85 Cal.App.5th 626
Cal. Ct. App.2022Background
- Employees (Navas, Lopez, Ramos and others) sued Fresh Venture Foods (FVF) for unpaid minimum/overtime wages and PAGA penalties (individual and representative claims).
- FVF moved to compel arbitration for Navas, Lopez, and Ramos, producing arbitration agreements it said they signed.
- Trial court found Lopez and Ramos did not sign or recognize the agreements; it found Navas’s agreement procedurally and substantively unconscionable.
- Navas testified the arbitration form was presented on a "take it or leave it" basis (a hiring condition); the agreement contained a PAGA-representation waiver, an ambiguous “self-representation” waiver, and other one-sided provisions.
- The trial court alternatively stayed arbitration under CCP §1281.2(c) because related non‑arbitrable court actions posed a risk of conflicting adjudications.
- The Court of Appeal affirmed the order denying FVF’s motion to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Validity of Lopez and Ramos arbitration agreements (signatures) | Lopez/Ramos: they never saw or signed the documents; signatures not theirs | FVF: plaintiffs evasive; offered witness testimony and documents | Court: trial court credited plaintiffs; FVF failed to prove agreements were signed — no arbitration compelled |
| 2) Procedural unconscionability of Navas’s agreement | Navas: agreement was adhesive, given as a condition of employment with no meaningful choice | FVF: standard form; necessary for uniform dispute resolution | Court: agreement was procedurally unconscionable (take-it-or-leave-it in hiring) |
| 3) Substantive unconscionability (PAGA waiver, one-sided terms, ambiguity) | Navas: contains improper PAGA waiver, ambiguous self‑representation clause, and one-sided terms favoring employer | FVF: PAGA waiver limited to representative claims; FAA preemption (Viking) limits Iskanian; employer did not intend to bar individual PAGA claims | Court: many terms substantively unconscionable (including automatic/ambiguous PAGA/self‑representation language and one-sided carveouts); unenforceable as written |
| 4) Whether arbitration must be stayed under CCP §1281.2(c) despite FAA invocation | Plaintiffs: related court action with non‑arbitrable parties creates risk of conflicting rulings — stay proper | FVF: FAA governs and preempts state stay provision; contract invoked FAA | Court: parties incorporated California arbitration law; Cronus controls; §1281.2(c) stay proper — enforcement may be stayed |
Key Cases Cited
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) (employment agreements cannot compel waiver of representative PAGA claims under state law)
- Viking River Cruises, Inc. v. Moriana, 596 U.S. _ (2022) (FAA preempts Iskanian insofar as it bars dividing PAGA into individual vs. non‑individual claims for arbitration)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000) (procedural and substantive unconscionability framework for employment arbitration agreements)
- Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951 (1997) (petitioner bears burden to prove existence of a valid arbitration agreement; trial court as factfinder)
- Cronus Investments, Inc. v. Concierge Services, 35 Cal.4th 376 (2005) (FAA does not preempt CCP §1281.2(c); California may permit stays to avoid conflicting adjudications)
- OTO, L.L.C. v. Kho, 8 Cal.5th 111 (2019) (sliding scale for balancing procedural and substantive unconscionability)
- Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (2016) (substantive unconscionability standards; overly harsh or one‑sided terms)
- Zullo v. Superior Court, 197 Cal.App.4th 477 (2011) (arbitration clauses that effectively apply only to employee claims are one‑sided and may be unenforceable)