Mohamad v. X-Therma, Inc.

Background

Elaa Mohamad alleged that he worked for X-Therma as Chief Business Officer until the company terminated him in September 2020. He asserted claims involving discrimination, retaliation for complaining about racist and offensive conduct, wrongful termination, breach of contract, and alleged violations of the federal and California False Claims Acts.

Mohamad’s employment agreement contained a broad arbitration provision. It required binding arbitration of disputes arising from his employment or its termination, including claims for discrimination, harassment, wrongful termination, and breach of contract. The agreement also stated that arbitration would be the exclusive remedy for covered disputes and that the arbitrator could decide motions and issue a written decision on the merits.

Arguments and analysis

The defendants asked the court to order arbitration of all of Mohamad’s claims except Claims Eight and Nine, which alleged direct violations of the federal and California False Claims Acts. They asked that those two claims be stayed. Mohamad did not dispute that Claims One through Five and Ten through Twelve fell within the arbitration provision, but argued that Claims Six and Seven—retaliation claims under the two false-claims laws—were not covered. He also argued that the arbitration provision was unconscionable, meaning unfairly imposed or unfair in its terms.

The court held that Claims Six and Seven fell within the arbitration provision because they were employment-related retaliation claims asserted by Mohamad personally. The court distinguished those claims from Claims Eight and Nine: damages claims for fraud against the government under the False Claims Acts belong to the government, not to the individual who brings the case on the government’s behalf. The court therefore treated Claims Eight and Nine differently from the retaliation claims.

The court rejected Mohamad’s unconscionability defense. It found that any procedural unfairness—concerning how the agreement was presented or negotiated—was minimal. In particular, an offer letter he had signed before starting work told him that arbitration would be a condition of employment and described important arbitration terms. The court also found no substantive unfairness, noting that Mohamad had not identified a specific unfair term and that the agreement’s language made arbitration mutually applicable to him and the company.

Disposition

The court granted the motion to compel arbitration. It ordered Claims One through Seven and Ten through Twelve to arbitration, stayed Claims Eight and Nine pending arbitration, and directed the parties to notify the court within 14 days after a final arbitration decision. The Clerk was instructed to administratively close the case while arbitration proceeded. The order did not decide the underlying discrimination, retaliation, contract, or false-claims allegations on their merits.