Opinion
B321248
06-29-2023
CHRISTOPER KING, Plaintiff and Respondent, v. BAKER PETROLITE LLC et al., Defendants and Appellants
Hunton Andrews Kurth and M. Brett Burns for Defendants and Appellants. Law Office of Jocelyn Sperling and Jocelyn Sperling; Law Office of Kelly Y. Chen and Kelly Y. Chen for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. 22STCV02400, Michael P. Linfield, Judge. Affirmed.
Hunton Andrews Kurth and M. Brett Burns for Defendants and Appellants.
Law Office of Jocelyn Sperling and Jocelyn Sperling; Law Office of Kelly Y. Chen and Kelly Y. Chen for Plaintiff and Respondent.
EGERTON, J.
Christopher King sued his former employer, Baker Petrolite LLC (Baker), for retaliation, defamation, wrongful termination, and failure to pay compensation. Baker moved to compel arbitration under an agreement King signed as a condition of his employment. The trial court concluded the agreement is unconscionable and refused to enforce it. Among other unconscionable provisions, the court noted the agreement does not identify the governing rules or hearing location, limits King's statutory remedies, excludes Baker's likely claims, and places presumptive limits on discovery and the arbitration hearing. On appeal, Baker argues the trial court should not have considered King's unconscionability arguments because the parties had delegated the issue to the arbitrator to decide. Alternatively, it argues the agreement is neither unconscionable nor unenforceable. We affirm.
King also sued Baker Hughes Oilfield Operations LLC, Baker Hughes Energy Services LLC, Baker Hughes Holdings LLC, and Ling Yeung. For the sake of simplicity, we refer to the defendants collectively as "Baker."
FACTUAL AND PROCEDURAL BACKGROUND
In January 2021, Baker hired King to work as a chemical technician at one of its jobsites. Baker fired King about four months later, purportedly for "a failure to meet the expectations and skills required of a Chemical Technician ...."
1. King's complaint
In January 2022, King filed a complaint against Baker. King alleged that, during his brief employment, Baker violated the law by failing to pay him for all hours worked, requiring that he work in unsafe conditions, frequently interrupting his breaks, and failing to reimburse him for business-related expenditures.
When King voiced these concerns, Baker retaliated by calling him" 'lazy,'" reprimanding him, issuing write-ups, denying him proper training, and ultimately terminating him.
The complaint asserted 10 causes of action, including unlawful retaliation in violation of the Labor Code, defamation, wrongful termination, and failure to pay all compensation. In relief, King sought damages, statutory penalties, reinstatement, attorney fees, and any other relief the court deems just and proper.
2. Baker's motion to compel arbitration
Baker responded to the complaint by filing a motion to compel arbitration, in which it asked the court to decide two threshold issues: "(1) whether the parties entered into an enforceable arbitration agreement; and (2) whether the claims asserted in the Complaint fall within the scope of the agreement." According to Baker, there was no dispute that King "entered into a valid, enforceable arbitration agreement in which he agreed to arbitrate the claims asserted in the Complaint."
In support of its motion, Baker submitted evidence that it offered to hire King in a letter dated January 7, 2021. In order to accept the offer, King had to agree to be bound by Baker's "Solutions Procedure," which includes an arbitration clause. We discuss the terms of the Solutions Procedure in detail below. According to Baker, King electronically signed the letter on January 8.
King opposed the motion to compel on the basis that he never signed the Solutions Procedure and, even if he had, the agreement is unconscionable. Among many other things, King argued the agreement includes improper "presumptive guidelines," which limit each party to five witnesses, three depositions, 20 interrogatories, 15 requests for documents, and 15 requests for admission.
In support of the opposition, King's attorney submitted a declaration in which she asserted, based on her experience litigating employment cases and her familiarity with King's claims, she would need more discovery than permitted under the Solutions Procedure. According to counsel, she would need to depose at least seven witnesses for King's defamation cause of action alone. Counsel also anticipated needing to depose at least two additional witnesses for the Labor Code violation claims. As for the hearing, counsel stated she would need to call between 12 and 15 witnesses.
In its reply brief, Baker urged the court not to consider the unconscionability issue, because the Solutions Procedure includes a delegation clause granting the arbitrator the exclusive authority to resolve disputes over issues of enforceability. Alternatively, it argued the Solutions Procedure is not unconscionable.
3. The court's decision
At the hearing on the motion, King argued Baker had forfeited the delegation issue by failing to raise it in its moving papers. Baker proposed that the court could allow King an opportunity to file a supplemental brief to address the issue. The court declined to do so, noting the agreement is "replete with unconscionable positions."
The court subsequently issued a detailed order denying Baker's motion on the basis that the "Solutions Procedure [a]rbitration agreement is both procedurally unconscionable and has numerous substantively unconscionable provisions which cannot be severed." The court explained the agreement is procedurally unconscionable because it "presents a contract of adhesion with significant surprise elements and fails to reference" the identity of the arbitration organization. The court also found "numerous provisions of the Solutions Procedure are substantively unconscionable," including requiring that only the employee keep certain information confidential, not specifying the arbitral forum or its rules, placing default limits on discovery that would tend to harm the employee more than the employer, limiting the number of witnesses at the hearing, limiting the arbitrator's ability to enjoin Baker from future discriminatory acts, allowing Baker to avoid reinstatement, requiring the use of Texas law, prohibiting arbitration of FEHA claims, including a misleading description of arbitration, and requiring that arbitration remain confidential.
Baker timely appealed.
DISCUSSION
Baker contends the trial court erred in considering King's unconscionability argument given the parties had delegated that issue to the arbitrator. Alternatively, it argues the Solutions Procedure is either not unconscionable, or the court should have severed the unconscionable provisions and enforced the rest of the agreement.
1. Applicable law and standard of review
Under both California and federal law, a written arbitration agreement is "valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract." (Code Civ. Proc., § 1281; see also 9 U.S.C. § 2 [similar].) "California law, like federal law, favors enforcement of valid arbitration agreements." (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97 (Armendariz).) Nevertheless, a trial court may refuse to enforce an arbitration agreement "based on general contract law principles," including if the agreement is "unconscionable or contrary to public policy." (Id. at p. 99.)
The party who moves to compel arbitration "bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense." (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) Because unconscionability is a contract defense, King bears the burden of proof on the issue. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 911 (Sanchez).)
" '[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." (Armendariz, supra, 24 Cal.4th at p. 114.) Both procedural and substantive unconscionability must be present for a court to refuse to enforce a contract or a contract term, including an arbitration agreement, under the doctrine of unconscionability. "But they need not be present in the same degree." (Ibid.) "[T]he 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." (Ibid.)
" 'On appeal from the denial of a motion to compel arbitration, "we review the arbitration agreement de novo to determine whether it is legally enforceable, applying general principles of California contract law."' [Citation.] Thus, unconscionability is a question of law we review de novo." (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 82 (Carmona).)
2. The Solutions Procedure
The Solutions Procedure is a 30-page document that purports to create a "binding obligation on Covered Employees and the Company for the resolution of employment disputes." It consists of "two internal levels of review followed by, if necessary and applicable, outside mediation (Level III) and arbitration (Level IV)." Unless the parties agree otherwise, an employee is required to complete each level of review before moving on to the next. Baker, in contrast, may start at Level III.
At Level I, the employee submits a claim form to the Solutions Administrator, who schedules an informal meeting between the employee and his or her manager. Only the employee, the manager, an HR representative, and "appropriate Company representatives who were involved in the events" may attend and participate in the meeting. The Level II procedure is essentially the same as Level I, with the primary difference being that a higher-level manager is required to attend the meeting. Level III consists of mediation before a neutral third party.
The Solutions Procedure mandates that, at the final level of review (Level IV), the parties arbitrate "all claims that arise or arose out of or are or were related to an employee's employment or cessation of employment ...." This includes claims related to involuntary termination, retaliation, compensation, and violations of public policy. The Solutions Procedure excludes certain types of claims from mandatory arbitration, including intellectual property claims.
According to the agreement, arbitration is to be "administered by a nationally recognized dispute resolution organization ('DRO')." The agreement states that, "[f]or each location covered by Solutions, [Baker] has designated a DRO .... Except as provided otherwise by this Procedure, the mediation and arbitration of Covered Claims will be administered by the designated DRO under its current rules for mediation and for arbitration, as may be amended, without notice by the DRO."
The Solutions Procedure does not identify the DRO that Baker selected to handle claims for King's location. However, it states an employee may "obtain information regarding which DRO has been designated to handle proceedings . . . and the DRO's rules governing such from the Solutions Administrator or the local HR manager."
The Solutions Procedure includes "presumptive guidelines" for discovery. Each party may request three depositions and submit to the other party 20 interrogatories, 15 requests for documents, and 15 requests for admission. The arbitrator may modify these guidelines by increasing or decreasing discovery.
Unless the parties agree or the arbitrator directs otherwise, the parties must use the "DRO office nearest to the employee's work location to arbitrate the Covered Claims." The arbitrator determines the duration of the arbitration, but "shall seek to limit" it to 16 hours total. Each party is limited to five witnesses, which includes experts. The arbitrator, however, may amend this requirement if it "will prevent the party from . . . presenting evidence that will assist the party in proving a claim or defense." The arbitrator must provide each party an adequate opportunity to present its case, considering the nature and complexity of the claims at issue.
The arbitrator generally is authorized to grant any remedy or relief that would have been available had the claim been asserted in court. This includes ordering Baker to "change the application of its policies, procedures, rules, or practices" with respect to the employee. The arbitrator may not, however, "change, require [Baker] to establish, nor diminish [Baker's] authority to establish or revise its policies, procedures, rules and/or practices."
If the arbitrator awards reinstatement, either party can request it order front pay instead. After receiving such a request, the arbitrator "shall accept additional evidence or argument on that issue and shall issue a supplemental award. Such an award will grant the employee reasonable front pay instead of reinstatement in accordance with applicable state or federal law."
The Solutions Procedure includes a severability provision and a delegation clause. The delegation clause states: "The Arbitrator, and not any court or agency, shall have exclusive authority to resolve any dispute relating to the applicability, interpretation, formation or enforceability of this Agreement including, but not limited to, any claim that the entirety or any part of this Agreement is voidable or void ...."
3. Murrey v. Superior Court
While this appeal was pending, an appellate court in the Fourth District decided Murrey v. Superior Court (2023) 87 Cal.App.5th 1223 (Murrey), which involved an arbitration agreement remarkably similar to the Solutions Procedure. In Murrey, the plaintiff filed a lawsuit against her former employer, General Electric Company (GE), alleging unlawful harassment based on gender and sex, failure to prevent harassment, Labor Code violations, and retaliation. (Id. at p. 1231.) GE moved to compel arbitration on the basis that the plaintiff had agreed to arbitrate her claims by signing a document titled"' "SOLUTIONS: An Alternative Dispute Resolution Procedure," '" which the court referred to as the Solutions manual. (Id. at p. 1232.) The Solutions manual in Murrey, and the Solutions Procedure at issue here, appear to be identical in all meaningful respects, likely because GE and Baker seem to be related companies.
According to a Securities and Exchange Commission filing, Baker Hughes Company "was formed in July 2017 as the result of a combination between Baker Hughes Incorporated (BHI) and the oil and gas business (GE O&G) of General Electric Company (GE) (the Transactions). As a result of the Transactions, substantially all of the business of GE O&G and of BHI was transferred to a subsidiary of the Company, Baker Hughes Holdings LLC (BHH LLC)." (Baker Hughes Co., Form 10-K for fiscal year ended Dec. 31, 2021, p. 1.)
Unlike this case, however, the trial court in Murrey determined the agreement is enforceable and granted GE's motion. The plaintiff challenged that decision in a petition for writ of mandate, arguing the agreement is unconscionable. The Court of Appeal agreed, concluding "the highly secretive and one-sided provisions . . . make it both procedurally and substantively unconscionable." (Murrey, supra, 87 Cal.App.5th at p. 1230.) The court granted the employee's petition and directed the trial court to deny GE's motion to compel arbitration.
Because the question of unconscionability turns on the unique circumstances of each case, Murrey is not determinative of the outcome of our case. (See Sanchez, supra, 61 Cal.4th at p. 911 ["An evaluation of unconscionability is highly dependent on context."].) Nevertheless, given the similarities between the challenged arbitration agreements, the Murrey court's reasoning often applies directly to the issues before us. Because we find the court's reasoning persuasive and its conclusions sound, we frequently refer to it throughout our discussion.
4. Baker forfeited its delegation argument; it also lacks merit
Baker argues that, because the Solutions Procedure contains a delegation clause stating the arbitrator shall decide issues of enforceability, the trial court erred in considering King's unconscionability defense.
Generally, a court decides the threshold questions of whether an arbitration agreement is valid and enforceable. (Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1108.) "An exception to this rule applies when the parties have clearly and unmistakably agreed to delegate questions regarding the validity of the arbitration clause to the arbitrator. [Citations.] Such delegation clauses are generally enforceable according to their terms." (Ibid.)
"The law presumes that a delegation to an arbitrator of enforceability issues is ineffective absent clear and unmistakable evidence that the parties intended such a delegation." (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 242 (Tiri).) Therefore, the "party seeking to enforce a delegation clause must show that it was clear and unmistakable, and silence or ambiguity will be deemed insufficient." (Ibid.) Even if a delegation clause is clear and unmistakable, a court will not enforce it if it is revocable on state-law grounds, such as fraud, duress, or unconscionability. (Id. at p. 243.)
A party seeking to prevent delegation must direct its arguments specifically at the delegation clause; it is not enough to show the arbitration agreement as a whole is unenforceable. (Tiri, supra, 226 Cal.App.4th at p. 244.) Indeed, if it were, an agreement to delegate to an arbitrator the question of enforceability would be effectively meaningless.
Relying on Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748 (Mendoza), King argues Baker forfeited its delegation argument. In Mendoza, the plaintiff opposed his former employer's motion to compel arbitration on the basis that the parties' arbitration agreement was void and unenforceable. (Id. at p. 759.) For the first time in its reply brief, the employer argued questions regarding the validity and enforceability of the agreement were for the arbitrator to decide under the terms of a delegation clause. (Ibid.) The trial court denied the motion to compel, and the employer raised the delegation issue on appeal. (Id. at p. 760.) The Court of Appeal held the employer forfeited the argument by failing to raise it in its moving papers, noting the plaintiff did not have an opportunity in the trial court to brief or present evidence on the issue. (Id. at pp. 770-771.)
The same is true here. Despite now claiming the enforceability issue is for the arbitrator alone to decide, Baker began the argument section of its moving papers with the heading, "Plaintiff's Arbitration Agreement is Valid and Enforceable." At no point did Baker mention the delegation clause, let alone urge the court to enforce it. Instead, Baker waited until its reply brief-when King would not have a full opportunity to respond-to cite the delegation clause for the first time. Even then, it devoted roughly a paragraph to the issue, focusing instead on the merits of the unconscionability issue. As in Mendoza, Baker forfeited the delegation clause issue by failing to raise it in its moving papers. (See Mendoza, supra, 75 Cal.App.5th at p. 770.)
Baker argues it was not required to address the delegation clause in its moving papers because King had the burden to prove the Solutions Procedure is unconscionable and unenforceable. True, "the party opposing arbitration bears the burden of proving any defense, such as unconscionability." (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle).) However, Baker overlooks that, for purposes of a motion to compel arbitration, a delegation clause is considered to be separate from the rest of the arbitration agreement. (See Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1559 ["courts have treated the delegation clause as a separate agreement to arbitrate solely the issues of enforceability"].) As the moving party, Baker had the burden of proving the existence of both an arbitration agreement and the delegation clause within it. (Tiri, supra, 226 Cal.App.4th at p. 239.) In its moving papers, Baker sought to prove only that the parties had an agreement to arbitrate King's claims; it did not seek to prove the existence of the delegation clause. Therefore, King's burden to prove any defenses to the delegation clause, such as unconscionability, never arose.
Even if Baker were not required to raise the delegation clause in its moving papers, its argument fails for another reason. King points out that, in its motion to compel arbitration, Baker asked the trial court to decide whether King's claims are covered under the parties' agreement, which is an issue going to the applicability and interpretation of the Solutions Procedure. The delegation clause, however, states the "arbitrator, and not any court or agency, shall have exclusive authority to resolve any dispute relating to the applicability [and] interpretation . . . of this Agreement." According to King, Baker's conduct is "so inconsistent with the exercise of the right to arbitration [under the delegation clause] as to constitute an abandonment of that right." (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1201.)
Baker contends its conduct is not inconsistent because the Solutions Procedure does not, in fact, delegate to the arbitrator the question of whether a claim is subject to arbitration. Baker points to section II(M) of the Solutions Procedure, which states that, when an employee files a complaint in court, the statute of limitations is tolled "until ninety days from the time a decision is made by the court regarding the appropriate forum for resolution ...." (Italics added.) Baker argues this provision makes clear that the parties intended for a court, and not the arbitrator, to determine the scope of the Solutions Procedure. At the very least, according to Baker, section II(M) creates an ambiguity, which precludes a finding of a "clear and unmistakable" agreement to delegate the issue to an arbitrator.
In making this argument, Baker has unwittingly undermined the foundation of its delegation argument. Whether arbitration is the "appropriate forum for resolution" of the parties' dispute-which Baker insists is for a court to decide- depends on whether the arbitration agreement is enforceable. Indeed, if the Solutions Procedure were unenforceable, arbitration plainly would not be an appropriate forum to decide King's claims. By Baker's own reasoning, then, the Solutions Procedure does not clearly and unmistakably delegate to the arbitrator the sole authority to determine whether the agreement is enforceable. Because the question of unconscionability goes to the agreement's enforceability, Baker has not met its burden of proving the parties clearly and unmistakably agreed to arbitrate that issue. The trial court, therefore, properly considered whether the Solutions Procedure is unconscionable. Accordingly, we now turn to that issue.
5. The Solutions Procedure contains a high degree of procedural unconscionability
"[P]rocedural unconscionability requires oppression or surprise.' "Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form." '" (Pinnacle, supra, 55 Cal.4th at p. 247.)" '[T]here are degrees of procedural unconscionability. At one end of the spectrum are contracts that have been freely negotiated by roughly equal parties, in which there is no procedural unconscionability.... Contracts of adhesion that involve surprise or other sharp practices lie on the other end of the spectrum.'" (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244 (Baltazar).)
One of the most common forms of procedural unconscionability involves the use of a contract of adhesion. A contract of adhesion 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.] 'Arbitration contracts imposed as a condition of employment are typically adhesive.'" (Davis v. Kozak (2020) 53 Cal.App.5th 897, 906 (Davis).)
The use of a contract of adhesion establishes only a minimal degree of procedural unconscionability. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 585.) Nevertheless, our Supreme Court has counseled that, when an employment contract is adhesive in nature, the court must be" 'particularly attuned'" to the employee's claim of substantive unconscionability. (Baltazar, supra, 62 Cal.4th at p. 1245.) Where a contract of adhesion also involves" 'surprise or other sharp practices,'" the court must subject the substantive terms to a higher degree of scrutiny. (Ibid.)
Here, the parties seem to agree the Solutions Procedure is a contract of adhesion. The parties disagree, however, as to whether the Solutions Procedure contains additional elements of procedural unconscionability reflecting "surprise[s] or other sharp practices." We conclude it contains several such elements, which we discuss in turn.
a. The Solutions Procedure does not identify the arbitration organization or the governing rules
Although the Solutions Procedure specifies many of its own rules, it also incorporates the rules of whichever "dispute resolution organization" (DRO) handles the claims. For example, the agreement states that, if a party fails to adhere to certain deadlines, "whether such failure will be excused or may result in sanctions or other penalties, shall be determined by the arbitrator in accordance with the DRO's rules." The agreement also empowers the arbitrator to sanction a party for failing to comply with the DRO's rules; this effectively incorporates every DRO rule into the agreement.
Despite the importance of the DRO and its rules, the Solutions Procedure does not specifically identify either. Instead, it grants Baker the exclusive authority to select the DRO, with the only requirement that it be "nationally recognized." The Solutions Procedure does not require that Baker reveal its selection, absent a specific request from the employee. It also seems to give Baker the right to change its selection at any time, for any reason, without providing notice to King. (See Murrey, supra, 87 Cal.App.5th at p. 1240 [noting the Solutions agreement "confer[s] a unilateral right to change the DRO for any particular location without notice and for its benefit"].)
As the Murrey court observed concerning similar provisions, this" 'scheme epitomizes the very definition of secrecy.'" (Murrey, supra, 87 Cal.App.5th at p. 1240.) Baker, however, offers no justification for it, which suggests its motivation was to gain "the upper hand in selecting a favorable DRO." (Id. at p. 1242.) We agree with the Murrey court that," '[g]iven the lack of choice and the potential disadvantages that even a fair arbitration system can harbor for employees' [citation] . . . this particular provision was highly unconscionable." (Ibid., citing Armendariz, supra, 24 Cal.4th at p. 115 ; see Subcontracting Concepts (CT), LLC v. De Melo (2019) 34 Cal.App.5th 201, 211 (Subcontracting Concepts) [an arbitration agreement was procedurally unconscionable because, although it referred to the American Arbitration Association, it did not state what rules would govern the arbitration].)
Baker insists this aspect of the Solutions Procedure is not unconscionable because King was free to request the name of the DRO and its rules. In support, it points to the provision in the agreement stating an employee may ask the Solutions Administrator or the local HR manager for information about" 'which DRO has been designated to handle proceedings'" and" 'the DRO's rules governing such.' "
Baker's argument fails for several reasons. First, Baker presented no evidence that it had selected a DRO before it presented the agreement to King to sign. In support of its motion to compel arbitration, Baker submitted a declaration from Tamara Pratt, who is the administrator of the Solutions Procedure. Pratt said she has been the administrator since May 2020, has access to corporate records, and is familiar with Baker's arbitration policies and practices for newly-hired employees, like King. Pratt did not, however, identify the DRO that Baker had selected for claims arising out of King's location. Nor did Baker provide this information in its reply brief, even after King had raised the issue in his opposition.
In a footnote in its opening brief on appeal, Baker contends the American Arbitration Association (AAA) is the DRO and the relevant rule set is the AAA's rules for arbitration of employment disputes. Baker does not cite any evidence in the record to support this assertion. Accordingly, we disregard it.
Regardless of whether Baker had selected a DRO before it presented the Solutions Procedure to King, we are not convinced King easily could have accessed that information. Although the Solutions Procedure states an employee may ask the "Solutions Administrator or the local HR manager" for the DRO's name and rules, it does not provide contact information for either. Nor is there evidence that Baker provided that information to King before he signed the agreement, or otherwise made it easily accessible to him. In any event, because Baker seems to have the unilateral right to change the DRO at any time without notice, there is no guarantee the same DRO would handle King's claims. Indeed, it seems Baker was free to select a new DRO immediately after disclosing its identity, without having to reveal that fact to King.
Baker alternatively argues its failure to identify the DRO and applicable rules alone is not enough to render the agreement unconscionable. Instead, according to Baker, King also must show its failure to provide the information was a mechanism for hiding something unfavorable to him. (See Baltazar, supra, 62 Cal.4th at p. 1246 [an employer's failure to attach the arbitration rules was irrelevant where the employee did not argue any of the rules were improper].)
We acknowledge that a viable claim of procedural unconscionability for failure to identify the applicable arbitral rules "depends in some manner on the substantive unfairness of a term or terms contained within the unidentified version of the rules applicable to the dispute." (Davis, supra, 53 Cal.App.5th at 909.) Here, however, we do not even know which organization's rules would apply to the dispute. As the Murrey court explained in rejecting a similar argument, "[u]nlike the cases incorporating standardized AAA/JAMS rules, we cannot say with any certainty the incorporated rules would not be surprising or oppressive in some way. While AAA/JAMS rules are generally accepted as fair (even if difficult for the employee to find), we found no authority upholding an agreement concealing both the rules and the name of the arbitration provider. Moreover, we question the relevance of case authority written when there were only two or three nationally recognized arbitration providers available. Currently, there are numerous international, national, and state-based arbitration providers, each offering different sets of rules and advertising different specialties. For this reason, agreements giving only one party the authority to select the DRO must be considered a substantively material term of the contract." (Murrey, supra, 87 Cal.App.5th at p. 1242, fns. omitted.) The same reasoning applies here.
Baker's reliance on HM DG, Inc. v. Amini (2013) 219 Cal.App.4th 1100, is misplaced. In that case, the court held the fact that an arbitration agreement did not identify the arbitrator or arbitration agency did not render the agreement impermissibly uncertain. The court reasoned that Code of Civil Procedure section 1281.6 specifically contemplates the existence of an enforceable arbitration agreement that does not provide a method for appointing an arbitrator, and it gives the court the authority to appoint an arbitrator in that situation. (HM DG, at p. 1103.)
Unlike in HM DG, the Solutions Procedure is not silent as to the method for selecting a DRO. Rather, it gives Baker the unilateral right to select the DRO. The Solutions Procedure fails, however, to identify the DRO Baker selected or require Baker to provide notice in the event it changes its selection. Code of Civil Procedure section 1281.6 does not cure those problems. HM DG, therefore, is inapposite. (See Murrey, supra, 87 Cal.App.5th at p. 1243 [rejecting a similar argument based on HM DG].)
b. The Solutions Procedure does not identify the location of the arbitration hearing
The Solutions Procedure requires the arbitration hearing take place at the "DRO office nearest to the employee's work location," unless the parties agree, or the arbitrator directs, otherwise. While there is nothing per se improper about this provision, because the agreement does not identify the DRO, it provides essentially no notice of the hearing's location. Moreover, because the Solutions Procedure does not require the DRO to have an office within a certain distance of King's location, there is a significant risk of a harsh and unexpected result. That risk is amplified by the fact that Baker seems to have the unilateral right to change the DRO at any time, without notice.
The Murrey court expressed similar concerns, explaining "this provision may have been reasonable if [the employer] had designated a specific DRO with offices near [the employee's] workplace. Alternatively, [the employer] could have drafted more specific terms guaranteeing the location would not unfairly burden the employee, such as including a default maximum distance from the employee's workplace or home. As written, the potential for a surprisingly harsh term heightens the level of procedural unconscionability of the agreement." (Murrey, supra, 87 Cal.App.5th at p. 1247.)
c. The Solutions Procedure includes an incomplete summary of arbitration
The Solutions Procedure states an "arbitration hearing resembles a court proceeding in certain ways." It then lists several similarities between the two, including the opportunity to be represented by an attorney, make an opening statement, present evidence, cross-examine witnesses, and make closing statements. The Solutions Procedure does not, however, identify any of the ways in which arbitration generally, and the Solutions Procedure specifically, differs from a court proceeding. This one-sided presentation of the issue is misleading and reflects some degree of procedural unconscionability. (See Gentry v. Superior Court (2007) 42 Cal.4th 443, 470, abrogated on other grounds by Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360 [one-sided explanation of the benefits of arbitration was procedurally unconscionable].)
6. The Solutions Procedure contains substantively unconscionable provisions
Because we have determined the Solutions Procedure contains elements of procedural unconscionability, we must consider whether any of its provisions are substantively unconscionable. When reviewing the agreement for substantive unconscionability, we are not concerned "with 'a simple old-fashioned bad bargain' [citation] but with terms that are 'unreasonably favorable to the more powerful party' [citation]. These include 'terms that impair the integrity of the bargaining process or otherwise contravene the public interest or public policy; terms (usually of an adhesion or boilerplate nature) that attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law, fine-print terms, or provisions that seek to negate the reasonable expectations of the nondrafting party, or unreasonably and unexpectedly harsh terms having to do with price or other central aspects of the transaction.'" (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145.)
a. The Solutions Procedure limits King's statutory remedies
i. The agreement limits reinstatement
King alleges in his complaint that Baker violated Labor Code section 6310 by discriminating against him for reporting unsafe working conditions. An employee who proves a violation of section 6310 "shall be entitled to reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer." (Lab. Code, § 6310, subd. (b).)
The Solutions Procedure allows the arbitrator to order reinstatement as a remedy. However, it significantly limits that authority. It provides that, if either party objects after the arbitrator orders reinstatement, the arbitrator "shall accept additional evidence or argument on that issue and shall issue a supplementary award. Such an award will grant the employee reasonable front pay instead of reinstatement in accordance with applicable state or federal law."
" 'Front pay,' as the term is used in employment litigation, is a measure of damages for loss of future income, as opposed to backpay, which is lost-wages damages through the time of trial." (Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 388.)
Because the remedy of reinstatement applies only to King, this provision is one-sided on its face. It is also unfair. In effect, it allows Baker to veto an order granting King reinstatement, notwithstanding the fact that reinstatement is a statutorily mandated remedy. True, the provision grants King the same veto power with respect to his own claims. In practice, however, it provides little, if any, benefit to him. Indeed, if King desires front pay in lieu of reinstatement, he could simply request it as a remedy for his claims. (See Armendariz, supra, 24 Cal.4th at p. 121 [front pay is a "a common and often substantial component" of damages in a wrongful termination case]; see also Freund v. Nycomed Amersham (9th Cir. 2003) 347 F.3d 752, 758 [under California law, a violation of Labor Code section 6310 supports a claim for wrongful termination].)
The provision also benefits Baker in a less obvious, but equally pernicious, way. A plaintiff seeking reinstatement under section 6310 is not required to prove anything beyond the substantive elements of the claim. (See Lab. Code, § 6310, subd. (b).) A plaintiff seeking front pay, however, also has the burden to prove damages. Given the forward-looking nature of front pay, this is not necessarily an easy task, and often requires expert testimony. (See Chin et al., Cal. Practice Guide: Employment Litigation (The Rutter Group 2023) ¶ 17:220.1.) Granting Baker the power to veto reinstatement, therefore, also grants it the power substantially to increase King's burden of proof. What's more, the provision permits Baker to exercise this power after King has presented his case. Although King would be allowed to present additional evidence in that situation, the agreement does not expressly grant him additional time or discovery to do so.
In addition to being unfairly one-sided, the limitation on reinstatement is contrary to public policy. Our Supreme Court has held an arbitration agreement that requires an employee to waive an unwaivable statutory right is contrary to public policy and unlawful. (Armendariz, supra, 24 Cal.4th at pp. 100-101.) For the same reasons, an arbitration agreement may not limit an employee's statutorily imposed remedies designed to redress violations of an unwaivable right. (Id. at p. 103.) Labor Code section 6310 plainly qualifies as an unwaivable right. (See Lab. Code, § 432.6, subd. (a) [an employer may not require, as a condition of employment, that an employee waive any "right, forum, or procedure" under the Labor Code].) Therefore, to the extent the Solutions Procedure limits King's statutory right to reinstatement, it is contrary to public policy and unenforceable.
Baker does not meaningfully contest that the Solutions Procedure is unconscionable and unenforceable to the extent it limits the arbitrator's authority to order reinstatement. It insists, however, the Solutions Procedure does nothing of the sort. According to Baker, the challenged provision instead merely requires that, if either party objects to reinstatement, "the arbitrator 'shall accept additional evidence or argument on that issue ....'" Even in that case, Baker insists, the arbitrator retains discretion to order reinstatement.
The problem with Baker's interpretation is that it wholly ignores language in the provision stating the arbitrator "shall issue a supplementary award" that "will grant the employee reasonable front pay instead of reinstatement ...." This language requires the arbitrator to award front pay in lieu of reinstatement in the event either party objects to reinstatement. Rather than address this crucial language, Baker simply replaces it with ellipses. It is difficult to conceive an innocent explanation for Baker's editorial decision. In any event, the limitation on King's statutory right to reinstatement plainly is substantively unconscionable.
ii. The agreement limits injunctive relief Under California's Fair Employment and Housing Act (FEHA), a court may grant injunctive relief to stop an employer's discriminatory practices, even if the plaintiff would not personally benefit from the injunction. (Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 211.) The Solutions Procedure, however, precludes an arbitrator from awarding such relief. It expressly forbids the arbitrator from ordering Baker to change its policies and procedures, even if it determines those policies and procedures are unlawful. Instead, the arbitrator may only order that Baker change the "application" of its policies and procedures with respect to King. This limitation on King's remedies under FEHA is substantively unconscionable. (See Armendariz, supra, 24 Cal.4th at p. 101 [an arbitration agreement cannot limit statutorily imposed remedies under FEHA]; Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205, 223 [a limitation on punitive damages for FEHA claims "supports a finding of substantive unconscionability"].)
Contrary to Baker's suggestions, it is irrelevant that King does not seek injunctive relief under FEHA. "The question in determining unconscionability . . . does not involve comparing the terms of the arbitration clause with the nonarbitration claims [the plaintiff] is pursuing. Rather, under Civil Code section 1670.5, subdivision (a), we review the arbitration clause for substantive unconscionability at the time the agreement was made." (Subcontracting Concepts, supra, 34 Cal.App.5th at p. 212.)
Baker contends this provision is not unconscionable because, under McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 (McGill), an employee may waive the right to pursue private injunctive relief, including injunctive relief under FEHA. In McGill, the California Supreme Court held the "FAA does not require enforcement of a provision in a predispute arbitration agreement that, in violation of generally applicable California contract law, waives the right to seek in any forum public injunctive relief under the UCL, the CLRA, or the false advertising law." (Id. at p. 963.)
Contrary to Baker's suggestions, the high court in McGill did not expressly hold a waiver of private injunctive relief can never be unconscionable. Although the court distinguished between claims for public and private injunctive relief, it did so while summarizing cases holding a plaintiff cannot be compelled to arbitrate claims for public injunctive relief. (McGill, supra, 2 Cal.5th at p. 955.) Here, the issue is not whether King can be compelled to arbitrate claims for injunctive relief under FEHA; instead, it is whether the Solutions Procedure is unconscionable because it requires King to waive such relief altogether. The California Supreme Court answered that question in Armendariz, holding an arbitration agreement may not limit an employee's right to pursue statutorily imposed remedies under FEHA. (Armendariz, supra, 24 Cal.4th at p. 103.) The Solutions Procedure, however, does precisely that.
In any event, we are not convinced an injunction under FEHA qualifies as a private, rather than public, form of relief. (See Vaughn v. Tesla, Inc. (2023) 87 Cal.App.5th 208, 215 ["injunctions sought under the California Fair Employment and Housing Act (FEHA) . . . may be considered 'public injunctions' "].) Therefore, even if McGill represents a change in the law from Armendariz, the waiver in the Solutions Procedure is nevertheless unconscionable.
b. The Solutions Procedure excludes from arbitration Baker's likely claims
The Solutions Procedure distinguishes between "covered claims"-which a party must resolve through arbitration- and "excluded claims"-which a party may litigate in court. Covered claims include "all claims that arise or arose out of or are or were related to an employee's employment or cessation of employment ...." Excluded claims include, among others, intellectual property claims.
King argues this aspect of the Solutions Procedure is substantively unconscionable because it requires the parties to arbitrate claims he is more likely to bring against Baker- such as claims for wrongful termination, claims for failure to pay compensation, and tort claims-while excluding claims Baker is more likely to bring against him-claims related to intellectual property.
"Although parties are free to contract for asymmetrical remedies and arbitration clauses of varying scope, . . . the doctrine of unconscionability limits the extent to which a stronger party may, through a contract of adhesion, impose the arbitration forum on the weaker party without accepting that forum for itself." (Armendariz, supra, 24 Cal.4th at p. 118.) Accordingly, courts "have repeatedly found this type of one-sided provision- where the employer exempts claims only it would bring from arbitration while restricting any employee claims to arbitration -to be substantively unconscionable." (Carmona, supra, 226 Cal.App.4th at p. 87 [listing cases].)
As the Murrey court explained in finding a nearly identical provision to be unconscionable," '[i]n Armendariz, the court observed substantive unconscionability may manifest itself if the form of "an agreement requiring arbitration only for the claims of the weaker party but a choice of forums for the claims of the stronger party." This is what we have here: [The employer] requires the weaker parties-its employees-to arbitrate their most common claims while choosing to litigate in the courts its own claims against its employees.' [Citation.] The lack of mutuality as to arbitrable claims together with other one-sided terms discussed above, adds to this agreement's substantive unconscionability." (Murrey, supra, 87 Cal.App.5th at pp. 12511252.)
Baker does not dispute the premise of King's argument: that King is substantially more likely than Baker to assert claims that must be arbitrated, and Baker is substantially more likely than King to assert intellectual property claims, which are excluded from arbitration. Nor does Baker identify any legitimate commercial need for the disparate treatment. (See Davis, supra, 53 Cal.App.5th at p. 916 ["Substantive unconscionability 'turns not only on a "one-sided" result, but also on an absence of "justification" for it.' "]; Carmona, supra, 226 Cal.App.4th at p. 87 [noting the employer's failure to justify the lack of mutuality in an arbitration agreement].) We suspect that is because Baker chose to exclude intellectual property claims from the Solutions Procedure for some of the same reasons King argues the agreement is unconscionable: it substantially limits (albeit presumptively) discovery, the length of the hearing, and the number of witnesses. At the very least, it is reasonable to infer Baker expected to receive some advantage from treating employment and intellectual property claims differently.
Baker acknowledges that courts have consistently held similar provisions to be unconscionable. (See, e.g., Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 249; Davis, supra, 53 Cal.App.5th at p. 916; Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 725; Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 665; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 176.) Nevertheless, it argues those cases are no longer good law in light of Baltazar, supra, 62 Cal.4th 1237. In Baltazar, the California Supreme Court rejected an employee's argument that an arbitration agreement was substantively unconscionable because it expressly permitted the parties to seek injunctive relief during the pendency of the arbitration. (Id. at p. 1247.) The employee argued the provision improperly favored the employer because it had a greater interest in protecting trade secrets and other confidential information. (Ibid.) In rejecting the employee's argument, the high court explained the provision did nothing more than recite the procedural protections already secured by section 1281.8, subdivision (b), of the Code of Civil Procedure. As the court noted, "an arbitration agreement is not substantively unconscionable simply because it confirms the parties' ability to invoke undisputed statutory rights." (Baltazar, at pp. 1247-1248.)
Here, there are no statutes precluding the parties from arbitrating intellectual property rights claims. Nor is Baker's decision to exclude such claims from arbitration otherwise a restatement of the parties' undisputed statutory rights. Baltazar, therefore, is wholly inapposite.
Baker's reliance on Tompkins v. 23 and Me, Inc. (9th Cir. 2016) 840 F.3d 1016, is similarly misplaced. That case concerned an arbitration agreement between customers and a business that provided direct-to-consumer genetic testing services. Like this case, the customers argued the agreement was unconscionable because it excluded from arbitration intellectual property claims, which the company was more likely to bring against them than vice versa. (Id. at p. 1030.) Applying California law, the federal appellate court rejected the customers' argument, finding the provision did not favor the company on its face. The court noted the company's own terms of service granted the customers certain intellectual property rights, the customers failed to identify any intellectual property claims the company was likely to bring against them, and the company had potentially legitimate business reasons to exempt such claims from arbitration. (Id. at p. 1031.)
None of those factors is present here. Unlike in Tompkins, Baker does not dispute it is more likely to bring intellectual property claims against Baker than vice versa, King does not have any apparent relevant intellectual property rights, and Baker has not identified any legitimate business reasons for excluding the claims from arbitration. Under these circumstances, the provision is unfairly one-sided in Baker's favor and does not possess the" 'modicum of bilaterality'" required for an enforceable agreement. (Armendariz, supra, 24 Cal.4th at p. 117.) The provision, therefore, is substantively unconscionable.
c. The Solutions Procedure requires that only King submit his claims to each level of review
The Solutions Procedure requires that, before submitting his claims to arbitration, King must complete two levels of internal review followed by mediation. In contrast, the agreement requires that Baker only complete mediation before proceeding to arbitration.
The Solutions Procedure permits an employee to request a Level II meeting after Baker submits a claim to mediation. The agreement, however, does not state whether Baker is required to grant the request or participate in the informal meeting.
Courts have repeatedly held similar provisions that require the employee, but not the employer, to participate in pre-arbitration informal dispute resolution, to be unconscionable. (See Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1282-1283; Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th 619, 635-636 (Carlson); see also Carmona, supra, 226 Cal.App.4th at p. 89 [unilateral requirement that an employee discuss problems or concerns with the employer before disclosing information to outside counsel was unconscionable].) As the Nyulassy court explained with respect to a similar provision, "[w]hile on its face, this provision may present a laudable mechanism for resolving employment disputes informally, it connotes a less benign goal. Given the unilateral nature of the arbitration agreement, requiring plaintiff to submit to an employer-controlled dispute resolution mechanism (i.e., one without a neutral mediator) suggests that defendant would receive a 'free peek' at plaintiff's case, thereby obtaining an advantage if and when plaintiff were to later demand arbitration." (Nyulassy, at pp. 1282-1283.) The same is true here.
Baker suggests it does not receive an unfair advantage from the disparity because, although it need not complete the informal levels of review, it must submit its claim to pre-arbitration mediation. As a result, Baker seems to argue, King also receives a "free peek" at its claims. While true, Baker overlooks the significant differences between mediation and the informal review levels. Most notably, attorneys are not permitted to attend the informal review meetings, whereas they are allowed at mediation. Therefore, Baker receives a "free peek" at King's case that has not been filtered through an attorney, which provides a potentially significant advantage. (See Carlson, supra, 239 Cal.App.4th at p. 636 [requiring the employee to participate in an alternative dispute mechanism without an attorney provided a significant advantage to the employer].) The potential advantage is magnified by the fact that, unlike neutral mediation, Baker controls the informal meetings. Because Baker offers no explanation for this disparity, it is reasonable to infer it included it in the Solutions Procedure in order to gain an advantage over King. This aspect of the agreement lacks mutuality and is substantively unconscionable.
d. The Solutions Procedure significantly limits discovery and the arbitration hearing
"A limitation on discovery is an important way in which arbitration can provide a simplified and streamlined procedure for the resolution of disputes. [Citations.] At the same time, '[a]dequate discovery is indispensable for the vindication of statutory claims' [citation], and '[t]he denial of adequate discovery in arbitration proceedings leads to the de facto frustration of' statutory rights [citation].... In striking the appropriate balance between the desired simplicity of limited discovery and an employee's statutory rights, courts assess the amount of default discovery permitted under the arbitration agreement, the standard for obtaining additional discovery, and whether the plaintiffs have demonstrated that the discovery limitations will prevent them from adequately arbitrating their statutory claims." (Davis, supra, 53 Cal.App.5th at pp. 910-911.)
Here, the Solutions Procedure contains "presumptive guidelines" for discovery, which limit each party to three depositions, 15 requests for documents, 15 requests for admissions, and 20 interrogatories. The agreement, however, grants the arbitrator the authority to deviate from these guidelines. In the section entitled, "Discovery," for example, the agreement states an arbitrator may "depart from these guidelines by increasing or decreasing the amount of discovery based on the facts of the particular claim." Elsewhere, in a section purporting to provide a "[d]escription" of arbitration, the agreement states the guidelines "will apply unless the arbitrator determines that they will prevent the party from obtaining information and/or presenting evidence that will assist the party in proving a claim or defense, in which case the arbitrator shall have authority to make reasonable alterations to such guidelines." In yet another section-entitled "Guidelines on Discovery"-the agreement states the arbitrator "shall have the authority to modify the discovery guidelines . . . in consideration of the interests of simplicity and expedition of arbitration balanced against [the] value of the information in establishing a claim or defense."
The Murrey court held identical presumptive guidelines were unconscionable, reasoning that, "[w]hile superficially neutral, these discovery restrictions only favor [the employer]. 'Employment disputes are factually complex, and their outcomes "are often determined by the testimony of multiple percipient witnesses, as well as written information about the disputed employment practice." [Citation.] Seemingly neutral limitations on discovery in employment disputes may be nonmutual in effect." 'This is because the employer already has in its possession many of the documents relevant to an employment discrimination case as well as having in its employ many of the relevant witnesses.'" '" (Murrey, supra, 87 Cal.App.5th at p. 1249.)
Baker does not contest that such limits would be unconscionable if they were absolute. However, it argues these limits are appropriate because the Solutions Procedure grants the arbitrator authority to depart from them. According to Baker, because we must presume the arbitrator will act reasonably and in accordance with the law, we also must presume it will exercise its authority in a way that ensures King receives adequate discovery.
In rejecting a similar argument, the Murrey court explained that "certain terms of the arbitration agreement appear to constrain an arbitrator's ability to expand discovery by imposing confusing 'presumptions' that favor limiting discovery. An arbitrator could reasonably infer he or she would need to overcome the 'presumption' for using [the employer's] designated rules and the Solutions manual does not clarify who has that burden of proof. Moreover, due to the mix of unclear and contradictory rules, [the employee] will likely have to expend unnecessary time, effort, and money litigating discovery with [the employer] because the governing procedures were confusing." (Murrey, supra, 87 Cal.App.5th at p. 1250.)
We share the Murrey court's concerns and similarly conclude these presumptive guidelines are unconscionable. King presented evidence that, to prove his claims, he will need to conduct significantly more discovery than permitted under the guidelines. Although the Solutions Procedure allows the arbitrator to exceed those guidelines, as the Murrey court observed, it does so in a confusing way, seemingly providing three different standards for determining whether to permit additional discovery. Baker has not suggested an interpretation that harmonizes the three standards; nor has it explained which standard would govern if there is a conflict among them. Moreover, as King points out, the Solutions Procedure expressly allows the arbitrator to decrease discovery below the presumptive guidelines based only on the "facts of the particular claim," meaning King is not guaranteed to receive any discovery. Under these circumstances, even presuming the arbitrator reasonably interprets and applies the Solutions Procedure, we are not sufficiently confident King will receive adequate discovery to prove his claims. (See Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713, 730 (Baxter) [concluding similar presumptive limits on discovery were unconscionable].)
We have similar concerns with respect to the presumptive limitations on the arbitration hearing. The Solutions Procedure states the arbitrator shall seek to limit the hearing to 16 hours, "provided, however, that the arbitrator shall provide each party an adequate opportunity to present its case, considering the nature and complexity of the Covered Claims at issue." Also, each party is limited to five witnesses, which the arbitrator may increase if it determines the limit will prevent the party from "presenting evidence that will assist the party in proving a claim or defense ...."
As with the discovery limitations, King submitted evidence that he will not be able fully to prove his claims under these restrictions. Although the arbitrator has authority to exceed the guidelines, as the Murrey court observed in finding similar restrictions unconscionable, "[d]ue to the mix of confusing rules, it is highly foreseeable there will be delays and additional expenses while sorting out whether [the employee] can have additional time and/or witnesses at the arbitration." (Murrey, supra, 87 Cal.App.5th at p. 1253.) Although less problematic than the limits on discovery, these limitations nevertheless contain some degree of unconscionability. (See Baxter, supra, 16 Cal.App.5th at p. 736 [finding similarly short arbitration timelines created a modest degree of unconscionability].)
e. The Solutions Procedure may contain other provisions that are substantively unconscionable
The agreement grants the arbitrator authority to sanction a party for violating the DRO's rules, requires that the arbitrator resolve discovery disputes based on those rules, and sets the location of the hearing as the DRO's office nearest King's location. Because the agreement does not identify the DRO, and because Baker failed to present evidence concerning its selection, we cannot be confident these provisions are lawful and enforceable. Indeed, each provision has the potential to be substantively unconscionable, depending on which DRO Baker selects. As just one example, because the Solutions Procedure grants Baker nearly unfettered authority to select a DRO, Baker may select an organization that does not have an office in California. If so, the Solutions Procedure's default location for the arbitration hearing would violate Labor Code section 925, which prohibits an employer from requiring an employee who resides and works in California to agree, as a condition of employment, to adjudicate outside of California a claim arising in California. We have similar concerns with respect to other provisions that incorporate the DRO's rules.
7. The Solutions Procedure is unenforceable
As we discussed in detail above, the Solutions Procedure contains several aspects of procedural unconscionability that extend beyond its adhesive nature. Those include the failure to specify the arbitration organization and applicable rules, the failure to identify the location of the arbitration hearing, and the inclusion of a misleading summary of arbitration. The agreement also contains several provisions that are substantively unconscionable, such as the limitations on King's statutory remedies, the exclusion of Baker's likely claims, the requirement that only King complete two levels of informal review, and the presumptive limitations on discovery and the arbitration hearing. Because the level of procedural unconscionability is high, only a slight degree of substantive unconscionability is required to render these terms unenforceable. That standard is easily met here. The only question, therefore, is whether to sever the unconscionable provisions or, instead, decline to enforce the entire agreement.
Under Civil Code section 1670.5, subdivision (a), courts have discretion to sever an unconscionable provision or instead refuse to enforce the entire agreement. (Armendariz, supra, 24 Cal.4th at p. 122.) If possible, a court generally should sever the unconscionable terms and enforce the agreement. (See ibid.) A court may decline to do so, however, if the agreement is "permeated by unconscionability." (Ibid.) In making this determination, a court should consider the number of unconscionable provisions and whether striking those provisions would remove the "unconscionable taint from the agreement." (Id. at pp. 124-125.)
Here, Baker has not shown the trial court erred in declining to enforce the entire agreement. We agree with the Murrey court's observation that, considering the "procedural and substantively unconscionable provisions together, they indicate a concerted effort to impose on an employee a forum with distinct advantages for the employer." (Murrey, supra, 87 Cal.App.5th at p. 1256.) Moreover, contrary to Baker's suggestions, it is impossible to remove the taint of unconscionability from the agreement by simply striking the unenforceable provisions. Indeed, given the uncertainty about the DRO and which rules apply, the only way we could ensure the agreement's legality would be essentially to rewrite substantial portions of it, something we are not permitted to do. (Armendariz, supra, 24 Cal.4th at pp. 124-125.) The Solutions Procedure is permeated with unconscionability, and the trial court properly refused to enforce it.,
Because we conclude the entire agreement is unenforceable, we need not consider King's arguments related to other provisions.
We acknowledge several federal district courts have enforced arbitration agreements that resemble the Solutions Procedure. (See, e.g., Harper v. Charter Communications, LLC (E.D.Cal. Dec. 19, 2019, No. 2:19-CV-01749-WBS DMC) 2019 WL 6918280; Harper v. Charter Communications, LLC (E.D.Cal. Oct. 13, 2021, No. 2:19-CV-00902-WBS DMC) 2021 WL 4784417; Gonzales v. Charter Communications, LLC (C.D.Cal. 2020) 497 F.Supp.3d 844; Castorena v. Charter Communications, LLC (C.D.Cal. Dec. 14, 2018, No. 2:18-CV-07981-JFW KS) 2018 WL 10806903; Esquivel v. Charter Communications, Inc. (C.D.Cal. Dec. 6, 2018, No. CV 18-7304-GW MRWx) 2018 WL 10806904; Asher v. E! Entertainment Television, LLC (C.D.Cal. Aug. 16, 2017, No. CV 16-8919-RSWL SSx) 2017 WL 3578699.) Those cases, however, are either distinguishable on their facts or fail to address all of King's arguments. In fact, in most of the cases, the employees were allowed to opt out of the arbitration agreements, which significantly reduced the degree of procedural unconscionability. In any event, we are not bound by decisions from federal district courts and may disregard those we find unpersuasive.
DISPOSITION
The order is affirmed. Christopher King shall recover his costs on appeal.
We concur: LAVIN, Acting P. J., BENKE, J. [*]
[*]Retired Justice of the Court of Appeal, Fourth District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.