ORDER DENYING DEFENDANT’S MOTION TO COMPEL ARBITRATION (Docket No. 8)
Plaintiff Jessica Jackson has brought a class action against Defendant S.A.W. Entertainment Ltd. (“S.A.W.”), alleging violations of the California Labor Code, the California Business and Professions Code, and the San Francisco Minimum Wage Ordinance. 1 Currently pending before the Court is SAW.’s motion to compel arbitration. Having considered the parties’ briefs and accompanying submissions, as well as the oral argument of counsel and all other evidence of record, the Court hereby DENIES S.A.W.’s motion. The Court finds the parties’ arbitration agreement unenforceable.
I. FACTUAL & PROCEDURAL BACKGROUND
Ms. Jackson is an exotic dancer or adult entertainer. She brings this action on behalf of herself as well as other dancers and entertainers who are similarly situated. S.A.W. is a corporation that owns the Larry Flynt’s Hustler Club (“Club”), located in San Francisco, California. The parties are in agreement that, in April 2008, Ms. Jackson performed at the Club. See Compl. ¶ 3 (alleging that she performed work at the Club in April 2008); Doyle Decl. ¶ 5 (stating that Ms. Jackson performed on three dates in April 2008 — ie., April 16, 18, and 19). The parties dispute whether Ms. Jackson was an independent contractor while she performed at the Club (S.A.W.’s position) or whether she was actually an employee of S.A.W. (Ms. Jackson’s position). They likewise dispute whether other exotic dancers working at the Club were properly characterized as independent contractors instead of employees.
The evidence of record indicates that, on or about April 15, 2008, Ms. Jackson signed a document provided by S.A.W. titled “Notice of Contract Alternative: Employee Status.” Compl., Ex. A (notice). The document states that “[e]ntertainers have historically performed at [the Club] as independent contractors who control if, when, where, how and for whom they perform. However, if you wish to become an ‘EMPLOYEE’ of [the Club], you may apply to do so.” Compl., Ex. A (notice) (emphasis in original). The document then lists certain terms and conditions to which an employee would be subject if she entered into an employment relationship with S.A.W. See Compl., Ex. A. An entertainer is required to sign the document to indicate that she has read its contents and also to indicate whether she wishes (1) to be provided with employee application forms or (2) to “[d]ecline to apply as an employee dancer, and choose to work as a contract entertainer” instead. Compl., Ex. A (notice). Ms. Jackson opted for the latter, ie., to work as an independent contract instead of as an employee.
On the same day that she signed the above-described notice, Ms. Jackson also signed a contract with S.A.W. The contract she signed specified that she was not an employee. See Compl., Ex. A (Club/Performer Contract 1ÍV.1) (“THE PARTIES DISAVOW AN EMPLOYMENT RELATIONSHIP ....”). The contract also contained several provisions that are relevant to S.A.W.’s currently pending motion to compel arbitration. Those provisions are as follows.
*1022 5. Severability: Any unenforceable portion of this Contract, to the extent possible, shall be severable from the Contract as a whole.
6. Arbitration: Any dispute, whether statutory, contractual or tort, arising out of this Contract or Performer’s performances, the relationship between the parties, or any other dispute between the parties, shall be decided by binding Arbitration, shall be pursuant to the Federal Arbitration Act, and shall be before a neutral arbitrator agreed upon by the parties who shall be permitted to award any relief available in a Court. Any award may be entered in any court having jurisdiction. The arbitrator shall have no authority or jurisdiction over a class action.
7. Waiver of Statute of Limitations — Claims to be Brought Within 6 Months of the Event. Due to the transient nature of some individuals associated with this industry, and the difficulty presented in locating witnesses, the parties agree to commence any action between them within 6 months of the event giving rise to the action and to waive any statute of limitation to the contrary.
8. Waiver of Class Action. Performer agrees that any substantial claim she may make shall be in her individual capacity, and not as a representative or class action, and that any claims she may have against Owner shall not be consolidated with the claims of others.
Club/Performer Contract ¶¶ V.5-8.
On December 12, 2008, Ms. Jackson filed a complaint in state court alleging that the Club and its owners misclassified her as an independent contractor. S.A.W. removed the case to federal district court and subsequently filed the pending motion to compel arbitration. Ms. Jackson opposes S.A.W.’s motion on the ground that the arbitration agreement is unenforceable due to unconscionability.
II. DISCUSSION
A. Legal Standard
As indicated above, the contract entered into between Ms. Jackson and S.A.W. includes an arbitration provision. That provision specifies that any dispute between the parties “shall be decided by binding Arbitration” and “shall be pursuant to the Federal Arbitration Act.” Club/Performer Contract § V.6. Under the FAA, an arbitration agreement “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 “generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2 [of the FAA].”
Doctor’s Assocs., Inc. v. Casarotto,
B. Unconscionability
The Ninth Circuit has instructed that,
in assessing whether an arbitration agreement or clause is enforceable, [a court] “should apply ordinary state-law principles that govern the formation of contracts.” [¶] Under California law, a contractual clause is unenforceable if it is both procedurally and substantively unconscionable. Courts apply a sliding scale: “the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice-versa.” Still, “both [must] be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.”
Davis v. O’Melveny & Myers, 485 F.3d 1066, 1072 (9th Cir.2007).
*1023 1. Procedural Unconscionability
“In assessing procedural unconscionability, the court focuses on whether the contract was one of adhesion. Was it imposed on employees as a condition of employment? Was there an opportunity to negotiate? ... [The test] focuses on factors of oppression and surprise.” Id. at 1073.
In the instant case, there is no real evidence of surprise. “ ‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.”
Stirlen v. Supercuts,
That evidence of surprise is lacking, however, does not mean that there is no procedural unconscionability. As noted above, oppression must also be considered. Oppression by itself is enough to make an arbitration agreement procedurally unconscionable.
See Nagrampa v. MailCoups, Inc.,
The Court finds that the arbitration provision in the instant case is procedurally unconscionable because it was presented on a take-it-or-leave-it basis without an opportunity to opt out. There can be no real dispute that the agreement to arbitrate was a condition of being hired as an independent contractor because the arbitration provision was part of the form Club/Performer Contract, which was drafted by S.A.W. There is nothing to suggest that Ms. Jackson had the opportunity to negotiate or to opt out of the arbitration provision and still be hired.
2
See Martinez v. Master Protec
*1024
tion Corp.,
S.A.W. argues that Ms. Jackson was given an opportunity to opt out of the arbitration provision because she could have been hired as an employee rather than as an independent contractor.
See
Mot. at 7-8. But there is no evidence as to what the terms of any contract would be if Ms. Jackson had decided to pursue an employee status with S.A.W. As Ms. Jackson notes, an employer-employee contract with S.A.W. might well have contained an arbitration provision, too. The critical question here is whether Ms. Jackson could have worked for S.A.W. in some capacity— whether as an employee or as an independent contractor — without being subject to an arbitration provision. S.A.W. did not offer any evidence that employees are not subject to arbitration. Notably, the case that S.A.W. cites,
Circuit City Stores v. Ahmed,
2. Substantive Unconscionability
While the Court finds procedural unconscionability, that unconscionability is not as strong as cases where the party objecting to arbitration was given no choice at all. Accordingly, in assessing substantive unconscionability, the Court applies the sliding scale test. “Substantive unconscionability addresses the fairness of the term in dispute. Substantive unconscionability ‘traditionally involves contract terms that are so one-sided as to “shock the conscience,” or that impose harsh or oppressive terms.’ ”
Szetela v. Discover Bank,
In considering whether there is substantive unconscionability, the Court must bear in mind that, at this juncture, it is examining unconscionability only as it relates to arbitration; in other words, the Court is not concerned with whether the Club/Performer Contract as a whole is unconscionable or whether terms not related to arbitration are unconscionable.
See Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
a. Class Action/Arbitration Waiver
As indicated above, the Club/Performer Contract signed by Ms. Jackson contains a class action waiver. Paragraph V.8 of the Contract provides: “Performer agrees that any substantial claim she may make shall be in her individual capacity, and not as a representative or class action, and that any claims she may have against Owner shall not be consolidated with the claims of others.” Club/Performer Contract ¶ V.8.
The Contract provides not only for a waiver of any class action but also for a waiver of any class arbitration. Paragraph V.6 of the Contract states:
Any dispute, whether statutory, contractual or tort, arising out of this Contract or Performer’s performances, the relationship between the parties, or any other dispute between the parties, shall be decided by binding Arbitration, shall be pursuant to the Federal Arbitration Act, and shall be before a neutral arbitrator agreed upon by the parties who shall be permitted to award any relief available in a Court. Any award may be entered in any court having jurisdiction. The arbitrator shall have no authority or jurisdiction over a class action.
Club/Performer Contract HV.6 (emphasis added).
Both of these terms are lacking in mutuality, imposing as a practical matter limitations on the entertainer but not S.A.W.
See Abramson v. Juniper Networks Inc.,
Although mutuality is lacking with respect to the class action and arbitration waivers, the California Supreme Court has stated that not all such waivers are necessarily unconscionable.
See Gentry,
in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superi- or bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then, at least to the extent the obligation at issue is governed by California law, the [class action or arbitration] waiver becomes in practice the exemption of the party from *1026 responsibility for [its] own fraud, or willful injury to the person or property of another. Under these circumstances, such waivers are unconscionable under California law and should not be enforced.
Id.
at 454,
The instant case, of course, is not a consumer contract but rather an employment contract. Nevertheless, the California Supreme Court has made clear that the analysis used in consumer cases is the same analysis to be used in employment cases; that is, the question is whether a class action or arbitration waiver in an employment contract acts as an exculpatory clause.
See id.
at 457,
S.A.W. contends that Ms. Jackson must submit specific, concrete evidence showing that a class action or class arbitration is the only effective way to halt and redress the alleged violations at issue or the waiver provisions in the case at bar may not be deemed unconscionable. No doubt Ms. Jackson must make a showing that the waiver provisions at issue are in effect exculpatory clauses, but S.A.W. overstates the case as to what kind of showing is necessary. For example, in Gentry, a case involving a claim for overtime, the California Supreme Court discussed general public policy-type considerations that would weigh against a class action or arbitration waiver. It stated:
[W]hen it is alleged that an employer has systematically denied proper overtime pay to a class of employees and a class action is requested notwithstanding an arbitration agreement that contains a class arbitration waiver, the trial court must consider ... the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members’ rights to overtime pay through individual arbitration.[ 4 ]
Gentry,
In light of
Gentry
and
Murphy,
the Court finds that Ms. Jackson has made a sufficient showing that the class action and arbitration waivers in the instant case are in essence exculpatory clauses. First, Ms. Jackson claims that she and other entertainers who worked at the Club should have been considered employees instead of independent contractors and thus should have been subject to wage and hour laws. As the California Supreme Court noted in
Gentry,
“individual awards in wage-and-hour cases tend to be modest.”
5
Gentry,
Second, as in
Gentry,
an entertainer would likely face a greater risk of retaliation if she were to sue the company individually.
See Gentry,
Third, as the Court noted in
Gentry,
“some individual [entertainers] may not sue because they are unaware that their legal rights have been violated.”
Id.
at 461,
Finally, there are real world obstacles to the vindication of entertainers’ rights through individual arbitration — most notably, the fact that there is likely to be difficulty in locating witnesses, a fact that 5.A.W. acknowledges in its Club/Performer Contract. See Club/Performer Contract HV.7 (imposing the statute of limitations waiver because of “the transient nature of some individuals associated with this industry, and the difficulty presented in locating witnesses”).
Because, for the reasons stated above, the class action and arbitration waivers provided for in S.A.W.’s Club/Performer Contract are exculpatory clauses, the Court concludes that both terms are substantively unconscionable. This is even under the sliding scale test where the evidence of procedural uneonscionability is less than compelling.
b. Statute of Limitations Waiver
As noted above, Ms. Jackson contends that the statute of limitations waiver is also substantively unconscionable. Under the statute of limitations provision, all claims — whether belonging to an entertainer or S.A.W. — must be brought “within 6 months of the event giving rise to the action,” Contract § V.7, notwithstanding any limitations periods provided for by statute.
Contractual agreements to shorten the statute of limitations period are generally disfavored because they “derogate” statutory intent.
Lewis v. Hopper,
Martinez
is a particularly instructive case. There, the plaintiff and defendant had signed an arbitration agreement at the time that the former was hired by the latter. The agreement included a provision which “require[d] the assertion of all statutory and common law claims covered by the agreement within six months of the date when the claim arises.”
Id.
at 117,
The plaintiff argued, among other things, that the statute of limitations provision was substantively unconscionable. In resolving this issue, the state appellate court made note that
[t]he statutes upon which [the plaintiffs] claims are premised provide significantly longer periods of time than six months within which to assert a claim of *1029 violation. Specifically, [the plaintiffs] claim of national origin discrimination arises out of the FEHA. That statute provides that [the plaintiffs] administrative charge must be filed within one year from the date of the discriminatory act, and that he must file any civil action within one year of the date on which the administrative agency issues a “right to sue” letter. “[A]n arbitration agreement cannot be made to serve as a vehicle for the waiver of statutory rights created by the FEHA.” Similarly, the Labor Code, which provides the bases for [the plaintiffs] causes of action for unpaid wages and penalties, affords an employee three or four years to assert the claims sued upon here. If there was any doubt, after Armendariz, it is clear that parties agreeing to arbitrate statutory claims must be deemed to consent to abide by the substantive and remedial provisions of the statute.... Otherwise, a party would not be able to fully vindicate [his or her] statutory cause of action in the arbitral forum. The shortened limitations period provided by [the defendant’s] arbitration agreement is [therefore] unconscionable and insufficient to protect its employees’ right to vindicate their statutory rights.
Id.
at 117-18,
The instant case is analogous to
Martinez.
The statute of limitations provision in the case at bar, like the one in
Martinez,
requires claims to be brought within six months. As in
Martinez,
the statutes upon which Ms. Jackson’s claims are premised provide significantly longer periods of time than six months within which to assert a claim. For example, Ms. Jackson’s claims for unpaid wages and the accompanying waiting time penalties would ordinarily be subject to a three-year statute of limitations.
See Gentry,
Because the statute of limitations waiver provided for in S.A.W.’s Club/Performer Contract significantly shortens the limitations period for Ms. Jackson’s claims, the Court concludes that — like the statute of limitations provision in Martinez — it is substantively unconscionable.
C. Severability
That the Court has found both procedural and substantive unconscionability, however, does not end the matter. The Court is still left with the decision as to whether there should be severance of the unconscionable terms — ie., the class action and arbitration waivers and the statute of limitations waiver.
In making this decision, the Court is guided by the California Supreme Court’s decision in
Armendariz.
In
Armendariz,
the court decided
not
to sever the provisions it found unconscionable for two reasons. First, “the arbitration agreement contain[ed] more than one unlawful provision ... [which] indicate[d] a system
*1030
atic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer’s advantage.”
Armendariz v. Foundation Health Psychcare Services, Inc.,
In the instant case, S.A.W. argues that the Court should sever the illegal provisions from the Club/Performer Contract, both because of the public policy weighing in favor of arbitration and because the contract itself provides for severance of all unenforceable provisions.
See
Club/Performer Contract ¶ V.5. S.A.W. also points to the fact that the contract otherwise meets the requirement in
Armendariz
that an arbitration agreement must (1) provide for neutral arbitrators, (2) provide for more than minimal discovery, (3) require a written award, (4) provide for all types of relief that would otherwise be available in court, and (5) not require entertainers to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum.
See Armendariz,
The Court is not persuaded. S.A.W. is correct that, as a mechanical matter, the problematic provisions could be excised from the Club/Performer Contract, leaving enough of the arbitration and arbitration-related provisions for the Court to enforce and without requiring the Court to reform the agreement.
See Armendariz,
Two reasons for severing or restricting illegal terms rather than voiding the entire contract appear 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 where 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.
Id.
In the instant case, the evidence that S.A.W. was trying to impose an “inferior
*1031
forum” on entertainers is strong. The class action/arbitration waivers do not stand alone but rather are joined by the provision that significantly shortens the statute of limitations period. An entertainer would be unlikely to bring only an individual suit where the damages at issue would be exceedingly small by virtue of the brief limitations period alone (not to mention the fact that, as noted above, wage claims tend to be modest). That an employee would likely be deterred from initiating a suit is compounded by the fact that the Club/Performer Contract does not expressly provide that S.A.W. will pay for all costs that are unique to arbitration. Even if, under California law, “a mandatory employment arbitration agreement that contains within its scope the arbitration of [statutory employment] claims impliedly obliges the employer to pay all types of costs that are unique to arbitration,”
id.
at 113,
Moreover, the two reasons discussed in Armendariz that generally support severance have no application in the instant case. First, voiding the arbitration and arbitration provisions in their entirety would not give Ms. Jackson an undeserved benefit nor would it cause S.A.W. to suffer an undeserved detriment. Second, there is no contractual relationship to preserve since it does not appear that Ms. Jackson is still performing or is seeking to perform at the Club.
Accordingly, the Court concludes that severance of the unconscionable provisions in the instant case is not appropriate and, therefore, S.A.W.’s motion to compel arbitration is denied.
The Court acknowledges that, in
Jones,
Judge Zimmerman of this District chose to sever when, similar to here, there was both an unconscionable class action waiver and an unconscionable statute of limitations provision in an arbitration agreement.
See Jones,
*1032
Furthermore, the cases cited by Judge Zimmerman, in which there was severance, are markedly different from the case at hand. For example, in
McManus v. CIBC World Markets Corp.,
III. CONCLUSION
Accordingly, for the reasons discussed above, S.A.W.’s motion to compel arbitration is denied.
A Case Management Conference is scheduled for July 29, 2009, at 1:30 p.m. A Joint Case Management Conference statement shall be filed by July 22, 2009.
This order disposes of Docket No. 8.
IT IS SO ORDERED.
Notes
. In her complaint, Ms. Jackson named two additional defendants but has since dismissed them from the case. See Docket No. 19 (notice of voluntary dismissal, filed on 3/26/09).
. The fact that the Club/Performer Contract includes a statement that an entertainer should "[s]ign this agreement only if you genuine agree with its terms” and "take the time to read it, consider the terms, and have someone assist you (a lawyer or accountant, or any other person you rely on to give you reasoned advice) before signing this contract,” Club/Performer Contract UV.10, is immaterial. As the California Supreme Court has noted, "it is unrealistic to expect anyone other than higher echelon employees to hire an attorney to review what appears to be a routine personnel document.”
Gentry v. Superior
*1024
Court,
. Although these terms are not formally part of the arbitration provision in the agreement
(i.e.,
HV.6 of the Club/Performer Contract), they clearly relate to the arbitration provision as they define the scope of the arbitration.
See, e.g., Gentry,
. The class representative in
Gentry
neither feared retaliation himself, as he was not a current employee, nor lacked awareness of his legal rights, as demonstrated by the fact that he had chosen to sue his employer.
See Gentry,
. An unpublished opinion from a state appellate court suggests that individual awards involving entertainers like Ms. Jackson would in fact be relatively modest.
See Moody v. Razooly,
No. A099065,
. Of course, a statute of limitations provision that would apply unilaterally to an employee, but not the employer, would more than likely be substantively unconscionable.
See, e.g., Nyulassy v. Lockheed Martin Corp.,