediation
16 should not prejudice Defendants as Plaintiff seems to assert. Plaintiff offers no counter to this apart
17 from the insinuation that a formal stipulation was no entered. In light of the circumstances surrounding
18 the case since May 2023, any delay is reasonable.
19 4. Defendants’ Did Not File a Counterclaim & Important Intervening Steps
Did Not Take Place
20
21 The fourth St. Agnes factor cuts against finding waiver as well. This factor asks whether a
22 defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings.
23 Plaintiffs conveniently neglected to list this factor in Opposition when listing the St. Agnes factors.
24 Opp. at 9:15-24. Unsurprisingly, the factor weighs completely in favor of Defendants who here, did
25 not file a counterclaim. (Munson Supp. Decl. at ¶ 8.) The final applicable St. Agnes factor analyzes,
26 “whether important intervening steps [e.g., taking advantage of judicial discovery procedures not
27 available in arbitration] had taken place.” Saint Agnes Medical Center v. PacifiCare of
LITTLER MENDELSON,
P.C. 28
5200 North Palm Avenue
Suite 302
5
Fresno, CA 93704.2225
559.244.7500
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 California (2003), supra, 31 Cal.4th at 1196. Courts analyze this factor identically to the second, third,
2 and fourth factor. Because these factors all balance in favor of Defendants, so too does this factor.
3 Because all St. Agnes factors support a finding that Defendants did not waive their right to arbitrate,
4 Defendants did not waive.
5 III. THE FAA UNDOUBTEDLY APPLIES, PREEMPTING LABOR CODE SECTIONS
229 AND 432.6
6
A. The Plain Text of The DRA Calls for the Application of the FAA, Preempting
7 Labor Code Sections 229 and 432.6
8 Plaintiffs attempt to circumvent the arbitration Plaintiff Beaty agreed to by claiming
9 the FAA does not apply, and because the FAA does not apply, California law prohibits arbitration of
10 Plaintiffs’ claims. This argument fails for numerous reasons. The FAA applies to contracts that
11 involve interstate commerce (9 U.S.C. §§ 1, 2), but since arbitration is a matter of contract, the FAA
12 also applies if it is so stated in the agreement. (Barrera v. Apple Am. Grp. LLC (2023) 95 Cal.App.5th
13 63, 76 [applying Victrola in the context of an employment arbitration agreement] citing Victrola 89,
14 LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355, 260; see also Davis, supra, 84
15 Cal.App.5th 956, 963 [“The FAA applies to contracts that involve interstate commerce…but since
16 arbitration is a matter of contract, the FAA also applies if it is so stated in the agreement.”].) First,
17 Plaintiffs completely ignore the language of the Arbitration Agreement entered with Defendants,
18 which specifically provides (and to which Plaintiff agreed) that the “Agreement is governed by the
19 Federal Arbitration Act, 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce.” (See
20 Declaration of Shawnte Priest [“Priest Decl.”] ¶ 6, Ex. A at Section 1. This statement alone is
21 sufficient to apply the FAA. (See Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th
22 376, 383 [“(W)e examine the language of the contract to determine whether the parties intended to
23 apply the FAA to the exclusion of California procedural law”]; Rodriguez v. Am. Technologies, Inc.
24 (2006) 136 Cal.App.4th 1110, 1122 [“(T)here is no ambiguity regarding the parties' intent. They
25 adopted the FAA — all of it — to govern their arbitration”].)
26 Accordingly, and as Plaintiffs explain in their Opposition, where the FAA applies,
27 Labor Code sections 229 and 432.6 are preempted. “Bonta [Chamber of Commerce of the United
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Fresno, CA 93704.2225
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DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 States v. Bonta (62 F.4th 473 (9th Cir. 2022)] makes clear, preemption is only a result of conflict
2 between the FAA and the California statutes, such that preemption only occurs when the FAA applies:
3 ‘Because all provisions of [Labor Code section 432.6] work together to burden the formation of
4 arbitration agreements, we conclude that the FAA preempts [Labor Code section 432.6] as a whole to
5 the extent it applies to arbitration agreements.’ (Id. at 490 (emphasis added).) Likewise, Perry [Perry
6 v. Thomas, 482 U.S. 483 (1987),] states that under the Supremacy Clause, the provision of the FAA
7 governing enforcement of arbitration agreements preempts Labor Code §229. (Perry at 490-492.).”
8 (Opp. 13:7-15.) Thus, the FAA applies and preempts Labor Code sections 229 and 432.6.
9 Even assuming for the sake of argument, the Court does not find preemption, it should
10 find that (i) Labor Code section 229 only requires litigation of individual claims, not PAGA action
11 claims, and (ii) more importantly, none of Plaintiff’s causes of action are governed by Labor Code
12 sections 200 to 244 or considered claims for unpaid wages in order to fall within the ambit of Labor
13 Code section 229. (Lab. Code, § 229 [referring to “actions to enforce the provisions of this article for
14 the collection of due and unpaid wages claimed by an individual”] [emphasis added]; Lane v. Francis
15 Cap. Mgmt. LLC (2014) 224 Cal.App.4th 676, 684.) For these reasons, even assuming the Labor Code
16 provisions cited were to apply, they would not preclude arbitration.
17 IV. THE DRA IS NOT PROCEDURALLY OR SUBSTANTIVELY UNCONSCIONABLE
18 At the outset, Plaintiff does not meaningfully contest the Agreement offered is the agreement
19 of the parties. Nor does Plaintiff contend that he assented to the Agreement. Finally, Plaintiff does
20 not contest that the Agreement encompasses his claims. Plaintiff bears the burden of proving
21 unconscionability and for the reasons set forth below, Plaintiff has failed to show unconscionability.
22 A. The DRA Contained an “Opt-Out” Provision and Plaintiffs’ Fail to Demonstrate
How the DRA is Susceptible to Surprise.
23
24 Both procedural and substantive unconscionability must be present for a court to exercise its
25 discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. (Fisher v.
26 MoneyGram Intern., Inc. (2021) 66 Cal.App.5th 1084, 1093.) Plaintiffs seem to contend the DRA is
27 procedurally unconscionable by alleging Plaintiff Beaty was provided with the DRA on a “take-it-
LITTLER MENDELSON,
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DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 or-leave-it basis.” Again, Plaintiff ignores the plain text of his Agreement. Section 8 of the DRA states
2 in bold typeface, “Arbitration is not a mandatory condition of Employee’s employment at the
3 Company, and therefore an Employee may submit a statement notifying the Company that the
4 employee wishes to opt out and not be subject to this Agreement.” (Priest Decl., Ex. A at section
5 8.) Section 8 goes on to provide employees with two means of notifying the company of the desire to
6 opt out of the DRA and thirty days to do so. (Id.) Assuming, for the sake of argument, Plaintiff’s
7 characterization of the “take it or leave it” nature of the agreement misstates the facts and is without
8 any merit. Moreover, “it is well-settled that [such] contracts typically contain some aspects of
9 procedural unconscionability” and yet they are regularly enforced. (Baltazar v. Forever 21, Inc. (2016)
10 62 Cal.4th 1237, 1244 [stating that ordinary contracts of adhesion “are indispensable facts of modern
11 life that are generally enforced”]; Serpa v. Calif. Surety Investigations, Inc. (2013) 215 Cal.App.4th
12 695, 704; Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1292 [“Arbitration
13 clauses in employment contracts have been upheld despite claims that the clauses were unconscionable
14 because they were presented as part of an adhesion contract on a take-it-or-leave-it basis. [Citations
15 omitted.] ‘[T]he compulsory nature of a pre-dispute arbitration agreement does not render the
16 agreement unenforceable on grounds of coercion or for lack of voluntariness’”].) Courts have rejected
17 a finding that an employee’s inability to modify an arbitration agreement makes that agreement
18 procedurally unconscionable. (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1476.)
19 Plaintiffs also argue the DRA is procedurally unconscionable due to its, “character as
20 a pre-printed prolix form which is susceptible to surprise.” (Opp. 17:1-4.) In 2024 it belies the current
21 state of technology and employment agreements to suggest that the “pre-printed” nature of a document
22 means it is procedurally unconscionable. Essentially all employment related agreements would be
23 deemed procedurally unconscionable if this were the case. Plaintiffs incorrectly cite to Serpa v.
24 California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, Nyulassy v. Lockheed Martin Corp.
25 (2004) 120 Cal.App.4th 1267, Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205 in support of this
26 argument. In Serpa, the court did not find procedural unconscionability despite the agreement being
27 presented on a “take it or leave it basis” because, there was no indication that the preprinted agreement
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DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 contained any element of surprise. (Serpa v. California Surety Investigations, supra, 215 Cal.App.4th
2 at p. 704.) In Nyulassy, the court did not find procedural unconscionability where, like here, the
3 plaintiff presented no evidence that he was unfairly surprised by the agreement. (Nyulassy v. Lockheed
4 Martin Corp. 120 Cal.App.4th 1329.) In Penilla, the court found the arbitration agreement at issue
5 was prolix because it was presented only in English to Spanish-speaking plaintiffs and because the
6 plaintiffs were given a single day to review the agreement. Here, Plaintiff has produced no evidence
7 of language barriers or Plaintiff’s understanding of the agreement nor contradicted the fact that he had
8 thirty days to review the DRA before opting out. For these reasons, Plaintiff cannot prove procedural
9 unconscionability, and the court should conclude the DRA stands.
10 B. The DRA was Not Permeated with Unconscionability and Any Isolated
Unconscionable Term May be Severed
11
12 Given the lack of procedural unconscionability, the DRA is not “permeated with
13 unconscionability” such that the entire agreement is null. Should the court find any provisions
14 substantively unconscionable, it may simply sever the unenforceable terms. “Where a contract has
15 several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part,
16 the contract is void as to the latter and valid as to the rest.” (Cal. Civ. Code § 1599.) The “refusal to
17 enforce an agreement altogether should be limited to situations where the agreement is ‘permeated’
18 by unconscionability.” (Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257, 1274 [holding
19 court abused its discretion in failing to sever offending term]; Poublon v. C.H. Robinson Co. (9th Cir.
20 2017) 846 F.3d 1251, 1273 [stating the existence of more than one unconscionable term does not
21 render the agreement unenforceable unless “the central purpose of the contract is tainted with
22 illegality”].). Severance of an unconscionable provision is inappropriate where “the court would have
23 to, in effect, reform the contract, not through severance or restriction, but by augmenting it with
24 additional terms.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83.)
25 However, severance here would not result in a reformation of the contract or a requirement to augment
26 it with additional terms. To the extent this Court were to find any offending provisions, this Court
27 could simply delete them, without requiring anything more. (See Mills v. Facility Solutions Group,
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DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
1 Inc. (2022) 84 Cal.App.5th 1035, 1067 [acknowledging that several provisions in an arbitration
2 agreement can be subject to severance at one time, such as a sentence barring tolling of the statute of
3 limitation, references to an employee paying filings fees, and provisions requiring a party to pay for
4 costs associated with postponement, provided that they would not need to be rewritten].)
5 V. A STAY IS NECESSARY AND PRUDENT
6 Plaintiffs assert in opposition that a stay is unwarranted. (Opp. 19:15-20:20.) Of
7 course, Plaintiff omits salient issues involved in this case that necessitate a stay. United Staffing offers
8 its DRA it entered into with Plaintiff Beaty. Plaintiff erroneously asserts that, “one plaintiff (Beaty)
9 may be order to arbitrate claims while other related plaintiff cannot bee (Valdovinos has no arbitration
10 agreement.)” (Opp. 19:18-20.) Valdovinos is not a party to the PAGA action and was never
11 employed by United Staffing Associates. Plaintiff offers argument only as to the California
12 Arbitration Act grounds for a stay (Cal. Code. Civ. Proc. §§ 1281.2(c) and 1281.4) but do not address
13 the grounds under the Federal Arbitration Act (9 U.S.C. § 3.) (See Defendant’s Notice of Motion and
14 Motion, page 2.). California’s decision in Adolph suggests that in the case of PAGA claims, an
15 arbitration may be had on a Plaintiff’s individual “aggrieved employee” status to determine standing.
16 (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1124.) Defendants respectfully request
17 that the Court order Plaintiff to arbitrate his claims and stay the matter while these claims are pending.
18 Dated: May 17, 2024 LITTLER MENDELSON, P.C.
19
20
21 Ryan L. Eddings
Samuel O. Munson
22
Attorneys for Defendants
23 HOMER T. HAYWARD LUMBER CO.;
UNITED STAFFING ASSOCIATES, LLC
4878-3932-4095, v. 1
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25
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DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND TO STAY PROCEEDINGS
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1 Ryan L. Eddings, Bar No. 256519 reddings@littler.com 2 Samuel O. Munson, Bar No. 333317 smunson@littler.com 3 LITTLER MENDELSON, P.C. 5200 North Palm Avenue 4 Suite 302 Fresno, California 93704.2225 5 Telephone: 559.244.7500 Fax No.: 559.244.7525 6 7 Attorneys for Defendants HOMER T. HAYWARD LUMBER CO.; UNITED 8 STAFFING ASSOCIATES, LLC 9 SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 COUNTY OF SANTA BARBARA - SOUTH COUNTY (ANACAPA) 11 12 CEDRIC A. BEATY, and on behalf of the State of Case No. 22CV04265 13 California and aggrieved persons, [related to Case No. 22CV04267] 14 Plaintiff, DEFENDANTS’ REPLY TO 15 v. PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL 16 HOMER T. HAYWARD LUMBER CO., a ARBITRATION AND TO STAY California corporation; UNITED STAFFING PROCEEDINGS 17 ASSOCIATES, LLC, a California limited liability company; and DOES 1 through 10, inclusive, ASSIGNED FOR ALL PURPOSES TO 18 JUDGE DONNA D. GECK Defendants. 19 Date: May 24, 2024 Time: 10:00 a.m. 20 Dept: 4 21 Trial Date: TBD Complaint Filed: October 28, 2022 22 23 24 25 26 27 LITTLER 28 MENDELSON, P.C. 5200 North Palm Avenue Suite 302 Fresno, CA DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL 93704.2225 ARBITRATION AND TO STAY PROCEEDINGS 559.244.7500 1 I. INTRODUCTION 2 Defendants HOMER T. HAYWARD LUMBER CO. (“HLC”) and UNITED 3 STAFFING ASSOCIATES, LLC (“USA”), (collectively “Defendants”) hereby submit this Reply in 4 support of their Motion to Compel Arbitration and Stay Proceedings, in the Private Attorneys General 5 Act (“PAGA”) case concerning the parties. Plaintiffs’ opposition to Defendants’ Motion to Compel 6 Arbitration (“Opposition”) is replete with legal misstatements and ignorance of the plain terms of the 7 Plaintiff Beaty’s Dispute Resolution Agreement (“DRA”). First, despite noting the five factors 8 analyzed to determine whether a party waives the right to arbitrate, Plaintiffs provides only a self- 9 serving analysis of one of the holistically considered factors. Considering the factors in totality, in no 10 way have Defendants waived their contractual rights to arbitrate. Second, Plaintiff’s insistence that the 11 FAA does not apply to the dispute runs afoul of the first sentence of the DRA and the clear intent of 12 the Parties. Third, the DRA is not procedurally or substantively unconscionable and even if any term 13 were deemed unconscionable the term is severable. Fourth, Plaintiff Valdovinos in the class action 14 case is not a party in the PAGA action and for that reason, a stay of claims against the Defendants is 15 proper. 16 II. DEFENDANTS DID NOT WAIVE THEIR RIGHT TO ARBITRATION 17 A. Analysis of All Five Waiver Factors Demonstrates Defendants Have Not Waived the Right to Arbitrate 18 19 The DRA explicitly states the “Agreement is governed by the Federal Arbitration Act, 20 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce.” (See Declaration of Shawnte 21 Priest (“Priest Decl.”) ¶ 6, Ex. A at Section 1.) Accordingly, the question of waiver of the right to 22 arbitrate is a question for federal law. (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 963 23 (“Courts have recognized that where the FAA applies, whether a party has waived a right to arbitrate 24 is a matter of federal, not state, law.”) Following the United States Supreme Court’s decision in 25 Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022), the applicable federal waiver test includes the 26 factors articulated in St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 (St. 27 Agnes), minus the prejudice factor: (1) whether the party’s actions are inconsistent with the right to LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 1 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 arbitrate; (2) whether “the litigation machinery has been substantially invoked” and the parties “were 2 well into preparation of a lawsuit” before the party notified the opposing party of an intent to arbitrate; 3 (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long 4 period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without 5 asking for a stay of the proceedings; (5) “whether important intervening steps [e.g., taking advantage 6 of judicial discovery procedures not available in arbitration] had taken place” (St. Agnes. at p. 1196.) 7 The party claiming that the other has waived the right to arbitrate “bears a heavy burden of proof.” 8 (Id. at p. 1195.) 9 Plaintiff fails to meet their heavy burden of proof by conducting an incomplete and 10 selective analysis of the St. Agnes factors in his Opposition. While Plaintiff mentions that courts 11 consider five factors in ruling on waiver, Plaintiffs emphasize ‘delay.’ While alleged delay is 12 considered, it has no greater force or weight than the other five factors. (Garcia v. Haralambos 13 Beverage Co., 59 Cal.App.5th 534, 541 (Cal. Ct. App. 2021) (“No one of these factors predominates 14 and each case must be examined in context.”); Burton v. Cruise, 190 Cal.App.4th 939, 944-45 (Cal. 15 Ct. App. 2011) (“waiver is not a mechanical process, and no one factor is predominant”); Lewis v. 16 Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 444.) Thus, the Court should look to 17 the each of the St. Agnes factors to find there has clearly been no waiver. 18 1. At All Times Defendants Acted in Consistently with Their Right to Arbitrate, Including by Plaintiffs’ Own Admissions 19 20 The first factor, whether the party’s actions are inconsistent with the right to arbitrate 21 balances for Defendants because of Defendants’ consistent assertion of its right. Plaintiff admits 22 Defendants took the following actions: 23 “On February 13, 2023, Defendants filed their General Denial and expressly referenced the 24 purported arbitration agreement in their Thirty-Seventh Affirmative Defense.” Plaintiff’s Opposition to Defendants’ Motion to Compel Arbitration (“Opp.”) at 7:23-24. 25 “On April 4, 2023, Defendants served written responses to Plaintiffs’ first set of discovery, without substantive responses and only asserting the improper objection that the DRA 26 voids any discovery outside of arbitration.” Opp. at 8:3-5. 27 Contrary to Plaintiff’s authorities, the facts here suggest no waiver. (See Gloster v. Sonic Automotive, LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 2 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 Inc. (2014) 226 Cal.App.4th 438 449–50 [defendants, who filed their motion to compel arbitration one 2 year after complaint filed, did not waive right to arbitrate by filing a procedural motion for summary 3 judgment and responding to discovery because they had consistently asserted their intention to 4 arbitrate by “insisting on the requirement of arbitration in communications with [the plaintiff] and his 5 counsel.”]; compare with Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 558 [finding 6 petitioner acted inconsistent with the right to arbitrate where the defendant: responded to plaintiff’s 7 discovery without objecting on the basis of arbitration, cross examined third party witnesses at 8 depositions, and took “full advantage of the opportunity to test the validity of Guess’s claims both 9 legally and factually.”] compare with Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443, 10 1451 [finding petitioner acted inconsistent with the right to arbitrate where petitioner filed two 11 demurrers, engaged in efforts to schedule discovery, and omitted to mark or assert arbitration in its 12 case management statement].) Given these examples, Defendants have taken no action inconsistent 13 with their right to compel arbitration. Defendants’ continually asserted their intent to arbitrate at all 14 times besides those mentioned by Plaintiffs: 15 On June 15, 2023, Defendants filed a Case Management Statement indicating the 16 scheduled mediation and repeatedly mentioning the intent to arbitrate. Munson Supp. Decl. at ¶ 3, Ex. A. 17 On September 21, 2023, Defendants again filed a form CM-110 Case Management Statement demonstrating the intent to arbitrate. Munson Supp. Decl. at ¶ 4, Ex. B. 18 On January 11, 2024, Defendants filed another form CM-110 Case Management Statement 19 reiterating the intent to arbitrate. Munson Supp. Decl. at ¶ 5, Ex. C. On February 28, 2024, Defendants requested Plaintiff stipulate to arbitration and 20 consolidation of the PAGA matter. Munson Supp. Decl. at ¶ 6, Ex. D. On March 14, 2024, Defendants filed the present Motion to Compel Arbitration and Stay 21 or Dismiss Judicial Proceedings. Munson Supp. Decl. at ¶ 7. 22 The parties stipulated to mediation in May 2023 and mediation was held in September 2023. During this time, the parties engaged in efforts to prepare for mediation. While 23 Defendant did not file its motion to compel arbitration during this time, it always maintained its right to do so if mediation was unsuccessful. Munson Decl. at ¶ 2; Munson 24 Supp. Decl. at ¶ 2. 25 Each of the events above, in addition to those mentioned by Plaintiff demonstrate that Defendants 26 have acted consistently with their right to arbitrate. 27 2. “Litigation Machinery” has not been Substantially Invoked Because of LITTLER MENDELSON, Defendants Continued Assertion of the Right to Arbitrate, and P.C. 28 5200 North Palm Avenue Suite 302 3 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 Defendants’ Minimal Participation in Litigation 2 Plaintiff omits meaningful analysis of the second St. Agnes factor, whether, “the 3 litigation machinery has been substantially invoked.” In determining this courts look to factors such 4 as whether: the petitioning party raised arbitration as an affirmative defense, the petitioning party made 5 the opposition aware of the intent to arbitrate early in litigation, the petitioning party filed dispositive 6 motions, the petitioning party propounded discovery, and whether the petitioning party took any 7 depositions. (See Spracher v. Paul M. Zagaris, Inc. (2019) 39 Cal.App.5th 1135 [holding petitioning 8 party substantially invoked the litigation machinery by failing to mention arbitration until two years 9 into litigation, failing to list arbitration as an affirmative defense, propounding extensive discovery, 10 deposing the plaintiff, filing multiple demurrers, and filing a motion for summary judgment]; see also 11 Law Offices of Dixon R. Howell v. Valley (2005) 129 Cal.App.4th 1076, 1099-1100 [holding “litigation 12 machine” substantially invoked where defendant made summary judgment motion, participated in 13 mandatory settlement conference, propounded discovery, and conducted multiple depositions].) 14 Litigation machinery has not been substantially invoked, let alone invoked. Defendants have not filed 15 a demurrer, propounded discovery, filed for summary judgment, or taken any depositions. (Munson 16 Supp. Decl. ¶ 8) Defendants have taken pains to make Plaintiff aware of their right to and intent to 17 arbitrate this dispute, as previously outlined. Defendants have at-all-times maintained that they would 18 seek to submit Plaintiff’s claims to arbitration should negotiations provide unsuccessful. (Munson 19 Supp. Decl. at ¶ 3-9.) For this reason, Defendants have at all times maintained their right to invoke 20 the arbitration agreement and have not substantially invoked the litigation machinery. (id.) 21 3. Any Alleged Delay in Bringing This Motion is Reasonable Given the Parties’ Ongoing Mediation Efforts 22 23 The third St. Agnes factor considers whether a party either requested arbitration 24 enforcement close to the trial date or delayed for a long period before seeking a stay. A trial date has 25 not been set in this case. (Munson Supp. Decl. ¶ 9). Defendants cannot request arbitration close to a 26 date that has not yet been determined. 27 As for delay, the relevant question is whether any delay was reasonable. (Davis, supra, LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 4 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 84 Cal.App.5th 956, 969.) Defendants filed their general denial on February 13, 2023, asserting 2 arbitration as an affirmative defense. (Opp. at 7:25-26.) After meeting and conferring on multiple 3 occasions following the answer to Plaintiffs’ complaint, the parties agreed to engage in mediation in 4 May 2023. (Munson Supp. Decl. ¶ 2.) The parties mediated the dispute on September 19, 2023. 5 Immediately following the mediation for several months, and continuing to this day, the parties remain 6 engaged in discussions with the mediator regarding settlement. On April 11, 2024, Defendants 7 received communication from the mediator demonstrating Plaintiffs’ willingness to continue post- 8 mediation settlement discussions through the mediator. (Munson Supp. Decl. ¶ 9.) To the extent 9 Defendants have delayed in filing the present motion they did so to facilitate and complete the 10 mediation process. Further, contrary to Plaintiffs’ contention that Defendants, “did not advise the 11 Court of their intent to prioritize mediation ahead of arbitration as “prophylactic clarification for 12 delay,” Defendants notified the court and Plaintiffs of Defendants’ desire to arbitrate should mediation 13 fail in its Case Management Statements filed on June 15, 2023, September 21, 2023, and January 11, 14 2024, as explained in earlier analysis. At all times Defendants asserted their rights and explained to 15 the court and Plaintiff that it would pursue this motion should mediation fail. Participation in mediation 16 should not prejudice Defendants as Plaintiff seems to assert. Plaintiff offers no counter to this apart 17 from the insinuation that a formal stipulation was no entered. In light of the circumstances surrounding 18 the case since May 2023, any delay is reasonable. 19 4. Defendants’ Did Not File a Counterclaim & Important Intervening Steps Did Not Take Place 20 21 The fourth St. Agnes factor cuts against finding waiver as well. This factor asks whether a 22 defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings. 23 Plaintiffs conveniently neglected to list this factor in Opposition when listing the St. Agnes factors. 24 Opp. at 9:15-24. Unsurprisingly, the factor weighs completely in favor of Defendants who here, did 25 not file a counterclaim. (Munson Supp. Decl. at ¶ 8.) The final applicable St. Agnes factor analyzes, 26 “whether important intervening steps [e.g., taking advantage of judicial discovery procedures not 27 available in arbitration] had taken place.” Saint Agnes Medical Center v. PacifiCare of LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 5 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 California (2003), supra, 31 Cal.4th at 1196. Courts analyze this factor identically to the second, third, 2 and fourth factor. Because these factors all balance in favor of Defendants, so too does this factor. 3 Because all St. Agnes factors support a finding that Defendants did not waive their right to arbitrate, 4 Defendants did not waive. 5 III. THE FAA UNDOUBTEDLY APPLIES, PREEMPTING LABOR CODE SECTIONS 229 AND 432.6 6 A. The Plain Text of The DRA Calls for the Application of the FAA, Preempting 7 Labor Code Sections 229 and 432.6 8 Plaintiffs attempt to circumvent the arbitration Plaintiff Beaty agreed to by claiming 9 the FAA does not apply, and because the FAA does not apply, California law prohibits arbitration of 10 Plaintiffs’ claims. This argument fails for numerous reasons. The FAA applies to contracts that 11 involve interstate commerce (9 U.S.C. §§ 1, 2), but since arbitration is a matter of contract, the FAA 12 also applies if it is so stated in the agreement. (Barrera v. Apple Am. Grp. LLC (2023) 95 Cal.App.5th 13 63, 76 [applying Victrola in the context of an employment arbitration agreement] citing Victrola 89, 14 LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355, 260; see also Davis, supra, 84 15 Cal.App.5th 956, 963 [“The FAA applies to contracts that involve interstate commerce…but since 16 arbitration is a matter of contract, the FAA also applies if it is so stated in the agreement.”].) First, 17 Plaintiffs completely ignore the language of the Arbitration Agreement entered with Defendants, 18 which specifically provides (and to which Plaintiff agreed) that the “Agreement is governed by the 19 Federal Arbitration Act, 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce.” (See 20 Declaration of Shawnte Priest [“Priest Decl.”] ¶ 6, Ex. A at Section 1. This statement alone is 21 sufficient to apply the FAA. (See Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 22 376, 383 [“(W)e examine the language of the contract to determine whether the parties intended to 23 apply the FAA to the exclusion of California procedural law”]; Rodriguez v. Am. Technologies, Inc. 24 (2006) 136 Cal.App.4th 1110, 1122 [“(T)here is no ambiguity regarding the parties' intent. They 25 adopted the FAA — all of it — to govern their arbitration”].) 26 Accordingly, and as Plaintiffs explain in their Opposition, where the FAA applies, 27 Labor Code sections 229 and 432.6 are preempted. “Bonta [Chamber of Commerce of the United LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 6 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 States v. Bonta (62 F.4th 473 (9th Cir. 2022)] makes clear, preemption is only a result of conflict 2 between the FAA and the California statutes, such that preemption only occurs when the FAA applies: 3 ‘Because all provisions of [Labor Code section 432.6] work together to burden the formation of 4 arbitration agreements, we conclude that the FAA preempts [Labor Code section 432.6] as a whole to 5 the extent it applies to arbitration agreements.’ (Id. at 490 (emphasis added).) Likewise, Perry [Perry 6 v. Thomas, 482 U.S. 483 (1987),] states that under the Supremacy Clause, the provision of the FAA 7 governing enforcement of arbitration agreements preempts Labor Code §229. (Perry at 490-492.).” 8 (Opp. 13:7-15.) Thus, the FAA applies and preempts Labor Code sections 229 and 432.6. 9 Even assuming for the sake of argument, the Court does not find preemption, it should 10 find that (i) Labor Code section 229 only requires litigation of individual claims, not PAGA action 11 claims, and (ii) more importantly, none of Plaintiff’s causes of action are governed by Labor Code 12 sections 200 to 244 or considered claims for unpaid wages in order to fall within the ambit of Labor 13 Code section 229. (Lab. Code, § 229 [referring to “actions to enforce the provisions of this article for 14 the collection of due and unpaid wages claimed by an individual”] [emphasis added]; Lane v. Francis 15 Cap. Mgmt. LLC (2014) 224 Cal.App.4th 676, 684.) For these reasons, even assuming the Labor Code 16 provisions cited were to apply, they would not preclude arbitration. 17 IV. THE DRA IS NOT PROCEDURALLY OR SUBSTANTIVELY UNCONSCIONABLE 18 At the outset, Plaintiff does not meaningfully contest the Agreement offered is the agreement 19 of the parties. Nor does Plaintiff contend that he assented to the Agreement. Finally, Plaintiff does 20 not contest that the Agreement encompasses his claims. Plaintiff bears the burden of proving 21 unconscionability and for the reasons set forth below, Plaintiff has failed to show unconscionability. 22 A. The DRA Contained an “Opt-Out” Provision and Plaintiffs’ Fail to Demonstrate How the DRA is Susceptible to Surprise. 23 24 Both procedural and substantive unconscionability must be present for a court to exercise its 25 discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. (Fisher v. 26 MoneyGram Intern., Inc. (2021) 66 Cal.App.5th 1084, 1093.) Plaintiffs seem to contend the DRA is 27 procedurally unconscionable by alleging Plaintiff Beaty was provided with the DRA on a “take-it- LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 7 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 or-leave-it basis.” Again, Plaintiff ignores the plain text of his Agreement. Section 8 of the DRA states 2 in bold typeface, “Arbitration is not a mandatory condition of Employee’s employment at the 3 Company, and therefore an Employee may submit a statement notifying the Company that the 4 employee wishes to opt out and not be subject to this Agreement.” (Priest Decl., Ex. A at section 5 8.) Section 8 goes on to provide employees with two means of notifying the company of the desire to 6 opt out of the DRA and thirty days to do so. (Id.) Assuming, for the sake of argument, Plaintiff’s 7 characterization of the “take it or leave it” nature of the agreement misstates the facts and is without 8 any merit. Moreover, “it is well-settled that [such] contracts typically contain some aspects of 9 procedural unconscionability” and yet they are regularly enforced. (Baltazar v. Forever 21, Inc. (2016) 10 62 Cal.4th 1237, 1244 [stating that ordinary contracts of adhesion “are indispensable facts of modern 11 life that are generally enforced”]; Serpa v. Calif. Surety Investigations, Inc. (2013) 215 Cal.App.4th 12 695, 704; Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1292 [“Arbitration 13 clauses in employment contracts have been upheld despite claims that the clauses were unconscionable 14 because they were presented as part of an adhesion contract on a take-it-or-leave-it basis. [Citations 15 omitted.] ‘[T]he compulsory nature of a pre-dispute arbitration agreement does not render the 16 agreement unenforceable on grounds of coercion or for lack of voluntariness’”].) Courts have rejected 17 a finding that an employee’s inability to modify an arbitration agreement makes that agreement 18 procedurally unconscionable. (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1476.) 19 Plaintiffs also argue the DRA is procedurally unconscionable due to its, “character as 20 a pre-printed prolix form which is susceptible to surprise.” (Opp. 17:1-4.) In 2024 it belies the current 21 state of technology and employment agreements to suggest that the “pre-printed” nature of a document 22 means it is procedurally unconscionable. Essentially all employment related agreements would be 23 deemed procedurally unconscionable if this were the case. Plaintiffs incorrectly cite to Serpa v. 24 California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, Nyulassy v. Lockheed Martin Corp. 25 (2004) 120 Cal.App.4th 1267, Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205 in support of this 26 argument. In Serpa, the court did not find procedural unconscionability despite the agreement being 27 presented on a “take it or leave it basis” because, there was no indication that the preprinted agreement LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 8 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 contained any element of surprise. (Serpa v. California Surety Investigations, supra, 215 Cal.App.4th 2 at p. 704.) In Nyulassy, the court did not find procedural unconscionability where, like here, the 3 plaintiff presented no evidence that he was unfairly surprised by the agreement. (Nyulassy v. Lockheed 4 Martin Corp. 120 Cal.App.4th 1329.) In Penilla, the court found the arbitration agreement at issue 5 was prolix because it was presented only in English to Spanish-speaking plaintiffs and because the 6 plaintiffs were given a single day to review the agreement. Here, Plaintiff has produced no evidence 7 of language barriers or Plaintiff’s understanding of the agreement nor contradicted the fact that he had 8 thirty days to review the DRA before opting out. For these reasons, Plaintiff cannot prove procedural 9 unconscionability, and the court should conclude the DRA stands. 10 B. The DRA was Not Permeated with Unconscionability and Any Isolated Unconscionable Term May be Severed 11 12 Given the lack of procedural unconscionability, the DRA is not “permeated with 13 unconscionability” such that the entire agreement is null. Should the court find any provisions 14 substantively unconscionable, it may simply sever the unenforceable terms. “Where a contract has 15 several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, 16 the contract is void as to the latter and valid as to the rest.” (Cal. Civ. Code § 1599.) The “refusal to 17 enforce an agreement altogether should be limited to situations where the agreement is ‘permeated’ 18 by unconscionability.” (Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257, 1274 [holding 19 court abused its discretion in failing to sever offending term]; Poublon v. C.H. Robinson Co. (9th Cir. 20 2017) 846 F.3d 1251, 1273 [stating the existence of more than one unconscionable term does not 21 render the agreement unenforceable unless “the central purpose of the contract is tainted with 22 illegality”].). Severance of an unconscionable provision is inappropriate where “the court would have 23 to, in effect, reform the contract, not through severance or restriction, but by augmenting it with 24 additional terms.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83.) 25 However, severance here would not result in a reformation of the contract or a requirement to augment 26 it with additional terms. To the extent this Court were to find any offending provisions, this Court 27 could simply delete them, without requiring anything more. (See Mills v. Facility Solutions Group, LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 9 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS 1 Inc. (2022) 84 Cal.App.5th 1035, 1067 [acknowledging that several provisions in an arbitration 2 agreement can be subject to severance at one time, such as a sentence barring tolling of the statute of 3 limitation, references to an employee paying filings fees, and provisions requiring a party to pay for 4 costs associated with postponement, provided that they would not need to be rewritten].) 5 V. A STAY IS NECESSARY AND PRUDENT 6 Plaintiffs assert in opposition that a stay is unwarranted. (Opp. 19:15-20:20.) Of 7 course, Plaintiff omits salient issues involved in this case that necessitate a stay. United Staffing offers 8 its DRA it entered into with Plaintiff Beaty. Plaintiff erroneously asserts that, “one plaintiff (Beaty) 9 may be order to arbitrate claims while other related plaintiff cannot bee (Valdovinos has no arbitration 10 agreement.)” (Opp. 19:18-20.) Valdovinos is not a party to the PAGA action and was never 11 employed by United Staffing Associates. Plaintiff offers argument only as to the California 12 Arbitration Act grounds for a stay (Cal. Code. Civ. Proc. §§ 1281.2(c) and 1281.4) but do not address 13 the grounds under the Federal Arbitration Act (9 U.S.C. § 3.) (See Defendant’s Notice of Motion and 14 Motion, page 2.). California’s decision in Adolph suggests that in the case of PAGA claims, an 15 arbitration may be had on a Plaintiff’s individual “aggrieved employee” status to determine standing. 16 (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1124.) Defendants respectfully request 17 that the Court order Plaintiff to arbitrate his claims and stay the matter while these claims are pending. 18 Dated: May 17, 2024 LITTLER MENDELSON, P.C. 19 20 21 Ryan L. Eddings Samuel O. Munson 22 Attorneys for Defendants 23 HOMER T. HAYWARD LUMBER CO.; UNITED STAFFING ASSOCIATES, LLC 4878-3932-4095, v. 1 24 25 26 27 LITTLER MENDELSON, P.C. 28 5200 North Palm Avenue Suite 302 10 Fresno, CA 93704.2225 559.244.7500 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS