Ritarose CAPILI, Plaintiff-Appellee, v. The FINISH LINE, INC., Defendant-Appellant, and Cigna Health Corporation; Life Insurance Company of North America, Defendants.
No. 15-16657
United States Court of Appeals, Ninth Circuit
Filed July 3, 2017
Argued and Submitted April 17, 2017 San Francisco, California
7. As to K-Beam, LLC, the IRS‘s investigation revealed that Hoang Ngo was either a member or manager of K-Beam, LLC pursuant to a “Statement of Information” filed with the Secretary of State in November of 2013. A manager is an agent under California law, see
8. There is no merit to Appellants’ contention that in order for the clause (ii) exception to apply, a determination of transferee liability is required. Neither Ip nor Viewtech suggest that a determination of transferee liability must have been made before clause (ii)‘s notice exception may be relied upon by the IRS. Appellants have admitted that Hoang Ngo transferred money into Keith Ngo‘s account. Thus, the clause (ii) exception applied to Keith Ngo.
9. Lastly, Appellants failed to meet their “heavy burden” with “specific facts and evidence” that the summons was issued in bad faith or for an improper purpose. For all of the above reasons, the district court properly denied Appellants’ motion to quash and granted the Appellee‘s motion to enforce the summons issued to East West Bank.
AFFIRMED.
Thomas M. McInerney, Esquire, Litigation Counsel, Brooke S. Purcell, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., San Francisco, CA, for Defendant-Appellant
Dennis Mont Brown, Anne Sweeney Jordan, Trial Attorney, Littler Mendelson P.C., San Jose, CA, for Defendant
Before: SCHROEDERR and RAWLINSON, Circuit Judges, and DRAIN,* District Judge.
MEMORANDUM **
The Finish Line, Inc. (“Finish Line“) appeals the district court‘s order denying its motion to compel arbitration. We have jurisdiction under
“[A]fter Concepcion, unconscionability remains a valid defense to a petition to compel arbitration.” Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109, 163 Cal. Rptr. 3d 269, 311 P.3d 184, 201 (2013). This is because California‘s “unconscionability standard is, as it must be, the same for arbitration and nonarbitration agreements.” Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899, 190 Cal. Rptr. 3d 812, 353 P.3d 741, 749 (2015). Under California law, both procedural and substantive unconscionability must be present to find a contract unconscionable; however, they
The district court properly concluded the arbitration agreement was adhesive, and thus at least minimally procedurally unconscionable. See Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 922-23 (9th Cir. 2013). Capili‘s employment application at Finish Line, which included The Finish Line, Inc. Employee Dispute Resolution Plan (“the Arbitration Agreement“), was adhesive because it was offered “on essentially a ‘take it or leave it’ basis.” Victoria v. Superior Court, 40 Cal.3d 734, 222 Cal. Rptr. 1, 710 P.2d 833, 837 (1985) (en banc). Adhesive contracts are at least minimally procedurally unconscionable under California law. See Baltazar v. Forever 21, Inc., 62 Cal.4th 1237, 200 Cal. Rptr. 3d 7, 367 P.3d 6, 11 (2016) (citing Gentry v. Superior Court, 42 Cal.4th 443, 64 Cal.Rptr.3d 773, 165 P.3d 556, 573 (2007)).
The district court also correctly determined the unconscionability of the Arbitration Agreement “at the time it was made.”
The district court properly determined that the cost-sharing provision was substantively unconscionable. The provision required Capili, a retail employee making $15 per hour, to pay up to $10,000 at the outset of arbitration, not including the fees and costs for legal representation. Much like Chavarria, the cost-sharing provision here imposes substantial non-recoverable costs on low-level employees just to get in the door, effectively foreclosing vindication of employees’ rights. 733 F.3d at 926-27.
The district court was also correct in finding that the clause that allowed Finish Line, but not Capili, to seek judicial resolution of specified claims was substantively unconscionable. While judicial carve-outs are not unconscionable for claims an employer is more likely to bring, these exemptions must still have a modicum of bilaterality. See Poublon, 846 F.3d at 1273 (acknowledging the concession that an employer‘s unilateral claim exemptions were substantively unconscionable); Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1031 (9th Cir. 2016) (allowing both parties to pursue intellectual property claims in court); Baltazar, 200 Cal.Rptr.3d 7, 367 P.3d at 13 (allowing both parties to seek injunctive relief in court). Based on the entire record, the district court did not err in finding that the Arbitration Agreement was both procedurally and substantively unconscionable.
At the time the order was issued, the district court was correct in finding the forum selection clause to be substantively unconscionable; however, subsequent precedent has refined the standard by which forum selection clauses are judged. See Tompkins, 840 F.3d at 1029-30. Parties opposing a forum selection clause must now show that the forum is “unavailable or unable to accomplish substantial justice” in order to demonstrate substantive unconscionability. Id. at 1029. Inconvenience and additional expense are not sufficient, unless proceeding in the selected forum will be “so gravely difficult and inconvenient that [the plaintiffs] will for all practical purposes be deprived of [their] day in court.” Id. (quoting Aral v. EarthLink, Inc., 134 Cal.App.4th 544, 36 Cal.Rptr.3d 229, 241-42 (2005)). Capili‘s pleadings did not provide sufficient details of such a hardship. Given the selected forum was not shown to be unavailable or unable to accomplish substantial justice, the forum se
The district court did not abuse its discretion by declining to sever the unconscionable portions of the Arbitration Agreement. See Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1005-06 (9th Cir. 2010);
For all of the above reasons, the district court properly denied Finish Line‘s motion to compel arbitration.
AFFIRMED.