91 Cal.App.5th 482
Cal. Ct. App.2023Background
- Cambrian hired Alberto in Sept. 2019; at orientation she signed three documents on the same day: an Arbitration Agreement, a Confidentiality Agreement, and a Confidentiality Addendum.
- Arbitration Agreement required arbitration of employment disputes and barred class/representative actions; Cambrian did not sign its signature block.
- Confidentiality documents broadly defined “trade secrets” to include salary/employee data, permitted Cambrian to obtain an immediate injunction in court without bond or proof of irreparable harm, and authorized recovery of attorneys’ fees.
- Alberto sued for wage-and-hour violations and PAGA penalties; Cambrian petitioned to compel arbitration.
- The trial court denied the petition, finding (1) the agreements were procedurally adhesive and substantively unconscionable (injunction carve-out, wage-secrecy clause violating Labor Code §232, and PAGA waiver), and (2) the unconscionable terms permeated the overall agreement so severance was inappropriate.
- The Court of Appeal assumed, without deciding, that an arbitration agreement was formed and affirmed the trial court’s refusal to enforce it on unconscionability and non-severability grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Formation: Was there a binding arbitration agreement? | Alberto: No binding agreement because Cambrian did not sign. | Cambrian: Signature block not required to form agreement/manifestation of mutual assent. | Court did not decide formation on appeal; proceeded assuming an agreement existed. |
| Should the separate Confidentiality documents affect enforceability of the Arbitration Agreement? | Alberto: Yes — documents were part of same transaction (hiring) and must be construed together under Civ. Code §1642. | Cambrian: Confidentiality agreement is separate; its defects don’t taint the arbitration clause. | Agreements executed same day in one transaction are read together; confidentiality terms are relevant to arbitration enforceability. |
| Are the confidentiality/injunction and wage‑secrecy provisions unconscionable? | Alberto: Yes — injunction carve-outs (no bond, preconsent to injunction, no irreparable‑harm requirement) are non‑mutual; wage‑secrecy violates Labor Code §232 and deters collective/representative claims. | Cambrian: Injunctive carve‑outs are a legitimate employer margin of protection; wage‑secrecy challenge is misplaced. | Court found a high degree of substantive unconscionability: injunction carve‑outs and wage‑secrecy are unconscionable and undermine mutuality and enforcement. |
| Is a blanket waiver of PAGA/representative claims enforceable? | Alberto: No — PAGA representative waivers are against public policy and unenforceable. | Cambrian: Attempted to enforce waiver; argued FAA issues generally. | Under California law, blanket PAGA waiver is unenforceable; Viking River did not eliminate the rule that wholesale PAGA waivers are invalid. |
| If some clauses are unconscionable, must the court sever them and enforce the rest? | Alberto: Multiple defects permeate the agreement; severance inadequate; refuse enforcement. | Cambrian: Sever the offending clauses and compel arbitration of the remainder. | Decision to sever reviewed for abuse of discretion; court reasonably found multiple unlawful provisions so pervasive that refusal to sever and denial of arbitration was within discretion. |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Servs., 24 Cal.4th 83 (Cal. 2000) (framework: procedural and substantive unconscionability, mutuality requirement, and severance principles)
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (PAGA representative‑action waivers are unenforceable as against public policy)
- Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (U.S. 2022) (FAA preemption limited; wholesale PAGA waiver rule preserved under state law)
- OTO, L.L.C. v. Kho, 8 Cal.5th 111 (Cal. 2019) (arbitration clauses containing unconscionable terms are unenforceable)
- Carbajal v. CWPSC, Inc., 245 Cal.App.4th 227 (Cal. Ct. App. 2016) (injunctive‑relief carve‑outs that waive bond and other requirements can render arbitration non‑mutual and unconscionable)
- Lange v. Monster Energy Co., 46 Cal.App.5th 436 (Cal. Ct. App. 2020) (waiver of bond and irreparable‑harm showing for injunctions is substantively unconscionable)
- IMO Dev. Corp. v. Dow Corning Corp., 135 Cal.App.3d 451 (Cal. Ct. App. 1982) (related instruments executed as part of one transaction are construed together under Civ. Code §1642)
- Brookwood v. Bank of Am., 45 Cal.App.4th 1667 (Cal. Ct. App. 1996) (courts may consider separate documents together when they are part of same transaction affecting arbitration terms)