52 Cal.App.5th 485
Cal. Ct. App.2020Background
- Plaintiff Jose Torrecillas worked for Fitness International for ~20 years, rising to high-paying VP roles; Fitness fired him in 2017 and he sued in 2018.
- Torrecillas signed two arbitration instruments: a 2008 arbitration agreement (plus Rules) and a negotiated, individualized 2013 employment agreement that incorporated the 2008 agreement and the Rules and included a “Dispute Resolution” clause.
- The 2013 agreement stated it was negotiated, encouraged Torrecillas to consult counsel, allowed written amendments, and limited arbitration to disputes arising under the agreement or relating to employment.
- Fitness moved to compel arbitration; the trial court denied the motion, finding the arbitration agreement procedurally and substantively unconscionable (noting adhesion and a five-deposition discovery limit).
- The Court of Appeal reviewed de novo, concluded there was little or no procedural or substantive unconscionability, rejected related challenges (scope, mutuality, UCL/PAGA relief, filing fees, Armendariz adequacy), and reversed, directing the trial court to compel arbitration of arbitrable claims.
Issues
| Issue | Torrecillas' Argument | Fitness' Argument | Held |
|---|---|---|---|
| Procedural unconscionability of the 2013 agreement | Agreement was adhesive and Torrecillas was forced to sign to keep his job | Agreement was negotiated, individualized, employee encouraged to seek counsel, and amendment right existed | No meaningful procedural unconscionability; parties negotiated the 2013 agreement and Torrecillas failed to show oppression or surprise |
| Substantive unconscionability (discovery limits & other terms) | Discovery limits (5 depositions), fees, scope, mutuality and other clauses are one-sided and shock the conscience | Discovery limits are standard and flexible (arbitrator may allow more); terms are mutual, limited to employment disputes, and routine | Little or no substantive unconscionability; discovery limits are not inherently unconscionable and terms are standard and mutual |
| Adequacy of arbitration procedures under Armendariz (ability to vindicate statutory rights) | Discovery and fee provisions prevent vindication of statutory rights | Procedures permit adequate access: initial disclosures, interrogatories, 5 depositions, arbitrator discretion to grant more; filing fee capped at court equivalent | Procedures are adequate under Armendariz; no evidence discovery or fees would thwart claims |
| Issue preclusion based on Pimpo v. Fitness Int’l | Pimpo (denial of arbitration) dispositively shows Fitness' agreements are unconscionable | Pimpo involved different facts and an expired online application agreement; issues are not identical | Pimpo does not preclude arbitration here; unconscionability is fact-specific and Pimpo’s facts materially differ |
Key Cases Cited
- Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, 55 Cal.4th 223 (discusses independent review standard and procedural unconscionability analysis)
- OTO, L.L.C. v. Kho, 8 Cal.5th 111 (party asserting unconscionability bears burden; fact-specificity of procedural defects)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (FAA preempts state rules that undermine arbitration’s fundamental attributes)
- Armendariz v. Foundational Health Psychcare Services, Inc., 24 Cal.4th 83 (arbitration agreements must permit adequate discovery to vindicate statutory rights)
- Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (distinguishes surprise and oppression in procedural unconscionability)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (substantive unconscionability standards and sliding scale application)
- Cruz v. PacifiCare Health Systems, Inc., 30 Cal.4th 303 (equitable monetary relief under UCL is arbitrable)
- McGill v. Citibank, N.A., 2 Cal.5th 945 (distinguishes public vs private injunctive relief for arbitrability)
- Stirlen v. Supercuts, Inc., 51 Cal.App.4th 1519 (adhesion/unconscionability pre-Concepcion; contrasted here)
- Baxter v. Genworth North America Corp., 16 Cal.App.5th 713 (party must produce evidence that discovery limits would practically thwart claims)