Baxter v. Genworth North America Corporation
A144744
| Cal. Ct. App. | Oct 26, 2017Background
- Baxter, a long‑time employee, was required to sign Genworth’s "Resolve" Conditions of Employment as a condition of continued employment; it mandated multi‑level internal dispute resolution culminating in arbitration.
- Resolve: levels 1–2 (internal, no attorneys), level 3 (mediation), level 4 (arbitration); employees face procedural deadlines and default discovery limits before arbitration.
- Baxter alleged race discrimination, CFRA and FEHA retaliation, wrongful termination; she filed suit after Genworth moved to compel arbitration under Resolve.
- Trial court denied Genworth’s motion, finding the arbitration agreement procedurally and substantively unconscionable and refusing severance.
- On appeal Genworth challenged unconscionability findings and the refusal to sever; the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability (adhesion) | Baxter: agreement was take‑it‑or‑leave‑it as a condition of continued employment; no meaningful choice | Genworth: many adhesion agreements are enforceable; Concepcion limits adhesion‑based attack | Court: high degree of oppression; procedural unconscionability established |
| Substantive unconscionability — prohibition on contacting coworkers | Baxter: gag on informal witness contact handicaps employees and chills coworker assistance (public policy) | Genworth: provision targets proprietary info and prevents improper self‑help; not one‑sided | Court: provision is one‑sided, not limited to proprietary info, raises public‑policy concerns; unconscionable |
| Substantive unconscionability — discovery limits | Baxter: default caps (interrogatories, document requests, two depositions/8 hours) are inadequate in complex employment disputes | Genworth: arbitrator can expand discovery; courts must presume arbitrator will act reasonably | Court: limits likely inadequate here; "good and sufficient cause" standard and low defaults make vindication of statutory rights unlikely; unconscionable |
| Substantive unconscionability — shortened limitations and admin remedies | Baxter: Resolve’s timelines effectively shorten FEHA timelines and may force waiver or arbitration before DFEH investigation | Genworth: Resolve permits pursuing administrative remedies and deferral; timelines are extendable for good cause | Court: practical effect shortens FEHA enforcement time; arbitrator extension provision cannot cure unconscionability; may deprive meaningful DFEH participation; unconscionable |
| Arbitration timelines and hearing length | Baxter: 120‑day/16‑hour default is a "rocket docket" that impairs presentation | Genworth: time limits are not per se unconscionable; arbitrator can extend for good cause | Court: timelines create modest unconscionability but arbitrator discretion reduces severity; not dispositive alone |
| Severance | Baxter: agreement permeated by multiple defects; cannot be cured by severance | Genworth: sever most offending terms and enforce remainder | Court: multiple, interconnected unconscionable provisions; severance would require rewriting; refusal to sever not abuse of discretion |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Servs., 24 Cal.4th 83 (California 2000) (minimum standards for mandatory employment arbitration)
- Fitz v. NCR Corp., 118 Cal.App.4th 702 (Cal. Ct. App. 2004) (adequate discovery requirement in employment arbitration)
- Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (California 2016) (procedural and substantive unconscionability sliding scale)
- Concepcion v. AT&T Mobility LLC, 563 U.S. 333 (U.S. 2011) (federal preemption of state rule disallowing class‑action waivers in arbitration)
- Sanchez v. Carmax Auto Superstores Cal., 224 Cal.App.4th 398 (Cal. Ct. App. 2014) (upholding certain limited discovery caps where employee failed to show inadequacy)
- Mercuro v. Superior Court, 96 Cal.App.4th 167 (Cal. Ct. App. 2002) (limited discovery in arbitration not per se unconscionable absent showing)
- Ellis v. U.S. Security Associates, 224 Cal.App.4th 1213 (Cal. Ct. App. 2014) (shortened limitations in arbitration can be unconscionable for FEHA claims)
- Dotson v. Amgen, Inc., 181 Cal.App.4th 975 (Cal. Ct. App. 2010) (presumption that arbitrator will follow law and act reasonably)
- Pinela v. Neiman Marcus Group, 238 Cal.App.4th 227 (Cal. Ct. App. 2015) (delegation to arbitrator cannot cure unconscionable limitations)
- Sonic‑Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109 (California 2013) (scope and standards for substantive unconscionability)