53 Cal.App.5th 897
Cal. Ct. App.2020Background
- Plaintiff Scott Davis, a 15-year Red Bull employee, sued Red Bull executives for age- and sex-based harassment and related emotional distress claims after his 2018 termination.
- Davis had signed a 2003 Red Bull "Binding Arbitration Agreement" as a condition of employment; it required arbitration of employment-related claims, contemplated selection of an arbitrator by agreement or AAA as a fallback, and limited default discovery (maximum two depositions per party; additional discovery only on a showing of "sufficient cause").
- The agreement carved out disputes involving "obligations under the Employee Confidentiality Agreement," which, as drafted, imposed obligations only on employees and not Red Bull.
- Red Bull and individual executives moved to compel arbitration; the trial court ultimately denied the motions, finding the arbitration agreement unconscionable due to restrictive discovery and a non‑mutual carve-out that advantaged the employer.
- On appeal, the Court of Appeal affirmed, concluding the agreement was procedurally adhesive (low degree) and substantively unconscionable (high degree) because the discovery limits and the confidentiality‑agreement carve‑out together rendered the contract one‑sided and likely to frustrate vindication of statutory FEHA rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability of the arbitration agreement | Agreement was a non‑negotiable condition of employment (adhesive) presented on a take‑it‑or‑leave‑it basis | Agreement was a clear standalone form; employee did not attempt to negotiate; AAA fallback and rules mitigate surprise | Low procedural unconscionability established (adhesive contract); no heightened surprise from not naming a specific rule version |
| Substantive unconscionability — discovery limits | Two depositions and no default written discovery will prevent adequate vindication of complex FEHA claims involving many witnesses and documents | Arbitrator may order more discovery on "sufficient cause"; comparable standards were upheld in other cases | Discovery limits are substantively unconscionable here because the case is factually complex and limits would likely frustrate statutory rights |
| Substantive unconscionability — mutuality (confidentiality carve‑out) | Carve‑out exempts employer's most likely claims from arbitration and imposes obligations only on employees, creating non‑mutuality and no justification | Agreement is mutual overall; carve‑out is narrow and legitimate | Carve‑out lacks mutuality and justification; combined with discovery limits renders the agreement substantively unconscionable |
| Severance vs. refusal to enforce whole agreement | If parts are unconscionable, court should sever offending provisions and enforce remainder | Court should sever and enforce the rest rather than refuse enforcement entirely | Court acted within discretion to refuse enforcement of the entire agreement because unconscionable provisions permeated the contract |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, 24 Cal.4th 83 (Cal. 2000) (standards for enforceability of employment arbitration clauses and need for basic fairness)
- Baltazar v. Forever 21, 62 Cal.4th 1237 (Cal. 2016) (failure to provide arbitral rules alone does not automatically heighten procedural unconscionability)
- OTO, L.L.C. v. Kho, 8 Cal.5th 111 (Cal. 2019) (unconscionability doctrine, sliding‑scale analysis)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (Cal. 2015) (ultimate fairness is the dispositive inquiry for unconscionability)
- Baxter v. Genworth North America Corp., 16 Cal.App.5th 713 (Cal. Ct. App. 2017) (restrictive arbitral discovery can render arbitration unconscionable in complex employment cases)
- Carbajal v. CWPSC, Inc., 245 Cal.App.4th 227 (Cal. Ct. App. 2016) (procedural unconscionability analysis regarding incorporation/identification of rules)
- Roman v. Superior Court, 172 Cal.App.4th 1462 (Cal. Ct. App. 2009) (AAA rules permitting arbitrator broad discovery can avoid unconscionability concerns)
- Poublon v. C.H. Robinson Co., 846 F.3d 1251 (9th Cir. 2017) (courts consider whether arbitration discovery suffices to vindicate statutory rights)