Carlson v. Home Team Pest Defense, Inc.
239 Cal. App. 4th 619
| Cal. Ct. App. | 2015Background
- Carlson was hired by Home Team Pest Defense and electronically signed an employment acknowledgment that incorporated an Agreement to Arbitrate and a 13‑page Dispute Resolution Policy (DRP) she could not access before signing.
- Carlson raised objections and asked to review/ negotiate the DRP; she was told the policy was not available and was pressured to sign the agreement that day or lose the job offer and unemployment benefits.
- The Agreement required employees (but not Home) to exhaust a company-controlled pre‑arbitration process (without counsel), file a Demand for Arbitration within 90 days of an initial Request for Dispute Resolution, and share arbitration costs (including an initial $120 filing fee).
- The Agreement barred consolidation, class, collective, and representative actions; it reserved for Home the right to litigate injunctive/competition/trade secret claims and to recover attorney fees for enforcing covenants.
- Carlson sued for wrongful termination and related claims; Home moved to compel arbitration. The trial court denied the motion, finding both procedural and substantive unconscionability and refusing to sever.
- The Court of Appeal affirmed, holding the arbitration agreement was procedurally and substantively unconscionable, FAA challenges did not preempt California unconscionability analysis, and severance was not appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability of arbitration agreement | Carlson argued the agreement was presented on a take‑it‑or‑leave‑it basis, she lacked meaningful choice, and the DRP/AAA rules were not provided | Home argued the agreement was a standard employment form and enforceable; relied on cases finding adhesion contracts enforceable when employees had access/notice | Court held high degree of procedural unconscionability: oppressive presentation, lack of access to DRP/AAA rules, and economic coercion to sign |
| Substantive unconscionability / lack of mutuality | Carlson argued the terms were one‑sided: Home could litigate injunctive/competition claims and recover fees while employee claims were forced into arbitration with unilateral pre‑arbitration burdens and fee provisions | Home contended terms were valid and consistent with FAA and arbitration principles | Court held agreement substantively unconscionable: one‑sided rights, pre‑arbitration unrepresented process, 90‑day demand limitation, cost‑sharing made agreement unfair |
| FAA preemption of California unconscionability analysis | Carlson relied on state unconscionability doctrine to invalidate the arbitration clause | Home argued the FAA and Concepcion require enforcing arbitration clauses and limit state defenses that target arbitration | Court held FAA does not preempt general unconscionability doctrine as applied; invalidation did not conflict with fundamental attributes of arbitration (citing Sonic‑Calabasas and Concepcion) |
| Severance of unconscionable provisions | Carlson argued the agreement was permeated by unconscionability and severance would effectively rewrite the contract | Home asked court to sever cost‑sharing provision and enforce remainder | Court held severance abused discretion would be inappropriate: multiple one‑sided provisions permeated the agreement and high procedural unconscionability made rewriting unjustified |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Servs., 24 Cal.4th 83 (2000) (established procedural/substantive sliding scale and limits on one‑sided employment arbitration clauses)
- Sonic‑Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109 (2013) (California unconscionability doctrine remains applicable post‑Concepcion; forbids rules that interfere with fundamental arbitration attributes)
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (federal policy favors arbitration; state rules that uniquely burden arbitration may be preempted)
- Little v. Auto Stiegler, Inc., 29 Cal.4th 1064 (2003) (fee‑shifting or cost‑sharing terms that impose arbitration costs not present in court may be substantively unconscionable)
- Trivedi v. Curexo Technology Corp., 189 Cal.App.4th 387 (2010) (failure to provide incorporated arbitration rules and one‑sided provisions support unconscionability/permeation analysis)