Filed 8/13/26 Elizondo v. Livermore Sales and Service CA1/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
EDUARDO ELIZONDO,
Plaintiff and Respondent,
A174408
v.
LIVERMORE SALES AND (Alameda County
SERVICE, INC., Super. Ct. No. 25CV118875)
Defendant and Appellant.
Livermore Sales and Service, Inc. (Livermore Toyota) appeals the trial
court’s denial of its petition to compel arbitration of a lawsuit brought by its
former employee, Eduardo Elizondo. Livermore Toyota contends the trial
court erred by finding the arbitration agreement unconscionable and refusing
to sever the offending provisions. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In August 2023, Elizondo began working as a parts driver for
Livermore Toyota, a car dealership, delivering car parts to various regional
Toyota dealerships and collision repair shops. In August 2024, Elizondo
electronically signed the “Handbook Acknowledgment At Will and
Arbitration Agreement” (arbitration agreement) underlying this case.
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Relevant Arbitration Agreement Provisions
The arbitration agreement contains all the terms set forth below.
Elizondo and Livermore Toyota agree to pursue “any claims [either
party] might have” against either party “that currently exist or that may
arise in the future exclusively through binding arbitration.”
“Our agreement to arbitrate includes any and all claims which arise out
of the employment context or any other interaction/relationship we had,
have, or may have in the future. Those claims include, but are not limited to,
any claim, dispute, and/or controversy that either party brings against the
other (including, but not limited to, any claims of discrimination and
harassment, whether they be based on the California Fair Employment and
Housing Act, the Americans With Disabilities Act, Title VII of the Civil
Rights Act of 1964, as amended, claims pursuant to the California Private
Attorneys General Act (‘PAGA’) unless prohibited by controlling law, as well
as all other applicable state or federal laws or regulations) which would
otherwise require or allow resort to any court or other governmental dispute
resolution forum between [Elizondo] and the Company, as well as any third-
party beneficiaries of the Company.”
The agreement to arbitrate also encompasses “any claims arising from,
related to, or having any relationship or connection whatsoever with
[Elizondo’s] seeking employment with, employment by, or other association
with the Company or third-party beneficiaries, whether based on tort,
contract, statute, equity or otherwise.” Third-party beneficiaries include “the
Company’s owners, directors, officers, managers, employees, agents,
partners, attorneys, sister-companies, subsidiaries, parent companies, joint-
1
venturers, affiliated persons/entities, independent contractors, and parties
affiliated with its employee benefit and health plans.”
The sole exceptions to mandated arbitration are claims arising under
the National Labor Relations Act (29 U.S.C. § 151 et seq.) brought before the
National Labor Relations Board, claims for medical and disability benefits
under the California Workers’ Compensation Act (Lab. Code, § 3200 et seq.),
Employment Development Department claims, and claims involving sexual
assault or harassment.
Elizondo is expressly prohibited from raising claims on behalf of others
under the Labor Code Private Attorneys General Act of 2004 (Lab. Code,
§ 2698 et seq.; PAGA) in any forum: “By signing below, you expressly waive
the right to bring a class, collective, representative or PAGA claim (unless
prohibited by controlling law) seeking any relief on behalf of others.”
No explicit termination date is included and the agreement “may not be
changed, altered, revised or modified without a writing signed by the General
Manager of the Company”; the final paragraph adds that “an agreement
contrary to the foregoing must be entered into, in writing, by both the
Owner(s) and/or President of the Company and [Elizondo].”
The arbitration agreement is governed by the Federal Arbitration Act
(9 U.S.C. § 1 et seq.; FAA) and contains a severance clause, stating generally
that if any portions of the agreement were found to be void or unenforceable,
the offending provisions will be removed to make the remainder of the
agreement enforceable.
Complaint and Petition To Compel Arbitration
In April 2025, Elizondo filed a complaint against Livermore Toyota
under PAGA on behalf of himself and other aggrieved employees, alleging the
following Labor Code violations: (1) failure to provide lawful meal periods;
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(2) failure to permit lawful rest periods; (3) failure to provide accurate
itemized wage statements; (4) failure to pay overtime wages; (5) failure to pay
minimum wages; (6) failure to timely pay wages; (7) failure to pay all wages
upon separation of employment; and (8) failure to reimburse business
expenses.
In June 2025, Livermore Toyota petitioned to compel arbitration of
Elizondo’s individual PAGA claims and to stay proceedings of the
representative action pursuant to the arbitration agreement.
Elizondo opposed the petition to compel arbitration on various grounds,
including unconscionability. He asserted the arbitration agreement was a
procedurally unconscionable contract of adhesion and was substantively
unconscionable because, among other bases, its scope and duration are
overbroad, it forced him to arbitrate his claims against third parties with no
privity of contract, and it prohibited him from bringing representative actions
under PAGA. He further contended the unconscionability could not be cured
through severance.
Ruling on Petition To Compel Arbitration
In September 2025, after holding a hearing, the court found the
arbitration agreement unconscionable and denied the petition to compel
arbitration. The court found at least minimal procedural unconscionability
inherent in the employment relationship as Elizondo lacked a meaningful
opportunity to negotiate the terms presented by Livermore Toyota.
The court determined two provisions in the agreement were
substantively unconscionable. First, it found the agreement’s scope to be
“unreasonably broad” because the language subjecting to arbitration any
claim “ ‘which arise[s] out of the employment context or any other
interaction/relationship we had, have or may have in the future’ ” (boldface
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omitted and italics added) is unlimited in duration and not restricted to
employment-related matters, relying on Cook v. University of Southern
California (2024) 102 Cal.App.5th 312 (Cook). Second, it found the waiver of
Elizondo’s class and PAGA claims “ ‘unless prohibited by controlling law’ ” to
be unconscionable because the burden is borne by Elizondo to determine
whether his claims fall within its terms; further, there is no similar provision
that limits claims that might be brought by Livermore Toyota based upon
controlling law.
The court declined to sever the unconscionable portions of the
agreement.
DISCUSSION
Livermore Toyota challenges the trial court’s determination that the
arbitration agreement is unconscionable, as well as its decision not to sever
any unconscionable provisions. We address each issue in turn and affirm.
I. The Arbitration Agreement Is Unconscionable
An agreement to submit a controversy to arbitration is valid,
enforceable, and irrevocable, except on grounds that exist for the revocation
of any contract. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (OTO).) As
such, generally applicable contract defenses, including unconscionability,
may be invoked to invalidate arbitration agreements without running afoul of
either the FAA or California law. (Ibid.)
“Unconscionability has both a procedural and a substantive element.
[Citation.] Procedural unconscionability ‘ “addresses the circumstances of
contract negotiation and formation, focusing on oppression or surprise due to
unequal bargaining power.” ’ [Citation.] ‘ “Substantive unconscionability
pertains to the fairness of an agreement’s actual terms and to assessments of
whether they are overly harsh or one-sided.” ’ [Citation.] Both elements
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must be proven, but they are evaluated on a sliding scale: ‘the more
substantively oppressive the contract term, the less evidence of procedural
unconscionability is required’ to find it unenforceable, ‘and vice versa.’ ”
(Haydon v. Elegance at Dublin (2023) 97 Cal.App.5th 1280, 1287.)
We review the trial court’s unconscionability finding de novo as no
disputed factual issue bears on our analysis. (Cook, supra, 102 Cal.App.5th
at p. 321.)
A. Procedural Unconscionability
Procedural unconscionability is generally established by showing the
agreement is a contract of adhesion, where a standardized contract drafted
by the party with greater bargaining strength is imposed on the other party,
leaving the subscribing party with only the option to adhere to the contract or
reject it. (Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478,
492–493 (Ramirez).) Arbitration contracts imposed as a condition of
employment are typically adhesive and may include elements of oppression.
(OTO, supra, 8 Cal.5th at pp. 126–127.)
Livermore Toyota concedes the arbitration agreement was offered as a
condition of employment, making it a contract of adhesion which “therefore
bears some degree of procedural unconscionability . . . .” Elizondo, in turn,
attempts to argue this admission itself demonstrates a “much higher” degree
of procedural unconscionability than found by the trial court.
The mere fact that the arbitration agreement is a contract of adhesion
demonstrates only a low degree of procedural unconscionability. (Ramirez,
supra, 16 Cal.5th at p. 494.) Even so, “the potential for overreaching in the
employment context warrants close scrutiny of the contract’s terms.” (Ibid.)
As we explain, such scrutiny reveals the arbitration agreement to be
substantively unconscionable.
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B. Substantive Unconscionability
Substantive unconscionability is typically found in the employment
context when an arbitration agreement is unfairly one-sided in favor of the
employer without sufficient justification. (Peng v. First Republic Bank (2013)
219 Cal.App.4th 1462, 1472–1473.) The doctrine is concerned with terms
that are “ ‘ “unreasonably favorable to the more powerful party,” ’ ” which
“ ‘ “impair the integrity of the bargaining process or otherwise contravene the
public interest or public policy” ’ or attempt to impermissibly alter
fundamental legal duties,” and may include fine-print terms and those that
undermine the nondrafting party’s reasonable expectations. (OTO, supra, 8
Cal.5th at p. 130.) Substantive unconscionability as to arbitration “ ‘is
viewed in the context of the rights and remedies that otherwise would have
been available to the parties.’ ” (Id. at p. 137.)
The trial court found substantive unconscionability based on the
arbitration agreement’s overbreadth and its treatment of PAGA claims.
Livermore Toyota challenges both findings, which we address below, along
with Elizondo’s claim that the agreement lacked mutuality.
1. Overbreadth in Scope and Duration
Livermore Toyota avers the court erred by concluding the breadth of
the arbitration agreement’s scope and duration render it substantively
unconscionable and that the court improperly relied on Cook, supra, 102
Cal.App.5th 312 in reaching that determination.1 We are not convinced.
1 We reject Livermore Toyota’s contention that Elizondo waived in the
trial court any argument that the arbitration agreement is unconscionable on
this basis. Elizondo expressly raised this ground in his opposition to the
petition to compel arbitration, asserting the “arbitration agreement is
overbroad in scope and time as it applies to claims not arising from Plaintiff’s
employment and for an unlimited duration of time.” Though he cited another
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In Cook, an arbitration agreement between the University of Southern
California (USC) and its former employee, Cook, required Cook to arbitrate
all claims she had against USC or any of its related entities, “ ‘whether or not
arising out of’ ” her employment or termination. (Cook, supra, 102
Cal.App.5th at p. 321.) The appellate court concluded the agreement was
unconscionably broad as it encompassed any claims Cook may have against
USC or its related entities, even if they were completely unrelated to her
employment, without any legitimate justification. (Id. at pp. 324–325.) The
court further found the duration of the arbitration agreement unconscionable
as it survived indefinitely, including after termination of Cook’s employment,
and could not be revoked or modified without a written document signed by
USC’s president. (Id. at pp. 325–326.)
Other cases have applied Cook to similar arbitration agreements to find
them overbroad and substantively unconscionable on the bases that they
were likewise not limited to employment-related claims and survived the
time of employment. (E.g., Phan v. Knight Sacramento SU Inc. (2026) 121
Cal.App.5th 641, 654–655 (Phan); Stoker v. Blue Origin, LLC (2026) 120
Cal.App.5th 91, 108 (Stoker).)
The pertinent portions of the arbitration agreements in Phan are
identical to the arbitration agreement in this case. (Phan, supra, 121
Cal.App.5th at pp. 645–646.) In particular, the agreements in both cases
require the employees “to pursue ‘any claims,’ including ‘any and all claims
which arise out of the employment context or any other
interaction/relationship we had, have or may have in the future’ against [the
employer], and third-party beneficiaries, through binding arbitration.” (Ibid.)
portion of the agreement as evidence of the overbreadth, he plainly presented
the argument below.
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The third-party beneficiaries included in the agreements in Phan are likewise
identical to those listed in the arbitration agreement in this case. (Id. at
p. 646.) The agreements in both cases further subject to arbitration “ ‘any
claims arising from, related to, or having any relationship or connection
whatsoever with my seeking employment with, employment by, or other
association with the Company or third-party beneficiaries, whether based on
tort, contract, statute, equity or otherwise.’ ” (Ibid., italics added.)
Phan concluded the trial court did not err in applying Cook to find the
agreements overbroad and unconscionable. (Phan, supra, 121 Cal.App.5th at
pp. 654–655.) The appellate court found there to be “no material difference
between the agreement in Cook and the Agreements” in Phan as “the plain
language is so broad that they, like the Cook agreement, also encompass all
of Phan’s claims against [the employer] and its related third parties, whether
related to her employment or not” and, “like the agreement in Cook, Phan is
bound by these terms indefinitely as the Agreements require her to arbitrate
all future claims as well.” (Phan, at p. 654.) Accordingly, Phan found the
expansive scope of arbitrable claims encompassed by the agreements to be
substantively unconscionable. (Ibid.)
Here, similarly, the trial court found the agreement to be overbroad
based on the exact same language as in Phan subjecting to arbitration “any
and all claims which arise out of the employment context or any other
interaction/relationship we had, have, or may have in the future” (italics
added), which the trial court found unreasonably required Elizondo to
arbitrate claims unrelated to his employment for an unlimited duration.
(Phan, supra, 121 Cal.App.5th at p. 654.) Also like in Phan, the agreement
here includes claims based on any “other association” with Livermore Toyota
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or third-party beneficiaries, “whether based on tort, contract, statute, equity
or otherwise.” (Ibid.)
We agree with Phan that the arbitration agreement here is not
materially different from the agreement in Cook and is substantively
unconscionable. (Phan, supra, 121 Cal.App.5th at pp. 654–655.) Like in
Phan and Cook, the arbitration agreement is overly broad in scope, applying
to claims wholly unrelated the employment context, as well as in duration,
requiring Elizondo to arbitrate any “future” claims. (Phan, at p. 654; Cook,
supra, 102 Cal.App.5th at pp. 325–326.)
Also as in Phan, the arbitration agreement encompasses any claims
Elizondo may have against an expansive list of third-party beneficiaries.
(Phan, supra, 121 Cal.App.5th at p. 654.) Such third parties include not just
those working for Livermore Toyota directly but also “agents, partners,
attorneys, sister-companies, subsidiaries, parent companies, joint-venturers,
affiliated persons/entities, independent contractors, and parties affiliated
with its employee benefit and health plans.”
Hence, the arbitration agreement could apply to claims based on
Elizondo’s association with any number of entities or persons having nothing
to do with his employment, even going so far as to potentially include, for
example, a car manufacturer parts liability claim against Toyota, or a
medical liability claim if he happened to be covered by an insurer affiliated
with Livermore Toyota’s employee health plan. (See, e.g., Cook, supra, 102
Cal.App.5th at pp. 318, 325 [agreement’s broad scope could encompass claim
based on botched surgery in USC hospital or for defamation against USC
employee]; Stoker, supra, 120 Cal.App.5th at p. 108 [arbitration provision’s
inclusion of employer Blue Origin’s related entities would encompass claims
if employee “were to be injured in an automobile accident with another Blue
9
Origin employee years after his employment ended, or if his house were
damaged by debris from a Blue Origin rocket”]; cf. Ayala-Ventura v. Superior
Court (2026) 119 Cal.App.5th 241, 257 [arbitration agreement’s scope not
unconscionably broad, even if interpreted to apply to claims outside
employment context, where employer only provides commercial janitorial
services as it is unlikely that a “vast range of claims completely unrelated to
[employee]’s employment could arise”].)
In arguing to the contrary, Livermore Toyota asserts the language of
the arbitration agreement is distinguishable from Cook and is instead akin to
the agreement in Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064 (Little).2
However, as explained in Phan, despite some similarities in the language, the
arbitration agreement in this case “go[es] further” than the one in Little
because, unlike in Little (but like in Cook), the scope of arbitrable claims here
includes claims unrelated to the employment context. (Phan, supra, 121
Cal.App.5th at p. 655.)
Livermore Toyota further attempts to distinguish Cook by asserting the
duration of the agreement here is not indefinite but will instead terminate
after a “ ‘reasonable time,’ ” relying on Reigelsperger v. Siller (2007) 40
2 The relevant portion of the agreement in Little stated: “ ‘I agree that
any claim, dispute, or controversy (including, but not limited to, any and all
claims of discrimination and harassment) which would otherwise require or
allow resort to any court or other governmental dispute resolution forum
between myself and the Company (or its owners, directors, and officers, and
parties affiliated with its employee benefit and health plans) arising from,
related to, or having any relationship or connection whatsoever with my
seeking employment with, employment by, or other association with, the
Company, whether based on tort, contract, statutory, or equitable law, or
otherwise, shall be submitted to and determined exclusively by binding
arbitration under the Federal Arbitration Act, in conformity with the
procedures of the California Arbitration Act . . . .’ ” (Little, supra, 29 Cal.4th
at pp. 1069–1070.)
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Cal.4th 574, 580 (arbitration agreements without a specified term of duration
are terminable at will after a reasonable time). Cook rejected a similar
argument based on Reigelsperger, concluding the agreement’s specification
that it would survive unless and until Cook and USC’s president terminate
the agreement in a signed writing amounted to an express term of duration
and showed the parties did not contemplate the agreement would be
terminable at will. (Cook, supra, 102 Cal.App.5th at pp. 325–326.)
Although the agreement here does not expressly state it will survive
Elizondo’s employment, by its terms, it applies to any claims stemming from
any interaction that may arise “in the future.” It further provides that any
modification of the agreement must be in writing signed by “both the
Owner(s) and/or President of the Company” and Elizondo, as Livermore
Toyota acknowledges. As in Cook, these provisions demonstrate the parties
did not intend for the agreement to be terminable at will. In any event,
Livermore Toyota does not suggest what a “reasonable time” would be in this
context, and we find any ambiguity in the duration of the agreement
underscores the unfairness of its provisions in favor of the employer.
Additionally, Livermore Toyota argues Cook is preempted by the FAA,
asserting the “Cook rule” as to overbreadth is specific to arbitration
agreements and not generally applicable to all contracts. However, the
defense of unconscionability, which Cook relied upon, is indisputably
applicable to all contracts and does not contravene the FAA or California law
when applied in the arbitration context. (OTO, supra, 8 Cal.5th at p. 125.)
That overbreadth was one of the reasons Cook found the agreement to be
unconscionable does not mean the court applied an arbitration-specific rule.
Rather, Cook properly considered the facts of that case and concluded that,
when “ ‘viewed in the context of the rights and remedies that otherwise would
11
have been available to the parties’ ” (OTO, at p. 137), the arbitration
agreement was unconscionable as it unfairly required Cook to arbitrate
numerous claims, wholly unrelated to her employment, that she would have
otherwise been able to bring in court. (See Cook, supra, 102 Cal.App.5th at
pp. 318, 325.) The same is true of the arbitration agreement in this case, and
we find this approach to be consistent with a general application of the
defense of unconscionability, which “is inherently fact specific.” (OTO, at
p. 138.)
Finally, we note Livermore Toyota fails to argue that there is any
justification for necessitating sending to arbitration any claim Elizondo may
have or that may arise in the future, even one entirely unrelated to his
employment, which further demonstrates unconscionability. (See Phan,
supra, 121 Cal.App.5th at pp. 655–656 [finding unconscionability after
rejecting purported business justifications for breadth of arbitration
agreement].)
In sum, the trial court did not err in relying on Cook and finding the
arbitration agreement unreasonably broad in scope and duration, which we
conclude reveals a high degree of substantive unconscionability.
2. Lack of Mutuality as to Associated Third Parties
If an agreement singles out certain claims for arbitration, there must
be mutuality as to the parties that are required to arbitrate those claims.
(Cook, supra, 102 Cal.App.5th at pp. 326–328; see Ramirez, supra, 16 Cal.5th
at p. 495.) In both Cook and Phan, the lack of such mutuality formed part of
the basis for findings of substantive unconscionability; the agreements in
those cases required employees to arbitrate their claims against various third
parties but did not require those third parties to arbitrate their claims
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against the employees. (Cook, at pp. 326–328; Phan, supra, 121 Cal.App.5th
at pp. 656–657.)
Elizondo argued in his opposition to the petition to compel arbitration
that, beyond being overbroad, the arbitration agreement is “one-sided”
because it would force him to arbitrate his claims against third parties “with
no privity of contract.” The trial court rejected this argument on the basis
that both Elizondo and Livermore Toyota must arbitrate claims against
third-party beneficiaries.
However, a lack of mutuality can exist even where the employer agrees
to arbitrate its claims against the employee if the agreement provides a
significant benefit to third-party beneficiaries (in the form of compelled
arbitration) without any reciprocal benefit to the employee and without a
legitimate justification. (Cook, supra, 102 Cal.App.5th at pp. 327–328;
accord, Phan, supra, 121 Cal.App.5th at pp. 656–657.) We conclude the
agreement here, which is in relevant parts identical to the one in Phan and
substantively similar to the one in Cook, also lacks mutuality because it
requires Elizondo to arbitrate his claims against the many third-party
beneficiaries but does not require them to arbitrate claims against him.
Livermore Toyota avers this lack of mutuality is not unconscionable on
this basis for three reasons. First, the nature of its business justifies the
inclusion of claims against the third parties “because such entities and
individuals are often named as defendants in cases arising out of an
employee’s employment.” Even if true, Livermore Toyota fails to explain why
it justifies the one-sided inclusion of third parties without any reciprocal
benefit for Elizondo.
Second, Livermore Toyota contends the agreement does not confer any
benefit to the listed third parties that they would not already have under
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contract law. However, as explained in Cook, the agreement’s inclusion of
listed classes of third-party beneficiaries provides a benefit to those third
parties by making it easier for them to compel arbitration; they would only
have to make a prima facie showing that they fall within one of the classes of
beneficiaries in the agreement to do so. (Cook, supra, 102 Cal.App.5th at
p. 328.) By contrast, it is unlikely Elizondo would be able to meet his burden
to compel the third parties to arbitration. (Ibid.)
Third, Livermore Toyota contends the FAA preempts invalidation of
arbitration agreements that benefit third-party beneficiaries. The sole
authority Livermore Toyota cites in support of this argument is Ramirez,
supra, 16 Cal.5th at page 518, for the proposition that the FAA prohibits
disfavoring arbitration agreements compared to other contracts. Though the
cited portion of Ramirez notes the FAA requires arbitration agreements to be
on an equal footing with other contracts, it also reinforces that “it does not
contravene the FAA to find that certain provisions of [an] Agreement are
unconscionable” and to declare an agreement unenforceable on that basis.
(Ramirez, at p. 518.) Ramirez also demonstrates that lack of mutuality,
without any cognizable justification, is a valid ground for finding substantive
unconscionability. (Id. at pp. 495–500.) Thus, it does not support the
conclusion that the FAA preempts invalidating arbitration agreements when,
as here, they provide an unjustified, one-sided benefit to third parties
associated with the stronger party.
We conclude the lack of mutuality as to the benefit of forced arbitration
afforded to third parties associated with Livermore Toyota, without
justification, is substantively unconscionable. (See Cook, supra, 102
Cal.App.5th at pp. 327–328; Phan, supra, 121 Cal.App.5th at pp. 656–657.)
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3. PAGA Waiver
The trial court found the arbitration agreement’s treatment of PAGA
claims to be substantively unconscionable. Livermore Toyota contends this
was error because any waiver of PAGA claims is limited by controlling law
pursuant to the terms of the arbitration agreement.
PAGA was enacted to enable employees to enforce the Labor Code as
representatives of the Labor and Workforce Development Agency.
(DeMarinis v. Heritage Bank of Commerce (2023) 98 Cal.App.5th 776, 782–
783 (DeMarinis).) “The statute ‘deputizes an “aggrieved” employee to bring a
lawsuit “on behalf of himself or herself and other current or former
employees” to recover civil penalties for Labor Code violations that would
otherwise be assessed and collected by the state.’ ” (Id. at p. 783.)
“Although the United States Supreme Court has held that class action
waivers are enforceable in cases to which the [FAA] applies [citations], the
same is not true of representative PAGA actions. As to those actions, ‘a
predispute categorical waiver of the right to bring a PAGA action is
unenforceable.’ ” (Stoker, supra, 120 Cal.App.5th at p. 111, quoting Adolph v.
Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1117.) Therefore, an
arbitration provision purporting to waive an employee’s right to bring
representative actions, including representative PAGA claims, is
substantively unconscionable. (Stoker, at p. 112.)
The PAGA provision states Elizondo “expressly waive[s] the right to
bring a class, collective, representative or PAGA claim (unless prohibited by
controlling law) seeking any relief on behalf of others.” The trial court found
this “may” be unconscionable by placing the onus on Elizondo to know which
claims are properly excluded from arbitration without specificity in its terms.
It further found “the unilateral exclusion of PAGA and all class related
15
claims to be problematic and, thus, unconscionable,” as well as lacking
mutuality as to claims that might be brought by Livermore Toyota.
As an initial matter, contrary to Livermore Toyota’s assertion that
there is no wholesale PAGA waiver because Elizondo’s individual PAGA
claims are subject to arbitration, even where “individual PAGA claims [are]
expressly subject to arbitration, requiring [him] to completely waive [his]
right[] to bring nonindividual PAGA claims in any forum would still
constitute a ‘wholesale’ PAGA waiver that violates public policy . . . .”
(DeMarinis, supra, 98 Cal.App.5th at p. 789.)
Further, to the extent the PAGA provision puts the burden on Elizondo
to know whether his PAGA claims are subject to arbitration or waived under
controlling law—no easy task in light of the recent developments in federal
and state caselaw on the topic (see, e.g., DeMarinis, supra, 98 Cal.App.5th at
pp. 783–786)—it bears at least some degree of substantive unconscionability.
For instance, it is unreasonably favorable to the more powerful party (OTO,
supra, 8 Cal.5th at p. 130), as Livermore Toyota would be more likely to
understand the controlling law. Further, the lack of specificity in the terms
of the PAGA waiver could undermine Elizondo’s reasonable expectations as
to his rights under the agreement by confusing the issue. (See ibid.)
Therefore, we conclude the PAGA waiver provisions reveal at least
some degree of substantive unconscionability. When considered in
combination with the high degree of substantive unconscionability due to
overbreadth in scope and duration (pt. I.B.1., ante) and lack of mutuality
(pt. I.B.2., ante), and the procedural unconscionability present in a contract of
adhesion (pt. I.A., ante), we conclude the trial court did not err in finding the
arbitration agreement unconscionable.
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II. Trial Court’s Refusal to Sever Was Not an Abuse of Discretion
We review the trial court’s decision to not sever any unconscionable
provisions of the arbitration agreement for abuse of discretion (Ramirez,
supra, 16 Cal.5th at p. 513) and conclude there was none.
If a trial court finds a contract or any of its provisions to be
unconscionable, the court has the discretion to either refuse to enforce the
entire agreement, particularly if it is permeated by unconscionability, or to
sever or limit the unconscionable portion and enforce the remainder of the
contract. (Ramirez, supra, 16 Cal.5th at p. 513.) Where an arbitration
agreement contains multiple unlawful provisions, those “ ‘multiple defects
indicate a systematic effort to impose arbitration on an employee not simply
as an alternative to litigation, but as an inferior forum that works to the
employer’s advantage,’ ” which supports a finding that the agreement is
permeated by an unlawful purpose. (Id. at p. 515.)
In exercising its discretion, the trial court begins by asking whether the
contract can be cured, or whether its central purpose is tainted with
illegality. (Ramirez, supra, 16 Cal.5th at p. 516.) “Even if a contract can be
cured, the court should also ask whether the unconscionability should be
cured through severance or restriction because the interests of justice would
be furthered by such actions.” (Ibid.) The trial court may consider the
deterrent effect of each option in conducting its severance analysis. (Id. at
p. 517.) And where a contract contains a severance clause, the court should
take it into account as an expression of the intent of the parties, but such
provision cannot divest the court of its discretion. (Ibid.)
The trial court declined to sever the unconscionable portions of the
agreement, reasoning that unconscionability permeates the agreement, that
severance of any one portion would be insufficient, and that doing so would
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reward Livermore Toyota with its desired outcome of arbitration without
incentivizing it to change its one-sided arbitration agreements used with
employees.
We see no abuse of the trial court’s discretion in declining to sever the
multiple unconscionable provisions after appropriately considering relevant
factors, such as whether the arbitration agreement is permeated by
unconscionability (Ramirez, supra, 16 Cal.5th at p. 513) and the deterrent
effect of refusing to enforce the one-sided agreement (id. at p. 517).
DISPOSITION
The order denying Livermore Toyota’s petition to compel arbitration is
affirmed. Elizondo shall recover costs on appeal. (Cal. Rules of Court,
rule 8.278(a)(1), (2).)
PETROU, J.
WE CONCUR:
TUCHER, P. J.
RODRÍGUEZ, J.
A174408 / Elizondo v. Livermore Sales and Service, Inc.
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