Opinion
E066122
12-21-2017
JACOB HEYWOOD, Plaintiff and Respondent. v. CASA CABINETS, INC., Defendant and Appellant
METAL Law Group, W. Dan Lee and Sarah H. Scheinhorn for Defendant and Appellant. RP Law Group, Raj Patel and Anreeka Patel for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVDS1603934) OPINION APPEAL from the Superior Court of San Bernardino County. Michael A. Sachs, Judge. Affirmed. METAL Law Group, W. Dan Lee and Sarah H. Scheinhorn for Defendant and Appellant. RP Law Group, Raj Patel and Anreeka Patel for Plaintiff and Respondent.
I
INTRODUCTION
Defendant Casa Cabinets, Inc. appeals the trial court's order denying its motion to compel arbitration of plaintiff Jacob Heywood's wrongful termination action. Defendant contends plaintiff signed an agreement to arbitrate employment disputes, and plaintiff has not provided evidence the arbitration agreement (Agreement) is unenforceable. Defendant argues that the Agreement is not procedurally or substantively unconscionable, and even if provisions of the Agreement are unconscionable, they are severable and do not invalidate the remainder of the Agreement. We reject defendant's contentions and conclude the Agreement violates Armendariz requirements for an enforceable arbitration agreement of statutory claims. Furthermore, the Agreement is procedurally and substantively unconscionable. The order denying defendant's motion to compel arbitration is therefore affirmed.
Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102 (Armendariz).
II
FACTUAL AND PROCEDURAL BACKGROUND
In March 2016, plaintiff filed a discrimination complaint with the Department of Fair Employment and Housing (DFEH) against defendant, alleging that on August 17, 2015, defendant committed the following adverse actions against plaintiff because of his disabilities: "Discrimination, Harassment, Retaliation[,] Denied a good faith interactive process, Denied a work environment free of discrimination and/or retaliation, Denied reasonable accommodation, Terminated [plaintiff]."
After the DFEH provided a notice of case closure and right to sue, plaintiff filed a verified wrongful termination complaint against defendant, alleging the following causes of actions: (1) discrimination based upon disability (Gov. Code, §§ 12940 et. seq.); (2) failure to prevent unlawful discrimination (Gov. Code, §§ 12940 et. seq.); (3) retaliation (Gov. Code, §§ 12940, subd. (h)); (4) failure to accommodate disability (Gov. Code, §§ 12940, subd. (m)); (5) failure to engage in interactive process (Gov. Code, §§ 12940, subd. (n)); (6) wrongful termination based on disability discrimination, in violation of public policy; (7) violation of Business and Professions Code sections 17200 et. seq. by discriminating against plaintiff and wrongfully terminating him; and (8) intentional infliction of emotional distress by not accommodating plaintiff's disability and harassing him. Plaintiff's prayer for relief requests general damages, including recovery of medical expenses, lost earnings; punitive damages; payment for unpaid rest periods; injunctive relief; civil and statutory penalties; attorney's fees and costs under the Fair Employment and Housing Act (FEHA); costs of suit; and prejudgment and postjudgment interest.
Plaintiff alleged in his verified complaint that he was employed as an hourly worker at Casa Cabinets, Inc. (defendant) from January 2014 to August 17, 2015. Defendant owned and operated a warehouse in Rancho Cucamonga. Plaintiff worked for defendant primarily as a forklift operator. During plaintiff's employment, defendant discriminated against plaintiff based on his disabilities. As a young child and thereafter, plaintiff was diagnosed with partial seizures, dyspraxia, dyslexia, and disorder of written expression. Plaintiff reads at the fourth grade reading level, cannot perform simple math, and has comprehension deficits.
Before working as a warehouse associate, plaintiff briefly worked for defendant in inventory. At that time, the human resources representative, Doris Yeung, asked plaintiff why he was making so many inventory mistakes. Plaintiff told her he had a disability affecting his ability to read and the disability could result in absence seizures. Thereafter plaintiff was not required to do inventory. No one discussed with plaintiff what job duties he could or could not perform because of his reading and seizure disabilities. Throughout plaintiff's employment he was given papers to sign but he did not read them and could not understand their contents because of his reading disability. Plaintiff often asked his supervisor, Kevin Rivera, and CEO assistant, Melissa Salazar, what the papers said, and they said they did not know. They told him several times to sign the papers or go home, because he could not work until he signed the papers. Salazar also suggested plaintiff ask Nathan Gordon what the papers said. No one ever explained to plaintiff what the papers said or read them to him. Plaintiff signed the papers.
Gordon's job title at defendant is unclear.
At work on July 27, 2015, plaintiff injured his left hand, wrist, and arm and right hand, lifting a box. This led to plaintiff suffering from depression and insomnia. Plaintiff attended workers' compensation appointments and therapy sessions. Plaintiff's job responsibilities changed because of his injuries. He was assigned to the office to do paperwork, despite his reading and seizure disabilities, and his fourth grade reading level. Plaintiff again informed Salazar of his disabilities. Salazar told him he had to provide paperwork verifying he had seizures and was therefore unable to perform his duties. Until he did so, he was not to return to work. Plaintiff told Salazar he could not afford paying a doctor to provide such paperwork verifying his disabilities, and could not afford to lose the income from lost working hours. Salazar said she did not care. Plaintiff left the office and asked his doctor for a disability note. He was told it would take a couple of weeks. Plaintiff told a supervisor there would be a short delay in providing a doctor's note. Plaintiff received no response.
After plaintiff's doctor told him the doctor's note would be ready the next day, plaintiff texted Rivera, Yeung, and Salazar, informing them the note would be ready soon. Rivera told plaintiff not to return to work. On August 17, 2015, plaintiff received in the mail a letter stating his employment had been terminated. The letter, signed by Gordon, stated his employment was terminated because he failed to return to work, failed to update his supervisor on his whereabouts, drove recklessly when leaving the parking lot, injured customers, failed to complete work duties with his uninjured hand, and failed to attend therapy and workers' compensation appointments. Plaintiff alleged in his complaint that defendant did not engage in the interactive process with plaintiff to attempt to accommodate his disabilities and terminated him based on his known disabilities in violation of FEHA.
In response to plaintiff's wrongful termination complaint, defendant filed a motion to compel arbitration. Plaintiff filed opposition. Plaintiff stated in his supporting declaration that he was diagnosed at a young age with reading and developmental disabilities, and reads at the fourth grade reading level. Reading documents with lots of text causes him to have absence seizures. Plaintiff's manager and supervisors at defendant were aware of his disabilities. Plaintiff notified them of his disabilities multiple times. Plaintiff did not do inventory because of his disabilities. On July 27, 2015, plaintiff sustained a work-related injury. He was asked to sign worker's compensation paperwork that day while he was in extreme pain from his injury. Plaintiff asked for clarification on what he was signing. He was not told the documents included an arbitration agreement. Plaintiff signed the documents. He was not told he had signed an arbitration agreement, and no one at Casa Cabinets, Inc. explained to him what arbitration was or what other options were available. Plaintiff was not given a copy of the arbitration rules.
In support of defendant's reply to plaintiff's opposition to the motion to compel, Yeung filed a supporting declaration stating the following facts. In July 2015, plaintiff was employed by defendant as a warehouse forklift operator. On July 21, 2015, he hit a customer with a forklift. After the incident, plaintiff was given a warning to be safe and careful not to violate defendant's safety regulations. After the incident, defendant decided to implement an arbitration agreement regarding work-place related matters. On Friday, July 24, 2015, defendant gave plaintiff an arbitration agreement to review before signing it. The following Monday, July 27, 2015, at approximately 8:30 a.m., plaintiff signed the Agreement before his work shift. Plaintiff's half-brother and the warehouse manager, Kevin Rivera, witnessed the signing. Plaintiff had not been injured on the job before signing the Agreement and he did not appear to be suffering from any physical pain or emotional distress. Plaintiff did not suggest he did not understand what he was signing. At no time before or at the time of signing the Agreement did plaintiff provide any documentation regarding his alleged reading disability. Plaintiff was previously given a written exam for forklift operation, which he passed without raising any issue regarding comprehension of the exam. After signing the Agreement, plaintiff was injured in the afternoon on July 27, 2015.
Attached to Yeung's declaration is a copy of plaintiff's workers' compensation deposition on January 28, 2016. Plaintiff testified he was injured "later in the day" on July 27, 2015. Plaintiff testified he did not remember if he signed the Agreement before or after he was injured. Plaintiff said his employment with defendant ended on August 17, 2015, after he was told to provide paperwork verifying he had seizures. He received a letter from defendant dated August 27, 2015, notifying him his employment was terminated. When asked if plaintiff could read at the deposition various documents, he said he could not because doing so would give him seizures. Someone, such as plaintiff's wife, had to read and explain documents to him.
On May 10, 2016, the trial court heard and denied defendant's motion to compel arbitration. After hearing argument, the court denied the motion on the ground the arbitration agreement was procedurally and substantively unconscionable.
III
STANDARD OF REVIEW
"There is no uniform standard of review for evaluating an order denying a motion to compel arbitration. [Citation.] If the court's order is based on a decision of fact, then we adopt a substantial evidence standard. [Citations.]" (Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1425.) Alternatively, if the court's denial rests solely on a decision of law, we apply a de novo standard of review. (Ibid.; in accord, Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th 619, 630 (Carlson).)
In this case the trial court made factual findings based on material disputed evidence. From those findings, the trial court concluded that the Agreement was both procedurally and substantively unconscionable and was therefore unenforceable. Accordingly, to the extent there are disputed material facts, "'we accept the trial court's resolution of disputed facts when supported by substantial evidence; we presume the court found every fact and drew every permissible inference necessary to support its judgment.'" (Carlson, supra, 239 Cal.App.4th at p. 630, quoting Brown v. Wells Fargo Bank, N.A. (2008) 168 Cal.App.4th 938, 953 (Brown).)
IV
AGREEMENT OF ADHESION
In Armendariz, supra, 24 Cal.4th 83, the California Supreme Court stated five minimum requirements for lawful arbitration of unwaivable statutory claims in the workplace, which are subject to a mandatory employment arbitration agreement. "Such an arbitration agreement is lawful if it '(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum." (Id. at p. 102.) Even though California public policy favors arbitration, an arbitration agreement subject to FEHA or other unwaivable statutory rights is unenforceable if it does not meet Armendariz's five-factor fairness test. (Ibid.)
In the instant case, it is undisputed that under the Agreement, plaintiff agreed to arbitration. Citing Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 693 (Lane), defendant asserts that the Agreement is enforceable because it meets the five Armendariz factors required under Armendariz, supra, 24 Cal.4th 83. In Lane, supra, 224 Cal.App.4th at page 693, the court held that the employee's arbitration agreement was valid as to the wrongful termination claims. But unlike in Lane, here, the Agreement does not meet all of the Armendariz factors and thus is unfair and unenforceable. The Agreement does not provide for all types of relief that would be available in court (the fourth Armendariz factor), and it requires employees to pay some of the arbitration costs (the fifth Armendariz factor). A. Fourth Armendariz Factor
The Agreement does not comply with the fourth Armendariz factor because not all types of relief available in a judicial forum are available in the arbitral forum. The amount of recovery is limited to a maximum of $10,000 and can be construed as applying not only to general damages but also to any recovery of punitive damages or attorney's fees. If plaintiff's action is litigated in court, he would not be subject to a monetary award cap of $10,000 and could seek injunctive relief, and recover attorney's fees and punitive damages in excess of $10,000. (Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1147-1148; Gelfo v. Lockheed Martin Corp. (2006) 140 Cal.App.4th 34, 63.)
Under FEHA, Government Code section 12965, subdivision (c), an employee asserting a FEHA violation may recover in the trial court "any relief a court is empowered to grant in a civil action . . . , in addition to any other relief that, in the judgment of the court, will effectuate the purpose of [FEHA, Gov. Code, §§ 12900, et. seq.]. This relief may include a requirement that the employer conduct training for all employees, supervisors, and management on the requirements of [FEHA], the rights and remedies of those who allege a violation of [FEHA], and the employer's internal grievance procedures. In addition, in order to vindicate the purposes and policies of [FEHA], a court may assess against the defendant, if the civil complaint or amended civil complaint so prays, a civil penalty of up to twenty-five thousand dollars ($25,000) to be awarded to a person denied any right provided for by Section 51.7 of the Civil Code [(civil rights provision)], as an unlawful practice prohibited under [FEHA]." (Gov. Code, § 12965, subd. (c).)
In addition, subdivision (b) of Government Code section 12965 provides that, "[i]n civil actions brought under this section, the court, in its discretion, may award to the prevailing party, including the department, reasonable attorney's fees and costs, including expert witness fees." (See Williams v. Chino Valley Independent Fire Dist. (2015) 61 Cal.4th 97, 99-100 [trial courts have discretion to award both attorney's fees and costs to prevailing FEHA parties, but normally an unsuccessful FEHA plaintiff should not be ordered to pay the defendant's fees or costs].) "In a FEHA case, unless it would be unjust, a prevailing plaintiff should recover attorney fees, but a prevailing defendant is awarded fees only if the case was frivolous or filed in bad faith." (Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1249 (Wherry), citing Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 985.)
The Agreement thus does not comply with the fourth Armendariz factor, because the Agreement fails to allow recovery of all of the types of relief that would otherwise be available in court. B. Fifth Armendariz Factor
The Agreement does not meet the fifth Armendariz factor as well. The fifth factor prohibits requiring employees to pay "any arbitrators' fees or expenses as a condition of access to the arbitration forum." (Armendariz, supra, 24 Cal.4th at p. 102.) Code of Civil Procedure section 1284.2 provides that, unless an arbitration agreement provides otherwise, each party to the arbitration shall pay his or her pro rata share of arbitration costs. Contrary to this statute, the court in Armendariz, held that "a mandatory employment arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration. Accordingly, . . . the employer must bear the arbitration forum costs." (Armendariz, supra, 24 Cal.4th at p. 113.)
The Armendariz court explained that "section 1284.2 is a default provision, and the agreement to arbitrate a statutory claim is implicitly an agreement to abide by the substantive remedial provisions of the statute. [Citation.] As noted, FEHA rights are unwaivable. Furthermore, under the FEHA, private civil actions by employees are the primary means of enforcing employees' rights to be free of unlawful discrimination, once the Department of Fair Employment and Housing determines it will not file a complaint against the employer. (Gov. Code, § 12965, subd. (b).) The statute further provides that '[t]he superior, municipal, and justice courts of the State of California shall have jurisdiction of such actions.' (Ibid.) While we do not interpret this language providing access to courts as precluding arbitration of FEHA claims, or even the imposition of mandatory employment arbitration agreements, we do construe it as providing further support for the above stated principle that any such arbitration must be an adequate substitute for litigation. We do not believe the FEHA contemplates that employees may be compelled to resolve their antidiscrimination claims in a forum in which they must pay for what is the equivalent of the judge's time and the rental of the courtroom." (Armendariz, supra, 24 Cal.4th at p. 112.)
The Armendariz court further noted that "[t]here is little reason to believe that the Legislature that passed Code of Civil Procedure section 1284.2 contemplated a situation in which the intended beneficiary of such an antidiscrimination statute would be compelled to pay large arbitration costs as a condition of pursuing an antidiscrimination claim. Thus, we construe the FEHA as implicitly prohibiting such costs, a prohibition which the default provisions of section 1284.2 do not displace." (Armendariz, supra, 24 Cal.4th at pp. 112-113.)
Here, the Agreement violates the fifth Armendariz factor by requiring plaintiff and defendant "to share equally the AAA administrative fees and the arbitrator's fees and expenses. All other costs and expenses associated with the arbitration, including, without limitation, each party's respective attorneys' fees, shall be borne by the party incurring the expense." The Agreement also deprives plaintiff from recovering his attorney's fees under FEHA (Gov. Code, § 12965, subd. (b)), particularly in the event he is the prevailing party and his recovery and attorney's fees exceed the $10,000 recovery cap.
Because the Agreement violates the fourth and fifth Armendariz factors, the Agreement is unenforceable as a matter of law. The Agreement does not meet the minimum requirements under Armendariz, supra, 24 Cal.4th 83, for arbitration of plaintiff's unwaivable statutory claims. C. General Principles of Unconscionability
The Agreement is also procedurally and substantively unconscionable. Unconscionability of an arbitration agreement may exist when arbitration is imposed on an employee by an employer as a condition of employment. (Armendariz, supra, 24 Cal.4th at p. 113.) Our unconscionability analysis begins with an inquiry into whether the Agreement is a contract of adhesion. (Ibid.) 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.] If the contract is adhesive, the court must then determine whether 'other factors are present which, under established legal rules — legislative or judicial — operate to render it [unenforceable].' [Citation.]" (Ibid.) An adhesion contract is indicative of procedural unconscionability because it is a standardized contract drafted by the party with greater bargaining power and offered to the weaker party on a take-it-or-leave-it basis. (Id. at p. 113.) "Such a contract will not be enforced if its provisions are not within the reasonable expectations of the weaker party or if they are oppressive. (Citation.)" (Chin v. Advanced Fresh Concepts Franchise Corp. (2011) 194 Cal.App.4th 704, 709.)
There are thus generally two judicially imposed limitations on the enforcement of adhesion contracts or provisions. "The first is that such a contract or provision which does not fall within the reasonable expectations of the weaker or 'adhering' party will not be enforced against him. [Citations.] The second — a principle of equity applicable to all contracts generally — is that a contract or provision, even if consistent with the reasonable expectations of the parties, will be denied enforcement if, considered in its context, it is unduly oppressive or 'unconscionable.'" [Citation.] Subsequent cases have referred to both the 'reasonable expectations' and the 'oppressive' limitations as being aspects of unconscionability. [Citations.]" (Armendariz, supra, 24 Cal.4th at p. 113.)
Under Civil Code section 1670.5 and Code of Civil Procedure section 1281, if the court as a matter of law finds an arbitration contract or any clause of the contract to have been unconscionable when made, the court may refuse to enforce the contract. (Civ. Code, § 1670.5, subd. (a); see Armendariz, supra, 24 Cal.4th at p. 114.) The doctrine of unconscionability, codified in Civil Code section 1670.5, has both a procedural and a substantive element. (Ibid.) The procedural unconscionability element focuses on oppression, lack of freedom of assent, and surprise due to unequal bargaining power and the weaker party's lack of notice of hidden or oppressive terms. "Procedural unconscionability may be proven by showing oppression, which is present when a party has no meaningful opportunity to negotiate terms or the contract is presented on a take-it-or-leave-it basis." (Wherry, supra, 192 Cal.App.4th at p. 1246.)
Substantive unconscionability is present when an agreement has overly harsh or one-sided terms. (Armendariz, supra, 24 Cal.4th at p. 114; Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532 (Stirlen).) Both procedural and substantive unconscionability must be present in order "'for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.'" (Armendariz, supra, 24 Cal.4th at p. 114, quoting Stirlen, at p. 1533.) But procedural and substantive unconscionability need not be present in the same degree. (Armendariz, at p. 114.) "'Essentially a sliding scale is invoked . . . . In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa." (Ibid.) D. Procedural Unconscionability
The record supports a finding of procedural unconscionability, which "focuses on the oppressiveness of the stronger party's conduct." (Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174 (Mercuro).) The evidence demonstrates that when plaintiff signed the Agreement, he lacked awareness of the oppressive, one-sided Agreement terms; defendant drafted the Agreement; defendant and plaintiff, as defendant's employee, had unequal bargaining power; and plaintiff believed there was no alternative but to sign the agreement. A reasonable inference could be made from the evidence that the one-sided Agreement was presented on a take it or leave it basis, and plaintiff felt compelled to sign the Agreement within a limited period of time, without knowing what he was signing. (Wherry, supra, 192 Cal.App.4th at p. 1246.) Plaintiff had no meaningful opportunity to negotiate the terms of the contract, particularly since he was unable to read the Agreement because of his reading disabilities and defendant made no attempt to explain the Agreement terms to plaintiff. According to plaintiff's declaration, at no time before, during, or after he signed the Agreement was he told he was signing an arbitration agreement or that he had a choice as to whether to sign the Agreement.
Plaintiff stated in his declaration that, when he signed the Agreement, he was in extreme pain from his injury. However, defendant's director of operations, Doris Yeung, states in her declaration that plaintiff sustained a work-related injury in the afternoon, on July 27, 2015, after plaintiff signed the Agreement earlier that day at 8:30 a.m., before his shift. Also, plaintiff was given the Agreement on Friday, July 24, 2015, so that he could review it over the weekend before signing it. Plaintiff testified in his workers' compensation deposition that he did not remember if he signed the Agreement before or after he was injured.
There is a conflict in the facts as to whether plaintiff signed the agreement while suffering extreme pain from a work-related injury. There is also a conflict in the evidence as to whether defendant was aware of plaintiff's disabilities. "'To the extent there are material facts in dispute, we accept the trial court's resolution of disputed facts when supported by substantial evidence; we presume the court found every fact and drew every permissible inference necessary to support its judgment.'" (Carlson, supra, 239 Cal.App.4th at p. 630, quoting Brown, supra, 168 Cal.App.4th at p. 953.)
Even assuming plaintiff was not suffering from severe pain when he signed the Agreement, and taking into account he was given the weekend to review the Agreement, there was sufficient evidence to support the trial court's finding of procedural unconscionability. Plaintiff had reading and developmental disabilities and a fourth grade reading ability, which prevented him from reading and comprehending the content of the Agreement. Giving plaintiff only the weekend to seek assistance and inquire as to what he was signing, without informing him of the nature of the Agreement or terms, supported a reasonable finding of procedural unconscionability and oppression.
In Wherry, supra, 192 Cal.App.4th 1242, the defendants appealed an order denying their motion to compel arbitration of a complaint for gender discrimination and sexual harassment. The Wherry court affirmed, holding the arbitration agreement was unconscionable and therefore unenforceable. (Id. at p. 1245.) The Wherry court concluded there was procedural unconscionability because the plaintiffs had no meaningful opportunity to negotiate agreement terms and the agreement was presented on a take it or leave it basis. (Id. at p. 1247.) When the plaintiffs were given the agreement, they were told they had to sign it if they wanted to work for defendants. No one described the agreement's contents and the plaintiffs were given only a few minutes to review and sign it, without any time to ask questions. Further, they were never given a copy of the document.
The Wherry court stated that the fact that the "plaintiffs initialed every page and signed the document does not vitiate plaintiffs' lack of time to review the agreement or have a lawyer look at it. This is similar to Ontiveros v. DHL Express (USA), Inc. (2008) 164 Cal.App.4th 494, where, a FEHA action, in which the court held an arbitration provision in an employment contract was procedurally unconscionable because the employee did not know she had agreed to arbitrate, the agreement was buried in a stack of other documents, the employee had no time to review it, and no one explained it to her." (Wherry, supra, 192 Cal.App.4th at p. 1247.)
Likewise, here, the fact that plaintiff initialed every page and signed the Agreement is not dispositive where there is evidence of plaintiff's inability to read and comprehend what he was signing, and plaintiff was not told and was unaware he had the option of refusing to sign the Agreement, which plaintiff indicated was one of numerous documents given to him to review, without any discussion of the terms of the Agreement. "Procedural unconscionability may be proven by showing oppression, which is present when a party has no meaningful opportunity to negotiate terms or the contract is presented on a take-it-or-leave-it basis." (Wherry, supra, 192 Cal.App.4th at p. 1246.) Here, the evidence was sufficient to support such a finding of oppression and procedural unconscionability. E. Substantive Unconscionability
Plaintiff argues there are several Agreement provisions that are substantively unconscionable. They include the $10,000 cap on recovery; the arbitration cost sharing provision prohibited by FEHA; the shortened limitations period; and the unilateral arbitral claims provisions. Defendant argues the $10,000 cap is not one-sided because it applies to both parties. But the type of claims subject to arbitration and the cap under the Agreement are primarily employment-related claims that would most likely be brought by employees against their employer. (Mercuro, supra, 96 Cal.App.4th at p. 176.) "'Substantive unconscionability addresses the fairness of the term in dispute. It "traditionally involves contract terms that are so one-sided as to "shock the conscience," or that impose harsh or oppressive terms." [Citation.]' [Citation.]" (Wherry, supra, 192 Cal.App.4th at p. 1248, quoting Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1100.) Noncompliance with any of the Armendariz five factors makes the arbitration agreement substantively unconscionable. (Wherry, at p. 1248.) As discussed above, the Agreement violates the fourth and fifth Armendariz factors.
In addition to the $10,000 cap, the Agreement is one-sided in a number of ways. It requires arbitration of most claims commonly brought by employees, but not most claims typically brought by an employer. The Agreement states that "disputes that may arise from your employment with CASA CABINETS or the termination of your employment must . . . be submitted for resolution by binding arbitration." The Agreement requires arbitration of "claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to, discrimination based on . . . race, . . . age, . . . mental or physical disability or medical condition or other characteristics protected by statute) claims for wrongful discharge; . . . and/or claims for violation of any federal, state or other governmental law, statute, regulation or ordinance, and whether based on statute or common law; . . ." These are claims employees would be most likely to bring against their employer. (Mercuro, supra, 96 Cal.App.4th at p. 176.)
The one-sided Agreement excludes from the arbitration mandate claims arising under "unfair competition, the use of unauthorized disclosure of trade secrets, the unauthorized disclosure of confidential information, [and] the unauthorized use of copyright, mask work, trademark (including common law trademark) and/or patent." These claims would typically be brought by the employer, not employees. (Mercuro, supra, 96 Cal.App.4th at p. 176.)
As observed in Armendariz and Mercuro, "substantive unconscionability may manifest itself if the form of 'an agreement require[es] 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: Countrywide 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." (Mercuro, supra, 96 Cal.App.4th at p. 176, quoting Armendariz, supra, 24 Cal.4th at p. 119.)
The Agreement also provides, to defendant's advantage as employer, that either party may demand the arbitrated dispute remain confidential. Defendant states in the Agreement that confidentiality of arbitrated disputes is defendant's preference. The Agreement further states: "The award, arbitration, and the facts of the dispute shall be held in confidence." In addition, the Agreement requires that the arbitration shall be conducted under the "Employment Dispute Resolution Rules of the AAA or other applicable rules (Rules)." Plaintiff was not provided with the Rules.
The one-sided nature of the Agreement favoring the employer is further reflected in the shorter limitation period for bringing an arbitration claim than is required when filing the complaint in the trial court. The Agreement states that the aggrieved party must give the other party notice of his claim within 45 days after the aggrieved party first knew or should have known of the facts giving rise to the claim. Otherwise the claim is barred and waived. In addition, the Agreement mandates that the location of the arbitration shall be at defendant's place of business, unless both parties agree to a different location. Holding the arbitration at defendant's office rather than at a neutral location further favors defendant.
In Wherry, the court held the arbitration agreement was substantively unconscionable because under the agreement the plaintiffs were subject to fees and costs prohibited by FEHA, and the limitations period to bring the arbitration claim was less than what was allowed by statute. (Wherry, supra, 192 Cal.App.4th at pp. 1248-1250.) Likewise, the Agreement in the instant case suffers from these same defects, as well as other one-sided terms, and is therefore substantively unconscionable. Because the Agreement is procedurally and substantively unconscionable, it is unenforceable. (Id. at p. 1250.)
V
SEVERANCE
Defendant argues that if this court finds provisions in the Agreement substantively unconscionable and thus unenforceable, the court should sever those provisions from the Agreement. Under Code of Civil Procedure section 1670.5, subdivision (a), if a court finds that an agreement to arbitrate, or any clause of the agreement, is unconscionable or unlawful, the court may refuse to enforce the contract, sever the offending clause, or limit application of the offending clause so as to avoid the unconscionable or illegal result. (Mercuro, supra, 96 Cal.App.4th at p. 184; see Civ. Code, § 1670.5, subd. (a); Armendariz, supra, 24 Cal.4th at pp. 121-122.)
Severance generally is not appropriate if the central purpose of the contract is "permeated" or "tainted" with unconscionability or illegality. (Mercuro, supra, 96 Cal.App.4th at pp. 184-185; Armendariz, supra, 24 Cal.4th at pp. 121-122.) This is because multiple defects in an agreement indicate a systematic effort to impose arbitration, as an inferior forum, on a weaker party, which works to the stronger party's advantage. (Armendariz, at p. 124; Wherry, supra, 192 Cal.App.4th at p. 1250.) "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, supra, 96 Cal.App.4th at pp. 184-185.)
"Any challenge to the failure by the trial court to sever an unconscionable provision and enforce the balance of the agreement is reviewed for abuse of discretion. (Carlson, supra, 239 Cal.App.4th at p. 631, citing Armendariz, supra, 24 Cal.4th at p. 124.) In determining whether to sever, the overarching consideration is whether the interests of justice would be furthered by severance. (Wherry, supra, 192 Cal.App.4th at p. 1250; Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 119.) Here, the Agreement is so permeated with unconscionability that the Agreement can only be saved, if at all, by a reformation beyond our authority. (Martinez, at p. 119; Wherry, at p. 1250.) The Agreement contains multiple serious defects, including the $10,000 recovery cap; provisions limiting the arbitration mandate to claims typically brought by employees against the employer; unlawful provisions shortening the statute of limitations; and the unlawful cost-sharing provision.
In Mercuro, supra, 96 Cal.App.4th at page 167, the plaintiff employee argued that his employer's arbitration agreement, which the plaintiff was compelled to sign, was unlawful because the agreement required the plaintiff to pay half the arbitrator's fee, in violation of the rules for arbitrating statutory claims set out in Armendariz. The employer conceded that the provision requiring the plaintiff to pay an equal share of the arbitration costs was unlawful under Armendariz. The employer argued that the offending provision could be severed from the remainder of the contract. (Mercuro, at p. 181.) The Mercuro court disagreed, concluding that "severing the unlawful fee provisions from the contract would not solve the problem because the contract is 'permeated' by unconscionability and could only be saved, if at all, by a reformation beyond our authority." (Id. at p. 182, citing Armendariz, supra, 24 Cal.4th at pp. 122-125.)
We recognize that public policy favors arbitration and arbitration terms should be interpreted liberally. (Gravillis v. Coldwell Banker Residential Brokerage Co. (2006) 143 Cal.App.4th 761, 771.) Nevertheless, when an arbitration agreement is rife with unconscionability, as here, the overriding policy requires that arbitration be rejected. (Armendariz, supra, 24 Cal.4th at p. 127; Wherry, supra, 192 Cal.App.4th at p. 1250.)
VI
DISPOSITION
The judgment is affirmed. Plaintiff is awarded his costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
CODRINGTON
J. We concur: RAMIREZ
P. J. MILLER
J.