Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County Super. Ct. No. BC363398, Kenneth R. Freeman, Judge.
Gibbs, Giden, Locher, Turner & Senet, Gerald A. Griffin, Gary E. Scalabrini for Defendants and Appellants.
Mark Weidmann, Lee Franck for Plaintiff and Respondent.
BOREN, P.J.
Defendants Ducommun Aerostructures, Inc., and others (collectively referred to as Aerostructures) appeal from an order denying a motion to compel arbitration. (Code Civ. Proc., § 1294, subd. (a).) The trial court found that the arbitration agreement between Aerostructures and its employee, plaintiff Fred Rondeau, was unconscionable and unenforceable because it limited the employee’s discovery depositions, precluded the employee from recovering attorney fees and costs, and lacked mutuality because it exempted typical employer claims from arbitration while requiring arbitration of claims most likely brought by employees. We agree with the trial court and affirm.
FACTUAL AND PROCEDURAL SUMMARY
Rondeau sued Aerostructures for wrongful termination because of age and disability discrimination, as well as unlawful retaliation for requesting reasonable accommodation. Aerostructures moved to stay the action and to compel arbitration. The motion was supported by a declaration from Aerostructures’ manager of human resources, who provided copies of a 1996 arbitration agreement and a 2004 amendment to the arbitration agreement, both signed by Rondeau.
The arbitration agreement, as amended, provided as follows: “The arbitration procedure contained in this agreement shall be the exclusive remedy to resolve all claims, disputes and controversies of any kind or nature, that [Aerostructures] may have against [Rondeau], or that [Rondeau] may have against [Aerostructures] or its officers, directors, employees or agents (‘Claims’), including without limitation all claims, disputes and controversies arising out of [Rondeau’s] employment or the termination of that employment. Specific examples of Claims covered by the Agreement include . . . wrongful termination in violation of public policy, retaliatory discharge, discrimination on the basis of race, sex, natural origin, religion, age, disability, marital status and sexual orientation, sexual harassment.” The agreement further specified that each party waives the right to a jury trial or a court trial, that the sole and exclusive method of resolving any claim is arbitration, and that the arbitrator “shall have the authority to award any form of remedy or damages that would be available in a court.”
Rondeau opposed the motion to compel arbitration. Rondeau argued that the arbitration agreement did not satisfy minimum acceptable standards required under Armendariz v. Foundation Health Psych care Services, Inc. (2000) 24 Cal.4th 83 (Armendariz), and was unenforceable because of the following: (1) it was procedurally unconscionable because he was forced to sign it or be fired, and he could not negotiate its terms; (2) the agreement was substantively unconscionable because it limited discovery, lacked mutuality, and restricted his recovery of attorney fees and costs.
The arbitration agreement, as amended, contained three provisions with which Rondeau found fault. First, the agreement limited the right of each party to take depositions so that each could only take the deposition of one individual, other than another party’s expert witness. As specified in the amended agreement: “The parties waive the provisions of California Code of Civil Procedure Section 1283.05. Each party shall have the right to take the deposition of one individual and any expert witness designated by another party. Each party may take depositions for discovery if the arbitrator grants leave to do so to the same extent that such depositions could be taken in civil actions. Each party also shall have the right to make requests for production of documents to any party. All issues related to discovery will be resolved by the arbitrator(s).”
Second, the agreement provided: “The Company shall pay reasonable and necessary fees of the American Arbitration Association and the arbitrator, unless the Employee elects to pay one-half (1/2) of the fees. The parties will pay their own attorneys’ fees and expenses associated with the arbitration.”
Third, the agreement required the employee to arbitrate all discrimination claims, but exempted from arbitration, in pertinent part, all claims for injunctive or equitable relief. The exemption from arbitration for injunctive or equitable relief specifically included claims “for unfair competition, or the use or the unauthorized disclosure of trade secrets or confidential information,” with either party nonetheless able to seek injunctive relief in court and then proceed with arbitration under the agreement.
Rondeau’s attorney provided a declaration in support of his opposition to the motion to compel arbitration. He asserted the need to depose at least eight people, including more than one supervisor with relevant information about the employee’s job performance, several allegedly less qualified coworkers who were not laid off, and two doctors to establish the employee’s level of disability.
Rondeau’s declaration in support of his opposition to the motion to compel arbitration explained that when he was presented with the arbitration agreement and amendment, he was told that he “had no choice but to sign,” that “there would be no negotiation or changes,” and that if he “did not sign the agreement [he] would be fired.” Rondeau also asserted that he was told he had “to sign right then and could not spend any time thinking over the agreement,” and he could not consult with a lawyer or anyone else about it.
Aerostructures objected to Rondeau’s declaration on the grounds that it failed to state the date when he was presented with the arbitration agreement or the amendment, and Rondeau did not indicate who presented it to him and who made the statements he described. Aerostructures asserted hearsay and other evidentiary objections.
The trial court denied Aerostructures’ motion to compel arbitration. The court referred the matter to mediation and also set dates for a settlement and status conference and for a jury trial. Aerostructures appeals.
DISCUSSION
I. General principles of unconscionability and arbitration agreements.
Public policy strongly favors arbitration as a method of resolving disputes. (Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 706-707; Stirlen v. Super cuts, Inc. (1997) 51 Cal.App.4th 1519, 1544.) Nonetheless, an arbitration agreement will not be enforced and may be revoked “upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.) For example, if a contract or any clause of a contract, such as an arbitration clause, was “unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of an unconscionable clause as to avoid any unconscionable result.” (Civ. Code, § 1670.5, subd. (a).) Moreover, because a “proceeding to compel arbitration is a suit in equity to compel the specific performance of a contract” (Saika v. Gold (1996) 49 Cal.App.4th 1074, 1081), the specific performance of arbitration cannot be enforced against a party to a contract if the contract “is not, as to him, just and reasonable.” (Civ. Code, § 3391, subd. 2.)
The doctrine of unconscionability has two components--procedural unconscionability and substantive unconscionability. (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 713 (Fitz).) The procedural element generally takes the form of an adhesion contract, which is drafted and imposed by the party with superior bargaining strength and relegates to the subscribing party only the opportunity to adhere to the contract or reject it. (Armendariz, supra, 24 Cal.4th at p. 113.) Substantive unconscionability, on the other hand, focuses on overly harsh or one-sided results. (Id. at p. 114.) Substantively unconscionable terms may “generally be described as unfairly one-sided.” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071.) An arbitration agreement must be both procedurally and substantively unconscionable before a court will refuse to enforce the arbitration agreement. (Armendariz, supra, 24 Cal.4th at p. 114.)
A. Procedural unconscionability.
The notion of procedural unconscionability focuses on the manner in which the contract was negotiated and the circumstances of the parties at the time. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 656.) The relevant factors are oppression and surprise. (Armendariz, supra, 24 Cal.4th at p. 114.)
“The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party.” (Kinney v. United Health Care Services, Inc. (1999) 70 Cal.App.4th 1322, 1329.) The surprise component arises when the challenged terms are “hidden in a prolix printed form drafted by the party seeking to enforce them.” (Ibid.) Where an adhesive contract is deemed oppressive, surprise need not be established. (Id. at p. 1330.)
In the present case, Rondeau explained in an uncontradicted declaration that he was told he “had no choice but to sign” the arbitration agreement, that he could not negotiate or change its terms, that if he “did not sign the agreement [he] would be fired,” and that he could not consult with an attorney or anyone else. In both Aerostructures’ opening brief and its reply brief, it observes in footnotes that it disputed at trial that the agreement was procedurally unconscionable. In the trial court, Aerostructures raised various evidentiary objections to the statements in Rondeau’s declaration. However, on appeal Aerostructures’ perfunctory footnotes lack any legal argument or citation to authority. (See Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co. (1987) 189 Cal.App.3d 1072, 1090.) Any complaint reflected in those footnotes is not framed as a discrete contention, is not “sufficiently developed to be cognizable” as an appellate issue, and is thus “rejected on that basis.” (People v. Turner (1984) 8 Cal.4th 137, 214, fn. 19.)
Accordingly, we find that, as is often the case in employment situations and as was described in Rondeau’s declaration, the employer thrust an arbitration agreement upon the employee as a condition of employment or continued employment, without any possibility of negotiating its terms or consulting an attorney. Under such circumstances and in view of the inequality of bargaining power, it is apparent that the parties’ arbitration agreement was procedurally unconscionable. (See Armendariz, supra, 24 Cal.4th at p. 115; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 172, 173, 174-175.)
B. Substantive unconscionability.
Because Rondeau’s claims involve certain unwaivable civil rights under California’s Fair Employment and Housing Act (FEHA; see Gov. Code, § 12900 et seq.), the arbitration agreement “must be subject to particular scrutiny.” (Armendariz, supra, 24 Cal.4th at p. 100.) To be enforceable, an arbitration agreement involving such public rights must comply with certain “minimum requirements.” (Armendariz, supra, 24 Cal.4th at p. 113.) Thus, the arbitration agreement is enforceable only if all of the following minimum procedural requirements are met: (1) neutral arbitrators; (2) more than minimal discovery; (3) a written award; (4) the availability of all the types of relief that would otherwise be available in court; and (5) employees are not required to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum. (Id. at p. 102; see also Abramson v. Juniper Networks, Inc., supra, 115 Cal.App.4th at pp. 653-654.) There must also be “‘a modicum of bilaterality,’” which would be lacking if the agreement required arbitration of claims only that an employee would be most likely to bring. (Armendariz, supra, 24 Cal.4th at p. 119; Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 114-115 (Martinez).) “[T]he paramount consideration in assessing conscionability is mutuality.” (Abramson v. Juniper Networks, Inc., supra, 115 Cal.App.4th at p. 657.)
Of those above stated requirements, the only ones at issue in the present case are the limitation on discovery, the restriction on availability of relief, and the requirement of mutuality.
1.The restriction to one deposition during discovery.
For an employment arbitration agreement to be enforceable, it must provide “discovery sufficient to adequately arbitrate [the employees’] statutory claim, including access to essential documents and witnesses, as determined by the arbitrator.” (Armendariz, supra, 24 Cal.4th at p. 106.) “[A]dequate discovery is indispensable for the vindication of FEHA claims.” (Armendariz, at p. 104.)
An enforceable agreement may provide “something less than the full panoply of discovery provided in California Code of Civil Procedure Section 1283.05.” (Armendariz, supra, 24 Cal.4th at pp. 105-106.) However, the arbitration agreement must “ensure minimum standards of fairness” so employees can vindicate their public rights. (Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at p. 1080.) The desire for simplicity in arbitration must be balanced with the need for adequate enforcement of FEHA claims. (Armendariz, supra, at p. 106, fn. 11; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 184.)
The situation in Fitz, supra, 118 Cal.App.4th 702, is instructive. In Fitz, where the plaintiff sued his former employer for age discrimination and related employment and contract claims, the appellate court found the arbitration agreement both procedurally and substantively unconscionable. The arbitration agreement, in pertinent part, limited discovery to the sworn deposition of two individuals and any expert witnesses expected to testify at the arbitration hearing. Also, all exhibits and a list of potential witnesses had to be exchanged at least two weeks in advance of the arbitration hearing, no other discovery was allowed unless the arbitrator found a compelling need to permit it, and the arbitrator was required to so limit discovery unless the parties could demonstrate that a fair hearing would be impossible without additional discovery. (Id. at p. 716.)
In comparison to the arbitration agreement in Fitz, the amended arbitration agreement here is arguably even more restrictive because it limits the parties to the right to take the deposition of only one individual, plus the deposition of any expert witness designated by the other party. The amended agreement also permits, in the discretion of the arbitrator, additional depositions to the same extent as could be taken in civil actions and does allows parties to request the production of documents of any party. However, there is no right to obtain more than that one, single deposition.
Aerostructures points out that by statute “[d]epositions for discovery shall not be taken unless leave to do so is first granted by the arbitrator” (Code Civ. Proc. § 1283.05, subd. (e)), and argues that its discovery restriction is more generous than the statute because it at least entitles each party to one deposition. However, the quoted statute bestows no substantive discovery rights. The statute merely sets forth the procedural requirement that a party request leave from the arbitrator prior to taking a deposition--even if it is the one deposition to which it is entitled by agreement.
Pursuant to the amended agreement herein, the arbitrator would be obligated to grant a party’s request to take the deposition of only one individual. Moreover, any additional depositions are in the discretion of the arbitrator, who would be guided at the outset by the severe constraint of that “one” deposition as a benchmark. Most significantly, the parties simply have no right to obtain more than that one, single deposition.
Thus, the amended agreement has such restricted discovery rights that there is no assurance that minimum standards of fairness will be satisfied so that FEHA claims can be adequately presented at the arbitration hearing. This concern is particularly compelling in light of the uncontradicted declaration of Rondeau’s attorney asserting the need to depose at least eight individuals, including more than one supervisor with relevant information about the employee’s job performance, several allegedly less qualified coworkers who were not laid off, and two doctors to establish the employee’s level of disability.
2. Limitation on the types of relief otherwise available in court regarding attorney fees and costs.
In the present case, the arbitration agreement also does not satisfy the requirement in Armendariz, supra, 24 Cal.4th at page 102, that the agreement provide for all types of relief that would otherwise be available in court. Here, the arbitration agreement limits the ability of the employee to obtain an award of attorney fees and costs. Although the agreement provides that the arbitrator has the authority “to award any form of remedy or damages that would available in a court,” the agreement specifically mandates that each side “will pay [its] own attorneys’ fees and expenses associated with the arbitration.” Under FEHA, however, a prevailing plaintiff is entitled to recover attorney fees and costs. (Gov. Code, § 12965, subd. (b).)
By so restricting the recovery otherwise available in court as to attorney fees and costs, the arbitration agreement thus fails to meet a second minimum standard established by Armendariz, supra, 24 Cal.4th at pages 103-104.
3. The lack of bilaterality regarding the types of claims that can be brought.
To further satisfy Armendariz, supra, 24 Cal.4th at pages 117-119, the arbitration agreement must also be bilateral, a requirement lacking to the extent the agreement only requires arbitration of claims that an employee is most likely to bring. (Martinez, supra, 118 Cal.App.4th at pp. 114-115; Fitz, supra, 118 Cal.App.4th at pp. 709, 724-727.) Here, the arbitration agreement, as amended, specifically excludes from arbitration claims “for injunctive and/or other equitable relief, including but not limited to [claims] for unfair competition, or the use or unauthorized disclosure of trade secrets or confidential information,” with either party nonetheless able to seek injunctive relief in court and then proceed with arbitration under the agreement.
Courts have repeatedly faulted arbitration agreements that exclude claims for breaches of confidentiality, non competition, and trade secrets because they are most often brought by employers, not employees, and thus the agreements lack mutuality and the necessary bilaterality. (Martinez, supra, 118 Cal.App.4th at pp. 114-115; Fitz, supra, 118 Cal.App.4th at pp. 709, 724-727.) Equally flawed are agreements worded, as here, specifically to exclude “‘claims for injunctive and/or other equitable relief’” for those types of claims typically brought by employers. (Mercuro v. Superior Court, supra, 96 Cal.App.4th at p. 176.)
It is undisputed that the amended arbitration agreement here exempts from arbitration injunctive and other equitable relief, which would typically involve the three employer claims specified in the agreement. Aerostructures, however, apparently argues that the arbitration agreement does nothing that is not already done by statute. By statute, injunctive relief may be sought in court for any arbitrable controversy (Code Civ. Proc., § 1281.8), which would include, of course, any employer claims involving breaches of confidentiality, non competition, and trade secrets. However, no applicable statute precludes also seeking injunctive or other equitable relief in arbitration. (See, e.g., Swan Magnetics, Inc. v. Superior Court (1997) 56 Cal.App.4th 1504 [injunctive relief]; Pacific Inv. Co. v. Townsend (1976) 58 Cal.App.3d 1, 10 [an accounting].) Here, injunctive and other equitable relief is precluded from arbitration only by the offending clause in the amended agreement.
Code of Civil Procedure section 1281.8, subdivision (b) provides, in pertinent part, as follows: “A party to an arbitration agreement may file in the court in the county in which an arbitration proceeding is pending, or if an arbitration proceeding has not commenced, in any proper court, an application for a provisional remedy [such as a preliminary injunction] in connection with an arbitrable controversy . . . .”
It is no defense to this fatal lack of mutuality and bilaterality that the amended agreement also excludes from arbitration any employee claims for workers’ compensation and for unemployment benefits. Because those two types of employee claims are by statute governed by separate adjudicative schemes (see Lab. Code, § 5300 et seq.; Unemp. Ins. Code, § 1951 et seq.; Mercuro v. Superior Court, supra, 96 Cal.App.4th at p. 176), neither of those types of claims could possibly be subject to arbitration. Thus, the amended agreement’s exclusion of those types of employee claims affects nothing.
Unlike the situation noted above with workers’ compensation and unemployment benefits, there is no mandatory alternative adjudicatory scheme for employers seeking injunctive relief for claims involving breaches of confidentiality, non competition, and trade secrets. Thus, the amended arbitration agreement improperly precludes injunctive relief in arbitration, relief which is otherwise available, for those three categories of typically employer-litigated claims. In that regard, the amended arbitration agreement is flawed because it lacks mutuality and the necessary bilaterality.
Accordingly, the trial court correctly found the arbitration provision unconscionable and properly denied Aerostructures’ motion to compel arbitration.
II. The trial court did not abuse its broad discretion in rendering the arbitration agreement unenforceable, rather than merely severing the three offending provisions.
Finally, Aerostructures’ contention that any provision deemed unconscionable should merely be severed and the remaining provisions of the arbitration agreement enforced is unavailing. (See Civ. Code, § 1670.5, subd. (a).) The arbitration agreement contained not one but three unenforceable provisions, which the trial court, quoting language from Armendariz, found indicative of a “systematic effort to impose arbitration . . . as an inferior forum.” (Armendariz, supra, 24 Cal.4th at p. 124.) We find the trial court did not abuse its broad discretion in declining to sever the three provisions, and thus did not err in opting to render the arbitration agreement unenforceable. (Ibid.)
“As a general rule, if the central purpose of the [arbitration] contract is ‘permeated’ or ‘tainted’ with unconscionability or illegality then the contract as a whole cannot be enforced. If, on the other hand, the unconscionability or illegality is collateral to the main purpose of the contract, and the offending provisions can be excised from the contract by means of severance or limitation, then the remainder of the contract can be enforced.” (Mercuro v. Superior Court, supra, 96 Cal.App.4th at pp. 184-185; see Armendariz, supra, 24 Cal.4th at pp. 122, 124.) As observed in Armendariz, supra, 24 Cal.4th at page. 124, the agreement’s unlawful purpose here, as demonstrated by the contract’s lack of mutuality, was “to impose arbitration on an employee . . . as an inferior forum that works to the employer’s advantage.”
Although Aerostructures argues for severance of the offending clauses, it is well settled that an offending employer should not benefit from the unconscionable agreement it attempted to impose. (Fitz, supra, 118 Cal.App.4th at p. 727.) Thus, because an employer will not be deterred from routinely inserting illegal clauses into an arbitration agreement if it knows the worst penalty is merely severance of the clause, severance is generally disfavored. (Armendariz, supra, at pp. 124-125.) The present case is no exception, particularly because it involves not one but three offending clauses with a cumulative impact that weighs heavily against severance. (Id. at p. 124.)
Moreover, Aerostructures’ suggestion of severance is uniquely inappropriate at least as to one of the three clauses--the discovery provision. Aerostructures fails to suggest how discovery would proceed without any provision on the subject. We could not, for example, replace that provision with the rules of the American Arbitration Association, because that would in effect rewrite the agreement. Although courts may cure a contract’s illegality through severance or restriction, we lack any power to cure contracts by reformation or augmentation. (Armendariz, supra, 24 Cal.4th at p. 125; Fitz, supra, 118 Cal.App.4th at p. 727.)
Accordingly, the trial court did not abuse its broad discretion in refusing severance as a remedy for the arbitration agreement it properly found unconscionable.
DISPOSITION
The order denying the motion to compel arbitration is affirmed.
We concur: DOI TODD, J., CHAVEZ, J.