98 Cal.App.5th 1041
Cal. Ct. App.2023Background
- Aljarice Hasty sued the American Automobile Association of Northern California, Nevada & Utah (AAA) alleging employment-based claims, including discrimination and retaliation.
- AAA petitioned to compel arbitration based on an arbitration agreement Hasty signed electronically as part of her employment onboarding.
- Hasty argued the arbitration agreement was unconscionable—procedurally and substantively—thus unenforceable.
- The trial court found high procedural unconscionability (due to adhesion, ambiguous presentation, small font, hidden/unexplained terms) and substantive unconscionability (one-sided terms, overbroad confidentiality, and illegal waivers).
- The court declined to sever the unconscionable terms, instead finding the agreement "permeated" with unconscionability and denying arbitration.
- AAA appealed, disputing both the findings of unconscionability and the refusal to sever any problematic terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration agreement was procedurally unconscionable | Hasty argues agreement was adhesive, hidden, ambiguous, and confusing, with lack of negotiation or real assent. | AAA argues formatting and process were adequate, employee could review terms, and presentation was standard. | High procedural unconscionability established |
| Whether the agreement was substantively unconscionable | Terms are one-sided (lack mutuality), overbroad confidentiality, and impermissible waivers (PAGA & administrative relief) | AAA claims the terms are mutual, confidentiality is lawful, and waivers are allowed or justified. | Multiple substantively unconscionable terms found |
| Whether any unconscionable terms could be severed | Unconscionability permeates the agreement; severance would improperly rewrite the parties' bargain. | Unconscionable provisions are minor/collateral and easily severable, agreement should otherwise be enforced. | Severance denied, agreement too permeated with issues |
| Validity of PAGA/representative action waivers | Waiver of representative claims is illegal and against public policy. | Arbitration agreement can require arbitration of PAGA/individual claims and limit representative actions per recent case law. | Waiver is unenforceable; anti-representative ban invalid |
Key Cases Cited
- OTO, L.L.C. v. Kho, 8 Cal.5th 111 (Cal. 2019) (sets unconscionability standards for arbitration agreements)
- Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (Cal. 2016) (addresses adhesive employment arbitration contracts)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (unconscionability in arbitration agreements, mutuality and severance)
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (PAGA waivers are not enforceable)
- Magno v. The College Network, Inc., 1 Cal.App.5th 277 (Cal. Ct. App. 2016) (sliding scale for procedural/substantive unconscionability)
- Nyulassy v. Lockheed Martin Corp., 120 Cal.App.4th 1267 (Cal. Ct. App. 2004) (appeal standard, mutuality in arbitration agreements)