Court Opinion

ID: 9400659
Source: CourtListenerOpinion
Date Created: 2023-06-08 19:04:34.772985+00
Date Added: 2024-06-11T17:19:25.223285
License: Public Domain

Filed 6/8/23 Lopez v. Pacific Dental Services CA4/2
                            NOT TO BE PUBLISHED IN OFFICIAL REPORTS

  California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
                                      or ordered published for purposes of rule 8.1115.

           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   FOURTH APPELLATE DISTRICT

                                                  DIVISION TWO

 SABRINA LOPEZ,

           Plaintiff and Respondent,                                      E078639

 v.                                                                       (Super. Ct. No. CVRI2103633)

 PACIFIC DENTAL SERVICES, LLC et                                          OPINION
 al.,

           Defendants and Appellants.

         APPEAL from the Superior Court of Riverside County. Carol A. Greene, Judge.

Reversed.

         Sheppard, Mullin, Richter & Hampton, Richard J. Simmons, Nora K. Stilestein,

Tyler J. Johnson, for Defendants and Appellants.

         Perona, Langer, Beck, Serbin, & Harrison, Ellen R. Serbin, Todd H. Harrison,

Brennan S. Kahn and Gerardo J. Sosa, for Plaintiff and Respondent.

                                                              1
                                               I.

                                     INTRODUCTION

       Pacific Dental Services, LLC (PDS) and Kristen Dunn-Sanchez appeal the trial

court’s order denying their petition to compel arbitration of Sabrina Lopez’s claims. We

reverse.

                                              II.

                   FACTUAL AND PROCEDURAL BACKGROUND

       PDS hired Lopez as an oral surgery dental assistant with Dunn-Sanchez as her

supervisor. As part of her onboarding paperwork, Lopez signed and agreed to a “Mutual

Binding Arbitration Agreement.” Lopez signed a “Binding Arbitration Policy” (the

Agreement) in an employee handbook about four years later, which expressly superseded

the previous arbitration agreement she signed.

       The Agreement is two pages long with many provisions, but only two provisions

are at issue. The first says in relevant part, “[T]he arbitrator selected shall be a retired

judge, or otherwise qualified individual to whom the parties mutually agree, and shall be

subject to disqualification on the same grounds as would apply to a judge of such court”

(the arbitrator-selection provision). The second says, “The arbitrator shall have the

authority to order such discovery, by way of deposition, interrogatory, document

production, or otherwise, as the arbitrator considers necessary to a full and fair

exploration of the issues in dispute, consistent with the expedited nature of arbitration”

(the discovery provision).

                                               2
       Lopez later sued PDS, Dunn-Sanchez, and third-party medical provider, Central

Occupational Medical Providers-Ontario (COMP), asserting ten causes of action,

including claims for violating the Fair Employment and Housing Act (Gov. Code,
                                                          1
§ 12940 et seq.), wrongful termination, and defamation. All of Lopez’s claims pertain to

her employment with PDS.

       PDS and Dunn-Sanchez—but not COMP—moved to compel arbitration of

Lopez’s claims, arguing they must be arbitrated under the Agreement. PDS and Dunn-

Sanchez argued, however, that COMP could enforce the Agreement even though it is a

non-signatory to the contract and thus Lopez’s claims against COMP should be arbitrated

as well.

       Lopez opposed the motion on the grounds that PDS and Dunn-Lopez cannot move

to compel arbitration of her claims against COMP on COMP’s behalf and, regardless, the

Agreement is unconscionable. Lopez argued the Agreement was procedurally

unconscionable because it is a contract of adhesion given that she had to sign it as a

condition of employment with PDS and that the arbitrator-selection and discovery

provisions were substantively unconscionable.

       The trial court found the Agreement unenforceable as unconscionable and denied

PDS and Dunn-Sanchez’s petition to compel arbitration on that basis. The trial court thus

declined to rule on the parties’ dispute over the arbitrability of Lopez’s claims against

COMP. PDS and Dunn-Sanchez timely appealed.

       1
           The specifics of Lopez’s claims are not relevant to the issues on appeal.

                                              3
                                             III.

                                       DISCUSSION

       PDS and Dunn-Sanchez contend the trial court erroneously found the Agreement

unconscionable and thus unenforceable. We agree.

           1. Applicable Law and Standard of Review

       Under Civil Code section 1670.5 and Code of Civil Procedure section 1281, if the

court finds an arbitration contract or any clause of the contract to have been

unconscionable when made, the court may refuse to enforce the contract. (Armendariz v.

Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).)

The doctrine of unconscionability has both a procedural and a substantive element.

(Ibid.) Both procedural and substantive unconscionability must be present in order “‘for

a court to exercise its discretion to refuse to enforce a contract or clause under the

doctrine of unconscionability.’” (Ibid.) The party resisting arbitration bears the burden

of showing the arbitration agreement is procedurally and substantively unconscionable.

(Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55

Cal.4th 223, 246.)

       “In general, ‘[t]here is no uniform standard of review for evaluating an order

denying a motion to compel arbitration. [Citation.] If the court’s order is based on a

decision of fact, then we adopt a substantial evidence standard. [Citations.]

Alternatively, if the court’s denial rests solely on a decision of law, then a de novo

standard of review is employed. [Citations.]’” (Laswell v. AG Seal Beach, LLC (2010)

                                              4
189 Cal.App.4th 1399, 1406.) “‘Where, as here, the evidence is not in conflict, we

review the trial court’s denial of arbitration de novo.’” (OTO, L.L.C. v. Kho (2019) 8

Cal.5th 111, 126.)

           2. Procedural unconscionability

       “A procedural unconscionability analysis ‘begins with an inquiry into whether the

contract is one of adhesion.’ [Citation.]” (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p.

126.) An adhesion contract is “‘a standardized contract, which, imposed and drafted by

the party of superior bargaining strength, relegates to the subscribing party only the

opportunity to adhere to the contract or reject it.’ [Citation.]” (Armendariz, supra, 24

Cal.4th at p. 113.)

       Lopez signed the Agreement during her new employee onboarding and later as a

PDS employee. As either a prospective or current party employee, Lopez was the weaker

party. (See Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 176.) The Agreement

was presented to her as a prewritten, standardized form. There is no evidence that PDS

explained the Agreements terms to her or told her that agreeing to it was optional. PDS

presented no evidence that suggested Lopez could have negotiated the Agreement’s terms

or that it was optional. On this record, we can infer—and PDS does not dispute—that

Lopez “was required to sign the [Agreement] as a condition of [] employment,” which

rendered it an adhesive contract. (Murphy v. Check ‘N Go of California, Inc. (2007) 156

Cal.App.4th 138, 144.)

                                             5
       “[T]he adhesive nature of [a] contract is sufficient to establish some degree of

procedural unconscionability.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th

899, 915; accord, Lennar Homes of California, Inc. v. Stephens (2014) 232 Cal.App.4th

673, 688 [adhesive nature of contract was “enough to satisfy the minimum” required to

find procedural unconscionability]; Ajamian v. CantorCO2e, L.P. (2012) 203

Cal.App.4th 771, 796 [“The finding that the arbitration provision was part of a

nonnegotiated employment agreement establishes, by itself, some degree of procedural

unconscionability”].) The trial court therefore correctly found that the Agreement is

procedurally unconscionable.

          3. Substantive Unconscionability

       However, the trial court found incorrectly found that the Agreement’s two

challenged provisions are substantively unconscionable.

       “‘Substantive unconscionability focuses on the one-sidedness or overly harsh

effect of the contract term or clause.’” (Lhotka v. Geographic Expeditions, Inc. (2010)

181 Cal.App.4th 816, 824-825.) In Armendariz, our Supreme Court held that an

arbitration agreement in an employment contract is unconscionable if it does not provide

for the appointment of a neutral arbitrator. (Armendariz, supra, 24 Cal.4th at p. 102.) As

Lopez concedes (at least implicitly), the Agreement satisfies this requirement by

providing that the arbitrator shall be an “individual to whom the parties mutually agree.”

       Lopez argues the arbitrator-selection clause is nonetheless substantively

unconscionable because it does not provide a procedure for selecting a neutral arbitrator.

                                             6
But neither Armendariz nor any case following it holds that an arbitration agreement is

substantively unconscionable if it fails to provide a procedure for choosing a neutral

arbitrator. We are unaware of any such precedent, and Lopez cites none.

       Lopez argues the provision is unconscionable because it allows PDS to

“stonewall[]” the arbitrator selection process until Lopez agrees to PDS’s preferred

arbitrator. We disagree. The Agreement states that the parties agree to “binding

arbitration under” the Federal Arbitration Act (FAA) with no reference to California

arbitration law. The FAA’s arbitration procedures thus apply to the parties’ dispute. (See

Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122.) Section

5 of the FAA provides that if the parties’ arbitration agreement does not contain a

procedure for appointing an arbitrator, and the parties cannot agree on one, then the court
                 2
can appoint one. (See Alan v. Superior Court (2003) 111 Cal.App.4th 217, 227.) We

discern nothing unconscionable about this procedure.

       Lopez contends the California Arbitration Act (CAA) applies, not the FAA. But

even if she is correct, the result is the same. A provision of the CAA, Code of Civil

       2
          Section 5 states in full: “If in the agreement provision be made for a method of
naming or appointing an arbitrator or arbitrators or an umpire, such method shall be
followed; but if no method be provided therein, or if a method be provided and any party
thereto shall fail to avail himself of such method, or if for any other reason there shall be
a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then
upon the application of either party to the controversy the court shall designate and
appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under
the said agreement with the same force and effect as if he or they had been specifically
named therein; and unless otherwise provided in the agreement the arbitration shall be by
a single arbitrator.”

                                              7
Procedure section 1281.6, “mirrors” section 5 of the FAA. (Alan v. Superior Court,

supra, 111 Cal.App.4th at p. 228.) It “provides that where the parties’ arbitration

agreement fails to provide a method of appointing an arbitrator, the method prescribed in

section 1281.6 shall control.” (Cruise v. Kroger (2015) 233 Cal.App.4th 390, 400, fn. 3.)

Like section 5 of the FAA, the statute grants the trial court the authority to pick an

arbitrator if the parties cannot agree on one and a party to the agreement petitions for the

appointment of an arbitrator. (HM DG, Inc. v. Amini (2013) 219 Cal.App.4th 1100,
                                                                                          3
1107-1108.) The statute then explains how the trial court must appoint an arbitrator.

We discern no unconscionability in section 1281.6.

       Whether or not the FAA or CAA applies, the Agreement provides a process for a

court to assign a neutral arbitrator, should the parties be unable to choose a mutually

       3
          The statute reads in full: “If the arbitration agreement provides a method of
appointing an arbitrator, that method shall be followed. If the arbitration agreement does
not provide a method for appointing an arbitrator, the parties to the agreement who seek
arbitration and against whom arbitration is sought may agree on a method of appointing
an arbitrator and that method shall be followed. In the absence of an agreed method, or if
the agreed method fails or for any reason cannot be followed, or when an arbitrator
appointed fails to act and his or her successor has not been appointed, the court, on
petition of a party to the arbitration agreement, shall appoint the arbitrator. [¶] When a
petition is made to the court to appoint a neutral arbitrator, the court shall nominate five
persons from lists of persons supplied jointly by the parties to the arbitration or obtained
from a governmental agency concerned with arbitration or private disinterested
association concerned with arbitration. The parties to the agreement who seek arbitration
and against whom arbitration is sought may within five days of receipt of notice of the
nominees from the court jointly select the arbitrator whether or not the arbitrator is
among the nominees. [¶] If the parties fail to select an arbitrator within the five-day
period, the court shall appoint the arbitrator from the nominees.” (Section 1281.6, italics
added.)

                                              8
agreeable one. As a result, the Agreement’s failure to explicitly provide a process to

assign an arbitrator is not unconscionable.

       Nor is the discovery provision unconscionable. The court in Roman v. Superior

Court (2009) 172 Cal.App.4th 1462, upheld a materially identical discovery provision in

an employment arbitration agreement. Like the discovery provision here, the parties’

arbitration agreement there “authorized the arbitrator to order ‘such discovery, by way of

deposition, interrogatory, document production, or otherwise, as the arbitrator considers

necessary to a full and fair exploration of the issues in dispute, consistent with the

expedited nature of arbitration.’” (Id. at p. 1476.) The Roman court observed that there

was “no meaningful difference” between this discovery provision, drawn from the

American Arbitration Association’s (AAA) discovery rules, and the one our Supreme

Court upheld in Armendariz. (Ibid.) We similarly find no material difference between

those discovery provisions and the one at issue here, and note that several courts have

upheld materially identical discovery provisions as not unconscionable in other

employment cases. (E.g., Lane v. Francis Capital Management LLC (2014) 224

Cal.App.4th 676 [AAA rules]; Nguyen v. Applied Medical Resources Corp. (2016) 4

Cal.App.5th 232, 256, fn. 7 [AAA rules]; Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th

976, 984 [AAA rules].) We therefore conclude the Agreement’s discovery provision is

not unconscionable.

       After briefing was completed, Lopez filed a notice of new authority citing Murrey

v. Superior Court (2023), 87 Cal.App.5th 1223 (Murrey), stating it was relevant to her

                                              9
argument that the arbitration agreement is unconscionable. Murrey does not help Lopez

because the discovery provisions in the extensive, complicated arbitration agreement at

issue there differs from the straightforward discovery provision she challenges here.

       The discovery provision in Murrey “set default limitations on discovery,” limiting

the parties to three depositions, 20 interrogatories, 15 requests for documents, 15 requests

for admission, and 180 calendar days to complete discovery. (Murrey, supra, 87 Cal.5th

at p. 1248.) The Court of Appeal held that these restrictions, though neutral on their face,

unfairly favor the employer given that employers generally already have much of the

relevant evidence in their possession or control. (Id. at p. 1249, citing Baxter v.

Genworth North America Corp. (2017) 16 Cal.App.5th 713, 727-728 [“‘[D]efault

limitations on discovery are almost certainly inadequate to permit [the employee] to fairly

pursue her claims’”].)

       The Murrey court then rejected the employer’s argument that the discovery

provisions were not substantively unconscionable because they also gave the arbitrator

discretion to order more discovery. (Murrey, supra, 87 Cal.App.5th at p. 1249.) The

court held that this provision, though similar to the AAA rule, did not salvage the

unconscionable discovery terms. (Ibid.) The court reasoned that an arbitrator following

the AAA rule—or the discovery provision in this case—does not start with a presumption

that “three depositions and a handful of written discovery was what the parties bargained

for.” (Ibid.) Moreover, instead of following the “broadly written AAA discovery rules,”

an arbitrator following the Murrey parties’ arbitration agreement would have to

                                             10
determine whether ordering expanded discovery violated the agreement’s “23 paragraphs

of confusing presumptive guidelines.” (Id. at pp. 1249-1250.) In short, Murrey is

distinguishable and does not apply here.

       Lopez did not argue below and does not argue on appeal that any other aspect of

the Agreement is substantively unconscionable aside from the arbitrator-selection and

discovery provisions. Because we conclude neither provision is substantively

unconscionable, the trial court erred by denying PDS and Dunn-Sanchez’s petition to

compel arbitration.

          4. Lopez’s Claims Against COMP

       In their petition to compel arbitration, PDS and Dunn-Sanchez argued that Dunn-

Sanchez and COMP could petition to enforce the Agreement as non-signatories to it. The

trial court’s ruling on the issue is somewhat unclear. The court’s order states in relevant

part, though Lopez argues considerably “regarding the enforcement of the arbitration

agreements as to COMP,” since the recommendation is to deny the petition, the court

need not consider either parties’ arguments regarding whether the scope of the agreement

includes COMP. “The recommendation below is to deny the petition based on

unconscionability, but if the court disagrees with that recommendation, the motion

should be denied to the extent [the] petition seeks to submit the claims against COMP to

arbitration for the reasons stated above—COMP has not filed a petition, does not join in

the present petition, and no evidence is submitted that COMP was an agent of Pacific.”

Defendants have sufficiently demonstrated that plaintiff entered into the arbitration

                                             11
agreement. (Italics added.) But the concluding line of the court’s order states, “the court

denies the petition because the arbitration agreement [is] procedurally and substantively

unconscionable.”

       Thus, as PDS and Dunn-Sanchez correctly note, the trial court “ultimately

declined to make a ruling on” whether COMP’s claims should be arbitrated, “instead

choosing to deny the motion on the grounds the Agreement was unconscionable.” We

disagree with PDS and Dunn-Sanchez, however, that “[t]he court did note it

would deny the motion as to the claims against COMP because COMP did not join in the

motion.” That aspect of the trial court’s order is couched in terms of a recommendation

to the court that is not in the record, so it appears to have been incorporated from a

recommendation from the trial court’s staff. We thus do not know how the trial court

would decide the issue.

       Because the trial court denied PDS and Dunn-Sanchez’s petition only because the

court found it unconscionable, the trial court should decide whether COMP can enforce

the Agreement in the first instance. (See Williams v. Atria Las Posas (2018) 24

Cal.App.5th 1048, 1055; Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36

Cal.4th 495, 508-509.) The parties and the trial court may revisit this and any remaining

issues on remand.

                                             12
                                         IV.

                                   DISPOSITION

      The trial court’s order denying PDS and Dunn-Sanchez’s petition to compel

arbitration is reversed. PDS and Dunn-Sanchez may recover their costs on appeal.

      NOT TO BE PUBLISHED IN OFFICIAL REPORTS

                                                            CODRINGTON
                                                                                   J.

We concur:

McKINSTER
               Acting P. J.

FIELDS
                         J.

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