Opinion
Case No. 20-cv-1818-MMA (MSB)
03-11-2021
JANE DOE, Plaintiff, v. CISSY STEELE, et al., Defendants.
ORDER DENYING MOTION TO COMPEL ARBITRATION
[Doc. No. 25]
Jane Doe ("Plaintiff") brings this action against multiple Defendants alleging that she was targeted and groomed "for the sole purpose of sex trafficking her, in violation of the [Trafficking Victims Protection Reauthorization Act]." Doc. No. 12 ("FAC") ¶ 1. A group of Defendants—Diabolic Video Productions, Inc. ("Diabolic"); Black Ice LTD ("Black Ice"); Zero Tolerance Entertainment, Inc. ("Zero Tolerance"); and Third Degree Films ("Third Degree") (collectively, "Video Defendants")—now move to compel arbitration. See Doc. No. 25. Plaintiff filed an opposition to Video Defendants' motion, and Video Defendants replied. See Doc. Nos. 30, 33. The Court found the matter suitable for determination on the papers and without oral argument pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7.1.d.1. See Doc. No. 34. For the reasons set forth below, the Court DENIES Video Defendants' motion.
I. BACKGROUND
Plaintiff's action arises from sex trafficking allegations against one individual and several pornographic film studios and websites. See FAC ¶¶ 1-8, 20-31.
Representing herself as a talent agent and promising to make Plaintiff a model, Cissy Steele ("Steele") allegedly targeted and groomed Plaintiff for sex trafficking in California and Nevada. See id. ¶¶ 1, 2, 14. Plaintiff claims Steele "coerced and lured [Plaintiff] to move into her home" where Steele then used "psychological manipulation and coercion, intimidation tactics, threats, and physical violence to control, dominate and exploit [Plaintiff]." Id. ¶¶ 3, 4. Plaintiff further avers that Steele forced Plaintiff to engage in "commercial sex acts" and then forced Plaintiff to give the profits to her. Id. ¶ 5. Additionally, Plaintiff alleges that Steele forced her to perform in pornographic videos for adult film companies against her will. See id. ¶ 6. The film companies paid Steele directly and failed to pay Plaintiff for her involuntary work. Id. Additionally, Plaintiff alleges that the pornographic film studios and websites participated in Steele's sex trafficking venture because they knew, or should have known, Steele was trafficking Plaintiff and "knowingly benefited from her illegal venture by selling videos and posting videos through online websites that featured [Plaintiff] for profit." Id. ¶¶ 7-8.
Based on these allegations, Plaintiff has brought seven causes of action: (1) violation of the Trafficking Victims Protection Act ("TVPA"), 18 U.S.C. § 1591(a); (2) participation in a venture in violation of the TVPA, 18 U.S.C. § 1591(a); (3) financially benefiting from sex trafficking in violation of the TVPA, 18 U.S.C. § 1595; (4) conspiracy to commit violation of the TVPA, 18 U.S.C. § 1594; (5) violation of record keeping requirements, 18 U.S.C. § 2257; (6) preliminary and permanent injunction; and (7) violations of California Labor Code §§ 201, 226.8, 1194. Id. ¶¶ 136-88. Video Defendants now move to compel arbitration based upon written arbitration agreements between Plaintiff and Video Defendants. See Doc. No. 25.
II. LEGAL STANDARD
The Federal Arbitration Act ("FAA") permits "[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration [to] petition any United States district court . . . for an order directing that . . . arbitration proceed in the manner provided for in [the arbitration] agreement." 9 U.S.C. § 4. Upon a showing that a party has failed to comply with a valid arbitration agreement, the district court must issue an order compelling arbitration. Id. The Supreme Court has stated that the FAA espouses a general policy favoring arbitration agreements. AT&T Mobility v. Concepcion, 563 U.S. 333, 339 (2011). Federal courts are required to rigorously enforce an agreement to arbitrate. See id.
In determining whether to compel a party to arbitration, the Court may not review the merits of the dispute; rather, the Court's role under the FAA is limited to determining "(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Kilgore v. KeyBank, Nat. Ass'n, 718 F.3d 1052, 1058 (9th Cir. 2013) (quoting Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)); see also 9 U.S.C. § 4. If the Court finds that the answers to both questions are "yes," then the Court must compel arbitration. Chiron Corp., Inc., 207 F.3d at 1130. A court's circumscribed role in making these inquiries "leav[es] the merits of the claim and any defenses to the arbitrator." Id. (quoting Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 478 (9th Cir. 1991)).
As to the first inquiry—whether the parties agreed to arbitrate—courts adopt a standard similar to summary judgment. See Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1141 (9th Cir. 1991); Lopez v. Terra's Kitchen, LLC, 331 F. Supp. 3d 1092, 1097 (S.D. Cal. 2018); Cordas v. Uber Techs., Inc., 228 F. Supp. 3d 985, 988 (N.D. Cal. 2017). Agreements to arbitrate are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Courts must apply ordinary state law principles in determining whether to invalidate an agreement to arbitrate. Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 782 (9th Cir. 2002). As such, arbitration agreements may be "invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability.'" Concepcion, 563 U.S. at 339 (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). In assessing whether there is an agreement to arbitrate, the presumption and policy in favor of arbitration do not apply, and instead, the issue is determined through standard contract law principles. See Comer v. Micor, Inc., 436 F.3d 1098, 1104 n.11 (9th Cir. 2006); see also E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 293 (2002).
As to the second inquiry—whether the agreement encompasses the dispute at issue—courts resolve any "ambiguities as to the scope of the arbitration clause itself . . . in favor of arbitration." Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76 (1989); see also Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) ("[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability."). Moreover, "the party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration." Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 91 (2000). Absent contractual ambiguity, "it is the language of the contract that defines the scope of disputes subject to arbitration." Waffle House, Inc., 534 U.S. at 289.
III. DISCUSSION
Video Defendants argue that arbitration is required because there is an arbitration agreement that encompasses the dispute at issue. See Doc. No. 25 at 2. Video Defendants request that the Court order the parties to arbitrate and stay this action pending the outcome of arbitration. See id. at 9. Plaintiff responds that the Court should not order arbitration because the agreements are unconscionable and the result of duress and undue influence. See Doc. No. 30 at 2. Plaintiff further argues that there would be conflicting rulings on common factual and legal issues if the Court were to compel arbitration. See id. at 2, 8.
A. Choice of Law
Because Plaintiff raises state law contract defenses, the Court first must assess what state law to apply. See Pokorny v. Quixtar, Inc., 601 F.3d 987, 994 (9th Cir. 2010) ("Before a federal court may apply state-law principles to determine the validity of an arbitration agreement, it must determine which state's laws to apply. It makes this determination using the choice-of-law rules of the forum state . . . ."). A federal court resolving a dispute involving nonfederal law applies the forum state's choice-of-law rules to decide the governing substantive law. See Fields v. Legacy Health Sys., 413 F.3d 943, 950 (9th Cir. 2005) (quoting Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002)) ("Federal courts sitting in diversity must apply 'the forum state's choice of law rules to determine the controlling substantive law.'"). Federal courts deciding nonfederal law in California apply California's choice-of-law rules. See Yeiser Research & Dev. LLC v. Teknor Apex Co., 281 F. Supp. 3d 1021, 1036 (S.D. Cal. 2017); Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148, 1151 (1992).
"When an agreement contains a choice of law provision, California courts apply the parties' choice of law unless the analytical approach articulated in § 187(2) of the Restatement (Second) of Conflict of Laws . . . dictates a different result." Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1002 (9th Cir. 2010) (quoting Hoffman v. Citibank (S.D.), N.A., 546 F.3d 1078, 1082 (9th Cir. 2008) (per curiam)). Under the Restatement approach, the court must first determine
(1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties' choice of law. If neither of these tests is met, that is the end of the inquiry, and the court need not enforce the parties' choice of law. If, however, either test is met, the court must next determine whether the chosen state's law is contrary to a fundamental policy of California. If there is no such conflict, the court shall enforce the parties' choice of law. If, however, there is a fundamental conflict with California law, the court must then determine whether California has a "materially greater interest than the chosen state in the determination of the particular issue." If California has a
materially greater interest than the chosen state, the choice of law shall not be enforced, for the obvious reason that in such circumstance we will decline to enforce a law contrary to this state's fundamental policy.Nedlloyd Lines B.V., 834 P.2d at 1152 (footnotes omitted) (quoting Restatement (Second) of Conflict of Laws § 187(2)(b) (Am. Law Inst. 1971)). Section 187(2)'s fundamental policy analysis "refers not merely to the forum state . . . but rather to the state '. . . which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.'" Id. at 1152 n.5 (quoting Restatement (Second) of Conflict of Laws § 187(2)(b)).
Here, the Performer Agreements contain a choice-of-law provision: "California law, excluding any laws that direct the application of another jurisdiction's laws, shall govern this Agreement, and any dispute arising from it or the relationship created by it." Doc. No. 25-2 at 26, 30. Given the choice-of-law provision, the Court applies California law regarding contract defenses unless the Restatement approach requires a different result. The parties do not dispute the applicable law and rely upon California law in arguing whether Plaintiff brings successful contract defenses. See Doc. No. 30 at 2-8; Doc. No. 33 at 2-7. Moreover, Plaintiff and Video Defendants reside or are based in California, and the underlying films appear to have been filmed in California. See FAC ¶¶ 21, 23, 24; Doc. No. 25-2 at 2, 14, 28. Thus, it appears that California law would be applied even in the absence of the choice-of-law provision. See Application Grp., Inc. v. Hunter Grp., Inc., 72 Cal. Rptr. 2d 73, 84 n.12 (Ct. App. 1998) ("[A]n early determination that the chosen state and the state that would provide 'the applicable law in the absence of an effective choice of law by the parties' are one and the same, or a finding that the chosen state is the only state with a significant interest in having its law applied, obviates any need to weigh the forum's public policy interests against the chosen state's interests or to determine which state has the 'materially greater interest' in having its law applied."); 1-800-Got Junk? LLC v. Superior Court, 116 Cal. Rptr. 3d 923, 932 (Ct. App. 2010) (quoting Washington Mut. Bank, FA v. Superior Court, 15 P.3d 1071, 1079 (Cal. 2001)) (stating that if the selected state has a substantial relationship to the parties or their transaction, then the burden shifts to the party challenging the choice of law provision to show a violation of a fundamental policy and greater material interest). Accordingly, the Court applies California law to analyze Plaintiff's contract defenses.
B. Whether a Valid Arbitration Agreement Exists
Video Defendants argue that the Court should compel arbitration because Plaintiff's claims against them fall under the arbitration provision of the Performer Agreements. See Doc. No. 25 at 8. Refuting allegations that they worked with Defendant Steele, Video Defendants claim that that "the two scenes at issue were purchased from Anthony Stebbins ['Stebbins']." Id. at 8; see also Doc. No. 25-2 at 2-12 (providing the "Agreement for Sale of a Completed Motion Picture" between Stebbins and Black Ice); id. at 14-24 (providing the "Agreement for Sale of a Completed Motion Picture" between Stebbins and Diabolic). In addition to the footage, Video Defendants contend that Stebbins "assigned and transferred the Performer Agreements and personal identification of Plaintiff to Diabolic and Black Ice." Doc. No. 25 at 8-9; see also Doc. No. 25-2 at 26-28 (providing the "Performer/Assistant Agreement and Release" ("Performer Agreement") between Stebbins and Plaintiff for the work ultimately purchased by Black Ice); id. at 30-33 (providing the Performer Agreement between Stebbins and Plaintiff for the work ultimately purchased by Diabolic, Inc.). Video Defendants assert that Plaintiff has not alleged that Stebbins took part in the alleged sex trafficking. See Doc. No. 25 at 9. Moreover, Video Defendants argue that the Performer Agreements require any dispute between Plaintiff and Video Defendants to be resolved in arbitration. See id.; see also Doc. No. 25-2 at 26 (providing the arbitration clause in the Performer Agreement between Stebbins and Plaintiff for the work ultimately purchased by Black Ice); see also id. at 30 (providing the arbitration clause in the Performer Agreement between Stebbins and Plaintiff for the work ultimately purchased by Diabolic).
Gregg Dunn ("Dunn") provides a declaration that shows the relationship between Video Defendants. See Dunn Decl., Doc. No. 25-1. Dunn was the Chief Executive Officer ("CEO") of Black Ice and Third Degree prior to their dissolution in 2016. See id. ¶ 2. Dunn is the current CEO of Diabolic and Zero Tolerance. See id. ¶ 1. Additionally, Plaintiff alleges that Black Ice and Zero Tolerance were created under the umbrella company of Third Degree. See FAC ¶¶ 23, 24. Plaintiff further claims that Zero Tolerance is a "mere continuation" or "alter ego" of Black Ice, and Black Ice's assets were transferred to Zero Tolerance. Id. ¶ 24.
Plaintiff responds there is no enforceable arbitration agreement because the Performer Agreements are unconscionable and the result of duress or undue influence. See Doc. No. 30 at 2-3. The Court addresses these contract defenses in turn.
1. Unconscionability
Plaintiff argues that the arbitration provisions between Plaintiff and Video Defendants are both procedurally and substantively unconscionable. See id. at 3. Plaintiff asserts that the Performer Agreements are procedurally unconscionable because they were contracts of adhesion and she was not given a chance to review or discuss the significance of the agreements. See id. at 4. Plaintiff contends that the Agreements are substantively unconscionable because they "contained little to no details concerning how she might initiate arbitration in the event of a dispute, and they contained no explanation of the significance of the provisions." Id. at 5.
Video Defendants respond that Plaintiff does not provide any evidence to show that the Performer Agreements are unconscionable. See Doc. No. 33 at 3. They claim that Plaintiff merely relies on "legal boilerplate and generalities" and, thus, fails to meet her burden to prove procedural or substantive unconscionability. Id. As to procedural unconscionability, Video Defendants assert that Plaintiff does not provide proof that she was denied a choice in signing the Performer Agreements or explanations as to how the Agreements constitute contracts of adhesion. Id. As to substantive unconscionability, Video Defendants respond that the arbitration provisions provide each party the rights and remedies available in a court, and the references to the California Code of Civil Procedure provide comprehensive rules for conducting arbitration. See id. at 6.
A general contract defense of "unconscionability . . . may operate to invalidate arbitration agreements." Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2002). The party asserting that an agreement is unconscionable bears the burden of proof. Sanchez v. Valencia Holding Co., LLC, 353 P.3d 741, 749 (Cal. 2015) (citing Sonic-Calabasas A, Inc. v. Moreno, 311 P.3d 184, 205 (Cal. 2013)). Both procedural and substantive unconscionability must be present for a court to refuse to enforce a contract. See Armendariz v. Found Health Psychcare Servs., 6 P.3d 669, 690 (Cal. 2000). California courts apply a sliding scale: "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." Id. However, courts cannot apply principles of unconscionability in a way that undermines the FAA's objective "to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings." Concepcion, 563 U.S. at 344.
i. Procedural Unconscionability
The procedural unconscionability analysis focuses on the circumstances surrounding the creation of a contract and the presence of "oppression or surprise." Gatton v. T-Mobile USA, Inc., 61 Cal. Rptr. 3d 344, 352 (Ct. App. 2007) (citing Armendariz, 6 P.3d at 690). In doing so, a court must uncover "the manner in which the contract was negotiated and the circumstances of the parties at that time." Ingle v. Cir. City Stores, Inc., 328 F.3d 1165, 1171 (9th Cir. 2003) (quoting Kinney v. United HealthCare Servs., Inc., 83 Cal. Rptr. 2d 348, 352-53 (Ct. App. 1999)). Oppression results from "an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice." Gatton, 61 Cal. Rptr. 3d at 352 (citing Flores v. Transamerica HomeFirst, Inc., 113 Cal. Rptr. 2d 376, 381 (Ct. App. 2001)). Surprise arises when the "agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms." Id. (citing Stirlen v. Supercuts, Inc., 60 Cal. Rptr. 2d 138, 145 (Cal. Ct. App. 1997)). Procedural unconscionability typically takes the form of an adhesion contract, which 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." Gutierrez v. Autowest, Inc., 7 Cal. Rptr. 3d 267, 275 (Ct. App. 2003) (quoting Armendariz, 6 P.3d at 689). However, an adhesive contract term not being read or understood "does not justify a refusal to enforce it"; rather, the imposed term can only be denied if it is also substantively unreasonable. Id.; see also Poublon v. C.H. Robinson Co., 846 F.3d 1251, 1261 (9th Cir. 2017) ("[T]he California Supreme Court has not adopted a rule that an adhesion contract is per se unconscionable").
Here, Plaintiff asserts the Performer Agreements are contracts of adhesion. See Doc. No. 30 at 4. However, she fails to explain how or why the Agreements are adhesive contracts. Examining the Performer Agreements, the Court finds that they are standardized given the template format and the fact Plaintiff signed two identical Agreements for different film projects in June 2010 and August 2010. See Doc. No. 25-2 at 26, 30. However, "[a] standardized form in itself does not render a contract to be a contract of adhesion." Coon v. Nicola, 21 Cal. Rptr. 2d 846, 852 (Ct. App. 1993). As to unequal bargaining power, Plaintiff merely relies upon the allegations in her First Amended Complaint ("FAC") and has not provided evidence, such as a declaration, to offer facts showing unequal bargaining power between the signatories of the Agreements. In fact, Plaintiff does not address the other party to the Agreements, independent adult film producer Stebbins, and the nature of their relative bargaining strength. Without evidentiary support, Plaintiff has not demonstrated sufficient context surrounding the signing of the Agreements and whether there was unequal bargaining power. In essence, Plaintiff has not carried her burden to show that the Agreements were adhesive contracts. See Arguelles-Romero v. Superior Court, 109 Cal. Rptr. 3d 289, 305 (2010) ("It is the plaintiff's burden to introduce sufficient evidence to establish unconscionability."). Regardless, finding an adhesion contract would only begin the Court's analysis. See Parada v. Superior Court, 98 Cal. Rptr. 3d 743, 757 (Ct. App. 2009) (citing Higgins v. Superior Court, 45 Cal. Rptr. 3d 293, 303 (2006)) ("A procedural unconscionability analysis also includes consideration of the factors of surprise and oppression.").
As to oppression, Plaintiff argues that she "was not given a chance to review or discuss the significance of the Agreements and her 'employment,' to the extent it could be considered that given the coercion that is the basis of the underlying action, was dependent upon her signing the Agreements." See Doc. No. 30 at 4-5. Similar to her argument regarding adhesive contracts, Plaintiff fails to supply the Court with evidence. Plaintiff does not supply the Court with a declaration or other evidence to show an inequality of bargaining power. Engalla v. Permanente Med. Grp., Inc., 938 P.2d 903, 915-16 (Cal. 1997) (citing Rosenthal v. Great W. Fin. Sec. Corp., 926 P.2d 1061, 1072 (Cal. 1996)) ("[A] party opposing the petition [to compel arbitration] bears the burden of proving by a preponderance of the evidence any fact necessary to its defense"). Again, Plaintiff does not discuss the other party to the Agreements, Stebbins, or facts showing how he had a stronger bargaining power over Plaintiff that deprived her of a meaningful negotiation or choice in the Agreements.
As to surprise, the arbitration clauses within the Agreements are not hidden. The clause is towards the end of the one-page Agreements. See Doc. No. 25-2 at 26, 30. The clause is in the same style and typeface as the other contract terms. Given that the terms of each arbitration clause were not hidden or otherwise buried within the Agreements, the Court finds that there is no surprise.
In sum, Plaintiff has not brought forth any meaningful evidence to show procedural unconscionability. "The issue of unconscionability is not an abstract one, but rather requires an examination of the actual facts." See Gonzales v. Charter Commc'ns, LLC, No. 2:20-cv-08299-SB (ASx), 2020 WL 6536902, at *5 (C.D. Cal. Oct. 26, 2020). Instead of relying on evidence, Plaintiff rests upon on her allegations, attorney argument in her opposition brief, and conclusory statements disconnected from the circumstances surrounding the creation of the Agreements. Cf. Flaherty v. Warehousemen, Garage & Serv. Station Emp. Local Union No. 334, 574 F.2d 484, 486 n.2 (9th Cir. 1978) (stating that legal memoranda, oral argument, and allegations are not evidence for the purposes of a motion for summary judgment and do not create issues of fact); Engalla, 938 P.2d at 916 (noting that the trial court considers evidence—such as "all the affidavits, declarations, and other documentary evidence, as well as oral testimony"—to determine whether an arbitration agreements exists and whether there is a defense). Without providing any meaningful evidence, Plaintiff's challenge fails. See Gonzales, 2020 WL 6536902, at *5 ("In the absence of any meaningful evidence, the Arbitration Plaintiffs' challenge must fail.").
ii. Substantive Unconscionability
The substantive unconscionability analysis focuses on the "terms of the agreement and whether those terms are so one-sided as to shock the conscience." Ingle, 328 F.3d at 1172 (quoting Kinney, 83 Cal. Rptr. 2d at 353). Courts evaluate substantive unconscionability "as of the time the contract was made." A & M Produce Co. v. FMC Corp., 186 Cal. Rptr. 114, 122 (Ct. App. 1982). The "shock the conscience" standard requires more than a contract term that "merely gives one side a greater benefit." Pinnacle Museum Tower Assn. v. Pinnacle Mkt. Dev. (US), LLC, 282 P.3d 1217, 1232 (Cal. 2012). "Substantive unconscionability may be shown if the disputed contract provision falls outside the nondrafting party's reasonable expectations." Parada, 98 Cal. Rptr. 3d 759 (citing Gutierrez, 7 Cal. Rptr. 3d at 275).
Plaintiff's failure to show procedural unconscionability forecloses her unconscionability defense. See Armendariz, 6 P.3d at 690 (stating that both procedural and substantive unconscionability are necessary to successfully raise an unconscionability defense); Gonzales, 2020 WL 6536902, at *6 ("The failure to prove procedural unconscionability is fatal to the Arbitration Plaintiffs' claim."); Prizler v. Charter Commc'ns, LLC, No. 3:18-cv-1724-L-MSB, 2019 WL 2269974, at *4 (S.D. Cal. May 28, 2019) (declining to analyze substantive unconscionability where the court found there was no procedural unconscionability). Even if Plaintiff had shown some degree of unconscionability, Plaintiff has not shown the necessary, significant degree of substantive unconscionability required under the sliding scale. Armendariz, 6 P.3d at 690 (providing the sliding scale framework for assessing different degrees of procedural and substantive unconscionability); Gonzales, 2020 WL 6536902, at *6.
Regarding the terms of the Agreements, Plaintiff argues they contain "little to no details concerning how she might initiate arbitration in the event of a dispute, and they contained no explanation of the significance of the provisions." Doc. No. 30 at 5. In response, Video Defendants point to the terms of the arbitration provisions:
The parties shall submit all disputes relation [sic] to this Agreement, whether contract, tort, or both to binding arbitration, in accordance with California Code of Civil Procedure sections 1280 through 1294.2. The arbitrator shall not have the authority to award punitive or exemplary damages or attorney's fees. Either party may enforce the award of the arbitrator under section 1285 of the Code. The parties understand that they are waiving their rights to a jury trial. The Arbitration provision in this paragraph does not apply to disputes or a group of disputes where the total amount of the claim does not exceed five thousand dollars ($5,000.00) nor does it apply to any claim solely for injunctive relief.Doc. No. 25-2 at 26, 30.
The Court finds Plaintiff's argument unavailing. Plaintiff's reliance on OTO, L.L.C. v. Kho, 447 P.3d 680 (Cal. 2019) is distinguishable from the facts here. As an initial matter the OTO court found "an 'extraordinarily high' degree of procedural unconscionability." Id. at 690. Additionally, OTO involved the court contrasting the efficient, informal, and affordable wage claim Berman proceedings in contrast to an arbitral procedure that incorporated the "intricacies of civil litigation." Id. at 695. In essence, the Court found that such arbitration procedures—when contrasted with the Berman procedures—were "imposed in a procedurally unconscionable fashion" and became substantively unconscionable. Id. at 695-96; see also id. at 695 n.17, 698 ("The substantive fairness of this particular agreement must be considered in terms of what [the employee] gave up and what he received in return.").
As noted above, Plaintiff does not demonstrate procedural unconscionability. Plaintiff does not argue or show what rights or remedies she would forfeit in arbitration in contrast to the alternative forum of this Court. The arbitration provisions directly incorporate California Code of Civil Procedure sections 1280 through 1294.2, which comprise part of the California Arbitration Act ("CAA"). See Doc. No. 25-2 at 26, 30. The CAA details how to initiate arbitration proceedings. See Cal. Civ. Proc. Code §§ 1281.2-1284.3. Notably, Plaintiff does not point to the specific terms of the provision or the incorporated CAA sections, and she does not explain how they are "overly harsh," "unduly oppressive," "so one-sided as to 'shock the conscience,'" or "unreasonably favorable to the more powerful party." OTO, L.L.C., 447 P.3d at 692-93 (first quoting Stirlen, 60 Cal. Rptr. 2d at 145; then quoting Perdue v. Crocker Nat'l Bank, 702 P.2d 503, 511 (Cal. 1985); then quoting Pinnacle Museum Tower Assn., 282 P.3d at 1232; and then quoting Sonic-Calabasas A, Inc., 311 P.3d at 202). As to Plaintiff's argument that the provisions do not explain their significance, the provisions plainly state that arbitral proceedings will govern contract or tort disputes over the Agreement and that "[t]he parties understand that they are waiving their rights to a jury trial." Doc. No. 25-2 at 26, 30. Aside from Plaintiff's argument, the Court finds that the terms are not so one-sided or harsh as to shock the conscience. Therefore, Plaintiff does not carry her burden to show substantive unconscionability.
iii. Conclusion
Accordingly, because Plaintiff does not meet her burden, Plaintiff's attempt to invalidate the Agreements under the unconscionability doctrine fails.
2. Duress and Undue Influence
In addition to unconscionability, Plaintiff argues the agreements are void or voidable because she signed them under duress or undue influence. See Doc. No. 30 at 5. Relying on the allegations in her FAC, Plaintiff contends she was under duress when she signed the agreements because "[s]he was lured by the false promises of certain Defendants to participate and in some instances forced to work." See id. at 6. Plaintiff also notes that her "consideration for her obligations under the Agreements fails in numerous ways," referring to unconscionability, uneven bargaining power, and failure to pay. See id. Video Defendants respond that Plaintiff fails to support her argument with evidence and, instead, merely relies on the allegations in her FAC. See Doc. No. 33 at 6-7.
The general contract defense of duress may invalidate an arbitration agreement. See Concepcion, 563 U.S. at 339 (quoting Doctor's Assocs., Inc., 517 U.S. at 687); see also Cal. Civ. Code §§ 1565, 1566, 1567, 1559, 1689. Under California law, duress is a means to "attack[] the validity of a contract." In re Marriage of Baltins, 260 Cal. Rptr. 403, 413 (Ct. App. 1989). "Duress, which includes whatever destroys one's free agency and constrains her to do what is against her will, may be exercised by threats, importunity or any species of mental coercion." Id. (brackets omitted) (quoting In re Marriage of Gonzalez, 129 Cal. Rptr. 566, 570 (Ct. App. 1976)); see also Tarpy v. Cty. of San Diego, 1 Cal. Rptr. 3d 607, 614 (Ct. App. 2003). Duress arises "where a party 'intentionally used threats or pressure to induce action or nonaction to the other party's detriment.'" In re Marriage of Baltins, 260 Cal. Rptr. at 413 (quoting In re Marriage of Stevenot, 202 Cal. Rptr. 116, 132 n.6 (Ct. App. 1984)). The coercing party "must induce the assent of the coerced party, who has no reasonable alternative to succumbing." Id. at 414 (citing Rich & Whillock, Inc. v. Ashton Dev., Inc., 204 Cal. Rptr. 86, 89 (Ct. App. 1984)). The party asserting that an agreement was formed under duress bears the burden of proof by a preponderance of the evidence. See Changzhou AMEC E. Tools & Equip. Co. v. E. Tools & Equip., Inc., No. EDCV 11-00354 VAP (DTBx), 2012 WL 3106620, at *14 (C.D. Cal. July 30, 2012) (citing In re Marriage of Balcof, 47 Cal. Rptr. 3d 183, 193 (Ct. App. 2006)); see also Engalla, 938 P.2d at 915-16 (citing Rosenthal, 926 P.2d at 1072) ("[A] party opposing the petition [to compel arbitration] bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.").
Similarly, the general contract defense of undue influence may invalidate an arbitration agreement. See Richards v. Stanley, No. CIV-S-04-2564 DFL-DAD, 2005 WL 8176778, at *4 (E.D. Cal. June 20, 2005); see also Cal. Civ. Code §§ 1565, 1566, 1567, 1575, 1689. Under California law, there are three different types of undue influence: (1) "[i]n the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him"; (2) "[i]n taking an unfair advantage of another's weakness of mind"; or (3) "taking a grossly oppressive and unfair advantage of another's necessities or distress." Cal. Civ. Code § 1575. Essentially, undue influence involves "undue susceptibility in the servient person" and "excessive pressure by the dominating person," which results in the "will of the servient person being in fact the will of the dominant person." Odorizzi v. Bloomfield Sch. Dist., 54 Cal. Rptr. 533, 540 (Ct. App. 1966). The party asserting that an agreement was formed under undue influence bears the burden of proof. See Olam v. Cong. Mortg. Co., 68 F. Supp. 2d 1110, 1139 (N.D. Cal. 1999); see also Engalla, 938 P.2d at 915-16 (citing Rosenthal, 926 P.2d at 1072).
Here, Plaintiff does not carry her burden to show duress or undue influence. As with her unconscionability argument, Plaintiff rests upon her allegations and attorney argument. See Doc. No. 30 at 6-7. Plaintiff's contract defenses require more than mere allegations or argument. The defenses require evidentiary support. See Engalla, 938 P.2d at 916 (stating that a party opposing arbitration carries the burden of proof and noting that courts rely upon evidence—such as "affidavits, declarations, and other documentary evidence, as well as oral testimony"). Accordingly, by not providing the Court with any evidence, Plaintiff's attempt to invalidate the Agreements under the duress and undue influence doctrines fails.
3. Conclusion
Video Defendants provide the Court with the Performer Agreements, which contain arbitration provisions. See Doc. No. 25-2 at 26, 30. Plaintiff challenges the validity of these agreements on the grounds of unconscionability, duress, and undue influence. However, Plaintiff does not carry her burden on these defenses to invalidate the Agreements or their arbitration clauses. Thus, the Court is left with the valid agreements to arbitrate within the Performer Agreements.
C. Whether the Arbitration Agreements Encompass the Dispute at Issue
Neither party clearly focuses on second prong of the arbitration analysis: "whether the agreement encompasses the dispute at issue." Kilgore, 718 F.3d at 1058 (quoting Chiron Corp., 207 F.3d at 1130). In their motion, Video Defendants briefly argue that "the Performer Agreements are clear that any dispute between Plaintiff and the Video Defendants shall be submitted to binding arbitration." Doc. No. 25 at 9; see also id. at 6. Plaintiff does not address the second prong. Plaintiff bears the burden to prove the claims are unsuitable for arbitration, and the Court resolves ambiguities regarding the scope of the arbitration clause in the favor of arbitration. See Green Tree Fin. Corp.-Alabama, 531 U.S. at 91; Volt Info. Scis., Inc., 489 U.S. at 475-76.
For the purpose of assessing the scope of the provisions, the applicable parts of the arbitration provisions are as follows:
The parties shall submit all disputes relation [sic] to this Agreement, whether contract, tort, or both to binding arbitration, in accordance with California Code of Civil Procedure sections 1280 through 1294.2. The arbitrator shall not have the authority to award punitive or exemplary damages or attorney's fees. . . . The Arbitration provision in this paragraph does not apply to disputes or a group of disputes where the total amount of the claim does not exceed five thousand dollars ($5,000.00) nor does it apply to any claim solely for injunctive relief.Doc. No. 25-2 at 26, 30. Plaintiff brings several claims against Video Defendants that relate to work she performed in their pornographic films. The allegations include the participation in a venture in violation of the TVPA, financially benefiting from sex trafficking in violation of the TVPA, conspiracy to commit violation of the TVPA, and violations of California Labor Code. See FAC ¶¶ 144-69, 182-88. The TVPA "creates a cause of action for tortious conduct that is ordinarily intentional and outrageous." Ditullio v. Boehm, 662 F.3d 1091, 1098 (9th Cir. 2011). Because Plaintiff's claims against Video Defendants sound in tort, no party disputes whether the claims fall under the scope of the Agreements, and the Agreements contain comprehensive language pertaining to "all disputes," the Court finds that the Agreements encompass the dispute at issue.
D. Whether There Is a Risk of Conflicting Rulings Where the Action Would Continue with Other Defendants
Alternatively, Plaintiff argues that arbitration and this action could yield conflicting rulings on common factual and legal issues if the Court were to compel arbitration. See Doc. No. 30 at 2, 7. Plaintiff relies on California Code of Civil Procedure section 1281.2(c). See id. at 7. Video Defendants respond that Plaintiff fails to identify any examples of potential conflicting rulings. See Doc. No. 33 at 8. Video Defendants add that the allegations against them are separate and do not impact the other Defendants. Id.
Under section 1281.2(c),
the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that . . . (c) [a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.Cal. Civ. Proc. Code § 1281.2(c). "Section 1281.2(c) addresses the peculiar situation that arises when a controversy also affects claims by or against other parties not bound by the arbitration agreement." Mount Diablo Med. Ctr. v. Health Net of California, Inc., 124 Cal. Rptr. 2d 607, 617 (Ct. App. 2002). The statute provides the following options if the conditions of section 1281.2(c) are satisfied:
the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.Id. The Supreme Court has held that the application of section 1281.2(c) to stay arbitration in accordance with the terms of the arbitration agreement does not necessarily undermine the goals and policies of the FAA. Volt Info. Scis., Inc., 489 U.S. at 477-78 (1989). Where the parties agree to follow state arbitration rules, "enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed where the Act would otherwise permit it to go forward." Id. at 479; see also Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1213 (9th Cir. 1998) (citing Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995)) ("[G]eneral choice-of-law clauses do not incorporate state rules that govern the allocation of authority between courts and arbitrators.").
Similar to the contracts in Mastrobuono and Wolsey, Video Defendants and Plaintiff have enforceable Performer Agreements with arbitration and choice-of-law provisions. Compare Wolsey, Ltd., 144 F.3d at 1212, with Doc. No. 25-2 at 26, 30. However, unlike Mastrobuono and Wolsey, the arbitration provisions here explicitly and unambiguously incorporate California Code of Civil Procedure sections 1280 through 1294.2. Compare Wolsey, Ltd., 144 F.3d at 1212, with Doc. No. 25-2 at 26, 30. Thus, the parties incorporated section 1281.2(c) into their Agreements, and the Court must give effect to the "contractual rights and expectations of the parties." Volt Info. Scis., Inc., 489 U.S. at 478; see also Defrees v. Kirkland, No. CV 11-4272 GAF (SPx), 2012 WL 12883971, at *5 (C.D. Cal. Jan. 17, 2012) (finding that section 1281.2(c) governed enforcement of the arbitration agreement where there were arbitration and choice-of-law provisions, the provisions were consistent, and the arbitration clause stated that the CAA governed arbitration proceedings), aff'd, 579 F. App'x 538, 541 (9th Cir. 2014).
In rebutting Plaintiff's argument, Video Defendants focus on an analysis of section 1281.2(c). See Doc. No. 33 at 8-9, 9 n.2. They do not dispute that section 1281.2 governs enforcement of the Performer Agreements. See id.; see also id. at 6 ("[B]y incorporating Sections 1280 through 1294.2 of the California Code of Civil Procedure, the arbitration provisions provide a comprehensive and thorough set of rules for how the arbitration is to be conducted.").
Plaintiff conclusively argues there will be a possibility of conflicting rulings on common legal and factual issues. See Doc. No. 30 at 7. Plaintiff neglects to point to instances where possible legal or factual conflicts could arise. However, Plaintiff can rely on her allegations to show a possibility of conflicting rulings. See Acquire II, Ltd. v. Colton Real Estate Grp., 153 Cal. Rptr. 3d 135, 146 (Ct. App. 2013) (citing Abaya, 118 Cal. Rptr. 3d 345, 351 (Ct. App. 2010)) ("We emphasize the allegations of the parties' pleadings may constitute substantial evidence sufficient to support a trial court's finding that section 1281.2(c) applies."). Plaintiff's allegations against each Video Defendant arise out of the same transactions or events that involve Defendant Steele—a nonparty to the Performer Agreements. See FAC ¶¶ 6-8, 56-57, 60-61, 145-51. Plaintiff alleges Steele and Video Defendants had a relationship where Steele forced Plaintiff to perform in Video Defendants' pornographic films, Video Defendants paid Steele and not Plaintiff, and Video Defendants "ratified and perpetuated the human trafficking scheme." Id. ¶¶ 6-8.
The Court finds that there is more than a mere possibility of conflicting factual rulings regarding the relationship between Steele and Video Defendants. In fact, Video Defendants challenge Plaintiff's claims regarding their interaction with Steele and the alleged sex trafficking. See Doc. No. 25 at 8 (citing Dunn Decl., Doc. No. 25-1 ¶¶ 5-6, 8); Doc. No. 33 at 8. If the Court were to compel arbitration, the Court and the arbitrator would need to resolve overlapping issues that could result in conflicting rulings. Video Defendants' objections speak to the core of Plaintiff's allegations against them, but "section 1281.2(c) prohibits a trial court from considering the merits of a party's claims when ruling on a motion to compel arbitration." Acquire II, Ltd., 153 Cal. Rptr. 3d at 146 (first citing Cal. Civ. Proc. Code § 1281.2(c); and then citing California Corr. Peace Officers Assn. v. State of California, 47 Cal. Rptr. 3d 717, 726 (Ct. App. 2006)). Therefore, the Court finds that Plaintiff's allegations satisfy her burden under section 1281.2(c) to show (1) Video Defendants are parties to this pending action with Steele, who is a third party to the Performer Agreements; (2) the alleged transactions between each Video Defendant, Steele, and Plaintiff are related to the alleged sex trafficking allegations; and (3) there is a possibility of conflicting rulings on a common issue of fact: the nature of Video Defendants' interactions and relationship with Steele.
Given that Plaintiff satisfies the requirements of section 1281.2(c), the final paragraph of section 1281.2 gives the Court several options: (1) refuse to enforce the arbitration agreement and order the parties to proceed in this single action, (2) "order intervention or joinder as to all or only certain issues," (3) order arbitration of the parties who agreed to arbitrate and stay this action, or (4) stay the arbitration pending the result of this action. Cal. Civ. Proc. Code § 1281.2. Here, whereas Plaintiff seeks option (1), see Doc. No. 30 at 8, Video Defendants prefer options (3) or (4). See Doc. No. 33 at 9 n.2. After determining that section 1281.2(c) applies, courts may consider judicial economy and "other similar factors" in selecting the outcome. Acquire II, Ltd., 153 Cal. Rptr. 3d at 151. Additionally, "[w]hat the trial court chooses to do in this situation is a matter of its discretion, guided largely by the extent to which the possibility of inconsistent rulings may be avoided." Id. at 154 (quoting Metis Dev. LLC v. Bohacek, 133 Cal. Rptr. 3d 585, 595 (2011)).
Because the second, third, and fourth causes of action call into question the conduct between Steele and each Video Defendant, the Court finds that the best option is to decline to compel arbitration at this time. Compelling arbitration while this action continues could lead to conflicting findings of fact regarding the relationship between Steele and Video Defendants. Cf. Defrees, 2012 WL 12883971, at *6-7 (denying arbitration where there could be conflicting rulings on law and fact and where staying arbitration would unnecessarily lengthen and duplicate efforts). This option also would reduce prejudice against Plaintiff's claims against Steele, who is not a party to the Performer Agreements. Finally, this option still gives deference to the strong policy in favor of enforcing arbitration agreements pursuant to their terms where the arbitration provisions here incorporate section 1281.2, see Doc. No. 25-2 at 26, 30, which envisions this result as a possible outcome. Accordingly, at this time, the Court refuses to enforce the arbitration agreement and declines to compel arbitration.
IV. CONCLUSION
For the foregoing reasons, the Court DENIES Video Defendants' motion to compel arbitration.
IT IS SO ORDERED. Dated: March 11, 2021
/s/_________
HON. MICHAEL M. ANELLO
United States District Judge