Mills v. Facility Solutions Group
84 Cal.App.5th 1035
Cal. Ct. App.2022Background
- Mills worked for Facility Solutions Group (FSG) as an apprentice electrician and, as a condition of employment, electronically signed a two‑page adhesive arbitration agreement via a cellphone onboarding app.
- The agreement incorporated the FAA and AAA rules, required individual arbitration (waiving class/group actions), and included numerous contested terms: $250 employee filing fee, no reallocation of administrative costs, fees for postponement, a three‑arbitrator appellate panel (appellant pays), fee‑shifting for frivolous claims and for filing outside arbitration, limited discovery (additional discovery only on a showing of "substantial need"), a no‑tolling clause for statutes of limitation, confidentiality, and a severability clause. It also purported to waive representative PAGA claims.
- In a separate FEHA case (Mills I) Judge Murphy granted FSG’s motion to compel arbitration, finding low procedural unconscionability and severing some substantively unconscionable terms; that order is on appeal and not final.
- Mills filed this class/PAGA Labor Code action; FSG moved to compel arbitration here as well. Judge Hogue denied the motion, finding low–moderate procedural unconscionability and a high degree of substantive unconscionability across multiple terms such that severance/reformation was infeasible.
- On appeal the Court of Appeal affirmed: preclusion did not apply because the prior order was not final; the arbitration agreement contained multiple substantively unconscionable provisions; and the trial court did not abuse its discretion in refusing to sever and enforce the remainder of the agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preclusion (claim/issue) | Mills: prior order in Mills I is not a final adjudication; preclusion inapplicable | FSG: Judge Murphy’s order compels arbitration and precludes relitigation | Held: Order compelling arbitration is not a final judgment; claim/issue preclusion does not apply |
| Procedural unconscionability | Adhesion contract signed as a condition of employment, small type, cellphone review => meaningful choice lacking | FSG: adhesive nature yields only low procedural unconscionability | Held: Low–moderate procedural unconscionability established |
| Filing fee & postponement costs | $250 filing fee and unilateral postponement costs deter access and create unique arbitration burden | FSG: analogous to court filing/continuance fees; not prohibitive | Held: Unconscionable — employee payment and non‑reallocation of arbitration admin/postponement costs unlawful |
| Appellate/rehearing costs (three‑arbitrator panel) | Requiring employee to pay appellate/arbitrator/rehearing costs deters appeals and favors employer | FSG: appeal provisions are bilateral | Held: Unconscionable in practice because costs disproportionately deter employee appeals |
| Attorneys’ fees clauses | Broad fee shifting (fees for non‑frivolous but “factually groundless” claims; fees for opposition to filing outside arbitration) conflicts with statutes that limit employer recovery | FSG: choice‑of‑law and AAA rules authorize arbitrator to apply statutory standards | Held: Clauses substantively unconscionable; specific fee provisions control and conflict with Labor Code/FEHA fee rules |
| Discovery limits | Limited written discovery and high ‘‘substantial need’’ standard will prevent vindication of statutory claims | FSG: AAA rules empower arbitrator to order discovery | Held: Substantively unconscionable because agreement’s specific discovery limits (not the AAA rule) govern and are inadequate |
| Tolling/statute‑of‑limitations clause | Agreement bars tolling by filing suit, which can extinguish claims before arbitration is compelled | FSG: substantive law/FAA/AAA will resolve conflicts | Held: Unconscionable — conflicts with CCP §1281.12; measured at formation date |
| PAGA representative waiver | Waiver of representative PAGA claims is invalid under Iskanian; it undermines enforcement interests | FSG: FAA preempts state law invalidating PAGA waivers | Held: Representative PAGA waiver unenforceable under Iskanian; Viking River allows arbitration of individual PAGA claims but does not validate wholesale waiver of representative claims |
| Severance/reformation | Mills: multiple defects permeate the agreement; severance would require rewriting and thus is inappropriate | FSG: many unlawful provisions are severable; court should enforce remainder | Held: Trial court did not abuse discretion; multiple defects would require reformation beyond severance, so the agreement is unenforceable as a whole |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (establishes minimum requirements for mandatory employment arbitration and doctrine on severance/permeation)
- OTO, L.L.C. v. Kho, 8 Cal.5th 111 (Cal. 2019) (unconscionability doctrine—procedural and substantive sliding scale analysis)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (Cal. 2015) (application of unconscionability and arbitration review)
- Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC, 55 Cal.4th 223 (Cal. 2012) (general contract defenses apply to arbitration agreements)
- Little v. Auto Stiegler, Inc., 29 Cal.4th 1064 (Cal. 2003) (severance appropriate where single unlawful provision can be excised)
- Ontiveros v. DHL Express (USA), Inc., 164 Cal.App.4th 494 (Cal. Ct. App. 2008) (discovery limits in arbitration can render agreement unconscionable)
- Carbajal v. CWPSC, Inc., 245 Cal.App.4th 227 (Cal. Ct. App. 2016) (specific attorneys’‑fees clause controls over general choice‑of‑law language)
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (PAGA waivers unenforceable as contrary to public policy)
- Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (U.S. 2022) (FAA preempts Iskanian’s indivisibility rule as to arbitration of individual PAGA claims)