139 F. Supp. 3d 1084
C.D. Cal.2015Background
- Plaintiffs Brandyn Ridgeway and Tim Smith (former Nabors employees) brought a putative class action alleging unpaid prevailing wages on public works, Labor Code §§ 203 and 226(a) violations, and UCL claims; also seek declaratory relief about public-work status against Nabors, City of Long Beach, and Tidelands.
- Each plaintiff signed an Application and an Employee Acknowledgment stating the Nabors Dispute Resolution Program (including arbitration) was available and that they were required to adhere to it; both allege the acknowledgments were signed as a condition of employment and that they never received a copy of the arbitration rules.
- Defendants moved to compel arbitration and to dismiss or stay the action; Tidelands and Long Beach (non‑signatories) also argued they could enforce the arbitration agreement.
- The arbitration program contains rules addressing scope of discovery, fee/cost allocation, and a unilateral modification clause allowing Nabors to amend the program with limited notice.
- The court assumed for argument that non‑signatories could enforce the agreement and that the proffered arbitration agreement was properly before the court, but evaluated enforceability on unconscionability grounds and PAGA waiver issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability: unconscionability (procedural) | Agreement was adhesive: required to apply/continue employment, no negotiation, plaintiffs didn’t receive actual copy | Employer argued adhesive arbitration clauses are permissible and plaintiffs signed acknowledgments | Procedural unconscionability found: take‑it‑or‑leave‑it employment condition mirrors Ninth Circuit precedent (e.g., Chavarria) |
| Enforceability: unconscionability (substantive) — discovery | Discovery is left to arbitrator’s discretion with no guaranteed depositions or document production, preventing vindication of statutory rights | Defendants: rules provide limited but adequate discovery; may follow FRCP forms | Substantively unconscionable: provision fails Armendariz requirement of more‑than‑minimal discovery to vindicate statutory claims |
| Enforceability: unconscionability — fees/costs | Fee and cost provisions (cost‑shifting, discovery costs) could impose prohibitive burdens and do not account for state cost‑shifting laws | Defendants point to modest $150 filing fee for employees and argue other costs mirror litigation | Provision unconscionable to extent it permits cost‑shifting that could prevent access to arbitration; overall fee scheme problematic |
| Enforceability: unilateral modification clause | Section allowing Nabors unilateral amendment (10 days’ notice) is illusory and solidifies adhesiveness; cannot rely on implied covenant to cure | Defendants rely on implied covenant of good faith and Asmus/Casas line to argue notice suffices | Unconscionable: unilateral modification renders agreement one‑sided and cannot be saved by implied covenant; clause taints agreement |
| PAGA waiver / representative claims | PAGA claims are public‑law actions for the state and not subject to individual arbitration or waivable by employees | Defendants argue arbitration/waivers cover such claims | PAGA representative claim not arbitrable under Iskanian and Sakkab; waiver denied |
| Remedy | Sever or severance of clauses to compel arbitration | Defendants sought enforcement in whole or in part | Court found multiple core clauses permeated the agreement; entire arbitration contract unenforceable and motion to compel denied |
Key Cases Cited
- Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (federal policy favoring arbitration)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (FAA preemption of state rules that frustrate arbitration)
- E.E.O.C. v. Waffle House, Inc., 534 U.S. 279 (non‑parties and limits on contracting away governmental enforcement)
- Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83 (requirements for employment arbitration of statutory claims, including adequate discovery)
- Chavarria v. Ralphs Grocery Co., 733 F.3d 916 (9th Cir. 2013) (employment arbitration unconscionability analysis; procedural and substantive issues)
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (PAGA claims are actions for the state and not waivable by individual arbitration agreements)
- Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir.) (FAA does not preempt Iskanian on PAGA waiver issue)