ORDER DENYING DEFENDANT’S MOTION TO DISMISS AND GRANTING PLAINTIFF’S MOTION TO COMPEL ARBITRATION
On November 12, 2014, CarMax Auto Superstores California LLC (“CarMax”) filed a petition for an order compelling arbitration under § 4 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 4; it also sought a stay of state court proceedings arising out of its dispute with Rosella Michelle Hernandez.
I. FACTUAL BACKGROUND
A. Facts Alleged in the Petition
CarMax alleges that, beginning in 2002, it employed Hernandez as a Management Assistant.
“[B]oth CarMax and I agree to settle any and all previously unasserted claims, disputes, or controversies arising out or relating to my application or candidacy for employment, employment, and/or cessation of employment with CarMax, exclusively by final and binding arbitration before a neutral Arbitrator.”8
The DRA requires the applicant to “file a claim for arbitration within one (1)' year of the day on which [she] know[s] or, through reasonable diligence, should have known of the facts giving rise to [the] claim.” It requires that the arbitration be conducted in accordance with CarMax’s Dispute Resolution Rules and Procedures (“DRRP”).
Hernandez was purportedly given a copy of the DRRP before signing the DRA.
On September 25, 2014, Hernandez sued CarMax and Alan Hanna, one of her supervisors, in Orange Superior Court.
CarMax alleges that, prior to filing the state court complaint, Hernandez’s attorneys told her in writing of the DRA and her obligation to submit the claims in the complaint to binding arbitration.
B. Plaintiff’s Request for Judicial Notice
CarMax requests that the court take judicial notice of a docket entry in Hernandez’s state court action in considering its opposition to Hernandez’s motion to dismiss the petition.
A court can consider evidence in deciding a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, including documents that can be judicially noticed. See, e.g., Villegas v. United States,
As noted, CarMax requests that the court take notice of an order issued in the parallel state court proceeding.
II. DISCUSSION
A. Defendant’s Motion to Dismiss the Petition
1. Defendant’s Alleged Failure to Meet and Confer
CarMax argues that Hernandez’s motion should be denied because she failed to comply with Local Rule 7-3.
“In all cases ..., counsel contemplating the filing of any motion shall first contact opposing counsel to discuss thoroughly, preferably in person, the substance of the contemplated motion and any potential resolution. The conference shall take place at least seven (7) days prior to the filing of the motion. If the parties are unable to reach a resolution which eliminates the necessity for a hearing, counsel for the moving party shall include in the notice of motion a statement to the following effect: ‘This motion is made following the conference of counsel pursuant to L.R. 7-3 which took place on (date).’ ” CA CD L.R. 7-3.
When a party fails to comply with Local Rule 7-3, the court can, in its discretion, refuse to consider the motion. See, e.g., Singer v. Live Nation Worldwide, Inc., No. SACV 11-0427 DOC (MLGx),
In her reply, Hernandez concedes that she did not meet and confer with CarMax prior to filing the motion to dismiss. She asserts, however, that “the parties subsequently met and conferred, and [she] filed an amended notice [of motion] following” that meeting.
In its discretion, therefore, the court could deny Hernandez’s motion. Failure to comply with the Local Rules does not automatically require the denial of a party’s motion, however, particularly where the non-moving party has suffered no apparent prejudice as a result of the failure to comply. See ECASH Techs., Inc. v. Guagliardo,
2. Legal Standard Governing Motions to Dismiss Under Rule 12(b)(1)
Federal courts are courts of limited jurisdiction, and may adjudicate only those cases authorized by the Constitution and by Congress. See Kokkonen v. Guardian Life Ins. Co.,
A defendant mounting a Rule 12(b)(1) challenge to the court’s jurisdiction may do so either on the face of the pleadings or by presenting extrinsic evidence for the court’s consideration. See Safe Air for Everyone v. Meyer,
3. Whether the Court Has Diversity Jurisdiction to Hear Plaintiffs Petition
CarMax’s petition seeks to compel arbitration under the Federal Arbitration Act.
a. Legal Standard Governing Diversity Jurisdiction
Under 28 U.S.C. § 1332(a), “[t]he district courts ... have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000.00, exclusive of interest and costs, and is between ... citizens of different states.” -28 U.S.C. § 1332(a); see also Matheson v. Progressive Specialty Ins. Co.,
b. Whether the Amount in Controversy Requirement is Satisfied
Although neither party disputes that the amount in controversy requirement is satisfied, the court nonetheless evaluates the allegations of the petition to determine whether more than $75,000 is at issue in this case. Generally, the amount in controversy claimed by a plaintiff in good faith will be determinative of the jurisdictional amount, unless it appears to a legal certainty that the claim is for less than $75,000. See St. Paul Mercury Indem. Co. v. Red Cab Co.,
c. Whether the Complete Diversity Requirement is Satisfied
The court next evaluates whether there is complete diversity of citizenship between the parties, i.e., whether Hernandez has citizenship different than all defendants. See Strawbridge,
“Najd claims that the district court lacked diversity jurisdiction.... Circuit City and Najd, the only parties in this action, are diverse. However, Najd argues that we must consider the citizenship of Khorsand, who is a defendant in the state court action. If Khorsand’s citizenship is considered, complete diversity is lacking because Najd and Khor-sand are both California residents. However, the citizenship of someone not before the court is irrelevant to the jurisdictional inquiry. The district court properly exercised diversity jurisdiction over Circuit City’s petition.”
Id. (citing We Care Hair Development, Inc. v. Engen,
As in Najd, it is undisputed that the citizenship of the parties before the court, i.e., the parties to CarMax’s arbitration petition, is diverse. It is of no consequence that Hannah, who is not a party to the petition, is a California citizen; under Najd, “the citizenship of someone not before the court[, i.e., Hannah,] is irrelevant to the jurisdictional inquiry.”
Hernandez asserts that Najd is no longer good law in light of the Supreme Court’s decision in Vaden v. Discover Bank,
Hernandez relies on the Supreme Court’s statement in Vaden that the district court should “look through a § 4 petition” to consider the “substantive conflict between the parties” as support for her argument that the court must consider the citizenship of all parties named in a parallel state court action to determine if it can exercise diversity jurisdiction over CarMax’s 4 petition. The court is not persuaded.
Most fundamentally, Hernandez’s argument ignores the limited scope of the Supreme Court’s holding in Vaden. The Eighth Circuit’s decision in Northport Health Services of Arkansas, LLC v. Rutherford,
First, it addressed “[t]he fundamental flaw in the [ ] contention that Vaden implicitly overruled prior circuit court diversity jurisdiction decisions” concluding that a court can consider only the citizenship of the parties to the § 4 petition. The court stated “that [the argument] ignore[d] the underlying facts and the Supreme Court’s decision in Moses H. Cone [Memorial Hospital v. Mercury Construction Corp.,
Second, the Eighth Circuit noted that, although the Supreme Court described at length “the ‘curious practical consequences’ of the no-look-through approach to federal question issues,” it made no mention of similar concerns associated with employing such an approach where diversity jurisdiction was invoked. Id. It found this significant, as the Vaden Court “adopted the look-through approach to expand the universe of § 4 cases in which there will be an independent basis of federal question jurisdiction [so that it would] be more compatible with diversity jurisdiction cases (i.e., Moses H. Cone).” Adopting the “look-through approach” for diversity jurisdiction, the Rutherford court observed, would run counter to the Supreme Court’s focus on expanding § 4 jurisdiction because it would “severely contradi ] pre-existing § 4 diversity jurisdiction” under Moses H. Cone. Id. at 490-91.
The court agrees with the Eighth Circuit’s reasoned analysis, and concludes that the Supreme Court’s holding in Vaden is not so expansive as to mandate that a district court adopt the “look-through approach” to determine whether it has diversity jurisdiction to hear a § 4 petition. In reaching this conclusion, the court finds particularly significant the expressly limited nature of the Vaden Court’s approval of the “look-through approach” to assess the existence of federal question jurisdiction. See Vaden,
The authority Hernandez cites, moreover, does not support her argument to the contrary. Each case cites Vaden only for the general proposition that “a federal court has jurisdiction over a petition to compel arbitration if the federal court would have jurisdiction over the underlying substantive dispute.” See Countrywide Home Loans, Inc. v. Mortgage Guar. Ins. Corp.,
In re Wade is similarly of little help; the court notes in summary fashion that “[it was] simply not the case [t]here” that “the matter involve[d] a question of federal law, or [that] it involve[d] diverse parties.” In re Wade,
In sum, for the reasons stated, the court declines to extend the limited approval of the “look-through” approach announced in Vaden to the question of diversity jurisdiction in this case.
B. Plaintiffs Motion to Compel Arbitration and Stay State Court Proceedings
1. Legal Standard Governing Motions to Compel Arbitration
The Federal Arbitration Act (“FAA”) provides that written arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Section 4 of the FAA, which governs petitions to compel arbitration, provides that
“[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction.... The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement....” 9 U.S.C. § 4.43
In enacting the FAA, Congress “declared a national policy favoring arbitration” that was intended to reverse centuries of judicial hostility to arbitration agreements. Southland Corp. v. Keating,
Despite this strong policy favoring arbitration, “ ‘arbitration is a matter of contract and a party cannot be re
A district court’s “role under the [FAA] is ... limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue. If the response is affirmative on both counts, then the Act requires the court to enforce the arbitration agreement in accordance with its terms.” Chiron Corp. v. Ortho Diagnostic Systems, Inc.,
When evaluating whether a party is bound by an arbitration agreement, “the liberal federal policy regarding the scope .of arbitrable issues is inappo-site.” Comer v. Micor, Inc.,
“[A]n arbitration agreement may - not function so as to require employees to
Thus, to be enforceable, an agreement to arbitrate claims based on statutory rights must meet minimum requirements first articulated in Cole v. Burns International Sec. Services,
In addition, “generally applicable defenses, such as ... unconscionability, may be applied to invalidate arbitration agreements” between employers and employees. Doctor’s Assocs., Inc. v. Casarotto,
2. Whether the Court Should Grant Plaintiffs Motion to Compel
a. Whether the FAA Applies to the Parties’ Agreement
As an initial matter, Hernandez contends that CarMax’s motion must be denied because the FAA does not apply to her arbitration agreement with CarMax.
“The FAA applies to any contract affecting interstate commerce.” Yahoo! Inc. v. Iversen,
“A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.
The Supreme Court has held that the FAA applies to employment contracts if the employment affects interstate commerce. See, e.g., Herrera v. CarMax Auto Superstores California, LLC, No. CV-14-776-MWF (VBKx),
The term “involving commerce” “signals an intent to exercise Congress’ commerce power to the full.” Circuit City Stores,
Hernandez argues that CarMax has “fail[ed] to establish that [her] specific
CarMax proffers the declaration of Kimberly Ross, its vice president of human resources.
The evidence proffered by CarMax suffices to demonstrate that Hernandez’s employment contract with CarMax “in-volv[ed] [interstate] commerce.” It is undisputed that Hernandez was employed by a national corporation that did business in thirty-six states and engaged in interstate transactions on a regular basis. CarMax has also adduced evidence that Hernandez’s job directly involved interstate commerce in that management assistants (1) hire employees who engage in interstate activity; (2) correspond with CarMax’s corporate offices in Virginia; and (3) make out-of-state travel arrangements. Courts have concluded that similar employment relationships have a sufficient connection in interstate commerce that they are subject to the FAA. See, e.g., Herrera,
b. Whether the Parties’ Arbitration Agreement is Valid
(1) Legal Standard Governing Unconscionability
Hernandez argues that the arbitration agreement is unconscionable and
The California Supreme Court’s decision in Armendariz “provides the definitive pronouncement of California law on uncon-scionability to be applied to mandatory arbitration agreements.” See Ferguson v. Countrywide Credit Industries, Inc.,
Under the first test, which derives from Graham v. Scissor-Tail, Inc.,
The different phrasing of the two tests has produced some confusion. In particular, Armendariz’s statement that “[u]n-conscionability analysis begins with an inquiry into whether the contract is one of adhesion,” id. at 113,
The Graham test is thus best understood as a specific application of the “sliding scale” adopted in A & M Produce. Because “[a] finding of a contract of adhesion is essentially a finding of procedural unconscionability,” Flores,
(2) Whether the 2001 or 2011 DRRP is Applicable
Before considering whether Hernandez and CarMax entered into a valid, enforceable arbitration agreement, the court must first determine whether the 2001 or 2011 DRRP reflects that agreement. Hernandez asserts that unconscion-ability must be measured “at the time the agreement is entered into, not when it is
Rule 19 of the 2001 DRRP included a modification clause stating:
“CarMax may alter or terminate the Agreement and these Dispute Resolution Rules and Procedures on December 31st of any year upon giving 30 calendar days written notice to Associates, provided that all claims arising before alteration or termination shall be subject to the Agreement and corresponding Dispute Resolution Rules and Procedures in efect at the time the Arbitration Request Form and accompanying filing fee, or Request for Waiver of Filing Fee is received by the Company. Notice may be given by posting a written notice by December 1 of each year at all CarMax locations (including locations of affiliated companies). A copy of the text of any modification to the Agreement or Rules and Procedures will be published in the Applicant Packet, which will be available at such locations after December 31 of each year.”59
Hernandez does not dispute that CarMax provided the notice required by Rule 19 or that it validly modified the DRRP. Rather, she appears to contend that the modified DRRP does not apply because it was not in effect at the time she entered into the DRA, and thus cannot govern any of her claims. While it is true that “[t]he court determines unconsciona-bility with reference to the time the contract is entered into,” Lanigan v. City of Los Angeles,
It is for this reason that courts considering modifications to arbitration clauses have found that, when a term has been altered through a valid modification, un-conscionability is judged with reference to the modified provision, rather than the original, superceded provision. See, e.g., Herrera,
Countrywide did not follow its company modification procedure,” citing Mercuro v. Superior Court,
(3) Whether the Arbitration Agreement Satisfies the Cole Factors
It is undisputed that the agreement mandates the arbitration of claims based on statutory rights.
(a) Whether the DRRP Provides for Neutral Arbitrators
Rule 5 of the 2011 DRRP governs the selection of a neutral arbitrator.
(b) Whether the DRRP Provides for More than Minimal Discovery
The second Cole factor examines whether the DRRP provides for “more than minimal discovery.” Rule 8 requires the parties to make initial disclosures within fourteen days of the appointment of an arbitrator, exchanging copies of “all documents (except for privileged documents that are protected from disclosure because they involve attorney-client, doctor-patient, or other legally privileged or protected communications or materials) upon which they rely in support of their claims or defenses”; it imposes a continuing obligation to supplement the initial disclosures.
Hernandez asserts, in summary fashion, and without substantive argument, that the discovery authorized by the 2001 Rules
Numerous courts have found that similar — and in some cases, identical — discovery provisions provide sufficient discovery and have held that the DRRP does not unfairly or unconscionably limit a party’s ability to conduct discovery in order to prove its case. See, e.g., Herrera,
(c) Whether the DRRP Requires a Written Award
Hernandez argues that the agreement does not require a “written reasoned award”; the provision she references, however, is from the 2001 DRRP.
(d) Whether the DRRP Provides for All Types of Relief That Would Be Available in a Court Proceeding
Rule 14 of the DRRP states that “[i]f the Arbitrator finds for the Associate, the Arbitrator, in his discretion, may aivard appropriate relief in accordance with applicable law.”
(e) Whether the DRRP Does Not Condition Access to the Arbitral Forum on Payment of Unreasonable Costs
Hernandez argues that the DRRP conditions access to the arbitral forum on payment of unreasonable costs by the employee because it “require[s] the employee to pay certain of the arbitration forum fees (including room rental), and also permits these fees to be shifted and awarded to CarMax if CarMax[] prevails.”
(O Conclusion Re: Cole Factors
For the reasons stated, the court finds that the 2011 DRRP between CarMax and Hernandez satisfies each of the Cole factors. Accordingly, the court proceeds to consider whether it is unconscionable generally.
(4) Whether the Arbitration Agreement is Procedurally Unconscionable
“Procedural unconscionability concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. It focuses on factors of oppression and surprise. The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party.” Parada v. Superior Court,
In Armendariz, the California Supreme Court concluded that an arbitration agreement was procedurally unconscionable because “[i]t was imposed on employees as a condition of employment and there was no opportunity to negotiate.... ” Armendariz,
“Given the disadvantages that may exist for plaintiffs arbitrating disputes, it is unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee, without at least some reasonable justification for such one-sidedness based on ‘business realities.’ As has been recognized ‘unconscionability turns not only on a “one-sided” result, but also on an absence of “justification” for it.’ ... If the arbitration system established by the employer is indeed fair, then the employer as well as the employee should be willing to submit claims to arbitration. Without reasonable justification for this lack of mutuality, arbitration appears less as a forum for neutral dispute resolution and more as a means of maximizing employer advantage. Arbitration was not intended for this purpose.” Id. at 117-18,99 Cal.Rptr.2d 745 ,6 P.3d 669 (citations omitted).
Like the arbitration agreement at issue in Armendariz, CarMax’s arbitration agreement is procedurally unconscionable. Although it is not hidden, or buried in a lengthy document, see Nat’l Bank of California, NA v. Gay, No. CV 11-2521-RSWL (JCGx),
Hernandez contends that, beyond the adhesive nature of the agreement, the fact that CarMax did not give her a copy of the DRRP before she signed the DRA adds an additional layer of procedural un-conseionability. She notes that courts have concluded that “[t]he failure to attach the applicable rules referred to in the agreement, or provide them to employee at the time the agreement is entered into establishes further procedural unconscion-ability.”
Evidence in the record, however, belies Hernandez’s assertion that she was not given the DRRP at the time she entered into the agreement, and that she was not given sufficient notice and access to the 2011 DRRP when modifications were made. Although Hernandez asserts that the employment application she completed did not include the DRRP,
“If you wish to be considered for employment you must read and sign the following agreement. You will be considered as an applicant when you have signed the Agreement. Included with this application is the CarMax Dispute Resolution Rules and Procedures. You should familiarize yourself with these rules and procedures prior to signing the Agreement. If the Rules and Procedures are not included in this booklet, you must request a copy from a CarMax representative prior to siyniny the Agreement. You will note that if you sign at this time you do have three (3) days to withdraw your consent. You may, of course, take the package with you and return with it signed, if you wish to continue your application process.”82
Hernandez does not dispute that she signed the employment application and subsequent agreements acknowledging, immediately below bolded text, that she had “received” a copy of the DRRP prior to signing the agreement.
As for subsequent DRRPs, including the 2011 DRRP, the agreement, as noted, requires that CarMax give employees notice of the modified DRRP. CarMax has submitted Ross’ declaration, which states that CarMax employees, including Hernandez, were given access to copies of all DRRPs through the company’s intranet system.
Poublon is distinguishable, and in fact supports CarMax’s contention that the modification provision is not unconscionable. That provision is, in all relevant respects, identical to the one at issue in Casas. Judge Snyder implicitly recognized that the Casas provision was not procedurally unconscionable. Hernandez does not dispute that the agreement required that CarMax give all employees notice of any intention to amend the DRRP at least thirty days before the modification took effect. She has adduced no evidence that the notice was not given.
(5) Whether the Arbitration Agreement is Substantively Unconscionable
The foregoing analysis indicates that the arbitration agreement was somewhat unconscionable procedurally. Cf. Nagrampa,
An arbitration provision is substantively unconscionable if it is “ ‘overly harsh’ ” or generates “ ‘one-sided’ results.” Armendariz,
(a) Statute of Limitations
Hernandez first argues that the DRRP is substantively unconscionable because it shortens the limitations period on statutory claims against CarMax and because the limitations provision is unilateral, i.e., it applies only to her claims against CarMax and does not apply to claims asserted by CarMax.
Although Rule 4(b) of the 2001 DRRP required that an employee submit an arbitration claim “not later than one year after the date on which [he or she] knew, or through reasonable diligence, should have known, of the facts giving rise to the ... claim(s)”,
(b) Written Arbitration Decision
Hernandez next argues that the DRRP is substantively unconscionable because it does not require a written arbitration award.
(c) Costs Provision
Hernandez’s next argument — that the agreement is substantively unconscionable because it does not require CarMax to bear all of the costs of arbitration — is unpersuasive for the same reason, i.e., that it is premised on the language of the 2001, rather than the 2011, DRRP.
(d) Confidentiality Provision
Rule 9(g) of the 2011 DRRP states:
“All aspects of an arbitration pursuant to these Dispute Resolution Rules and Procedures, including the hearing and record of the proceeding, shall be confidential and shall not be open to the public, except (I) to the extent both Parties agree otherwise in writing; (ii) as may be appropriate in any subsequent proceeding between the Parties; or (iii) as may otherwise be appropriate in response to a governmental agency or legal process. All settlement negotiations, mediations, and the results thereof shall be confidential.”97
Hernandez argues that “the requirement of confidentiality of the arbitration proceedings is unconscionable because, although it is facially mutual, in reality it may greatly favor the employer because [it is a] ‘repeat player[ ].’ ”
First, as CarMax notes, both the Sanchez and Herrera courts concluded that the confidentiality provision in the 2011 DRRP was not substantively unconscionable. Those courts considered the nature of the provision and concluded that it was not enough, standing alone, to warrant a finding of substantive unconscionability. See Herrera,
Second, and more fundamentally, the Ninth Circuit has noted that “the enforceability of the confidentiality clause is a matter distinct from the enforceability of the arbitration clause in general.” Kilgore v. KeyBank Nat’l Ass’n,
Because confidentiality provisions are generally unobjectionable and, in any event, “the enforceability of the confidentiality clause is a matter distinct from the confidentiality of the arbitration clause in general” — the question now before the court — the court concludes that Rule 9(g) of the 2011 DRRP does not render the DRRP substantively unconscionable and thus unenforceable. Hernandez is “free to argue during arbitration that the confidentiality clause is unenforceable.” Kilgore,
(e) Settlement Restrictions
In passing, Hernandez asserts that the “Rules prohibit the parties from settling their case after the arbitration hearing has been closed without the approval of the arbitrator.” She contends this “acts as an obstacle to parties’ resolving their dispute among themselves, in violation of public policy.”
“The Parties may settle their dispute at any time. Prior to the closure of the arbitration hearing, the Parties may settle the case without involvement of the Arbitrator. Once the hearing has closed, settlement may take place only with the approval of the Arbitrator. At any point prior to the Arbitrator’s issuance of an award, the Parties may, by agreement, refer their dispute to mediation before a mediator provided by the Arbitration Service.”100
Although Hernandez does not clearly argue so, it appears she believes that the provision conditioning settlement on approval of the arbitrator after the arbitration hearing has concluded is unconscionable because the arbitrator, who is being paid to conduct the arbitration, may have an incentive to disapprove a settlement on which the parties mutually agree. Such a limitation on the parties’ ability to resolve the dispute voluntarily could run contrary to the “strong public policy of this state ... encouraging] voluntary settlement of. litigation.” Osumi v. Sutton,
The DRRP, however, gives the parties free rein to settle the case without the arbitrator’s approval at all times after the filing of the arbitration demand through conclusion of the hearing. Given this freedom, and the narrow set of circumstances under which the arbitrator’s approval must be obtained, the settlement provision is, at most, minimally unconscionable.
(f) Discovery Limitations
Hernandez next contends that the limitations on discovery set forth in the DRRP are substantively unconscionable.
(g) Burden of Proof
Finally, Hernandez argues that the DRRP is substantively unconscionable because it “expressly placets] the burden of proving a claim or claims by [a] preponderance of the evidence [on the employee],” and makes no “exception for those claims for which the employee does not bear the burden of proof.” For this reason, she contends, the agreement “improperly shifts th[e] burden [of proof] to the employee” on all claims.
“For the Associate to prevail, the Associate must prove that the Company’s conduct with respect to the Associate was a violation of applicable law. For the Company to prevail on any claims asserted against an Associate, the company must prove that the Associate’s conduct was [a] violation of applicable law.”103
Thus, far from “improperly shifting] th[e] burden” to Hernandez, the DRRP explicitly requires that she satisfy the same burden of proof she would be required to satisfy if proceeding in court. Hernandez cites no reason why the court should conclude that a bilateral requirement that both Hernandez and CarMax satisfy their respective burdens of proof under applicable law is unconscionable, and the court can discern none. Because the DRRP provides that Hernandez and CarMax have the burden of proving their respective claims just as they would in court, the 2011 DRRP does not unconscionably shift the burden of proof on all claims to Hernandez. See, e.g., Sanchez,
(6) Severability of the Settlement Provision
The arbitration agreement at issue has indicia of both procedural and substantive unconscionability: it is a contract of adhesion that the prospective employee must accept as a condition of employment and it might have the effect of preventing the parties from voluntarily resolving the case after the close of the arbitral hearing. Under Civil Code § 1670.5(a), a court may either refuse to enforce an agreement that is “permeated” by unconscionability, Armendariz,
In Armendariz, the court discussed the severance of contractual provisions:
“Two reasons for severing or restricting illegal terms rather than voiding the entire contract appear implicit in case law. The first is to prevent parties from gaining undeserved benefit or suffering undeserved detriment as a result of voiding the entire agreement — particularly when there has been full or partial performance of the contract. Second, more generally, the doctrine of severance attempts to conserve a contractual relationship if to do so would not be condoning an illegal scheme. The overarching inquiry is whether the interests of justice ... would be furthered by severance. Moreover, courts must have the capacity to cure the unlawful contract through severance or restriction of the offending clause.... ” Armendariz,24 Cal.4th at 124 ,99 Cal.Rptr.2d 745 ,6 P.3d 669 (citations and internal quotation marks omitted).
Factors weighing against severance include (1) the existence of more than one unlawful provision in the arbitration agreement, and (2) the inability of the court to “remove the unconscionable taint from the agreement” by simply striking or limiting a provision. Id. at 124-25,
Here, unlike in Armendariz, severance of the unconscionable provision is appropriate. Compare id. at 124,
By contrast, CarMax’s arbitration agreement contains a single portion of one provision that could arguably be said to be unconscionable. Unlike the provisions at issue in Armendariz and the cases cited above, the settlement provision is mutual and affects both parties’ ability to settle the case equally. The restriction on their right to settle without the arbitrator’s approval does not “permeate” the arbitration agreement as a whole, or even the provision in which it is found, and can be easily severed.
Consequently, the court concludes that severing the unconscionable portion of the settlement provision — i.e., the portion that requires the parties to obtain the arbitrator’s approval of any settlement reached after the arbitral hearing has concluded— is appropriate. See Martin v. Ricoh Americas Corp., No. C-08-4853 EMC,
III. CONCLUSION
For the reasons stated, the court denies Hernandez’s motion to dismiss and grants CarMax’s motion to compel arbitration. The court severs the arbitration agreement’s provision requiring the parties to obtain the arbitrator’s approval of a settlement reached after the close of the arbitration hearing. The court stays the state court action currently pending in Superior Court pending resolution of the arbitration in this matter. See, e.g., Brown v. Pacific Life Ins. Co.,
Notes
. Petition for Order Compelling Arbitration and Stay of State Court Proceedings Pursuant to Federal Arbitration Act ("Petition”), Docket No. 1 (Nov. 12, 2014).
. Notice of Motion and Motion to Dismiss Petition to Compel Arbitration ("MTD”), Docket No. 8 (Dec. 3, 20 Í4). See also Reply in Support of Motion to Dismiss Petition to Compel Arbitration ("MTD Reply”), Docket No. 16 (Mar. 16, 2015).
. Notice of Motion and Motion to Compel Arbitration ("MTC”), Docket No. 10 (Dec. 30, 2014). See also Reply in Support of Motion to Compel Arbitration ("MTC Reply”), Docket No. 17 (Mar. 9, 2015).
. See Opposition to Motion to Dismiss Petition to Compel Arbitration (“MTD Opposition”), Docket No. 11 (Feb. 23, 2015); Memorandum in Opposition to Motion to Compel Arbitration ("MTC Opposition”), Docket No. 15 (Mar. 9, 2015).
. Petition, ¶ 4.
. Id.
. See id., Exh. A (“DRA”)
. Id., ¶ 4; Exh. A.
. Id.
. Id., ¶ 4.
. Id.
. Id., Exhs. B ("2001 DRRP”); C ("2011 DRRP”).
. Id., Exh. D ("Complaint”).
. Id.,n 32-42.
. Id., ¶¶ 43-53.
. Id.,n 54-65.
. Id., ¶¶ 66-71.
. Id.,n 72-79.
. Id., ¶¶ 80-87.
. Id.,m 88-95..
. Id., ¶¶ 96-104.
. Id., ¶¶ 105-115.
. Id., ¶¶ 116-126.
. Id., ¶¶ 127-136.
. Id., ¶¶ 137-143.
. Id., ¶¶ 144-153.
. Id., ¶¶ 154-170.
. Id., «171-177.
. Petition, ¶ 7.
. Id.
. Request for Judicial Notice in Support of Petitioner CarMax’s Opposition to Motion to Dismiss ("RJN”), Docket No. 14 (Feb. 25, 2015).
. RJN at 1.
. MTD Opposition at 7-8.
. MTD Reply at 4.
. Petition at 1.
. Petition, ¶ 3.
. Petition, ¶ 3; see also Complaint at 29.
. The petition adequately alleges Hernandez's and CarMax's respective citizenship. An individual like Hernandez is a citizen of the state in which he or she is domiciled. See Gilbert v. David,
The Ninth Circuit treats limited liability companies such as CarMax like partnerships for purposes of diversity jurisdiction. See Johnson v. Columbia Props. Anchorage LP,
. MTD at 1 ("The Petition alleges that the Court has diversity jurisdiction over this matter, arguing only that Respondent's state court action seeks a judgment in excess of $5,000,000, thus satisfying the $75,000 threshold. As the petition also admits, the state court action names an additional defendant, Alan Hannah, who is alleged to be a resident of the state of California. Respondent cannot rely upon the state court action to assert diversity jurisdiction for purposes of the amount in controversy, and yet disclaim reliance upon the state court action to the extent it facially destroys diversity jurisdiction. The Petition should be dismissed”).
. MTD Opposition at 3-6.
. MTD Reply at 2-4.
. In reaching this conclusion, the court joins all federal courts throughout the country that have been addressed a similar question following the Supreme Court’s decision in Vaden. See, e.g., Rutherford,
. The statute further provides: "If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default ... the court shall hear and determine such issue.” 9 U.S.C. § 4.
. MTC Opposition at 4-6.
. Id. at 5 (“Respondent was a management assistant performing administrative tasks at the Buena Park location in California, and her job duties had nothing to do with interstate commerce. CarMax’s motion fails to establish that Respondent’s specific job and job duties bears upon interstate commerce in any substantial way as required”).
. MTC Opposition at 5.
. MTC Reply at 2-6.
. Declaration of Kimberly Ross in Support of CarMax Auto Superstores California, LLC, A Virginia Limited Liability Company’s Motion to Compel Arbitration and Stay State Court Action ("Ross Decl.”), Docket No. 10-1 (Dec. 30, 2014).
.Ross Decl., ¶ 8.
. Id.
. Id.
. Id.
. Id., ¶ 9.
. Id.
. The single case cited by Hernandez as support for her contention that the FAA does not apply — The California Court of Appeal's decision in Hoover v. American Income Life Ins. Co.,
Here, in contrast to Hoover, CarMax has adduced evidence concerning the extent of its interstate activities. (See Ross Decl., ¶ 8.) It has also shown that Hernandez's job affected interstate commerce in that management assistants hired employees who sold and transported vehicles across state lines, served as liaisons to CarMax’s out-of-state corporate offices, and arranged interstate travel for Car-Max employees. (Ross Decl., ¶ 9.) No evidence of this type was proffered in Hoover. As the authorities cited indicate, such evidence is sufficient to show that an employment relationship involves interstate commerce under the FAA.
. Even if the FAA did not apply, Hernandez fails to identify the effect on the arbitrability analysis if the California Arbitration Act ("CAA”), rather than the FAA applied. As one California district court has observed:
"The CAA, like the FAA, favors arbitration. Armendariz v. Found. Health Psychcare Servs., Inc.,
. "Although the court is not bound by unpublished decisions of intermediate state courts, unpublished opinions that are supported by reasoned analysis may be treated as persuasive authority." Scottsdale Ins. Co. v. OU Interests, Inc., No. C 05-313 VRW,
. MTC Opposition at 6-8.
. Ross Dec!., Exh. B (“2001 DRRP”) at 20.
. At the hearing, Hernandez reiterated her the argument that unconscionability must be judged by looking to the DRRP that was in effect at the time she entered into an employment contract with CarMax and signed the DRA. She cited Fitz v. NCR Corp.,
In Fitz, plaintiff began to work for NCR Corp. in 1981. Beginning in 1996, the company implemented a mandatory, binding arbitration policy. Fitz,
Prior to considering the merits of the trial court's decision regarding unconscionability, the appellate court addressed Fitz's contention that the 1996 policy should be considered in its entirety when determining whether the policy was unconscionable or not. Id. at 715,
Harper also does not stand for the proposition that the court must judge unconscionability with reference to the 2001, rather than 2011, DRRP. The Court of Appeal there did not address whether a court can consider validly modifications to a written arbitration agreement when determining unconscionability. Instead, it noted that the agreement was procedurally unconscionable because Ultimo had failed to attach the relevant arbitration rules to the agreement at the time it was presented to the employee to sign. Harper,
Although the Harper court referenced the modification provision as additional evidence of procedural unconscionability, id. at 1407,
For these reasons, the court finds Fitz and Harper distinguishable. The authority cited above for the proposition that unconscionability should be judged by looking to the most recent, validly modified agreement is directly on point and not in conflict with Fitz and Harper. Thus, the court applies it to the facts of this case.
. Although CarMax addresses the Cole factors in its motion (see MTC at 10-11), Hernandez does not make reference to the factors in her opposition. Instead, she addresses un-conscionability more generally.
. Of Hernandez's fifteen causes of action, ten (the first through ninth and twelfth causes of action) expressly invoke statutory rights.
. See Ross Deck, Exh. D ("2011 DRRP”) at 9.
. Id.
. Id.
. Id.
. 2011 DRRP at 9.
. Id. at 9-10.
. Id. at 10.
., The discovery provisions in the 2001 DRRP are identical to those in the 2011 DRRP. (Compare 2001 DRRP at 14-15 with 2011 DRRP at 9-10.)
. MTC Opposition at 14.
.See also Mercuro v. Superior Court,
. MTC Opposition at 12.
. See 2011 DRRP at 12.
. 2011 DRRP at 13 (emphasis added).
. MTC Opposition at 12.
.2011 DRRP at 12-13.
. MTC Opposition at 8-11.
. Greene Decl., Exh. 1.
. MTC Opposition at 8-9 (citing Harper v. Ultimo,
. See Declaration of Rosella Michelle Hernandez in Support of Opposition to Motion to Compel Arbitration ("Hernandez Dec!.”), Docket No. 15-1 (Mar. 9, 2015), ¶ 5.
. Ross Decl., Exh. A at 7 (italics added).
. Id., Exh. A at 8 ("The Dispute Resolution Agreement and the Dispute Resolution Rules and Procedures affect your legal rights. By signing this Agreement, you acknowledge receipt of the Dispute Resolution Rules and Procedures. You may wish to seek legal advice before signing this Dispute Resolution Agreement,” (italics added)).
. Hernandez Deck, ¶ 5 (“The 2001 Rules were not provide[d] to me at the time I completed my application, nor were they offered to me, nor were they provided to me at any
. Ross Dec!., ¶ 4. Thus, although Hernandez argues that "there is no evidence submitted that the 2001 Rules (or any of CarMax's arbitration rules) are available on the internet,” CarMax has submitted evidence demonstrating that CarMax employees, including Hernandez, had ready access to the DRRPs.
. Id., ¶ 4; id., Exh. G.
. Hernandez notes, in passing, that “Car-Max did not ... provide the[] [2001 Rules] to her before she was hired.” (MTC Opposition at 10.) She also states, in her declaration, that she had been hired by CarMax prior to being required to complete an employment application and to sign the DRA. (Hernandez Decl., ¶ 3.) Although she does not explicitly make the argument in her memorandum, it appears that she contends that this timeline of events added an additional degree of procedural unconscionability because she would have been required to "quit” her job with CarMax if she refused to sign the DRA given the fact that the agreement was mandatory and she was not asked to sign it until after she had purportedly been hired.
The court is not persuaded that this demonstrates procedural unconscionability. First, CarMax has presented evidence from its Human Resources department indicating that Hernandez had not been hired until July 8, 2002, some twelve days after she was presented with and signed the DRA. (See Declaration of Kristy P. Jordan In Support of Petitioner
More fundamentally, even if Hernandez had not been presented with the DRA until after she was officially hired by CarMax— which the evidence indicates is not the case— courts have found that "the exact date that [an employee] began to work for CarMax is not alone determinative of whether [she] showed oppression or surprise,” particularly in cases where, as here, "[t]he stand-alone arbitration agreement was not hidden, but prominently featured as part of the employment application.” Sanchez,
. MTC Opposition at 10-11 ("Further, the fact that CarMax alone may modify or even terminate the Agreement adds to the procedural unconscionability and unfair surprise”).
. See Ross Decl., ¶¶ 3-4; id., Exh. G.
. The court's conclusion that the modification clause is not procedurally unconscionable is consistent with the decisions of at least two other courts that have considered the same provision. See, e.g., Herrera,
. MTC Opposition at 11-12.
. See 2001 DRRP at 13.
. See 2011 DRRP at 8.
. MTC Opposition at 12 ("Armendariz requires a written arbitration award with adequate judicial review. To ensure adequate judicial review, ‘an arbitrator in a FEHA case must issue a written arbitration decision that will reveal, however briefly, the essential findings and conclusions on which the award is based”).
.See 2011 DRRP at 12.
. MTC Opposition at 12.
. 2011 DRRP at 11.
. MTC Opposition at 13.
. MTC Opposition at 13-14.
. 2011 DRRP at 13.
. MTC Opposition at 14.
. MTC Opposition at 14.
. 2011 DRRP at 11 (emphasis original).