©2023 Seyfarth Shaw LLP www.seyfarth.com 2023 Cal-Peculiarities | 135 54 OTO, L.L.C. v. Kho, 8 Cal. 5th 111 (2019). 55 Id. As Justice Chin noted in dissent, this opinion creates tension with the FAA, which prohibits courts from refusing to enforce arbitration on the basis that another forum was preferable or that arbitration would not be effective in vindicating a statutory right. 56 Armendariz, 24 Cal. 4th at 117. (“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.’”‘). The language about “disadvantages that may exist for plaintiffs arbitrating disputes” betrays a judicial prejudice against arbitration, which is antithetical to the FAA. 57 Thus, Trivedi v. Curexo Tech. Corp., 189 Cal. App. 4th 387, 396-97 (2010), disapproved of a provision permitting the parties to seek judicial injunctive relief while arbitration proceeded, because Trivedi viewed the employer as more likely to seek injunctive relief than the employee. What makes this conclusion particularly peculiar, even for California, is that the California Arbitration Act itself authorizes precisely this sort of interim judicial injunctive relief. Code Civ. Proc. § 1281.8(b) (party to arbitration agreement may seek provisional judicial relief, if arbitral award “may be rendered ineffectual without provisional relief[,]” without thereby waiving the right to arbitrate). Finally, in 2016, the California Supreme Court repudiated this holding of Trivedi: “[A]n arbitration agreement is not substantively unconscionable simply because it confirms the parties’ ability to invoke undisputed statutory rights.” Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237 (2016). 58 Trivedi, 189 Cal. App. 4th at 394-95 (arbitration agreement cannot serve to waive statutory rights, and so arbitration clause calling for prevailing-party attorney fees was “substantively unconscionable” because it put the suing employee “at greater risk than if he brought his FEHA claims in court”); see also Wherry v. Award, Inc., 192 Cal. App. 4th at 1248-49 (arbitration agreement authorizing arbitrator to award costs, including arbitration fees, to the prevailing party was substantively unconscionable, because the agreement would cause a losing FEHA plaintiff to pay costs greater than the costs of litigating in court). 59 See Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 923-26 (9th Cir. 2013). 60 Little v. Auto Steigler, Inc., 29 Cal. 4th 1064 (2003) (special Armendariz rules apply to claim for dismissal in violation of public policy); see Mercuro v. Sup. Court (Countrywide Securities Corp.), 96 Cal. App. 4th 167, 180 (2002) (special rules cover claim under statute enacted for “public reason,” such as Labor Code sections 230.8 [protecting employee-parent for taking time off to visit school] and 970 [prohibiting false job promises to induce people to move]). 61 Nyulassy v. Lockheed Martin Corp. 120 Cal. App. 4th 1267, 1282-83 (2004). Importantly, the challenged arbitration agreement also required only the employee to arbitrate, and shortened the employee’ statutes of limitations, so the independent significance of the “free peek” provision was unclear. See also Carmona v. Lincoln Millennium Car Wash, Inc., 226 Cal. App. 4th 74, 89 (2014) (relying on Nyulassy to find a similar “unilateral `free peek’ provision” substantively unconscionable, because the provision unfairly favored the employer by subjecting employees to mandatory prearbitration disclosures while the employer had “no corresponding obligation … to discuss its disputes with employees before taking action in court or through arbitration”); Carlson v. Home Team Pest Defense, Inc., 239 Cal. App. 4th 619, 635 (2015) (arbitration agreement unconscionable in requiring employees, but not the employer, “to submit to an unspecified form of alternative dispute resolution before demanding arbitration”); Pokorny v. Quixtar, Inc., 601 F.3d 987, 999 (9th Cir. 2010) (arbitration provision that required employees—but not the employer—to submit disputes to non-binding, “employer-controlled” prearbitration dispute resolution process was substantively unconscionable because the provision gave the employer an “unfair advantage” by providing a “free peek” at the employee’s case). 62 Baxter v. Genworth N. Am. Corp., 16 Cal. App. 5th 713, 730 (2017). In upholding a refusal to compel arbitration, the Court of Appeal also cited provisions in the arbitration agreement that (1) prohibited contacting other employees about a claim, (2) shortened limitations periods, and (3) effectively limited an employee’s right to seek administrative remedies before an arbitration is conducted. 63 Davis v. Kozak, 53 Cal. App. 5th 897 (2020). The agreement was also deemed substantively unconscionable for exempting from arbitration any disputes involving “obligations under the Employee Confidentiality Agreement[.]” This provision enabled judicial claims that the employer was most likely to bring, while obliging the employee to arbitrate claims against the employer for wrongfully using the employee’s inventions or intellectual property. 64 E.g., Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1175 (9th Cir. 2003) (one-year limitations period set forth in arbitration agreement is unconscionable, as it would bar suits on continuing violations); Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 894 (9th Cir. 2002) (same); Stirlen v. Supercuts, Inc., 51 Cal. App. 4th 1519, 1542 (1997) (criticizing one-year limitations period in arbitration agreement that would not permit tolling). 65 Soltani v. W. & S. Life Ins. Co., 258 F.3d 1038, 1043-47 (9th Cir. 2001) (upholding provision in job application creating post-termination limitations period of six months, but striking down 10-day deadline to give written notice of intent to sue). 66 Pellegrino v. Robert Half Int’l, Inc., 182 Cal. App. 4th 87, 107-110 (2010). The California Supreme Court granted review of this case, albeit on other grounds, so it has been officially depublished. See Martinez v. Master Protection Corp., 118 Cal. App. 4th 107 (2004) (holding it was unconscionable for employer-imposed arbitration agreement to shorten limitations period to six months from date of violation, as that are insufficient to protect employees’ right to vindicate statutory protections). 67 Pearson Dental Supplies, Inc. v. Sup. Court, 166 Cal. App. 4th 71 (2008), rev. granted, No. S167169 (Cal. Aug. 21, 2008) (raising these issues: (1) What standard of judicial review applies to an arbitrator’s decision on a FEHA claim? (2) Can a mandatory arbitration agreement restrict an employee from seeking administrative remedies for violations of the Act?). 68 Pearson Dental Supplies, Inc. v. Sup. Court, 48 Cal. 4th 665 (2010). Pearson declined to address whether a one-year limitations period in the arbitration agreement was unlawful and independently rendered the agreement invalid, because the issue was not presented in the petition for review. Id. at 682 n.5. 69 Baxter v. Genworth N. Am. Corp., 16 Cal. App. 5th 713, 731-32 (2017) (reasoning that “[r]educing the time to pursue a claim by as much as two-thirds does not provide sufficient time to vindicate an employee’s statutory rights under the FEHA”). 70 Id. at 732. 71 Code Civ. Proc. § 1281.12.
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