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Pereyra v. Guaranteed Rate, Inc.

United States District Court, N.D. California

June 28, 2019





         Currently pending before the Court is Defendant's motion to compel arbitration. The Court ruled from the bench that there are four unconscionable provisions all of which can be severed or reformed. For the reasons stated on the record and as memorialized, clarified and supplemented herein, the Court GRANTS Defendant's motion to compel arbitration.


         Plaintiff seeks to file a class action for claims arising under the California Labor Codes §§ 510; 1198; 226.7(a); 512(a); 226.7(a); 226(a); 201-203; 221-224 et seq.; and violations of the Business and Professions Code § 17200 et seq. Complaint (“Compl.”) Plaintiff argues that she and other class members are entitled to premium wages for overtime pay based on a regular rate with commission and bonuses. Id. ¶ 8. She alleges that Defendant denied her, and other class members, minimum wages owed to her and others based on overtime work laws, wages upon discharge, and compensation for meals and rest breaks. Id. Similarly, Plaintiff claims that Defendant failed to keep accurate payroll and wage statements in accordance with California law. Id.

         She also raises a breach of contract claim. She claims the breach of her employment contract was the failure “to provide Plaintiff with the draw amount as stated and in the proper amounts, failing to provide Plaintiff with the basis points on each loan, failing to pay the correct commission payments for loans originated, failing to pay the enhanced commission, failing to pay accurate monthly commissions after submitting questions within the time required, failing to pay all wages owed per the contract for each pay period, and imposing deductions for expenses not contemplated by the employment contract.” Id. ¶ 32.

         Plaintiff worked as an employee of Defendant from August 2015 to August 2016. Id. ¶ 13. She held the position of mortgage specialist in Orange County, California. Id. She contends that in that position she regularly worked over eight hours a day and more than 40 hours a week without overtime pay or compensation for meal and rest breaks. Id.

         After Plaintiff filed the Complaint, Defendant moved to compel arbitration and to dismiss the action under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1). Defendant's Motion to Compel (“Mot.”). The basis for this motion is an arbitration agreement in Plaintiff's employment contract.

         Plaintiff opposes the motion to compel arbitration on several grounds. She argues the contract is procedurally unconscionable because it was a contract of adhesion and Defendant failed to include the AAA rules. Opposition to Motion to Compel (“Opp'n”) at 1. She also challenges the agreement on substantive unconscionability grounds, asserting that it lacked mutuality, it requires Plaintiff to waive un-waivable claims, and allows Defendant to recover attorneys' fees and costs in violation of California law. Id. She also argues that both the choice of law provision and choice of forum provision are unconscionable. Id. at 14-15. Despite the choice of law clause, Defendant does not argue that Illinois law applies here. Reply at 6.

         A. The Contract

         On July 24, 2015, Plaintiff signed an arbitration agreement. This agreement was superseded by a contract signed by Plaintiff on July 8, 2016. Confusingly, the parties have each submitted the arbitration agreement for a different employee (the plaintiff in the related case Turng). Turng v. Guaranteed Rate, Inc., 371 F.Supp.3d 610, 615 (N.D. Cal. 2019). However, both parties agree that it is identical to the copy of the arbitration agreement provided to Plaintiff in this matter. The relevant provisions of the arbitration agreement read:

. . .
(f) Enforcement; Remedies
You covenant, agree and recognize that because the breach or threatened breach of the covenants, or any of them, contained in Section V hereof will result in immediate and irreparable injury to the Company, the Company shall be entitled to an injunction restraining you from any violation of the covenants and agreements contained in this Section V to the fullest extent allowed by law. Nothing herein shall be construed as prohibiting the Company, and its respective successors and assigns, from pursuing all legal or equitable remedies that may be available to them for any such breach, including the recovery of damages from you.
(f) Construction
You hereby expressly acknowledge and agree as follows:
(i) the covenants set forth in Section V are reasonable in all respects and are necessary to protect the legitimate business and competitive interests of the Company in connection with its business, which you agree, pursuant to this Agreement, to assist in maintaining and developing; and
(ii) each of the covenants set forth in Section V is separately and independently given, and each such covenant is intended to be enforceable separately and independently of the other such covenants, including without limitation, enforcement by injunction, and that the invalidity or unenforceability of any provision of this Agreement in any respect shall not affect the validity or enforceability of this Agreement in any other respect. In the event that any provision of this Section V shall be held invalid or unenforceable by a court of competent jurisdiction by reason of the duration thereof of any such covenant, or for any other reason, such invalidity or unenforceability shall attach only to the particular aspect of such provision found invalid or unenforceable as applied and shall not affect or render invalid or unenforceable any other provision. This Section V shall be construed as if the provision or other basis on which such provisions has been determined to be overly broad had been more narrowly drafted so as not to be invalid or unenforceable. . . .
(a) Arbitration
Any and all claims (legal or equitable), demands, disputes, or controversies between you and the Company must be resolved by arbitration in accordance with the rules of the American Arbitration Association then in existence. Such arbitration shall take place in Chicago, Illinois, the applicable law will be the laws of the State of Illinois without regard to the conflicts of law provisions therein and the decision of the arbitrator shall be final and binding on you and the Company. Without limiting the foregoing, the following claims must be resolved by arbitration:
(i) Claims related to your compensation with the Company brought under any federal, state or local statute, law, ordinance, regulation or order or the common law of any state, including without limitation claims relating to your wages, salary increases, bonuses, commissions, overtime pay, vacation pay, or severance pay whether or not such claim is based upon a legally protected right, whether statutory, contractual or common law; and
(ii) Claims brought under any federal, state, or local statute, law, ordinance, regulation, or order, or the common law of any state, alleging that you were or are being subject to discrimination retaliation, harassment, or denial of equal employment opportunity based on sex, race, color, religion, national origin, disability, age, marital status, or any other category protected by law; and/or relating to your benefits or working conditions, including without limitation, claims related to leaves of absence, Employee benefit plans, Employee health and safety, and activity protected by federal labor laws.
(b) Waiver of Right to Sue and Right to File any Action as a Class or Collective Action
You and the Company expressly waive any right to resolve any dispute covered by this Agreement by filing suit in court for trial by a judge or jury.
With respect to any and all claims made by you, there will be no right or authority for any dispute to be brought, heard or arbitrated under this Agreement as a class or collective action, private attorney general, or in a representative capacity on behalf of any Person.
(c) Exclusions
The mandatory arbitration provisions of this Agreement do not apply to: (i) any claim by you for workers compensation benefits or unemployment compensation benefits; (ii) any claim for injunctive or equitable relief, including without limitation claims related to unauthorized disclosure of confidential information, trade secrets or intellectual property; or (iii) any action brought relating to or arising out of any non-solicitation violations.
This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to the conflicts of laws provisions therein. You irrevocably consent to the exclusive jurisdiction of the state and federal courts located in Cook County, Illinois, for the purposes of any action or proceeding relating ...

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