46 Cal.App.5th 436
Cal. Ct. App.2020Background
- Lange was hired by Monster in 2006 and signed an employment agreement containing an arbitration clause referring disputes to JAMS; he initialed an all-caps jury-waiver/arbitration acknowledgement.
- The employment agreement incorporated a separate Proprietary Information Agreement (PIA) that included an Equitable Remedies clause: asserted irreparable harm, entitlement to injunctions without bond, and San Diego jurisdiction.
- Monster terminated Lange in 2017; Lange sued in 2018 for FEHA claims (disability discrimination, failure to accommodate/engage) and wrongful termination (Tameny).
- Monster moved to compel arbitration. The trial court found low procedural unconscionability but substantive unconscionability in multiple provisions (punitive-damages waiver; PIA carveout/equitable remedies; predispute jury-waiver) and denied the motion as the agreement was "permeated" with unconscionability and not readily severable.
- On appeal, the Court of Appeal held that (1) a rule that multiple unconscionable provisions ipso facto precludes severance is incorrect, but (2) after independent review it affirmed because the agreement’s unconscionable terms (including waiver of punitive damages and PIA injunctive-relief provisions) could not be cured by severance, so arbitration enforcement was denied.
Issues
| Issue | Lange's Argument | Monster's Argument | Held |
|---|---|---|---|
| Procedural unconscionability of the arbitration clause | Adhesion contract; inconspicuous terms; missing JAMS rules make formation unfair | Agreement was conspicuous and initialed; common employment adhesion with low procedural defect | Court: low level of procedural unconscionability (adhesive but conspicuous and initialed) |
| Substantive unconscionability: punitive-damages waiver | Waiver of punitive damages for nonstatutory (e.g., Tameny) claims is unconscionable and removes remedies | Waiver is mutual and limited by language "except as required by law" (argued) | Court: punitive-damages waiver is substantively unconscionable as to nonstatutory claims |
| PIA Equitable Remedies clause and predispute jury-waiver | PIA creates a one-sided carveout allowing employer injunctive relief without bond and presuming irreparable harm; jury-waiver language (if claims go to court) is unconscionable | PIA is a legitimate "margin of safety" to protect proprietary info and was incorporated; arbitration covers disputes | Court: PIA carveout is not a standalone carveout exempting PIA from arbitration, but specific PIA terms (waiving bond and not requiring irreparable-harm showing) are substantively unconscionable; the jury-waiver phrased "if determined in a court of law" is unconscionable |
| Severability / enforceability of arbitration agreement | Agreement is permeated by multiple unconscionable terms; severance inadequate so arbitration unenforceable | Multiple unconscionable clauses do not per se prevent severance; court should sever offending clauses and compel arbitration | Court: rejected per se rule that "more than one" unconscionable clause bars severance, but independently concluded severance could not cure the pervasive unconscionability here; affirmed denial of motion to compel arbitration |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Servs., 24 Cal.4th 83 (Cal. 2000) (framework on procedural/substantive unconscionability and severance preference)
- Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (Cal. 2016) (adhesion agreements, conspicuousness, and limits of attacking unreferenced arbitration rules)
- Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109 (Cal. 2013) (substantive unconscionability: one-sided, "shocks the conscience," and public policy considerations)
- Tameny v. Atlantic Richfield Co., 27 Cal.3d 167 (Cal. 1980) (recognition of nonstatutory wrongful termination in violation of public policy)
- Little v. Auto Stiegler, Inc., 29 Cal.4th 1064 (Cal. 2003) (availability of remedies for Tameny claims, including punitive damages)
- Gentry v. Superior Court, 42 Cal.4th 443 (Cal. 2007) (severance inquiry when arbitration contains unconscionable terms)
- Trivedi v. Curexo Technology Corp., 189 Cal.App.4th 387 (Cal. Ct. App. 2010) (multiple unlawful provisions as evidence of systemic effort to impose one-sided arbitration)
- Poublon v. C.H. Robinson Co., 846 F.3d 1251 (9th Cir. 2017) (California law does not adopt a per se rule that multiple unconscionable clauses always preclude severance)
- Farrar v. Direct Commerce, Inc., 9 Cal.App.5th 1257 (Cal. Ct. App. 2017) (discussion of severability and unconscionability)