California Courts of Appeal
Arbitration provisions will be found unconscionable and unenforceable when they have sufficient elements of both procedural and substantive unconscionabilityDAVIS v. TWC DEALER GROUP, INC.
Here, as in most employment cases, the arbitration agreement was procedurally unconscionable as a contract of adhesion, written in small type in prolix legal jargon. It was also substantively unconscionable for a number of reasons, an important one including that it maintained the employer’s unilateral right to modify it.
THE DAVISES SUED FOR FEHA AND WAGE CLAIMS
Three members of the Davis family worked for TWC Dealer Group, a Toyota dealership in Walnut Creek. When Appellant TWC hired a new general manager, that person allegedly made racist and ageist remarks to and about the Davises. The Davis Respondents alleged that they complained to TWC, but to no
THE TRIAL COURT DENIED TWC’s PETITION TO COMPEL ARBITRATION
Respondent TWC petitioned the trial court to enforce what it alleged was its arbitration agreement with the Davises. The trial court denied the petition. Finding that there was an agreement to arbitrate, the court nonetheless found that it was procedurally and substantively unconscionable, and therefore unenforceable.
THE APPELLATE COURT FOUND THAT ANY AGREEMENT WAS PROCEDURALLY UNCONSCIONABLE
The appellate court affirmed. It pointed out that there were actually three arbitration agreements that each employee, including the Davises, were required to sign.
The court found that the agreements were contracts of adhesion, meaning that they were offered on a “take it or leave it” basis, as are most arbitration agreements in the employment context. Worse, the three agreements were all printed in small type, strained the limits of legibility, and in dense legal jargon including references to statutes that weren’t quoted and some that didn’t say what the agreement said they did.
THE AGREEMENT WAS SUBSTANTIVELY UNCONSCIONABLE
Because a finding of unconscionability requires both procedural and substantive unconscionability – although not in equal measures – the court moved on to determine that the agreement was substantively unconscionable as well.
Importantly, the court found the fact that TWC maintained the unilateral right to alter the agreement was substantively unconscionable.
Adding to the substantive unconscionability was the near-illegibility of the agreements, and the mere existence of three, internally inconsistent and mutually contradictory agreements. This further demonstrates that facts contributing to a finding of procedural unconscionability can show substantive unconscionability as well.
The court also found that the fact that the company did not sign the agreement showed a lack of mutuality.
Finally, the agreement’s removal of any authority of the arbitrator to hear class, collective, or joint actions indicated an intention to prevent claims under the Private Attorneys General Act (“PAGA”), a violation of public policy.
CONCLUSION
California courts continue to protect workers’ rights to seek justice in a judicial forum. Arbitration agreements will be unenforceable, and petitions to enforce them will be denied, if they unconscionably try to limit those rights.
COA 1st Dist., Div. 2, Filed 10/30/19. Opinion by Justice Richman.
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