75 Cal.App.5th 365
Cal. Ct. App.2022Background
- Charter required job applicants to accept its Solution Channel program and a mutual arbitration agreement as a mandatory condition of employment.
- Ramirez accepted the agreement, worked for Charter, and was terminated in May 2020; she then filed FEHA and wrongful-discharge claims.
- Charter moved to compel arbitration and sought attorney fees under the arbitration agreement; Ramirez opposed, arguing procedural and substantive unconscionability and arguing severance was improper.
- The trial court found the contract adhesive (minimal procedural unconscionability) and multiple substantive defects (shortened FEHA statute of limitations, an interim-fee clause for motions to compel, and other one-sided terms), denied the motion to compel, and refused severance.
- On appeal, the Court of Appeal affirmed: it found the agreement permeated by unconscionability (including the shortened limitations period, paragraph K awarding fees for motions to compel, discovery limits, and lack of mutuality) and rejected Charter’s severance request; it also disagreed with Patterson on saving paragraph K by implication.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability (adhesion) | Ramirez: agreement was take-it-or-leave-it as a condition of hire; procedural unconscionability exists | Charter: adhesive nature is common and does not by itself invalidate arbitration | Court: agreement is an adhesion contract establishing minimal procedural unconscionability (sliding scale applies) |
| Shortened FEHA statute of limitations | Ramirez: clause requiring filing within the administrative filing period (one year) unlawfully shortens FEHA enforcement window | Charter: clause mirrors statutory filing windows; Ramirez suffered no prejudice | Court: clause effectively cuts a potential ~3-year window to one year and can force arbitration before DFEH issues right-to-sue; substantively unconscionable |
| Remedy clause for prevailing party in arbitration (general remedy language) | Ramirez: could allow defendants to recover fees more broadly than FEHA permits | Charter: provision only permits remedies the party could obtain in court, so FEHA’s asymmetric fee rule controls | Court: provision is not substantively unconscionable; it must be applied consistent with FEHA’s lawyer-fee standard |
| Paragraph K: fees for successful motion to compel arbitration (interim fee award) | Ramirez: awards fees to employer for merely prevailing on a compel motion chill access and violate FEHA’s asymmetric fee rule | Charter: clause is enforceable; trial court should sever any offending portions | Court: paragraph K unambiguous and awards fees without qualification; unenforceable as written and cannot be judicially reformed by implying FEHA’s rule; unconscionable |
| Discovery limitations (90 days, 4 depositions) | Ramirez: limits (4 depositions) would deny necessary discovery (she needed ~7) to vindicate FEHA claims | Charter: limited discovery is typical in arbitration and arbitrator can resolve disputes | Court: deposition cap would prevent Ramirez from obtaining key testimony; substantively unconscionable as applied |
| Mutuality / excluded claims | Ramirez: agreement compels employee-typical claims but exempts employer-typical claims (one-sided) | Charter: exclusions (workers’ comp, IP, etc.) are reasonable and not decisive | Court: agreement is unfairly one-sided because it compels arbitration of employee claims while excluding employer-favored remedies; contributes to unconscionability |
| Severability | Ramirez: multiple defects permeate the agreement so severance improper | Charter: any offensive provisions should be severed and arbitration compelled | Court: because multiple significant unconscionable terms exist, severance was properly denied and agreement cannot be enforced |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (framework for enforceability of mandatory employment arbitration and limits on costs)
- Pearson Dental Supplies, Inc. v. Superior Court, 48 Cal.4th 665 (Cal. 2010) (ambiguous arbitration terms should be construed, if reasonable, to preserve enforceability)
- Sanchez v. Valencia Holding Co., 61 Cal.4th 899 (Cal. 2015) (adhesion establishes some procedural unconscionability)
- OTO, LLC v. Kho, 8 Cal.5th 111 (Cal. 2019) (adhesive employment arbitration agreements are typical; discuss analysis of procedural unconscionability)
- Baxter v. Genworth North America Corp., 16 Cal.App.5th 713 (Cal. Ct. App. 2017) (one-year FEHA limitation in arbitration held substantively unconscionable)
- Patterson v. Superior Court, 70 Cal.App.5th 473 (Cal. Ct. App. 2021) (construed paragraph K by implication to incorporate FEHA fee rule; court here disagrees with that approach)
- Mercuro v. Superior Court, 96 Cal.App.4th 167 (Cal. Ct. App. 2002) (arbitration clause unconscionably one-sided where it compels employee claims but exempts employer-favored claims)
- Fitz v. NCR Corp., 118 Cal.App.4th 702 (Cal. Ct. App. 2004) (discovery limits in arbitration must permit adequate vindication of statutory rights)