Filed 10/6/26 Cortez v. Burberry Ltd. CA2/8
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
GABRIELA CORTEZ, B339740
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. 23STCV21363)
v.
BURBERRY LIMITED et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Theresa M. Traber, Judge. Reversed with
directions.
Morgan, Lewis, & Bockius, Barbara J. Miller and David J.
Rashé for Defendants and Appellants.
Reisner and King, Adam Jason Reisner; Pletcher Law and
Andrew S. Pletcher for Plaintiff and Respondent.
_________________________
INTRODUCTION
Gabriela Cortez claims her employer Burberry Limited and
Ana Fragoso, a Burberry manager, harassed her and ultimately
terminated her employment on account of her pregnancy. We
refer to both defendants collectively as Burberry. When Cortez
was hired, she signed an agreement to arbitrate claims related to
her employment (Agreement). Instead of proceeding to
arbitration with her claims, Cortez filed a lawsuit in Los Angeles
Superior Court. Burberry filed a motion to compel arbitration
based on the contract Cortez had signed. The trial court found
the Agreement unconscionable and declined to sever the
offending contract terms.
On appeal, Burberry contends the Agreement was not
revocable due to unconscionability, and that even if it were, the
trial court could easily have severed the offending terms. Based
on caselaw issued after the trial court’s ruling, we conclude the
trial court should have enforced the arbitration contract after
severing the offending terms. We reverse the trial court’s order
denying Burberry’s motion to compel arbitration.
FACTS AND PROCEDURAL BACKGROUND
I. Factual Allegations of the Complaint
In April 2018, Burberry hired Cortez as a sales associate.
When Cortez became pregnant and suffered from back pain, she
asked to be approved to work remotely from March 1, 2020 until
about June 23, 2020, the start of her approved maternity leave.
While Cortez was on leave, Burberry asked her to return early
from her maternity leave. Cortez asked to continue working
remotely but Burberry refused to let her do so. Instead, Burberry
extended her maternity leave through January 4, 2021, crediting
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it against her personal time off. On February 3, 2021, Cortez
submitted a doctor’s note to justify a further leave extension.
Burberry gave her a hard deadline of March 9, 2021, to submit
additional documentation in support of an extension of her leave.
She submitted the requested paperwork on March 8, 2021; yet on
March 16, 2021, Burberry pressured her again to return to work.
She did not. On March 29, 2021, Burberry terminated Cortez
based on her absences.
On April 15, 2021, Burberry told Cortez it had not received
her additional paperwork. It turned out that Hartford Insurance,
to whom she had submitted the requested documentation,
mistakenly sent the wrong paperwork to Burberry. Hartford told
Cortez it would admit its mistake to Burberry. Up until the filing
of the complaint, however, Cortez had yet to hear back from
Burberry about the mistake. Her employment remained
terminated.
II. Litigation in the Trial Court
On September 6, 2023, Cortez filed a complaint in Los
Angeles Superior Court against Burberry asserting several
causes of action for violations of the California Fair Employment
and Housing Act (FEHA) (Gov. Code, § 12940 et seq.). The
complaint alleges causes of action for:
• actual/perceived disability harassment under FEHA;
• actual/perceived disability discrimination under FEHA;
• actual/perceived disability retaliation under FEHA;
• failure to engage in the mandatory good-faith interactive
process under FEHA;
• failure to accommodate disability under FEHA;
• violation of the California Family Rights Act;
• violation of the California Pregnancy Disability Leave Law;
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• sex/gender harassment under FEHA;
• sex/gender discrimination under FEHA;
• sex/gender retaliation under FEHA;
• intentional infliction of emotional distress; and
• failure to prevent and investigate harassment,
discrimination, or retaliation under FEHA.
Burberry filed an answer to the complaint, an unsuccessful
motion to remove the action to federal court, and a motion to
compel arbitration and to stay the court proceedings. In support
of its motion to compel arbitration, Burberry included a
declaration from Nicola Internullo, vice president of human
resources at Burberry, who attested Cortez electronically
received the digital packet of onboarding documents via her email
address and electronically signed and returned the Agreement
when she was hired. Burberry attached the five-page Agreement
as an exhibit to the declaration.
Cortez opposed the motion arguing, among other things,
that the Agreement is unenforceable because it is procedurally
and substantively unconscionable. Cortez attached a declaration
to her opposition, attesting she did not know what the Agreement
was, did not recall signing or initialing it, did not know the
Agreement called for her to waive rights, and was never provided
a copy of the rules cited in the Agreement. Burberry filed a reply.
III. The Trial Court’s Ruling
On May 24, 2024, the trial court denied Burberry’s motion
to compel arbitration, finding the Agreement adhesive, and
therefore procedurally unconscionable. It also found two of the
Agreement’s provisions substantively unconscionable. It declined
4
to sever the two offending provisions, finding the Agreement
“permeated” with unconscionability.
The trial court succinctly summarized Cortez’s claims,
stating that “Plaintiff alleges that she was harassed for taking
maternity leave and terminated for complaining about her
mistreatment.” The court found the Agreement minimally
procedurally unconscionable because it is a contract of adhesion.
As for substantive unconscionability, the court reviewed all
grounds alleged by Cortez and concluded that two contract terms
were unconscionable. First, it found “some measure” of
unconscionability because the Agreement includes a
confidentiality provision that serves to benefit the employer only.
Second, the court found unconscionable the waiver of class,
collective, and representative actions other than Private
Attorneys General Act (PAGA) claims under Labor Code section
2698 et al. The court found this term “one factor in the Court’s
evaluation” of unconscionability. The trial court then proceeded
to consider whether these terms could be severed from the
Agreement. It found: “Plaintiff has thus demonstrated that the
agreement has multiple unconscionable provisions, the most
consequential being the confidentiality provision that bars
employees from learning about an employer’s discrimination or
other mistreatment of similarly situated workers. [¶] . . . It is not
an abuse of discretion for the Court to refuse to enforce an
arbitration agreement which contains multiple unconscionable
terms. [Citation.] As Plaintiff has identified multiple
substantively unconscionable provisions and demonstrated some
minimal procedural unconscionability, that discretion is exercised
here. [¶] The Court finds that Plaintiff has shown the agreement
is permeated with substantive unconscionability and is
5
unconscionable on the whole. Defendants are therefore not
permitted to enforce the Arbitration Agreement.” Burberry
timely appealed.
DISCUSSION
The primary questions we consider are two: whether the
agreement to arbitrate is unconscionable and therefore
unenforceable under California law; and whether the court
properly declined to enforce the entire agreement rather than
sever unconscionable provisions.
I. Standard of Review and Burden of Proof
The trial court sits as the trier of fact when deciding a
motion to compel arbitration, “weighing all the affidavits,
declarations, and other documentary evidence, as well as oral
testimony received at the court’s discretion, to reach a final
determination.” (Engalla v. Permanente Medical Group, Inc.
(1997) 15 Cal.4th 951, 972 (Engalla).) The party opposing a
motion to compel arbitration bears the burden of proving by a
preponderance of the evidence any fact necessary to its defense.
(Ibid.)
Our review of an order regarding an arbitration
agreement’s validity is de novo if the evidence is not in conflict
and the ruling is based entirely on an interpretation of law. If a
validity ruling rests on the trial court’s resolution of evidentiary
disputes, substantial evidence review applies to the court’s
factual findings. (Ramirez v. Charter Communications, Inc.
(2024) 16 Cal.5th 478, 493 (Ramirez).)
The court’s refusal to sever unconscionable terms from an
arbitration agreement is reviewed for abuse of discretion.
(Armendariz v. Foundation Health Psychcare Services, Inc. (2000)
6
24 Cal.4th 83, 122 (Armendariz).) In keeping with California’s
strong public policy in favor of arbitration, any doubts regarding
the validity of an arbitration agreement are resolved in favor of
arbitration. (Coast Plaza Doctors Hospital v. Blue Cross of
California (2000) 83 Cal.App.4th 677, 686.)
II. Unconscionability Generally
California law and public policy establish “a presumption in
favor of arbitrability.” (Engalla, supra, 15 Cal.4th at p. 971; see
Code Civ. Proc., § 1280 et seq.) Contract defenses like
unconscionability, “ ‘ “may be applied to invalidate arbitration
agreements without contravening” the’ FAA or California law.”
(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (OTO).) “The
degree of unfairness required for unconscionability must be as
rigorous and demanding for arbitration clauses as for any other
contract clause.” (Ibid.)
The general principles of unconscionability are well
established. The unconscionability doctrine includes separate
procedural and substantive elements. (OTO, supra, 8 Cal.5th at
p. 125.) “ ‘The procedural element addresses the circumstances of
contract negotiation and formation, focusing on oppression or
surprise due to unequal bargaining power.’ ” (Ibid.) “This
element is generally established by showing the agreement is a
contract of adhesion, i.e., a ‘standardized contract which, imposed
and drafted by the party of superior bargaining strength,
relegates to the subscribing party only the opportunity to adhere
to the contract or reject it.’ ” (Ramirez, supra, 16 Cal.5th at
p. 492.) The trial court found “only a minimal amount of
procedural unconscionability” based on the adhesive nature of the
Agreement. On appeal, Burberry does not contest the trial
7
court’s finding of minimal procedural unconscionability so we do
not further discuss this finding.
“Substantive unconscionability pertains to the fairness of
an agreement’s actual terms and to assessments of whether they
are overly harsh or one-sided.” (Pinnacle Museum Tower Assn. v.
Pinnacle Market Development (US), LLC (2012) 55 Cal.4th
223, 246.) Substantive unconscionability “typically is found in
the employment context when the arbitration agreement is ‘one-
sided’ in favor of the employer without sufficient justification.”
(Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1472–
1473.) “A contract term is not substantively unconscionable
when it merely gives one side a greater benefit; rather, the term
must be ‘so one-sided as to “shock the conscience.” ’ ” (Pinnacle
Museum Tower Assn., at p. 246.)
Both procedural and substantive unconscionability must be
present for the unconscionability defense to be established, but
“they need not be present in the same degree.” (Armendariz,
supra, 24 Cal.4th at p. 114.) Procedural and substantive
unconscionability are evaluated on a “ ‘sliding scale’ ” where “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.”
(Ibid.)
So, “a finding of procedural unconscionability does not
mean that a contract will not be enforced, but rather that courts
will scrutinize the substantive terms of the contract to ensure
they are not manifestly unfair or one-sided.” (Gentry v. Superior
Court (2007) 42 Cal.4th 443, 469, abrogated on other grounds as
recognized in OTO, supra, 8 Cal.5th at p. 129, fn. 10.)
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III. Substantive Unconscionability
A. The Class Action Waiver
The Introductory section of the Agreement summarizes it
in bold: “[T]his Agreement prohibits employees and the
Company from filing, opting into, becoming a class
member in, or recovering through a class action,
collective action, or other representative action or similar
joint proceeding, except as otherwise stated herein.” The
actual provision at issue states: “Any legal disputes, claims or
controversies (‘Claims’) an employee may have against the
Company or the Company may have against an employee must
be submitted to and resolved by arbitration instead of the courts,
whether or not such claims arise out of an employee’s
employment or termination. All Claims may only be brought in
the party’s individual capacity, and not as a plaintiff, claimant or
class member in any class, collective or other representative or
joint proceedings (excluding California Private Attorney[s]
General Act representative actions).” The Agreement continues:
“All parties covered by this Agreement expressly waive any right
with respect to any Claims to submit, initiate, or participate in a
representative capacity or as a plaintiff, claimant, or member in a
class action, collective action, or other representative or joint
action (excluding California Private Attorney[s] General Act
representative actions), regardless of whether the action is filed
in arbitration or in court. Furthermore, if a court orders that a
class, collective, or other representative or joint action should
proceed, in no event will such action proceed in the arbitration
forum. Claims may not be joined or consolidated in arbitration
with disputes brought by other individuals(s) unless agreed to in
writing by all parties. [¶] Employees will not be retaliated
9
against, disciplined, or threatened with discipline as a result of
his or her filing of or participation in a class, collective, or other
representative or joint action in any forum. However, all parties
covered by this Agreement may lawfully seek enforcement of this
Agreement and the above Class Action/Collective
Action/Representative Action Wavier under the Federal
Arbitration Act and seek dismissal of such class, collective,
representative, or other joint actions or claims. Notwithstanding
any other clause contained in this Agreement, any claim that all
or part of the Class Action/Collective Action/Representative
Action Waiver is invalid, unenforceable, unconscionable, void, or
voidable may be determined only by a court of competent
jurisdiction and not by an arbitrator. [¶] The Class
Action/Collective Action/Representative Action Waiver shall be
severable when a dispute is filed as an individual action and
severance is necessary to ensure that the individual action
proceeds in arbitration.” The Agreement stipulated that
“interpretation and enforcement of this Agreement shall be
governed by the Federal Arbitration Act.”
The trial court ruled that “[w]hile class action waiver
provisions may be enforceable in some instances, there is no
question that they are one-sided against the employee and, thus,
may be considered as one factor in the Court’s evaluation of
whether an arbitration agreement should be deemed
unconscionable.”
We disagree with the trial court that the class action
waiver here contributed to the Agreement’s unconscionability. It
is true that an employee has an unwaivable right to bring a
representative claim under PAGA. (Iskanian v. CLS
Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 383,
10
overruled on other grounds in Viking River Cruises, Inc. v.
Moriana (2022) 596 U.S. 639 (Viking River Cruises); Stoker v.
Blue Origin, LLC (2026) 120 Cal.App.5th 91, 111–112 [waiver of
right to bring representative actions is contrary to state law and
unenforceable as a matter of state law].) However, the class
action waiver here specifically exempted PAGA representative
actions. Thus, the Agreement does not interfere with an
employee’s unwaivable right to bring a representative claim
under PAGA. Because PAGA representative actions have been
exempted from the waiver, the Federal Arbitration Act (FAA)
(9 U.S.C. § 1 et seq.) otherwise requires enforcement here of the
class action, representative action, and collective action waiver.
(See AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333
(Concepcion); Sanchez v. Valencia Holding Co., LLC (2015)
61 Cal.4th 899, 923–924 [certain consumer contract rights under
the Consumers Legal Remedies Act are preempted by FAA and
can be waived]; American Express Co. v. Italian Colors
Restaurant (2013) 570 U.S. 228, 232–235 [waivers of class action
of antitrust claims are preempted and can be waived]; Adolph v.
Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1114 [individual
PAGA claims may be waived, the right to bring a representative
PAGA action cannot be waived].)
In finding the class action waiver unconscionable the trial
court relied on Hasty v. American Automobile Assn. etc. (2023)
98 Cal.App.5th 1041, 1061 (Hasty) and Navas v. Fresh Venture
Foods, LLC (2022) 85 Cal.App.5th 626, 636. However, neither
case is apposite. Both involved waivers that improperly included
PAGA representative actions. (Hasty, at p. 1063; Navas, at
pp. 634–635.) Such is not the case here. The class
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action/collective action/representative action waiver here is not
unconscionable.
B. Confidentiality Clause
The Agreement provides: “All proceedings and documents
prepared in connection with any arbitration pursuant to this
Agreement shall be confidential and, unless otherwise required
by law, shall not be disclosed to any other person other than the
parties, their counsel, witnesses, expert, and the arbitrator(s).
The results of the arbitration, unless otherwise agreed to by the
parties, are confidential and may not be disclosed, made public,
or reported to any person or entity, except as otherwise required
by law, or to the extent necessary in connection with judicial
review of the final written decision.”
The trial court ruled that the confidentiality provision in
the Agreement was substantively unconscionable because
Burberry did not identify any commercial need for it. Citing
Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1250, the trial
court recognized that confidentiality provisions are not per se
unconscionable if they are based on a legitimate commercial
need. There is no evidence in the record before us and no
language in the Agreement recognizing a commercial need for the
confidentiality provision. The trial court went on to cite Hasty,
which held that a confidentiality provision in an arbitration
agreement is substantively unconscionable with respect to
harassment, retaliation, and discrimination claims because it “
‘serve[s] 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
12
and thus potentially discourages that employee from pursuing a
valid discrimination claim.” ’ ” (Hasty, supra, 98 Cal.App.5th at
p. 1062.) The Hasty court also noted “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.” (Ibid.)
We agree with the trial court and the holding in Hasty.
Burberry presented no commercial need for the confidentiality
provision and as a practical matter, the provision does not evince
mutuality. Burberry, as employer, has historical information on
hand about suits against it for claims of harassment, retaliation
and discrimination; Cortez, as employee, does not. Thus it is
more onerous for Cortez to investigate the history of the employer
with respect to these types of claims, and even more difficult
when investigating under a gag order. There is no meaningful
mutuality in this confidentiality provision as it benefits the
employer only. Having the ability to freely investigate past
claims of discrimination and retaliation inures to Cortez’s benefit.
Given the employer’s built-in database, losing the ability to freely
investigate impacts negatively only on Cortez with no negative
effect on the employer.
Sealing the results of the arbitration can only benefit the
employer as well as other employees are kept unaware of past
cases brought against the employer that might establish a
pattern or practice of discrimination, harassment, or retaliation.
Finally the confidentiality provision has nothing to do with
furthering the purposes of arbitration itself as a cost-saving and
efficient way to adjudicate claims because the provision
effectively serves only to give the employer an unfair advantage.
13
(Haydon v. Elegance at Dublin (2023) 97 Cal.App.5th 1280, 1290
(Haydon).)
Most significantly, the provision prohibits either party from
disclosing proceedings or documents to anyone other than
counsel, witnesses and experts. The practical impact of this is
that Cortez would be in violation if she attempted to interview
any other party informally to determine if they could, should, or
would be witnesses on her behalf. (Gurganus v. IGS Solutions
LLC (2025) 115 Cal.App.5th 327, 339 [confidentiality provision
unconscionable where disclosing information to possible
witnesses is prohibited unless it is done as part of the formal
discovery process; (Haydon, supra, 97 Cal.App.5th at p. 1290
[clause barring parties form disclosing the existence, content or
results of the arbitration unconscionable because it restricts
plaintiff from gathering information informally, increases costs
unnecessarily and defeats the purpose of using arbitration as a
simpler, more time-effective forum for resolving disputes].)
We agree with the trial court that the confidentiality
provision is substantively unconscionable. We also note that in
the trial court Burberry offered to waive the provision, and, on
appeal, persists in that position. It argues severance of the
confidentiality provision would promote the interests of justice.
It is apparent to us, and we assume to Burberry, that the
arbitration can go forward to Burberry’s satisfaction because it
can prepare whether or not the confidentiality provision is
enforced; its impact is to unfairly impinge on only Cortez’s ability
to investigate and prepare the presentation of her case. This is
the antithesis of mutuality. (Abramson v. Juniper Networks, Inc.
(2004) 115 Cal.App.4th 638, 657 [lack of mutuality can be
14
manifested as much by what the agreement does not provide as
by what it does].)
IV. Severance
The Agreement provides: “If any provision of this
Agreement is held to be invalid or unenforceable, in whole or in
part, the remaining provisions shall continue to be valid.
The trial court declined to sever the provisions it found
unconscionable, concluding the Agreement was “permeated” by
unconscionability because two of its many provisions were
unconscionable.
The trial court’s ruling suggests that it was applying a
“bright line” rule that whenever an agreement has more than one
unconscionable provision, severance is prohibited. This is not
now the law. As our Supreme Court held in Ramirez, issued after
the trial court’s ruling, “[W]e clarify that no bright-line rule
requires a court to refuse enforcement if a contract has more than
one unconscionable term. Likewise, a court is not required to
sever or restrict an unconscionable term if an agreement has only
a single such term. Instead, the appropriate inquiry is
qualitative and accounts for each factor Armendariz identified.
At the outset, a court should ask whether ‘the central purpose of
the contract is tainted with illegality.’ (Armendariz, supra,
24 Cal.4th at p. 124.) If so, the contract cannot be cured and the
court should refuse to enforce it. If that is not the case, the court
should go on to ask first, whether the contract’s unconscionability
can be cured purely through severance or restriction of its terms,
or whether reformation by augmentation is necessary.
(Armendariz, supra, 24 Cal.4th at pp. 124–125.) If no
‘reformation is required,’ the offending provision can be severed
or limited and ‘the rest of the arbitration agreement left intact,’
15
then severance or restriction is the preferred court for provisions
that are collateral to the agreement’s main purpose. [Citations.]
If the unconscionability cannot be cured by extirpating or
limiting the offending provisions, but instead requires
augmentation to cure the unconscionability, then the court
should refuse to enforce the contract. [Citations.] Courts cannot
‘rewrite agreements and impose terms to which neither party has
agreed.’ ” (Ramirez, supra, 16 Cal.5th at p. 516.)
Ramirez continues: “Even if a contract can be cured, the
court should also ask whether the unconscionability should be
cured through severance or restriction because the interest of
justice would be furthered by such actions. (Armendariz, supra,
24 Cal.4th at p. 124.) This part of the inquiry focuses on whether
mere severance of the unconscionable terms would function to
condone an illegal scheme and whether the defects in the
agreement indicate that the stronger party engaged in a
systematic effort to import arbitration on the weaker party not
simply as an alternative to litigation, but to secure a forum that
works to the stronger party’s advantage. (Ibid.) If the answer to
either of these questions is yes, the court should refuse to enforce
the agreement.” (Ramirez, supra, 16 Cal.5th at pp. 516–517.)
We conclude the trial court erred in finding the Agreement
was permeated with unconscionability and declining to sever the
challenged provisions because it found more than one unfair
provision in the Agreement. We have found one substantively
unconscionable provision, the confidentiality clause. That clause
benefits only the employer in a way that can effect Cortez’s
investigation, production and presentation of evidence at the
arbitration itself. Its excision will cure that potential negative
non-mutual impact while preserving the prospect of a fair
16
arbitration of the claims Cortez raises and to which both parties
agreed as the method to settle their differences. No reformation
or rewriting is required. Put another way, the Agreement can be
fairly enforced and its purpose—arbitration—fairly executed
without the confidentiality provision. The provision, although
antithetical to the interest of justice, is collateral to the conduct
of the arbitration proceedings themselves.
We find no evidence in this record to support a finding that
severance will condone an illegal scheme or otherwise defeat the
ends of justice. Nor do we have evidence from which we can infer
that Burberry wrote this Agreement intending to pound weaker
parties, that is, its employees, into submission. Indeed, many
other provisions of the Agreement passed muster as fairly posed.
We trust Burberry will remove the confidentiality provision in its
arbitration agreements now that it has been found
unconscionable. To do otherwise would supply the evidence and
inferences now missing as to Burberry’s true intent.
V. Preemption of the Confidentiality Provision
The Agreement provides: “The interpretation and
enforcement of this Agreement shall be governed by the Federal
Arbitration Act or, to the extent the Federal Arbitration Act is
not applicable, then under applicable state law.” Based on this
language, the trial court found the Agreement governed by the
FAA. We do not quarrel with that finding. (Ramirez, supra, 16
Cal.5th at p. 518 [the Agreement expressly provides that it “will
be governed” by the FAA.].)
Burberry argues that the FAA preempts the rule against
confidentiality provisions. It first contends that section 2 of the
FAA provides that a written arbitration agreement “shall be
valid, irrevocable, and enforceable, save upon such grounds as
17
exist at law or in equity for the revocation of any contract.”
(9 U.S.C. § 2.) The United States Supreme Court interprets
section 2 as including two separate clauses: “An enforcement
mandate, which renders agreements to arbitrate enforceable as a
matter of federal law, and a savings clause, which permits
invalidation of arbitration clauses on grounds applicable to ‘any
contract.’ ” (Viking River Cruises, supra, 596 U.S. at p. 650.)
While the FAA’s saving clause preserves generally applicable
contract defenses such as unconscionability, “nothing in [the
FAA] suggests an intent to preserve state-law rules that stand as
an obstacle to the accomplishment of the FAA’s objectives.”
(Concepcion, supra, 563 U.S. at p. 343.)
Burberry contends that the categorical refusal to enforce
any arbitration agreement that contains a confidentiality
provision, as it contends the trial court did, is preempted by the
FAA, because the FAA preemption analysis inquires as to
whether the state law rule singles out arbitration agreements
and discriminates against them as opposed to other types of
contracts. (See Morgan v. Sundance, Inc. (2022) 596 U.S. 411,
418 [under the FAA, the court must “hold a party to its
arbitration contract just as the court would to any other kind” of
contract].)
Cortez argues the trial court’s ruling was far from a
categorical bar of confidentiality provisions in arbitration
agreements. Instead, Cortez argues the trial court’s ruling was
based on the confidentiality provision’s limits on discovery and
lack of “legitimate commercial need” for the provision.
We agree with Cortez that the trial court’s ruling did not
categorically create or apply a rule that singularly affects
arbitration agreements and no other types of contracts.
18
“[A]lthough the FAA ‘requires courts to place arbitration
agreements on an equal footing with other contracts and to
enforce them according to their terms,’ it also permits courts to
declare arbitration agreements unenforceable upon the same
grounds as any other contract, including unconscionability.”
(Ramirez, supra, 16 Cal.5th at p. 518.) “Thus, it does not
contravene the FAA to find that certain provisions of the
Agreement are unconscionable. The FAA seeks to treat
interpretation and enforcement of arbitration agreements equally
with other contracts. Such treatment continues to recognize the
severance of unconscionable claims as an option for the court’s
consideration.” (Ibid.)
Armendariz also touches upon this issue. It held that FHA
claims are not exempt from arbitration. “To be sure, the FEHA
provides critically important protections against discrimination.
But the imperative to enforce such protections does not, as a
general matter, inherently conflict with arbitration. Assuming
an adequate arbitral forum, we agree with the Supreme Court
that ‘[b]y agreeing to arbitrate a statutory claim, a party does not
forgo the substantive rights afforded by the statute; it only
submits to their resolution in an arbitral, rather than a judicial,
forum.’ [Citation.] [¶] In short, . . . our inquiry into the
enforceability of the arbitration agreement at issue in this case
entails the same inquiry under the [California Arbitration Act] as
the FAA: Are there reasons, based on general contract law
principles, for refusing to enforce the present arbitration
agreement?” (Armendariz, supra, 24 Cal.4th at pp. 98–99, fn.
omitted.)
19
We conclude that the FAA permits us to apply the doctrine
of unconscionability, a general contract principle, to this
arbitration contract and its impact on Cortez’s FEHA claims.
Our ruling is not an obstacle to arbitration. On the contrary, it
preserves and protects the integrity of the arbitration that will
resolve the parties’ differences. That is all the trial court did here
in finding the confidentiality provision unconscionable; that is all
we do now.
VI. Cortez’s Argument that Burberry Waived Its Right to
Enforce the Agreement
In the trial court, Cortez contended Burberry waived its
ability to enforce the Agreement because it attempted to remove
the action to federal court and filed an answer to the complaint.
The trial court rejected Cortez’s argument, finding Cortez “cites
no authority standing for the position that removal to federal
court and filing of an answer constitute acts inconsistent with a
right to compel arbitration. [Cortez] has thus failed to carry her
[burden to] substantiate this objection.” ~(AA 309)~
In so ruling, the trial court noted the law favors arbitration,
waiver is not “ ‘ “ ‘lightly inferred,’ ” ’‘” and the party seeking to
prove waiver “ ‘bears a heavy burden of proof.’ ” (Hoover v.
American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1203
(Hoover).) The court further cited to the holding in Hoover, that
a “party seeking to prove waiver of a right to arbitration must
demonstrate ‘ “(1) knowledge of an existing right to compel
arbitration; (2) acts inconsistent with that existing right; and
(3) prejudice to the party opposing arbitration.” ’ ” (Ibid.)
20
Relying on Quach v. California Commerce Club, Inc. (2024)
16 Cal.5th 562 (Quach), Cortez again argues that Burberry
waived its ability to enforce the Agreement because it attempted
to remove the case to federal district court. Under Quach, to
“establish waiver under generally applicable contract law, the
party opposing enforcement of a contractual agreement must
prove by clear and convincing evidence that the waiving party
knew of the contractual right and intentionally relinquished or
abandoned it.” (Id. at p. 584.) Courts examine the totality of the
waiving party’s actions in determining waiver. (Armstrong v.
Michael’s Stores, Inc. (9th Cir. 2023) 59 F.4th 1011, 1015
(Armstrong).) The waiver analysis focuses on the actions of the
party who held the right to compel arbitration and whether the
actions were inconsistent with the right. (Quach, at p. 585.) The
conduct must be “inconsistent with an intent to enforce the
contractual right” to arbitrate and the inquiry is fact-specific.
(Id. at p. 584.)
Using the Quach framework, Cortez contends Burberry
knew about its contractual right to arbitrate, but intentionally
relinquished the right when, instead of moving to compel
arbitration at the start of litigation, Burberry instead filed an
answer in state court, attempted to remove the case to federal
court, argued to remove Fragoso as a “ ‘sham’ ” defendant named
only to defeat federal diversity jurisdiction, and then, only after
its efforts were unsuccessful, filed its motion to compel
arbitration.
Burberry argues that it never acted inconsistently with its
“known right to arbitrate.” Burberry contends it filed an answer
on October 11, 2023, in which it asserted arbitration as its third
defense, stating “The Complaint is barred because Plaintiff is
21
contractually bound to arbitrate her claims against Defendant.”
The very next day on October 12, 2023, Burberry filed a notice of
removal. After remand on October 27, 2023, Burberry argues it
filed its motion to compel “just ten days later on November 6,
2023.” Burberry further contends that removing the case to
federal court, did not, by itself suffice to demonstrate waiver.
(See Armstrong, supra, 59 F.4th at p. 1015.) And, in any event,
Burberry avers its attempt to remove based on diversity of
jurisdiction involved a purely jurisdictional inquiry, not an
adjudication on the merits. (Grancare, LLC v. Thrower by and
through Mills (9th Cir. 2018) 889 F.3d 543, 549.)
Under the Quach framework, we agree with the trial court
that Burberry did not waive its right to arbitrate.1 (See Hoover,
supra, 206 Cal.App.4th at p. 1204 [“A defendant’s removal of a
case filed in state court to federal court does not by itself
constitute an implicit waiver of the right to compel arbitration];
Armstrong, supra, 59 F.4th at pp. 1015–1016 [removal and
limited discovery insufficient to support waiver where the
removing party asserted right to arbitrate in answer].)
1 Given our ruling, we do not address Burberry’s argument
that Cortez improperly relied on materials outside the record in
support of her argument.
22
DISPOSITION
The trial court’s order denying Burberry’s motion to compel
arbitration is reversed with directions to the trial court to excise
the confidentiality provision in the Agreement and to grant
Burberry’s motion to compel arbitration and to stay court
proceedings pending conclusion of the arbitration. No costs are
awarded.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
STRATTON, P. J.
I concur:
VIRAMONTES, J.
23
WILEY, J., Concurring in the result:
I agree with the result. The decision to sever is fine with
the employer. It thus suffices to assume rather than decide the
contract is unconscionable. This is enough to send the case to
arbitration. I join that bottom line. I do not join the majority
opinion.
WILEY, J.
24