Judge Kerry Bensinger, Case Number: 23STCV23841, Date: 2023-12-11 Tentative Ruling

Jess Ravich (“Ravich”) and Jennifer Robles (“Robles”) began working together in the early 2000s. At some point, they were both hired by TCW. Robles was hired as Ravich’s personal assistant. In June 2019, TCW fired Ravich. Robles was terminated as well.

In August of 2019, Ravich, who was CEO of Libra Securities Holdings, LLC (“Libra”), hired Robles as the Chief Operating Officer. Robles signed an Employment Agreement (“Agreement”) and Release with Libra. As relevant here, the Agreement contains an arbitration provision.

In 2020, Ravich discovered Robles stole $1.8 million from Libra. Ravich fired Robles. In 2023, Robles contacted TCW and accused Ravich of misconduct. Robles made several financial demands to settle claims against Ravich. Ravich refused her demands.

On August 10, 2023, Plaintiffs (Libra and Ravich) sued Defendant Robles in Nevada District Court (hereafter, the “Nevada Case”), for damages relating to her alleged theft and injunctive relief to prevent her from breaching the confidentiality and non-disparagement clauses of the Agreement.

The parties agreed to bring the case to Los Angeles. On October 2, 2023, Plaintiffs filed a Complaint seeking damages and injunctive relief in this court.

At the hearing on February 28, 2024, the court requested further briefing. Robles was given the opportunity to respond to Ravich’s Declaration that was filed along with Plaintiffs’s Reply, and Ravich was given the opportunity to respond to Robles’s “failure to pay the arbitration fees” argument. The court continued the hearing to March 22, 2024. Robles submitted a supplemental declaration and Ravich submitted a brief re: payment of arbitration fees.

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) Under both the FAA and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) Arbitration agreements can be invalidated by “generally applicable contract defenses, such as fraud, duress, or unconscionability.” (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.)

The petitioner bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, the party opposing the petition then bears the burden of proving by a preponderance of the evidence any fact necessary to demonstrate there should be no enforcement of the agreement, and the trial court sits as a trier of fact to reach a final determination on the issue. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) Pursuant to Code of Civil Procedure section 1281.2, the court can compel parties to an arbitration agreement to arbitrate their dispute.

There is no dispute Robles signed an arbitration agreement. There is also no dispute the Federal Arbitration Act applies. The court must decide two issues: (1) does this court or the arbitrator decide whether the arbitration provision is enforceable? (The delegation clause question) and (2) if this court decides, is the arbitration provision enforceable? (The enforceability question).

“Although threshold questions of¿arbitrability¿are ordinarily for courts to decide in the first instance under the [Federal Arbitration Act (FAA)], the ‘[p]arties to an¿arbitration agreement¿may agree to¿delegate¿to the arbitrator, instead of a court, questions regarding the enforceability of the agreement.’” (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 239 (Pinela) quoting¿Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 241.) “Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, … so the question who has the primary power to decide arbitrability turns upon what the parties agreed about that matter.” (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 891 (Aanderud).) The delegation issue is a “gateway” question. (Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 69 (Rent-A-Car).)

“There are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability. The ‘clear and unmistakable’ test reflects a ‘heightened standard of proof’ that reverses the typical presumption in favor of the arbitration disputes.” (Aanderud, supra, 13¿Cal.App.5th at p. 892 (cleaned up).) Thus, “[u]nless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.’” (Pinela, supra, at pp. 239-40 (cleaned up).)

Plaintiffs argue the parties clearly and unmistakably agreed to commit questions of arbitrability to the arbitrator. In support, Plaintiffs point to the arbitration provision which states that “[t]he arbitrator shall have exclusive authority to resolve any dispute relating to the interpretation, applicability or enforceability of this Agreement … any Claim that all or part of this Agreement is void or voidable.” (Ravich Decl., Ex. 1, Agreement, § 10.2.)

Robles disagrees. Robles argues the delegation clause is not clear and unmistakable because the Agreement includes contradictory language in the severability clause. The law favors Robles’s position.[2] “As a general matter, where one contractual provision indicates that the enforceability of an arbitration provision is to be decided by the arbitrator, but another provision indicates that [a] court might also find provisions in the contract unenforceable, there is not clear and unmistakable delegation of authority to the arbitrator. Even broad arbitration clauses that expressly delegate the enforceability decision to arbitrators may not meet the clear and unmistakable test, where other language in the agreement creates an uncertainty in that regard.” (Jack v. Ring LLC (2023) 91 Cal.App.5th 1186, 1197 (Jack).)

The string cite in Jack makes the point: “in Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 240–241, 190 Cal.Rptr.3d 159, an arbitration agreement provided “the arbitrator is to decide enforceability questions,” but a severability provision recognized a court may decide the same issue; Division Four of this court found the agreement “point[ed] in two directions” and, as a result, “there [wa]s no clear and unmistakable delegation.” (Accord Najarro v. Superior Court (2021) 70 Cal.App.5th 871, 877, 880, 285 Cal.Rptr.3d 700 [where a delegation clause gave the arbitrator “exclusive power” to resolve disputes relating to “enforceability” including whether the agreement was void, but a severability clause allowed a court to determine issues such as unconscionability, there was “no clear and unmistakable delegation to the arbitrator to decide enforceability”]; Dennison, supra, 47 Cal.App.5th at pp. 209–210, 260 Cal.Rptr.3d 675 [where “a contract includes a severability clause stating a court of competent jurisdiction may excise an unconscionable provision, there is no clear and unmistakable delegation to the arbitrator to decide if the arbitration agreement is unconscionable”]; Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425, 1444–1445, 140 Cal.Rptr.3d 38 [where a “delegation provision states that the arbitrator is to decide whether the Agreement is enforceable while the severability provision contemplates that a court has the same authority,” “the severability provision that a court may decide the question of enforceability creates an ambiguity as to whether an arbitrator should decide if an arbitration contract is enforceable”]; Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1565–1566, 98 Cal.Rptr.3d 743 [where an arbitration agreement provided that any dispute relating to enforcement or validity of the agreement “ ‘shall be submitted to final and binding arbitration’ ” but a severability provision contemplated a “ ‘trier of fact of competent jurisdiction’ ” may find a provision of the agreement unenforceable, the agreement “did not ‘ “clearly and unmistakably” reserve’ ” the threshold issue of enforceability to arbitration].)” (Jack, supra, 91 Cal.App.5th at p. 1198.)

For example, in Parada, to determine if the delegation clause was clear and unmistakable, the appellate court looked to the severability provision in the relevant account agreement and compared it to the delegation clause found in the arbitration provision. (Parada, supra, 176 Cal.App.4th at p. 1566.) The severability provision states “’[i]n the event that any provision of this Agreement shall be determined by a trier of fact of competent jurisdiction to be unenforceable in any jurisdiction, such provision shall be unenforceable in that jurisdiction and the remainder of this Agreement shall remain binding upon the parties as if such provision was not contained herein.’ (Italics added.)” (Id.) The delegation clause states, “‘The parties agree that any and all disputes, claims or controversies arising out of or relating to any transaction between them or to the breach, termination, enforcement, interpretation or validity of this Agreement, including the determination of the scope or applicability of this agreement to arbitrate, shall be submitted to final and binding arbitration before JAMS....’” (Italics added.)” (Id. at p. 1565.) The Court of Appeal found that “[u]se of the term ‘trier of fact of competent jurisdiction’” (in the severability clause) instead of “arbitration panel” or “panel of three (3) arbitrators” (as used in the delegation/arbitration clause) “suggests the trial court also may find a provision, including the arbitration provision, unenforceable.” (Id. at p. 1566.) The Parada Court held that the delegation clause did not clearly and unmistakably reserve to the arbitration panel “the issue whether those arbitration provisions were unenforceable.” (Ibid.)

So too here. The language and the ambiguity are virtually identical to that in Parada. The result must therefore be the same.[3] The delegation clause does not clearly and unmistakably reserve to the arbitrator the issue whether the agreement is enforceable. The court must therefore decide the enforceability of the arbitration agreement.

“California law strongly favors arbitration. Through the comprehensive provisions of the California Arbitration Act (Code Civ. Proc., § 1280 et seq.), the Legislature has expressed a ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. As with the FAA (9 U.S.C. § 1 et seq.), California law establishes a presumption in favor of arbitrability. An agreement to submit disputes to arbitration “is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (OTO).)

Robles raises several challenges to the enforceability of the arbitration clause. First, she argues the entire Agreement is unenforceable because it was entered into for an illegal purpose. If this argument fails, she argues the entire Agreement and/or the arbitration clause are unconscionable. Next, she argues the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act precludes arbitration. And finally, she argues Plaintiffs waived their right to arbitrate because they failed to pay the required arbitration initiation fees.

In general, the doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133 (Sonic) (cleaned up).) If unconscionable, the arbitration agreement is not a valid contract and therefore is unenforceable.¿ (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).)

“Unconscionability consists of both procedural and substantive elements. Procedural unconscionability addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided.) Both elements must be present for a court to refuse to enforce an arbitration agreement. However, the elements do not need to be present in the same degree and are evaluated on a sliding scale. [T]he 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.” (Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277, 284–285 (Magno) (cleaned up).)

“Procedural unconscionability pertains to the making of the agreement and requires oppression or surprise. Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.” (Magno, 1 Cal.App.5th at p. 285 (cleaned up).)

“ ‘[T]here are degrees of procedural unconscionability. At one end of the spectrum are contracts that have been freely negotiated by roughly equal parties, in which there is no procedural unconscionability.... Contracts of adhesion that involve surprise or other sharp practices lie on the other end of the spectrum.’ ” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244, 200 Cal.Rptr.3d 7, 367 P.3d 6.) The procedural unconscionability analysis, therefore, “begins with an inquiry into whether the contract is one of adhesion” and a finding of a contract of adhesion is essentially a finding of procedural unconscionability. (Armendariz, supra, 24 Cal.4th at p. 113.) “An adhesive contract is standardized, generally on a preprinted form, and offered by the party with superior bargaining power ‘on a take-it-or-leave-it basis.’ ” (OTO, supra, 8 Cal.5th at p. 126.)

Surprise occurs where the arbitration agreement is “written in an extremely small font” with “ ‘visually impenetrable’ ” paragraphs “filled with statutory references and legal jargon.” (OTO, supra, 8 Cal.5th at p. 128.) It may further be shown when “the agreement appears to have been drafted with an aim to thwart, rather than promote, understanding,” thereby undermining the non-drafting party's informed consent. (Id. at p. 129.) “[I]n the case of preemployment arbitration contracts, the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration requirement.” (Armendariz, supra, 24 Cal.4th at p. 115.)

Here, the Agreement bears several telltale signs of surprise. The Agreement is long (twelve pages) followed by a nine-page Release agreement. The Agreement is thick with legal terms and jargon. The arbitration agreement is not located in a separate document or set off by any distinct notation. The arbitration agreement does not bear its own signature line. The arbitration clause is located towards the end of the document on page 10. These factors provide a basis to believe Robles may have been surprised to learn she signed an arbitration agreement.

On the other hand, the Agreement is not a classic adhesion contract. The Agreement and the arbitration clause are not written in small font. The document is not visually impenetrable. The Agreement is not printed on a standardized form, nor used and implemented by an employer hiring teams of employees. To the contrary, this was an agreement drafted and modified specifically for Robles, as evidenced by the various red-line versions. Most importantly, the Agreement was not sprung on Robles during the onboarding process. The Agreement did not come as a “surprise” to Robles.[4] Ravich sent her the Agreement nine months before she signed it. The terms of the agreement, including her title and role as Chief Operating Officer (COO) and Executive Assistant to the Chief Executive Officer (CEO) of Libra, along with a $250,000 salary, and a $750,000 severance package, set her apart from the mine-run of employees who sign adhesion contracts. Robles was a “highly sought after” employee.

“ ‘The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.’ ” (OTO, supra, 8 Cal.5th at pp. 126-127.)

Time to consider the Agreement. Ravich provided Robles with various versions of the Agreement over the course of nine months. Ravich attached to his January 29, 2024 Declaration various drafts of the Agreement, including red-line versions. (See Ravich Decl., (1/29/24) Exhs. 4, 5, 6.) This factor weighs heavily in Ravich’s favor.

Pressure to sign the Agreement. Robles argues she was pressured to sign the Agreement. She points out that Ravich came to her apartment in August 2019, presented the final Agreement to her, and told her to sign and initial the documents. According to Robles, she had little choice because Ravich was her boss, and her continued employment as well as her future employment with Libra was contingent upon her signing the Agreement. Ravich counters that she had months to review and consider the Agreement and her continued at-will employment was not contingent upon her signing the Agreement.

This factor weighs in Robles’s favor. Ravich does not dispute he went to her apartment to obtain her signature. Arriving at Robles’s door with the written Agreement in hand departs from standard business practices. It’s also an intrusion into Robles’s space and adds a physical urgency to the signing.[5] That, coupled with the parties’ prior sexual relationship and Ravich’s position as her employer raises concerns over Ravich pressuring Robles to sign the Agreement.

Length and Complexity of the Agreement. The Agreement and Release are long and dense. The Agreement contains numerous provisions and subparts. The Agreement covers a wide variety of employment related terms – accrued obligations upon termination, for cause and without cause termination provisions, voluntary resignation, parachute provisions, conflicts of interest, confidentiality, injunctive relief, Department of Treasury Regulation section 409A, representation and warranties, taxes, choice of law, arbitration. The Release Agreement attached as Exhibit A continues for nine more pages with the same difficult legal terms and language. This factor weighs in Robles’s favor. According to Robles, Ravich did not explain the numerous terms of the Agreement with her; never explained that she was waiving her right to a jury trial and agreeing to arbitration. Ravich does say otherwise.

Education and Experience of the Parties. Robles is a high school graduate while, according to Robles, Ravich graduated from The Wharton School and Harvard Law School. This factor weighs in Robles’s favor.

Assistance from Counsel. Robles asserts that she did not have counsel advise her, but she certainly had time to obtain counsel. Indeed, the Agreement specifically states the parties had “a full opportunity to negotiate the terms of this Agreement and, respectively, to review this Agreement with legal counsel.” (Ravich Decl., Ex. 1, Agreement, § 9.5.) Robles might not have engaged counsel, but it was not for lack of opportunity.[6] This factor weighs slightly in Ravich’s favor.

All in all, the court finds a low degree of procedural unconscionability. The Agreement is not the standard adhesion contract, and Robles is not the standard adhesion contract employee. She was a highly compensated and sought after employee. Robles had the Agreement for months and could have sought assistance from counsel. Nonetheless, the circumstances under which the Agreement was signed (including consideration of their prior sexual relationship, Ravich’s appearance at her apartment, and Ravich’s status as her employer), the length and complexity of the Agreement, and Robles’s education level raise concerns about whether this Agreement was a freely negotiated by roughly equal parties. The court turns to the substantive terms of the arbitration provision.

“Substantive unconscionability examines the fairness of a contract’s terms. . . . [The] doctrine is concerned not with a simple old-fashioned bad bargain, but with terms that are unreasonably favorable to the more powerful party. Unconscionable terms impair the integrity of the bargaining process or otherwise contravene the public interest or public policy or attempt to impermissibly alter fundamental legal duties.” (OTO, supra, 8 Cal.5th at p. 130 (cleaned up); accord, Baltazar, supra, 62 Cal.4th at pp. 1244-1245; Lange v. Monster Energy Co. (2020) 46 Cal.App.5th 436, 448.)

“In evaluating substantive unconscionability, courts often look to whether the arbitration agreement meets certain minimum levels of fairness. In Armendariz, our Supreme Court instructed that, at a minimum, a mandatory employment arbitration agreement must (1) provide for neutral arbitrators, (2) provide for more than minimal discovery, (3) require a written award that permits limited judicial review, (4) provide for all of the types of relief that would otherwise be available in court, and (5) require the employer to pay the arbitrator's fees and all costs unique to arbitration. [Citation.] ‘Elimination of or interference with any of these basic provisions makes an arbitration agreement substantively unconscionable.’[Citation.]” (Murrey v. Superior Court (2023) 87 Cal.App.5th 1223, 1247-1248 (Murrey).)[7]

Robles argues many of the terms of the arbitration agreement are substantively unconscionable. She is correct.

Confidentiality. Section 10.2 contains a confidentiality clause. It states, “Claims shall be submitted exclusively to confidential and binding arbitration.” Section 10.3, entitled Confidentiality of Disputes, states “All proceedings conducted pursuant to this Section 10, including any order, decision or award of the arbitrator, shall be kept confidential by all parties.” While the confidentiality provision shares a certain sense of mutuality (both Ravich’s claims regarding Robles’s theft and Robles’s claims of sexual harassment and retaliation are both subject to the confidentiality provision), case law supports the conclusion that confidentiality provisions in an employment case involving claims of sexual harassment are substantively unconscionable.

The confidentiality provision favors the employer in an employment related sexual harassment case. For example, in Murrey, supra, 87 Cal.App.5th at p. 1254, the appellate court observed that “our Supreme Court has determined a confidentiality provision in an arbitration agreement is not per se unconscionable when it is based on a legitimate commercial need (such as to protect trade secrets or proprietary information). [Citation.] [The employer] has not identified a commercial need for the proceedings to remain confidential.” (Id.) So too here. Ravich has not identified the need to maintain confidentiality.[8]

The Murrey Court went further. The appellate court found the confidentiality provision substantively unconscionable because it “serve[d] no purpose other than to benefit [the employer]. Future employees cannot take advantage of findings in past arbitrations or prove a pattern of discrimination and/or retaliation.... In addition, keeping past findings secret undermines an employee’s confidence in the fairness and honesty of the arbitration process and thus potentially discourages that employee from pursuing a valid discrimination claim.” (Murrey, supra, 87 Cal.App.5th at p. 1255 (cleaned up).)

In Hasty v. American Automobile Assn. etc. (2023) 98 Cal.App.5th 1041, 1062, the appellate court, following Murrey’s lead, also found the confidentiality clause problematic.

The court found the confidentiality provision essentially barred plaintiff from conducting informal discovery and hampered future plaintiffs’ ability to prove a pattern of discrimination. The court agreed with Murrey that keeping findings secret also undermined confidence in the fairness and honesty of the arbitration process and would potentially discourage future employees from pursuing claims. Moreover, the Hasty Court found that the language in the confidentiality provision that states that the provision “applies to only the ‘extent permitted by law’ does not save it because the employee would have no way of knowing what would be covered or not covered by this provision.” (Id.)

Sections 10.2 and 10.3 of the Agreement make the arbitration process as well as the outcome confidential. As such, the confidentiality provision makes Robles’s efforts to obtain discovery more difficult. In Haydon, supra, 97 Cal.App.5th at p. 1290, the appellate court found the confidentiality provision barring the parties from “disclos[ing] the existence, content, or results of arbitration” substantively unconscionable. The Haydon Court wrote, “as in the employment context, confidential arbitration of claims like Haydon’s tilt[s] the scales of justice against potential victims of abuse by denying [them] access to any information about other claims against the facility.” (Id. at p. 1290 (cleaned up).) The Haydon Court found the confidentiality requirement to be unconscionable to a “high degree” because it is at odds with the Legislature’s declaration that “confidential settlement agreements are disfavored in actions involving violations of the Elder Abuse Act.” (Ibid. (cleaned up).) The Legislature reached the same conclusion with respect to a “nondisparagement agreement or other document that purports to deny the employee the right to disclose information about unlawful acts in the workplace, including, but not limited to sexual harassment.” (See Former Gov. Code, § 12964.5, subd. (a)(2)(A), added by Stats. 2018, ch. 955, § 4, and amended by Stats. 2021, ch. 638, § 2, eff. Jan. 1, 2022, bold italics added.)

In Ramos, supra, 28 Cal.App.5th at p. 1066, the appellate court found the confidentiality provision unconscionable because it would “prevent an employee from contacting other employees to assist in litigating (or arbitrating) an employee’s case. An inability to mention even the existence of a claim to current or former [] employees would handicap if not stifle an employee’s ability to investigate and engage in discovery.” (Id. at p. 1066, quoting, Davis v. O’Melveny & Myers (9th Cir. 2007) 485 F.3d 1066, 1078.) The Ramos Court concluded that “[I]t is hard to see how she could engage in informal discovery or contact witnesses without violating the prohibition against revealing an ‘aspect of the arbitration.’” (Ibid.) The appellate court concluded “the provisions requiring all aspects of the arbitration be maintained in strict confidence is substantively unconscionable.” (Id. at p. 1067.) So too here.

Choice of Law – Section 10.2, the arbitration clause, states that “[t]he arbitrator shall apply the substantive law of the State of Delaware, federal law or both, as applicable….” This language violates Labor Code section 925. Section 925(a) states “An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would …. (2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.” Section 925(b) goes on to say that “[a]ny provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.” And “for purposes of this section, adjudication includes litigation and arbitration.” (Lab. Code, § 925, subd. (d).)[9] The choice of law provision is substantively unconscionable because it requires the arbitrator to apply the law from Delaware or federal law or both in contravention of Labor Code section 925.

Allocation of Costs – Section 10.4 states that the “non-prevailing party in respect to any Claim shall bear all costs and expenses of the arbitration that are actually incurred by the parties, unless otherwise determined by the arbitrator in accordance with California or federal law; provided, however, that each party shall bear its own attorney fees and expenses in any dispute unless a statutory section at issue, if any, authorizes the award of such costs to the prevailing party.” This provision is both confusing and, depending upon how it is read, runs afoul of the law. As the California Supreme Court stated in Armendariz, supra, 24 Cal.4th at pp. 110-111, “we conclude that when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” The Armendariz Court went on to say, “”we therefore hold that a mandatory employment arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration.” (Id. at p. 113.)

Here, the allocation of costs shifts all costs and expenses of the arbitration on to Robles if she loses. This runs afoul of Armendariz. The fact the arbitrator may determine otherwise is of no solace to Robles and provides no assurance the arbitrator will reach the same conclusion regarding the law. Worse still, the provision requires Robles to pay arbitration expenses, which although not specified, presumably includes the arbitrator’s fees and expenses associated with arbitration. As described in the Declaration of Edmund Espinoza, the arbitrator’s fees far exceed the type of expenses Robles would bear if she brought her case in court. (Espinoza Decl., ¶ 8; see Haydon, supra, 97 Cal.App.5th at p. 1291 (requirement that parties bear their own costs and fees in connection with the arbitration was substantively unconscionable).) Moreover, in FEHA cases, a prevailing plaintiff is ordinarily entitled to an award of attorney’s fees, which is another statutorily recognized remedy not accounted for in the allocation of costs provision because the allocation of costs as described in Section 10.4 provides for an award of costs to the prevailing party, but not fees.[10]

Based upon the foregoing the court finds a low degree of procedural unconscionability but a sufficiently high degree of substantive unconscionability to render the arbitration agreement unenforceable.

The Agreement contains a severability provision. Civil Code section 1670.5, subdivision (a), also provides that “[i]f the court as a matter of law finds [a] contract or any clause of the contract to have been unconscionable at the time it was made[,] the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”

“In deciding whether to sever terms rather than to preclude enforcement of the provision altogether, the overarching inquiry is whether the interests of justice would be furthered by severance; the strong preference is to sever unless the agreement is ‘permeated’ by unconscionability.... An agreement to arbitrate is considered permeated by unconscionability where it contains more than one unconscionable provision.” (De Leon v. Pinnacle Property Management Services, LLC (2021) 72 Cal.App.5th 476, 492 (cleaned up).) “Such multiple defects indicate a systematic effort to impose arbitration on [the nondrafting party] not simply as an alternative to litigation, but as an inferior forum that works to the [drafting party's] advantage.” (Armendariz, supra, 24 Cal.4th at p. 124.) An arbitration agreement is also deemed “permeated” by unconscionability if “there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement.” (Id. at pp. 124-125.) If “the court would have to, in effect, reform the contract, not through severance or restriction, but by augmenting it with additional terms,” the court must void the entire agreement. (Id. at p. 125.)

Here, the court finds at least three substantively unconscionable terms in the arbitration provision. To remove the unconscionable taint, the court would have to reform the arbitration agreement – delete and/or rewrite the confidentiality provision, rewrite the Choice of Law provision and rewrite the allocation of costs provision. As the California Supreme Court stated in Armendariz, “Because a court is unable to cure this unconscionability through severance or restriction and is not permitted to cure it through reformation and augmentation, it must void the entire agreement. [Citation.] ¶ Moreover, whether an employer is willing, now that the employment relationship has ended, to allow the arbitration provision to be mutually applicable, or to encompass the full range of remedies, does not change the fact that the arbitration agreement as written is unconscionable and contrary to public policy. Such a willingness “can be seen, at most, as an offer to modify the contract; an offer that was never accepted. No existing rule of contract law permits a party to resuscitate a legally defective contract merely by offering to change it. [Citation.]” (Armendariz, supra, 24 Cal.4th at p. 125.)

Given the foregoing, the court need not address the remaining issues at this time.[11] The motion to compel arbitration is DENIED. The court sets a status conference in approximately 30 days. The court will discuss available dates with counsel.

[1] At the hearing on February 28, 2024, the court indicated it was not inclined to consider Plaintiffs’s sur-reply, which was filed without leave of court. Plaintiffs argued the sur-reply was appropriate because Robles served Plaintiffs with two oppositions, and the sur-reply addressed the second opposition. Plaintiffs are technically correct. Robles served Plaintiffs with her opposition timely, but, due to under-seal filing complications, Robles was unable to file her opposition. Having received Robles’s opposition, Plaintiffs timely filed their reply to the served opposition. After Plaintiffs filed their reply, Robles successfully filed her opposition. Plaintiffs took that filing as an opportunity to file their sur-reply. With this background in mind, the court stated that if Robles’s two oppositions contained different information, the court would consider the sur-reply. If they were the same document, however, the court would not. The court gave Plaintiffs the opportunity to compare the two documents and asked Plaintiffs report back to the court. On March 4, 2024, Plaintiffs responded: “the words of Defendant’s Opposition are the same.” (3/4/24 Response, p. 3:1, italics added.) Accordingly, the court will not consider Plaintiffs’ sur-reply. “A court has broad discretion to accept or reject late-filed papers, and the general rule is that new evidence is not permitted even on reply.” (Haydon v. Elegance at Dublin (2023) 97 Cal.App.5th 1280, 1289 (Haydon).)

[2] Plaintiffs argue Robles did not specifically challenge the enforceability of the delegation clause. In Rent-A-Center, supra, 561 U.S. at p. 71, the High Court made clear that judicial consideration of a challenge to the enforceability of the delegation clause is triggered only if the challenge is directed specifically to the delegation clause. (See also Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1109 [court resolves challenge to a delegation clause only “when a specific contract challenge is made to the delegation clause”].) Contrary to Plaintiffs contention, however, Robles does in fact challenge the enforceability of the delegation clause. (See Opp., p. 7:17-23.)

[3] A side by side comparison between the language in the agreement considered in Parada and the language at issue here is illustrative: In Parada the two clauses at issue state: Delegation: “‘The parties agree that any and all disputes, claims or controversies arising out of or relating to any transaction between them or to the breach, termination, enforcement, interpretation or validity of this Agreement, including the determination of the scope or applicability of this agreement to arbitrate, shall be submitted to final and binding arbitration before JAMS....’” Severability: “‘[i]n the event that any provision of this Agreement shall be determined by a trier of fact of competent jurisdiction to be unenforceable in any jurisdiction, such provision shall be unenforceable in that jurisdiction and the remainder of this Agreement shall remain binding upon the parties as if such provision was not contained herein.’ (Italics added.)” (Parada, supra, 176 Cal.App.4th at p. 1566, bold italics added.)

In this case the delegation and severability clauses state: Delegation: “[t]he arbitrator shall have exclusive authority to resolve any dispute relating to the interpretation, applicability or enforceability of this Agreement … any Claim that all or part of this Agreement is void or voidable.” (Ravich Decl., Ex. 1, Agreement, § 10.2.) Severability: “In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction…. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.” (Ravich Decl., Ex. 1, Agreement, § 9.4, bold italics added.)

[4] Robles states in her Declaration, dated 1/23/24, that she “was not given any meaningful opportunity to review [the Agreement] or to have it reviewed by my own counsel.” (Robles Decl., ¶ 11.) She reiterates this position in her supplemental Declaration dated 3/8/24. (Robles Decl., ¶ 10.) These are not credible positions. She was in possession of the Agreement for months -- since October 2018.

[5] Neither party indicates the time when Ravich arrived -- day or night. Similarly, neither party indicates whether Ravich told Robles he was coming over before he arrived. Robles’s Declaration presents Ravich’s arrival as a surprise, Ravich does not counter Robles’s characterization.

[6] Robles presents herself as unsophisticated and unfamiliar with the legal system. However, attached as Exhibit F to her March 15, 2024, Declaration is a signed joint retainer agreement with the law firm, Theodora Oringher. While the subject matter of the retainer relates to the Tirschwell subpoena, Robles was at least familiar with the process of retaining counsel. Interestingly, the other client identified in the joint retainer agreement is Libra, with a signature line for Ravich, which appears to contradict Ravich’s statement that “Robles’s attorney has never represented Libra or me.” (Ravich Decl., 1/29/24, ¶ 17.)

[7] Plaintiffs argue Armendariz does not apply because Robles is not “preemployment,” in the sense that she is not walking in off the street hoping to land a job with Libra or with Ravich. However, Armendariz is not restricted to preemployment arbitration agreements. As noted by the Supreme Court in Sonic, supra, the law governing mandatory employment arbitration agreements encompasses “arbitration agreements that are conditions of new or continuing employment.” (Sonic, supra, 57 Cal.4th at p. 1130.) (Emphasis added.) Further, Plaintiffs read “preemployment” too narrowly. In Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1249-1250, the appellate court affirmed the trial court’s refusal to compel arbitration of a salesperson’s FEHA claims. The court observed the fact “[t]hat plaintiffs are independent contractors and not employees makes no difference in this context” because the “contract by which they were to work for defendants contained a mandatory arbitration provision.” (Id. at p. 1249.) Similarly, in Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1046 (Ramos), the appellate court applied Armendariz where the plaintiff was excluded “from opportunit[ies] for career advancement.” There is no doubt Robles’s hiring as COO was contingent upon her signing the Agreement and Release. (See, e.g., Release Agreement, § 1.2.)

[8] The Murrey Court went on to find that the two cases relied on by the employer, Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 398, 408 and Woodside Homes of Cal., Inc. v. Superior Court (2003) 107 Cal.App.4th 723, 732, were “not persuasive in the context of a workplace sexual harassment complaint.” (Murrey, supra, 87 Cal.App.5th at p. 1254.) Here, Plaintiffs rely on the same two unpersuasive cases.

[9] To confuse matters further Section 10.1, entitled, Choice of Law, states that the Agreement shall be interpreted under the “substantive laws of the State of California applicable to contracts executed and performed entirely in such State.” The venue provision for any trial is equally problematic and in violation of California law. Section 10.6 states that if the arbitration provision “is unenforceable for any reason, all claims shall be decided by trial before the court and not by a jury. The venue for any such trial shall be in the state or federal courts located in Clark County, Nevada.” (Agreement, § 10.6, emphasis added, and text changed to lower case.)

[10] The court recognizes that Robles has not filed her answer or cross-complaint. Nonetheless, the parties consider, as does the court, the impact of Robles’s potential FEHA claims, including her claims for sexual harassment, on the merits of the motion to compel arbitration. Whether Robles’s potential causes of action survive scrutiny is left for another day.

[11] Robles challenges whether Plaintiffs paid the JAMS initiation fees in compliance with Code of Civil Procedure sections 1281.97 and 1281.98. (See Doe v. Superior Court of City and County of San Francisco (2023) 95 Cal.App.5th 346, 350 [“we strictly enforce the 30-day grace period in section 1281.98(a)(1) and conclude fees and costs owed for a pending proceeding must be received by the arbitrator within 30 days after the due date”]; Cvejic v. Skyview Capital, LLC (2023) 92 Cal.App.5th 1073, 1078 [“The statute provides recourse when the party that pressed for arbitration fails to pay its arbitration fee. The statute deems this failure to be a material breach and entitles the claimant to withdraw unilaterally from arbitration.”].) The court is satisfied Plaintiffs complied with their obligations to initiate arbitration. (See Ede Decl., Exs. B and C.)