Case 1:13-cv AWI-JLT Document 10 Filed 03/10/14 Page 1 of 12

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1 Case :-cv-00-awi-jlt Document Filed 0// Page of SAM S. YEBRI (SBN ALEXANDER M. MERINO (SBN MERINO YEBRI, LLP Century Park East, Suite 0 Los Angeles, California 00 Tel: ( -000 Fax: ( - Attorneys for Plaintiffs JOSEPH JACKSON; DARRIN BLACKMON; LASHONDA BROWN; and PATRICK MITCHELL UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA 0 JOSEPH JACKSON, an individual; DARRIN BLACKMON, an individual; LASHONDA BROWN, an individual; PATRICK MITCHELL, an individual; v. Plaintiff, TIC - THE INDUSTRIAL COMPANY, a Delaware corporation d/b/a THE INDUSTRIAL COMPANY; and DOES through 0, inclusive, Defendants. Case No. :-CV-00-AWI-JLT Hon. Anthony W. Ishii, Courtroom PLAINTIFFS OPPOSITION TO DEFENDANT S MOTION TO COMPEL ARBITRATION [Declarations of Joseph Jackson, Darrin Blackmon, Lashonda Brown, and Patrick Mitchell filed concurrently herewith] Hon. Magistrate Judge Jennifer L. Thurston Date: March, 0 Time: :00 a.m. Place: United States District Court th Street Bakersfield, CA 0

2 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 MEMORANDUM OF POINTS AND AUTHORITIES Plaintiffs Joseph Jackson, Darrin Blackmon, Lashonda Brown, and Patrick Mitchell (collectively, Plaintiffs hereby submit this Memorandum of Points and Authorities in Opposition to Defendant TIC - THE INDUSTRIAL COMPANY ( Defendant s Motion to Compel Arbitration and Dismiss Plaintiffs Complaint (the Motion. I. INTRODUCTION On October, 0, Plaintiff filed suit in Kern County Superior Court against their former employer, asserting claims arising from their employment, including, without limitation, race and age discrimination, wrongful termination, and wage and hour violations. On December, 0, Defendant removed the action to this Court. On February 0, 0, Defendant filed the Motion seeking to move this lawsuit to yet another forum, binding arbitration. The Motion should be denied because the arbitration provision upon which Defendant relies is procedurally and substantively unconscionable under wellsettled California law. II. LEGAL STANDARD A. Courts Have Discretion To Invalidate Unconscionable Arbitration Agreements Under Federal and California Law Arbitration agreements are contracts. See Cal. Civ. Proc. Code ( C.C.P. ( A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract. When grounds exist at law or in equity for the revocation of any contract, courts may decline to enforce such agreements. See Doctor s Assocs., Inc. v. Casarotto ( U.S., ; Ferguson v. Countrywide Credit Indus., Inc. (th Cir. 00 F.d,. Under California law, [i]f the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as

3 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 to avoid any unconscionable result. C.C.P. 0.(a. Even under federal law, because arbitration agreements under the Federal Arbitration Act ( FAA are contracts, they are subject to the same defenses as any other contract which include fraud, duress, unconscionability or other general contract law defenses. See AT&T Mobility LLC v. Concepcion (0 S.Ct. 0, - ( Concepcion. As a preliminary matter, in its moving papers, Defendant attempts to stretch and contort the United States Supreme Court s decision in Concepcion to broadly preempt the California Supreme Court s landmark decision in Armendariz v. Foundation Health Psychcare Services, Inc. (000 Cal.th ( Armendariz. Under Defendant s theory, all arbitration agreements are now enforceable in California under the FAA no matter how unconscionable they may be. (Mot. at. Of course, this is not the law. The Concepcion Court simply addressed the narrow issue of whether consumer class action arbitration agreements were valid. In fact, the U.S. Supreme Court in Concepcion stated explicitly that [t]he final phrase of [of the FAA] however, permits arbitration agreements to be declared unenforceable upon such grounds as exist at law or in equity for the revocation of any contract. This saving clause permits agreements to arbitrate to be invalidated by generally acceptable contract defenses, such as fraud, duress, or unconscionability. S.Ct. at. Moreover, a California appellate court recently rejected this precise argument in Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (0 Cal.App.th, n.: We invited the parties to provide their comments on the recent United States Supreme Court case, AT&T Mobility LLC v. Concepcion (0 U.S., S.Ct. 0, L.Ed.d (AT&T. Defendants appear to argue that AT&T essentially preempts all California law relating to unconscionability. We disagree, as the case simply does not go that far. General state law doctrine pertaining to unconscionability is preserved unless it involves a defense that applies only to arbitration or that derive[s] [its] meaning from the fact that an agreement to arbitrate is at issue. (Id. at p., S.Ct. at p.. This simply does not apply here. Therefore, under current California law, arbitration agreements are neither favored nor disfavored, but simply placed on an equal footing with other contracts. Armendariz, Cal.th at.

4 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 B. Arbitration Agreements Are Not Enforceable If They Are Procedurally And Substantively Unconscionable As Defendant correctly points out, the California Supreme Court identified minimum requirements for arbitration of claims under the Fair Employment and Housing Act ( FEHA, Cal. Gov. Code 00, et seq., and determined that arbitration agreements must not be procedurally or substantively unconscionable. The Armendariz Court, in emphasizing its goal to ensure that such agreements are not used as a means of effectively curtailing an employee s FEHA rights, held that: [U]nconscionability has both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results. The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. But they need not be present in the same degree. Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves. In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa. Cal.th at (citations omitted. Procedural and substantive unconscionability need not be present in the same degree. See Mercuro v. Sup.Ct. (Countrywide Secur. Corp. (00 Cal.App.th, - (given employer s highly oppressive conduct in obtaining employee s consent to arbitration agreement, employee was required to make only minimal showing of substantive unconscionability. Here, there is substantial evidence of both procedural and substantive unconscionability in connection with Defendant s arbitration provision. III. DISCUSSION A. Defendant s Arbitration Provision Is Procedurally Unconscionable Procedural unconscionability focuses on oppression or surprise due to unequal bargaining power, and concerns the manner in which the contract was negotiated and the parties circumstances at that time. See Armendariz, Cal.th at -. This element is generally satisfied if the agreement constitutes a contract of adhesion. See Nyulassy v.

5 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 Lockheed Martin Corp. (00 0 Cal. App. th, 0. The oppression component arises from an inequality of bargaining power... and an absence of real negotiation or a meaningful choice on the part of the weaker party. Id. at. When the weaker party is presented the clause and told to take it or leave it without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present. Szetela v. Discover Bank (00 Cal.App.th, 0. See also Samaniego v. Empire Today LLC (0 0 Cal.App.th, - (finding procedural unconscionability where employee was presented arbitration provision as a condition of employment, with little time to review the contract, which did not include a copy of the relevant arbitration rules. A meaningful opportunity to negotiate or reject the terms of a contract requires, at a minimum, that a party have reasonable notice of (the opportunity to negotiate or reject the terms of a contract, and... an actual, meaningful, and reasonable choice to exercise that discretion. Circuit City Stores, Inc. v. Mantor (th Cir. 00 F.d,.. Defendant s Arbitration Provision Is A Contract of Adhesion First, it is undisputed that the arbitration provision relied on by Defendant is buried in pre-printed, standardized contracts created by Defendant and imposed on Plaintiffs and Defendant s other employees, without any opportunity for discussion or negotiation. Defendant s arbitration provision constitutes a per se contract of adhesion: Procedural unconscionability turns on adhesiveness - a set of circumstances in which the weaker or adhering party is presented a contract drafted by the stronger party on a take it or leave it basis. Mercuro v. Superior. Ct. (00 Cal.App.th,. When an employee is required to consent to arbitration as a condition of employment with no opportunity to negotiate, the agreement is procedurally unconscionable. See Armendariz, Cal.th at -. In Armendariz, the Court held that the arbitration agreements that plaintiffs had signed as a condition of employment were procedurally unconscionable: [I]n case of preemployment arbitration contracts, the economic pressure exerted by the employer on all but the most sought after employees may be particularly acute, for the arbitration agreement stands between the employee

6 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 Id. at. and necessary employment, and few employees are in a position to refuse a job because of an arbitration agreement. Here, Defendant concedes that the arbitration agreement explicitly provided that [a]cceptance of the terms and conditions of this Arbitration policy is an express condition precedent to [Plaintiffs ] employment with Defendant. (Mot. at p.. Each of the Plaintiffs felt pressure to sign any agreements or documents that Defendant presented to them, prior to and during their employment. (Declaration of Joseph Jackson ( Jackson Decl. ; Declaration of Darrin Blackmon ( Blackmon Decl. ; Declaration of Lashonda Brown ( Brown Decl. ; Declaration of Patrick Mitchell ( Mitchell Decl.. Plaintiffs were presented with numerous complex legal documents when they applied for employment and, later, during their employment. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. When signing these documents, Plaintiffs were never informed, nor were they aware, that they were signing an arbitration agreement. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. None of the Plaintiffs had any opportunity to review the documents, including the arbitration agreement, or to consult with an attorney prior to signing them. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. Each of the Plaintiffs was told by Defendant that he or she was required to sign the documents in order to work for Defendant. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. No one from Defendant explained the documents to Plaintiffs; instead, Plaintiffs were given only a few minutes to quickly sign the agreements without any time for questions or time to review the stack of documents. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. Equally important is the fact that Defendant did not inform Plaintiffs that they were waiving an important constitutional right a right to a trial by jury. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. Nor did any of the Plaintiffs have any opportunity or power to negotiate or reject any of the terms of the arbitration provision, which were buried in pre-printed, standard

7 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 forms. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. No form presented by Defendant in support of its Motion provides Plaintiffs with any choice to reject arbitration. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. As such, the arbitration agreements are adhesion contracts because they are part of standardized forms, drafted and imposed by a party of superior bargaining strength, and Plaintiffs only option was to sign these documents or reject them under risk of not being hired or losing their employment. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. Courts have long held that a non-negotiable contract of adhesion in the employment context is procedurally unconscionable. Armendariz, supra, at. See Circuit City Stores, Inc. v. Adams (th Cir. 00 F.d, (finding arbitration agreement procedurally unconscionable because it was a take it or leave it prerequisite to employment, and job applicants were not permitted to modify the agreement s terms. There is no question that such is the case here.. Defendant s Failure to Provide Plaintiffs with Copies of AAA s Rules Also Renders the Arbitration Provision Procedurally Unconscionable It is well settled that an employer s failure to provide a copy of the arbitration rules to which the employee will be bound supports a finding of procedural unconscionability. See Trivedi v. Curexo Technology Corp. (0 Cal.App.th, 0-; Fitz v. NCR Corp. (00 Cal.App.th 0, -; Zullo v. Superior Court (0 Cal.App.th, - (holding it was oppressive to require the party to make an independent inquiry to find the applicable rules in order to fully understand what she was about to sign, and that the employer s failure to provide the applicable rules rendered the provision procedurally unconscionable. Here, at no time did Defendant ever provide any of the Plaintiffs a copy of the arbitration rules to which each of them would be bound by the arbitration provision. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. Plaintiffs were never given an opportunity to review the rules that purport to govern the

8 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 provision. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. Thus, Plaintiffs could not and did not determine what rights each was giving up by entering into Defendant s arbitration scheme. (Jackson Decl. ; Blackmon Decl. ; Brown Decl. ; Mitchell Decl.. In fact, Defendant concedes in its moving papers that it did not provide a copy of the applicable arbitration rules to Plaintiff, and instead only attempted to incorporate by reference the rules of the American Arbitration Association ( AAA. (Mot. at p.. Courts routinely refuse to enforce such arbitration provisions that fail to provide a copy of the AAA rules. See, e.g., Fitz, Cal.App.th at (refusing to enforce provision that incorporated the AAA rules without attaching them because this required the employees to go to another source to learn the full ramifications of the arbitration agreement ; Trivedi, Cal. App. th at - (refusing to enforce arbitration provision that was drafted by the employer, that was mandatory, and that did not attach a copy of the AAA rules referenced in the agreement; Zullo, Cal.App.th at (concluding that the absence of the AAA rules was procedurally unconscionable. In sum, Defendant s arbitration provision is permeated with procedural unconscionability. B. The Arbitration Provision Is Also Substantively Unconscionable Substantive unconscionability exists when a contract imposes unduly harsh, oppressive, or one-sided terms. Armendariz, Cal.th at. [P]rovisions of arbitration agreements unduly advantageous to one party at the expense of the other will not be judicially enforced. Stirlin v. Supercuts, Inc. ( Cal.App.th,. Given the overwhelming evidence of procedural unsconscionability, only a minimal showing of substantial unconscionability is required to invalidate the arbitration provision. See id. at ( (The more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa. ; Mercuro, Cal.App.th at - (given employer s highly oppressive conduct in obtaining employee s consent to arbitration agreement, employee was required to make only minimal showing of substantive unconscionability.

9 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 Here, two aspects of Defendant s arbitration provision are substantively unconscionable. First, the arbitration provision restricts Plaintiffs right to discovery. Specifically, there is no express provision for Plaintiffs right to discovery; instead, the provision only incorporates by reference the AAA rules. In its moving papers, Defendant claims vaguely that the arbitration provision provides for adequate discovery under AAA Rule, which Defendant claims permits discovery by way of deposition, interrogatory, document production or otherwise, as the arbitrator considers necessary for a full and fair exploration of the dispute. (Mot. at p.. Rather than providing for discovery explicitly in the arbitration agreement, as required by Armendariz, Cal.th at, the provision hands over the scope of discovery entirely to the discretion of the arbitrator. In fact, AAA Rule empowers the arbitrator to limit discovery to only that which the arbitrator considers necessary to a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration. (See AAA Rule. Needless to say, discovery at the discretion of an arbitrator differs substantially from a litigant s broad discovery rights in federal or state court. AAA Rule grants the arbitrator the sole right and discretion to allow the breadth of depositions, interrogatories, document requests, requests for admissions, and subpoenas to which a party in federal or civil court would broadly be entitled. Given that Plaintiffs were never even provided a copy of the AAA rules to which Defendant now seeks to bind them, Plaintiffs do not even know to what discovery, if any, they would be entitled if this matter is compelled to arbitration. Courts have routinely held that the absence of the express provision for discovery rights renders arbitration agreements unconscionable. See Armendariz, Cal.th at ; Sparks, 0 Cal.App.th at ; Fitz, Cal.App.th at ( Adequate discovery is essential for vindication of statutory claims.. Specifically, the Sparks court held that the arbitration provision was substantively unconscionable because, like here, the provision required the employee to relinquish statutory administrative and judicial rights, and because there was no express provision for discovery. See 0 Cal.App.th at.

10 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 Second, the burdens imposed on Plaintiffs to pay the arbitration fees and costs render the provision substantively unconscionable. Defendant asserts in its moving papers that, under the arbitration provision, the employer must pay arbitrator s fees and all costs unique to arbitration which govern this Arbitration Agreement, allocate most costs of arbitration for disputes arising out of an employer promulgated plan to the employer. (Mot. at p.. In support of this position, Defendant provides a link to an link. However, the link, and the AAA website, refer broadly to numerous categories of different employment arbitrations, such as an employer-promulgated plan, individuallynegotiated employment agreements, and supplementary rules class action arbitrations, each with its own fee structures and categories and ranges of fees and costs. See Defendant fails to identify anywhere in its moving papers what the arbitration provision requires Plaintiffs and Defendant to each pay, respectively, to arbitrate this dispute. Nor can Defendant. The arbitration provision, and the AAA Rules that it attempts improperly to incorporate by reference, are silent as to who pays what. The AAA Rules themselves say nothing explicitly about the exact amount of fees; instead, employees, like Plaintiffs, are left to their own devices to figure out what their payment obligations would be if they are forced to fight their dispute in a forum to which they never agreed. In similar circumstances, courts have refused to enforce such unconscionable provisions. See Adams F.d at (agreement requiring employee to split the arbitrator s fee with the employer rendered the entire arbitration agreement unenforceable; Armendariz, Cal.th at - ( [W]hen an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court. ; Mercuro, Cal.App.th at - (provisions requiring plaintiffs to share equally in arbitration costs after the first hearing day, and permitting the arbitrator to impose the entire costs of the arbitration on the plaintiffs should they lose, are substantively unconscionable.

11 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 C. The Arbitration Provision Is Permeated With Unconscionability And Cannot Be Cured Where, as here, an arbitration agreement that contains numerous unconscionable provisions, severance cannot save it. The Armendariz Court noted that a court s power to reform an arbitration agreement is limited to instances in which parties make mistakes, not to correct illegal provisions. Cal.th at. The Armendariz Court stated that if the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced since multiple defects [in an agreement] indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer s advantage. Id. at. The fact that an arbitration agreement contains more than one unlawful provision may indicate a systematic effort to impose arbitration on an employee as an inferior forum that works to the employer s advantage. Ontiveros v. DHL Exp. (USA Inc. (00 Cal.App.th,. Here, the number of unconscionable provisions permeating Defendant s arbitration provision, coupled with the high degree of established procedural and substantive unconscionability, clearly illustrates a systematic effort by Defendant to gain an advantage over Plaintiffs through the arbitration provision. Accordingly, the arbitration provision is irreparably tainted, cannot be reformed by severing the numerous unconscionable provisions, and is therefore unenforceable. IV. Motion. CONCLUSION For the foregoing reasons, Plaintiffs respectfully request that the Court deny the DATED: March, 0 MERINO YEBRI LLP By: /s/ Sam S. Yebri SAM S. YEBRI Attorneys for Plaintiffs JOSEPH JACKSON; DARRIN BLACKMON; LASHONDA BROWN; and PATRICK MITCHELL

12 Case :-cv-00-awi-jlt Document Filed 0// Page of 0 PROOF OF SERVICE I am employed in the County of Los Angeles, State of California. I am over the age of eighteen years and not a party to the within action. My business address is: Century Park East, Suite 0, Los Angeles, CA 00. On March, 0, I served the documents described as: PLAINTIFFS OPPOSITION TO DEFENDANT S MOTION TO COMPEL ARBITRATION DECLARATIONS OF JOSEPH JACKSON, DARRIN BLACKMON, LASHONDA BROWN, AND PATRICK MITCHELL FILED CONCURRENTLY HEREWITH on all interested parties in this action as follows: [X]: ELECTRONIC SERVICE: I caused each document listed above to be sent via electronic transmission to the address(es referenced below. I did not receive any electronic message indicating that the transmission was unsuccessful. Keith A. Jacoby (kjacoby@littler.com Elizabeth Nguyen (enguyen@littler.com Littler Mendelson, P.C. 0 Century Park East, th Floor Los Angeles, CA 00 [ ]: BY U.S. MAIL SERVICE I enclosed the documents in an envelope or package addressed to the person(s at the address(es listed above, and I placed the envelope for collection and mailing, following our ordinary business practices. I am readily familiar with the firm s practice for collecting and processing correspondence for mailing. On the same day that the correspondence is placed for collection and mailing, it is deposited in the ordinary course of business with the United States Postal Service, in a sealed envelope with postage fully prepaid. I am aware that on motion of the party served, service is presumed invalid if the postal cancellation date or postage meter date is more than one day after the date of deposit for mailing as set forth in this Proof of Service. [X]: (FEDERAL I declare that I am employed in the office of a member of the bar of this court at whose direction the service was made. I declare under penalty of perjury that the foregoing is true and correct. EXECUTED on March, 0, in Los Angeles, California. /s/ Sam S. Yebri Sam S. Yebri