Filed 10/20/26 Solorio v. SBS Franchising LLC CA4/1
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
ALMA ROSSIO ZAMARRIPA SOLORIO D086613
et al.
(Super. Ct. No. 37-2024-
Plaintiffs and Respondents, 00029829-CU-OE-CTL)
v.
SBS FRANCHISING LLC et al.
Defendants and Appellants.
APPEAL from an order of the Superior Court of San Diego County,
Loren G. Freestone, Judge. Affirmed.
O’Hagan Meyer, Michael S. Metta, Derek S. Sachs; Lathrop GPM,
Frank J. Sciremammano, and Cassie Doutt for Defendants and Appellants.
Olivier & Schreiber, Monique Olivier, Christian Schreiber, George A.
Warner, Estefania Palacios, Rachel Bien; Legal Aid at Work, Alexxander
Campbell, Samuel L. Aber; Verum Law Group, Sam Kim, and Yoonis Han for
Plaintiffs and Respondents.
Alma Rossio Zamarripa Solorio and her daughter Melissa Viviana
Covarrubias entered into a franchise agreement with SBS Franchising, LLC
in March 2020 to provide cleaning services. In 2024, Solorio and Covarrubias
brought suit against SBS Franchising, LLC and its wholly owned subsidiary
SBS Services Group, LLC (collectively, SBS) asserting a claim under the
Private Attorneys General Act (PAGA) (Lab. Code, § 2698 et seq.) for various
Labor Code violations.
After answering the complaint, SBS filed a motion to compel Solorio
and Covarrubias to arbitration under the arbitration provision contained in
the franchise agreement. Solorio and Covarrubias opposed the motion,
asserting the arbitration agreement was unconscionable. The trial court
denied the motion to compel, agreeing with the plaintiffs that the arbitration
provision was both procedurally and substantively unconscionable. The court
also found the provision’s substantively unconscionable terms could not be
severed and, therefore, the provision was not enforceable.
SBS appeals the order denying its motion to compel, asserting the trial
court’s unconscionability determination was erroneous and the court abused
its discretion by denying SBS’s request to sever the arbitration provision’s
unconscionable terms. As we shall explain, we reject SBS’s arguments and
affirm the trial court’s order denying the motion to compel arbitration.
FACTUAL AND PROCEDURAL BACKGROUND
In 2017, Solorio and her daughter filed a fictitious business name
statement for Melross Maintenance Services (Melross) with the County of
San Diego. On March 24, 2020, as the COVID-19 pandemic was emerging,
Solorio and Covarrubias visited SBS’s office and met with its representative,
Jiovanna Espinosa, to discuss working for the company. The plaintiffs were
already feeling the effects of the pandemic and struggling to find work.
2
Solorio and Covarrubias are native Spanish speakers with limited English
comprehension.1
During the meeting, which was conducted in Spanish, Espinosa gave
Solorio and Covarrubias a copy of SBS’s standardized Unit Franchise
Agreement (UFA). The UFA explains that its franchisees perform work
under SBS’s business name and trademarks, and according to its cleaning
system. Under the UFA, customers pay for cleaning services by sending
checks directly to SBS and not the franchisees. SBS then remits a portion of
the payments to the cleaners after making various deductions.
The UFA was written in English and the plaintiffs could not
understand the document’s terms. When they asked Espinosa for a copy of
the document in Spanish, she responded by telling the women something
like, “Don’t worry about it, it doesn’t say anything important.” Solorio and
Covarrubias took the document home with them. In their declarations in
support of their opposition to the motion to compel arbitration, they stated
they could not understand most of the terms in the UFA. They also declared
that they could not afford to hire an attorney to review the document and did
not know anyone that could help them understand its terms.
The following week, Solorio and Covarrubias again met with Espinosa,
as well as SBS representatives Martin Olivera and Rodolfo Baena. They
again asked for a Spanish version of the UFA and were told that none was
available. The SBS representatives urged the women to sign the UFA, telling
them SBS risked losing customers and needed more cleaners urgently.
Desperate for work and not wanting to jeopardize their relationship with
1 SBS solicits in Spanish in its advertisements.
3
SBS, Solorio and Covarrubias signed the UFA as “shareholders, owners or
partners” of Melross. The UFA states that the agreement is between SBS
Services Group, LLC and “the following independent business”: “Melross
Maintenance Services.”2
None of the SBS representatives told Solorio and Covarrubias that the
UFA contained an arbitration agreement and neither woman was aware of
the provision when they signed the document. The provision is located on
page 26 of the 32-page contract, which also has 16 additional pages of
attachments. The arbitration provision is printed in the same typeface as the
rest of the agreement, although other provisions (including the contract’s
damage waiver, limitations of claims, and jury trial waiver) are highlighted
in bold and capitalized. Together with their opposition to the motion to
compel, the plaintiffs submitted evidence from a service that assesses the
complexity of language, which showed the dispute resolution portion of the
UFA that includes the arbitration provision is written at a level that “is
accessible for students in their senior year of college” and is “accessible for
college graduates.” In addition, although the arbitration provision requires
binding commercial arbitration with the American Arbitration Association
(AAA) subject to the AAA’s commercial rules, SBS did not provide the
plaintiffs with a copy of the rules.
On April 2, 2024, Solorio and Covarrubias served a pre-litigation notice
of PAGA claims on SBS and the California Labor and Workforce
Development Agency. The gravamen of the plaintiffs’ claims is that SBS
willfully misclassifies its cleaners as independent contractor “unit
2 The UFA also states that the “franchisee” entering the contract “must
be a business entity (not an individual).”
4
franchisees,” when as a matter of law they are employees. The complaint
asserts that because the cleaners are misclassified, SBS fails to pay
minimum and overtime wages, provide required breaks, or comply with
numerous other provisions of the Labor Code. On June 25, 2024, Solorio and
Covarrubias filed a complaint in the San Diego County Superior Court
alleging the same violations on behalf of themselves and other aggrieved SBS
employees. SBS answered on August 6, 2024, denying the allegations.
On October 22, 2024, SBS filed a motion to compel arbitration of the
plaintiffs’ individual PAGA claims and requested to stay their representative
claims. SBS asserted the arbitration provision contained in the UFA covered
the plaintiffs’ individual PAGA claims; thus, the trial court was required to
compel arbitration under the Federal Arbitration Act. SBS also asserted that
Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th
83 (Armendariz) “does not apply here” because Melross was a franchisee of
SBS and Solorio and Covarrubias “were not Defendants’ employees in any
capacity.” SBS also argued that, even if Armendariz did apply, the UFA is
not procedurally or substantively unconscionable. Finally, SBS asserted that
to the extent any terms of the arbitration provision were deemed
unconscionable, those terms should be severed under the UFA’s severance
provision, and the rest of the arbitration provision enforced.
In their opposition to the motion to compel, Solorio and Covarrubias
argued they were not bound by the arbitration agreement, because they had
signed the UFA in their capacity as general partners of Melross, not as
individuals. Alternatively, the plaintiffs argued that if they were bound by
the UFA, the arbitration was procedurally and substantively unconscionable.
Further, they asserted that the arbitration provision was so permeated by
unconscionability that severance was not possible without rewriting the
5
contract, and that it would be a miscarriage of justice to enforce the provision
because its clear purpose was to relegate the plaintiffs to a disadvantageous
forum.
In its reply, SBS repeated its prior arguments and also asserted the
UFA delegated the question of the arbitration provision’s enforcement to the
arbitrator, which deprived the trial court of jurisdiction over the dispute.
After a hearing on the motion, the trial court issued its ruling denying
SBS’s motion. The court found SBS had demonstrated the existence of an
arbitration agreement that applied to plaintiffs, but that the agreement was
unconscionable and could not be enforced. With respect to the gateway
question of whether the determination of the provision’s unconscionability
was delegated to the arbitrator, the trial ruled the arbitration agreement
contained no “clear and unmistakable” delegation clause and, further, that
the delegation clause was unconscionable.
The trial court found the evidence supported “a finding of a relatively
high level of procedural unconscionability,” and the terms of the arbitration
agreement showed a “high level of substantive unconscionability,” under the
Armendariz factors and the Supreme Court’s decision in Ramirez v. Charter
Communications, Inc. (2024) 16 Cal.5th 478 (Ramirez). The trial court
explained that the provision’s substantively unconscionable terms included
(1) its limitation on damages to “actual damages sustained,” excluding the
civil penalties available under PAGA; (2) its one-sided limitation precluding
damages against SBS’s “individual officers, directors, agents, affiliates …,
whereas Plaintiffs as principals of Melross can be sued;” (3) the requirement
that plaintiffs pay both mediation fees and filing fees under the AAA
commercial rules, which exceed the fees required in civil court, (4) the one-
sided exceptions to arbitration for SBS’s potential claims against its
6
franchisees and SBS’s one-sided ability to seek injunctive relief in court;
(5) its shortening of the statute of limitations to one-year; and (6) the
attorney fee-shifting rules, which contravened PAGA’s statutory one-way fee-
shifting provision.
Finally, the court rejected SBS’s assertion that the unconscionable
provisions of the arbitration agreement could be severed, finding it was “not
possible to cure all the unconscionability through severance.” The court
found that given the high degree of procedural and substantive
unconscionability, “the central purpose of the agreement is permeated by
unconscionability and the interests of justice would not be furthered by
severance.”
SBS timely appealed from the order denying its motion to compel
arbitration.
DISCUSSION
I
Delegation Clause
SBS first asserts that the trial court erred by finding the
unconscionability of the arbitration agreement should be decided by the court
and not delegated to an arbitrator under the terms of the UFA. Solorio and
Covarrubias respond that the trial court correctly found the delegation clause
7
is not sufficiently clear to require delegation, and is also unenforceable
because it is unconscionable.3
“ ‘ “[P]arties may agree to have an arbitrator decide not only the merits
of a particular dispute but also ‘ “gateway” questions of “arbitrability,” such
as whether the parties have agreed to arbitrate or whether their agreement
covers a particular controversy.’ ” [Citation.] But “[c]ourts should not
assume that the parties agreed to arbitrate arbitrability unless there is
‘clea[r] and unmistakabl[e]’ evidence that they did so.” ’ ” (Beco v. Fast Auto
Loans, Inc. (2022) 86 Cal.App.5th 292, 302 (Beco); see also Sandoval-Ryan v.
Oleander Holdings LLC (2020) 58 Cal.App.5th 217, 223 (Sandoval-Ryan)
[“Courts presume that the parties intend courts, not arbitrators, to decide
threshold issues of arbitrability.”].)
“ ‘This is a “ ‘heightened standard’ ” that “ ‘pertains to the parties’
manifestation of intent, not the agreement’s validity.’ ” [Citations.] That is
because the question of who would decide gateway questions like the
unconscionability of an arbitration provision “is not one that the parties
would likely focus upon in contracting, and the default expectancy is that the
court would decide the matter.” [Citation.] “Although parties are free to
authorize arbitrators to resolve such questions, [courts] will not conclude that
they have done so based on ‘silence or ambiguity’ in their agreement, because
3 Solorio and Covarrubias also contend that SBS waived its claim that
the issue was delegated to the arbitrator because they raised it only in their
reply brief, and not in the initial brief in support of the motion to compel.
Because the facts are not in dispute and the issue is a question of law that is
well briefed in this court, we exercise our discretion to reach the merits of
SBS’s delegation claim. (See City of Clovis v. County of Fresno (2014) 222
Cal.App.4th 1469, 1477 [“we have discretion to consider a forfeited claim”].)
8
‘doing so might too often force unwilling parties to arbitrate a matter they
reasonably would have thought a judge, not an arbitrator, would decide.’ ” ’ ”
(Beco, supra, 86 Cal.App.5th at pp. 302–303.) Two requirements must be
satisfied for a so-called delegation clause “ ‘ “ ‘to be effective. First, the
language of the clause must be clear and unmistakable. [Citation.] Second,
the delegation must not be revocable under state contract defenses such as
fraud, duress, or unconscionability.’ ” ’ ” (Beco, at p. 303.)
Section XXVII of the UFA is titled “Dispute Resolution.” The first
subsection of that section is “A. Dispute Resolution by Mediation,” which
requires the parties to the agreement “to try to resolve any” dispute, except
disputes concerning SBS’s trade secrets and the UFA’s non-competition and
confidentiality provisions, by mediation and to bring a request for mediation
within 20 days of the dispute arising. The second subsection is the
arbitration provision. It states: “i. The parties hereto agree that, except for
controversies, disputes, or claims related to or based on improper use of the
Marks or in connection with [the contract sections involving trade secrets and
the non-compete provision], and except for otherwise mediation required in
[the previous subsection] hereof, all controversies, disputes, or claims
between Franchisee and Franchisor’s affiliates, and Franchisor’s and their
respective members, officers, managers, agents, and/or employees, and
Franchisee (and/or Franchisee’s owners, managers, guarantors, affiliates,
and/or employees) arising out of or related to: [¶] 1. this Agreement or any
other agreement between Franchisee and Franchisor; [¶] 2. Franchisor’s
relationship with Franchisee; [¶] 3. the validity of this Agreement or any other
agreement between Franchisee and Franchisor; or [¶] 4. any [SBS] System
Standard; [¶] must be submitted for binding arbitration, on demand of either
party, to the American Arbitration Association. The arbitration proceedings
9
will be conducted by one arbitrator and, except as this Subsection otherwise
provides, according to the then current commercial arbitration rules of the
American Arbitration Association. Any questions regarding the arbitrability
of any claim is to be determined by the arbitrator and is binding upon the
parties. All proceedings will be conducted at a suitable location chosen by the
arbitrator in or nearest the city where Franchisor’s principal business
address is then located. All matters relating to arbitration will be governed
by the Federal Arbitration Act (9 U.S.C. []§ 1 et seq.). Judgment upon the
arbitrator’s award may be entered in any court of competent jurisdiction.”
(Italics added.)
SBS contends the language providing that any dispute concerning “the
validity of this Agreement or any other agreement between Franchisee and
Franchisor … must be submitted for binding arbitration” and the subsequent
statement that “[a]ny questions regarding the arbitrability of any claim is to
be determined by the arbitrator” are clear and unmistakable delegations to
the arbitrator of the question of arbitrability. We disagree.
The language of the provision is, at best, ambiguous. The language
could easily be interpreted to delegate the question of the validity of the UFA
to the arbitrator, but it does not unambiguously delegate the question of the
validity of the arbitration provision to the arbitrator. Further, the
subsequent language—“Any questions regarding the arbitrability of any
claim”— could easily “be read to mean [the arbitrability of] a specific
substantive dispute or claim, not the issue of who decides whether the
[arbitration] agreement is enforceable or unconscionable.” (Beco, supra, 86
Cal.App.5th at p. 303.) This is especially true in the context of the UFA given
the exceptions to arbitration for SBS’s potential claims against its franchisees
contained in the UFA’s dispute resolution section.
10
“ ‘Language such as “any disputes, differences or controversies” may
well be adequate and necessary for the parties to express their intention to
arbitrate all substantive claims, since the number and diversity of potential
future substantive claims is so great as to defy a specific enumeration of each
type. But the issue of who would decide the enforceability of the arbitration
clause itself is a horse of a different color. It is a distinct issue that could and
would be easily addressed—if the parties actually contemplated it at the time
of contracting—by stating expressly that the arbitrator shall decide questions
of the enforceability of the arbitration provision.’ ” (Beco, supra, 86
Cal.App.5th at pp. 303–304.) No such clear statement is contained in the
UFA’s arbitration provision.
Other Courts of Appeal have reached the same conclusion about
language similar to that contained in the UFA. In Sandoval-Ryan, the court
evaluated the following language: “ ‘The parties understand that, except as
provided below, any claim other than a claim for medical malpractice, arising
out of the provision of services by the Facility, the admission agreement, the
validity, interpretation, construction, performance and enforcement thereof, or
which allege wrongful death or violations of the Elder Abuse and Dependent
Adult Civil Protection Act [Welf. & Inst. Code, § 15600 et seq.], or the Unfair
Competition Act, or which seek an award of punitive damages or attorneys’
fees, will be determined by submission to neutral arbitration as provided by
California law, and not by a lawsuit or court process ....’ ” (Sandoval-Ryan,
supra, 58 Cal.App.5th at pp. 223–224.)
In Sandoval-Ryan, the court held the italicized language “reference[d]
the admission agreement rather than the arbitration agreement.” (Sandoval-
Ryan, supra, 58 Cal.App.5th at p. 224.) Likewise, here, although the
arbitration provision is contained in the UFA, rather than as a separate
11
document as in Sandoval-Ryan, the language references the “Agreement” and
the arbitrability of “any claim.” This is not a “clear and unmistakable”
delegation of the determination of the enforceability of the arbitration
provision to an arbitrator, but rather “signals the parties’ agreement to
submit questions regarding the validity, interpretation, construction,
performance, and enforcement of the” UFA “to the arbitrator.” (Sandoval-
Ryan, at p. 224; see also Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th
771, 783 [language that “ ‘[a]ny disputes, differences or controversies arising
under this Agreement shall be settled and finally determined by arbitration’
[and] ‘It is expressly agreed that arbitration as provided herein shall be the
exclusive means for determination of all matters arising in connection with
this Agreement,’ ” is reasonably interpreted “to bring within the exclusive
scope of arbitration all substantive disputes, claims or controversies on which
a court action might otherwise be brought, while the enforceability of the
arbitration provision itself remains a matter for determination by a court”].)
In contrast, the two cases SBS relies on contained much more explicit
delegations of the question of arbitrability. In Malone v. Superior Court
(2014) 226 Cal.App.4th 1551, for instance, the delegation provision in the
arbitration agreement stated, “ ‘The arbitrator has exclusive authority to
resolve any dispute relating to the interpretation, applicability, or
enforceability of this binding arbitration agreement.’ ” (Id. at p. 1557.)
Unlike here, the Malone provision explicitly stated that the enforceability of
the arbitration agreement itself is determined by the arbitrator.
In the other case on which SBS relies, Tiri v. Lucky Chances, Inc.
(2014) 226 Cal.App.4th 231, the arbitration agreement at issue was a
separate, stand-alone, five-page document. The delegation clause therein
stated, “ ‘The Arbitrator, and not any federal, state, or local court or agency,
12
shall have the exclusive authority to resolve any dispute relating to the
interpretation, applicability, enforceability, or formation of this Agreement,
including, but not limited to, any claim that all or any part of this Agreement
is void or voidable.’ ” (Tiri, at p. 237.) The Court of Appeal concluded, and
the plaintiff conceded, that this language, in the context of the stand-alone
arbitration agreement, was sufficiently clear and unmistakable to “indicate[]
an intent to delegate all issues to an arbitrator, including issues of
enforceability.”4 (Id. at p. 242.) Here, in contrast, the arbitration provision
is contained in a broad and lengthy contract between the parties, and its
language does not make clear that SBS intended that the question of
enforcement of the arbitration provision itself would be delegated to the
arbitrator.5
In sum, we agree with the trial court that the UFA’s arbitration
provision is, at best, ambiguous as to whether it delegates the question of its
enforcement to the arbitrator. Thus, it does not meet the requirement of a
“clear and unmistakable” delegation of such authority.
4 A third case SBS cites, Zhang v. Superior Court (2022) 85 Cal.App.5th
167, was ordered depublished by the California Supreme Court and thus is
not citable or of precedential value. (Zhang v. S.C. (2025) 338 Cal.Rptr.3d
808.)
5 Further, as Solorio and Covarrubias point out, unconscionability is not
a challenge to a contract’s validity. Rather, “[t]he doctrine of
unconscionability is a defense to the enforcement of a contract or a term
thereof. (Civ. Code, § 1670.5; California Grocers Assn. v. Bank of America
(1994) 22 Cal.App.4th 205, 213.) No such defense arises without a contract.”
(Marin Storage & Trucking, Inc. v. Benco Contracting and Engineering, Inc.
(2001) 89 Cal.App.4th 1042, 1049.)
13
II
Unconscionability
Because we reject SBS’s assertion that its arbitration provision
delegates the question of its enforcement to the arbitrator, we turn to SBS’s
claim that the trial court erred by finding the provision is not enforceable
because it is both procedurally and substantively unconscionable.
A
Legal Standards
In Ramirez, supra, 16 Cal.5th 478 the California Supreme Court set
forth the applicable legal standards to the determination of whether an
agreement to arbitrate is unconscionable. The court explained, “Federal and
California law treat valid arbitration agreements like any other contract and
favor their enforcement. [Citations.] The California Arbitration Act (Code
Civ. Proc., § 1280 et seq.; CAA) expresses a ‘ “ ‘strong public policy in favor of
arbitration as a speedy and relatively inexpensive means of dispute
resolution.’ ” ’ [Citation.] A written agreement to submit a controversy to
arbitration is valid, enforceable, and irrevocable, ‘save upon such grounds as
exist for the revocation of any contract.’ (Code Civ. Proc., § 1281.)
Unconscionability provides such grounds.” (Ramirez, supra, 16 Cal.5th at
p. 492.)
“The ‘general principles of unconscionability are well established. A
contract is unconscionable if one of the parties lacked a meaningful choice in
deciding whether to agree and the contract contains terms that are
unreasonably favorable to the other party.’ [Citations.] Unconscionability
has both a procedural and a substantive element. [Citation.] The party
resisting enforcement of an arbitration agreement has the burden to
establish unconscionability.” (Ramirez, supra, 16 Cal.5th at p. 492.)
14
“Procedural unconscionability ‘addresses the circumstances of contract
negotiation and formation, focusing on oppression or surprise due to unequal
bargaining power.’ [Citation.] 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.’ [Citation.] Adhesion contracts are subject to scrutiny
because they are ‘not the result of freedom or equality of bargaining.’
[Citation.] However, they remain valid and enforceable unless the resisting
party can also show that one or more of the contract’s terms is substantively
unconscionable or otherwise invalid.” (Ramirez, supra, 16 Cal.5th at pp. 492–
493.)
“Substantive unconscionability looks beyond the circumstances of
contract formation and considers ‘the fairness of an agreement’s actual terms’
[citation], focusing on whether the contract will create unfair or one-sided
results (Armendariz, supra, 24 Cal.4th at p. 114). Substantively
unconscionable contractual clauses ‘reallocate risks in an objectively
unreasonable or unexpected manner.’ ” (Ramirez, supra, 16 Cal.5th at
p. 493.)
“Both procedural and substantive elements must be present to conclude
a term is unconscionable, but these required elements need not be present to
the same degree. [Citation.] Courts apply a sliding scale analysis under
which ‘the more substantively oppressive [a] term, the less evidence of
procedural unconscionability is required to come to the conclusion that the
term is unenforceable, and vice versa.’ (Armendariz, supra, 24 Cal.4th at
p. 114.) ‘[W]hether a contract is fair or works unconscionable hardship is
determined with reference to the time when the contract was made and
15
cannot be resolved by hindsight by considering circumstances of which the
contracting parties were unaware.’ ” (Ramirez, supra, 16 Cal.5th at p. 493.)
“Appellate 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. [Citation.] If a validity ruling rests on
the trial court’s resolution of evidentiary disputes, substantial evidence
review applies to the court’s factual findings. [Citation.] The facts here are
undisputed; our review is de novo.”6 (Ramirez, 16 Cal.5th at p. 493.)
B
Armendariz Governs Our Analysis
SBS’s argument that the court erred by finding the arbitration
agreement is procedurally unconscionable is based on its assertion that the
UFA should be viewed as a commercial agreement with an independent
contractor, rather than an employment agreement. SBS asserts that because
the UFA makes clear that Solorio and Covarrubias are independent
contractors operating as the owners of Melross, California cases addressing
6 Solorio and Covarrubias assert that this court may also affirm the trial
court’s order denying SBS’s motion to compel arbitration on the grounds that,
as individuals, they were not parties to the UFA. SBS responds that this
argument is not properly before the court because Solorio and Covarrubias
did not appeal the court’s order rejecting this claim and, in any event, the
trial court’s ruling that the plaintiffs are parties to the agreement was
correct. We decline to reach this argument and instead, as we discuss, affirm
the trial court’s decision denying SBS’s motion to compel arbitration based on
the unconscionability of the arbitration provision.
16
unconscionability in the employer-employee context are inapplicable. We
disagree.
“In Armendariz[, supra,] 24 Cal.4th 83, 115[], our high court observed
that ‘[a]rbitration is favored in this state as a voluntary means of resolving
disputes, and this voluntariness has been its bedrock justification.’
Nevertheless, ‘[g]iven the lack of choice and the potential disadvantages that
even a fair arbitration system can harbor for employees, we must be
particularly attuned to claims that employers with superior bargaining power
have imposed one-sided, substantively unconscionable terms as part of an
arbitration agreement.’ (Ibid.)” (Ali v. Daylight Transport, LLC (2020) 59
Cal.App.5th 462, 472 (Ali).)
“Here, although the [UFA] state[s] that respondents are independent
contractors, respondents’ complaint is based primarily on the contention that
they were misclassified as independent contractors, and were instead
employees, entitled to certain protections under the Labor Code.” (Ali, supra,
59 Cal.App.5th at p. 472.) Further, as Solorio and Covarrubias point out,
what matters for purposes of the procedural unconscionability analysis is not
the label placed on the parties by the UFA, but the unequal bargaining power
between them. (Ali, supra, 59 Cal.App.5th at pp. 473–474; see Ramos v.
Superior Court (2018) 28 Cal.App.5th 1042, 1056 [agreement between law
firm and its partner evaluated under Armendariz in light of unequal
bargaining power between the parties]; Wherry v. Award, Inc. (2011) 192
Cal.App.4th 1242, 1249 [“[t]hat plaintiffs are independent contractors and
not employees makes no difference in this context”].)
Here, SBS does not dispute that the UFA was a contract of adhesion
and contained a mandatory arbitration provision. Further, SBS does not
provide any basis to overturn the trial court’s factual finding that SBS had
17
superior bargaining power and forced the plaintiffs to sign the contract as a
condition of employment. Accordingly, “[w]hether or not a finder of fact
ultimately agrees with [SBS’s] allegations that they were employees, ‘the
relationship between [appellant and respondents] was characterized by a
power imbalance analogous to that of an employer-employee relationship’ and
[is] ‘sufficiently similar to that of an employee-employer relationship to
conclude the parties’ arbitration agreement is subject to Armendariz
requirements.’ ” (Ali, supra, 59 Cal.App.5th at pp. 473–474.)
C
Procedural Unconscionability
“A procedural unconscionability analysis ‘begins with an inquiry into
whether the contract is one of adhesion.’ (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.’ [Citations.] Arbitration contracts imposed as a condition of
employment are typically adhesive (see Armendariz, at pp. 114–115; Serpa v.
California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704), and
the agreement here is no exception. The pertinent question, then, is whether
circumstances of the contract’s formation created such oppression or surprise
that closer scrutiny of its overall fairness is required. [Citations.]
‘ “ ‘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.’ ” ’ ” (OTO, L.L.C. v. Kho (2019) 8
Cal.5th 111, 126 (Kho).) As the trial court found, “[t]his record reveals both
oppression and surprise.” (Ibid.)
“ ‘The circumstances relevant to establishing oppression include, but
are not limited to (1) the amount of time the party is given to consider the
18
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.’ (Grand Prospect Partners, L.P. v. Ross
Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348, fn. omitted.) With
respect to preemployment arbitration contracts, we have observed that ‘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.’ ” (Kho,
supra, 8 Cal.5th at pp. 126–127.)
The circumstances presented here demonstrate both surprise and
oppression. Although the UFA was provided to Solorio and Covarrubias a
week before they signed the agreement, its contents and significance were not
explained to them. When they asked for a copy of the document in Spanish
they were told that it did not contain anything important and that a Spanish
version was not available. This fact alone shows a significant level of
procedural unconscionability. (See e.g., Nunez v. Cycad Management LLC
(2022) 77 Cal.App.5th 276, 284 (Nunez) [“Procedural unconscionability arises
when an arbitration agreement ‘was neither provided in a Spanish-language
copy nor explained to respondents who did not understand written
English.’ ”]; Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226
Cal.App.4th 74, 84 (Carmona) [high degree of procedural unconscionability
where employer knew plaintiffs did not speak English but failed to provide
Spanish translation of portions of arbitration agreement]; and Samaniego v.
Empire Today LLC (2012) 205 Cal.App.4th 1138, 1142, 1145–1146 [finding
19
procedural unconscionability where workers who spoke English as a second
language were required to sign an 11-page single-spaced agreement written
in English, which was “riddled with complex legal terminology” and in which
arbitration provision was set forth in 36th of 37 sections].)7
In addition, the arbitration provision is buried on page 26 of the 32-
page single-spaced document and is written in the same font size as the rest
of the agreement. Further, although the plaintiffs were required to
acknowledge other specific provisions of the UFA by initialing their
understanding, the arbitration provision contained no such requirement.
These facts also supported the trial court’s determination of significant
surprise and oppression. (See Higgins v. Superior Court (2006) 140
Cal.App.4th 1238, 1252–1253 [finding procedural unconscionability where
arbitration provision was near end of 24-page, single-spaced document,
contained in a section titled “miscellaneous,” no text in the provision was
highlighted or set apart, and “[a]though petitioners were required to place
their initials in boxes adjacent to six other paragraphs, no box appeared next
to the arbitration provision”].)
7 SBS points to Caballero v. Premier Care Simi Valley LLC (2021) 69
Cal.App.5th 512 to support its assertion that it was incumbent on Solorio and
Covarrubias to have the contract translated or explained to them. Caballero,
however, concerned an arbitration agreement in a health care setting that
complied “with the requirements of Code of Civil Procedure section 1295 for
arbitration clauses in medical service contracts” and “[c]onsequently, as a
matter of public policy, the Arbitration Agreement ‘[was] not a contract of
adhesion, nor unconscionable nor otherwise improper.’ ” (Id. at p. 515.)
Further, in Caballero there was no evidence before the court that the plaintiff
communicated his inability to read the agreement before signing. (Ibid.)
Accordingly, we do not agree with SBS that Caballero supports reversal of
the trial court’s finding of procedural unconscionability.
20
SBS also failed to disclose the costs of the arbitration or provide a copy
of the AAA commercial rules the plaintiffs would be subject to, creating an
additional element of surprise. (See Nunez, supra, 77 Cal.App.5th at p. 284
[“The potential cost of the arbitration was an unknown surprise to [plaintiff]
because [employer] failed to provide the AAA fee schedule. Failure to provide
documentation of arbitration fees supports a finding of unconscionability
because it causes surprise.”]; Carmona, supra, 226 Cal.App.4th at p. 84
[“Failure to provide the applicable arbitration rules is another factor that
supports procedural unconscionability.”].) SBS concedes it did not provide
the AAA commercial rules referenced in the UFA to the plaintiffs. As the
trial court found, under those rules, Solorio and Covarrubias would be
responsible for payment of a $950 filing fee, another fee of at least $825, and
half the costs of the arbitrator, whose fees were not disclosed at all. These
facts undoubtedly support a finding of procedural unconscionability.
Finally, Solorio and Covarrubias faced significant economic pressure at
the time they signed the UFA. Their declarations stated they “desperately
needed work because the COVID-19 pandemic had caused many businesses
and schools to close so there were very few cleaning jobs available.” Further,
SBS’s representatives exerted additional pressure, telling the women SBS
risked losing customers if it could not hire more cleaners. The plaintiffs
declared this caused them to feel “a lot of pressure to sign because [they were]
worried that if [they] didn’t, [they] would jeopardize [their] relationship with
[SBS]. These facts also supported a finding of a high level of procedural
unconscionability. (See Armendariz, supra, 24 Cal.4th at p. 115.)
In sum, we agree with the trial court that the arbitration provision has
“a relatively high level of procedural unconscionability.”
21
D
Substantive Unconscionability
SBS also contends that the trial court’s finding of substantive
unconscionability is “legally flawed” and that none of the terms the court
found problematic were unfair.
“Substantive unconscionability examines the fairness of a contract’s
terms. This analysis ‘ensures that contracts, particularly contracts of
adhesion, do not impose terms that have been variously described as
“ ‘ “overly harsh” ’ ” [citation], “ ‘unduly oppressive’ ” [citation], “ ‘so one-sided
as to “shock the conscience” ’ ” [citation], or “unfairly one-sided” [citation]. All
of these formulations point to the central idea that the unconscionability
doctrine is concerned not with “a simple old-fashioned bad bargain” [citation],
but with terms that are “unreasonably favorable to the more powerful
party.” ’ [Citation.] 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.
[Citation.] They may include fine-print terms, unreasonably or unexpectedly
harsh terms regarding price or other central aspects of the transaction, and
terms that undermine the nondrafting party’s reasonable expectations.
[Citations.] These examples are illustrative, not exhaustive.” (Kho, supra, 8
Cal.5th at pp. 129–130.)
In addition, “[s]ubstantive terms that, in the abstract, might not
support an unconscionability finding take on greater weight when imposed by
a procedure that is demonstrably oppressive. Although procedural
unconscionability alone does not invalidate a contract, its existence requires
courts to closely scrutinize the substantive terms ‘to ensure they are not
manifestly unfair or one-sided.’ ” (Kho, supra, 8 Cal.5th at p. 130.) Thus, if
22
there is “substantial procedural unconscionability here, ‘even a relatively low
degree of substantive unconscionability may suffice to render the agreement
unenforceable.’ ” (Ibid.)
The trial court determined that many aspects of the arbitration
agreement were substantively unconscionable: its one-way limitation on
available damages; its requirement that plaintiffs split the cost of an
arbitrator and pay filing fees that would exceed those required for a civil
lawsuit; its carve-outs for SBS for trademark claims and claims for breach of
the UFA’s confidentiality and non-compete provisions, as well as its
preservation of only SBS’s right to seek injunctive relief in court; the
provision’s shortening of the statute of limitations to one year for all claims;
and its allowance for an award of attorneys fee against plaintiffs in
contravention of statutes, like PAGA, that preclude such awards.
The arbitration agreement unilaterally restricts its franchisees’
remedies by providing that they “waive, to the fullest extent permitted by
law, any right to or claim for any punitive, exemplary, incidental, indirect,
special, consequential or other damages (including, without limitation, loss of
profits) against Franchisor, its affiliates, and their respective officers,
directors, shareholders, partners, agents, representatives, independent
contractors, servants and employees, in their corporate and individual
capacities, arising out of any cause whatsoever.” No comparable limitation of
remedies is imposed on SBS.
SBS asserts this language is not substantively unconscionable because
the arbitrator has discretion to determine the waiver is unlawful and refuse
to preclude damages. Further, SBS contends that the PAGA civil penalties
the trial court found were precluded by the provision are not available to the
plaintiffs as individuals in this case; thus, the limitation is not
23
unconscionable. Solorio and Covarrubias respond that the provision should
not be viewed with respect to the circumstances of the present case. Instead,
“whether a contract ‘works unconscionable hardship is determined with
reference to the time when the contract was made’ and cannot be resolved in
hindsight, ‘considering circumstances of which the contracting parties were
unaware.’ ” (Ramirez, supra, 16 Cal.5th at p. 503.)
We agree with the plaintiffs, and the trial court, that the damages
limitation is substantively unconscionable. First, as the plaintiffs state, the
provision is properly analyzed from the time the contract is entered, not
based on particular claims that might later arise, including the PAGA claims
asserted by the plaintiffs. (Ramirez, supra, 16 Cal.5th at p. 503.) Further,
the one-sided damages limitation is like those found unconscionable by our
Supreme Court and other Courts of Appeal. (See, e.g., Armendariz, supra, 24
Cal.4th at p. 102 [concluding arbitration provision limiting “ ‘remedies for
violation of the terms, conditions or covenants of employment … to a sum
equal to the wages I would have earned from the date of any discharge until
the date of the arbitration award’ ” and precluding “ ‘any other remedy, at
law or in equity, including but not limited to reinstatement and/or injunctive
relief’ ” was substantively unconscionable]; Gentry v. Superior Court (2007)
42 Cal.4th 443, 471 [limitations on back pay to one year and punitive
damages to $5,000 substantively unconscionable]; and Suh v. Superior Court
(2010) 181 Cal.App.4th 1504, 1515 [holding arbitration forum’s rules limiting
remedies were substantively unconscionable].)
Although the clause does state the franchisee waives her rights “to or
claim for any punitive, exemplary, incidental, indirect, special, consequential
or other damages” only “to the fullest extent permitted by law,” we do not
agree this language insulates the provision from a finding of substantive
24
unconscionability. Rather, it shows a recognition by the drafter that the
provision’s preclusion of statutory remedies is unlawful and unfairly puts the
burden on the litigant in the arbitration forum to prove their rights cannot be
waived.
The trial court also concluded the arbitration agreement’s clause
preventing the plaintiffs from naming or seeking to hold anyone but the
contracting party, SBS Franchising LLC, personally liable, but providing no
similar limitation running in the plaintiffs’ favor is another substantively
unconscionable aspect of the agreement. SBS argues that the provision is not
unconscionable because the complaint does not seek to hold anyone but SBS
Franchising, LLC, the contracting party, liable. Again, the unconscionability
analysis is viewed at the time of contracting, not at the time claims arise or
are prosecuted. (Ramirez, supra, 16 Cal.5th at p. 503.) Further, the
plaintiffs’ claims are against SBS Franchising, LLC, and its wholly-owned
subsidiary SBS Services Group, LLC, which would be precluded in
arbitration. As the trial court found, this clause is also “unfairly one-sided,
overly harsh, unduly oppressive, and inconsistent with Armendariz,” supra,
24 Cal.4th at p. 117.
Next, the trial court found that the fees required by the arbitration
agreement were substantively unconscionable because they are greater than
the costs of litigating in civil court. SBS argues that its fee structure is not
unconscionable because of the commercial nature of the UFA. It asserts, “the
record fails to demonstrate that [Solorio and Covarrubias], … (or perhaps
more importantly their Franchise), are unable to pursue their claims under
the AAA commercial rules due to the fees.” As discussed, we do not view this
contract as a commercial agreement between parties with equal bargaining
power. Rather, because the “complaint is based primarily on the contention
25
that [Solorio and Covarrubias] were misclassified as independent contractors,
and were instead employees, entitled to certain protections under the Labor
Code” the determination is governed by the analysis in Armendariz. (Ali,
supra, 59 Cal.App.5th at pp. 473–474.)
SBS also argues the AAA commercial rules “account for a party’s
alleged inability to pay,” by allowing the arbitrator to reapportion the fees at
the time of any award or reduce or defer the fees in the event of hardship.
These provisions, however, do not guarantee the plaintiffs would not pay
significant fees and expenses that would not be required in court, including
an upfront $950 filing fee, a subsequent fee of $825 before the first hearing,
and half the fee of the arbitrator (an amount, which as discussed, is
undisclosed). Additionally, the agreement imposes mandatory mediation
before arbitration and requires the parties to equally split the mediation fees.
Contrary to SBS’s assertion, the trial court properly concluded that the fees
imposed by the arbitration provision are substantively unconscionable under
Armendariz. (See Ramirez, supra, 16 Cal.5th at p. 508 [provision that
“creates a potential obligation to pay costs only in a arbitral setting”
unconscionable]; Ali, supra, 59 Cal.App.5th at p. 479 [cost-sharing provision
in AAA commercial rules was substantively unconscionable as applied to
independent contractor]; Subcontracting Concepts (CT), LLC v. De Melo
(2019) 34 Cal.App.5th 201, 212 [requirement that plaintiff claiming
misclassification must bear own arbitration costs was unconscionable].)
The trial court next determined the arbitration provision’s carve-outs
for SBS for trademark claims and claims for breach of the UFA’s
confidentiality and non-compete provisions, as well as its one-way
preservation of SBS’s right to seek injunctive relief in court were
substantively unconscionable. Again, we agree with the trial court.
26
The UFA exempts from arbitration all “controversies, disputes, or
claims related to or based on improper use of the Marks or in connection with
Sections VI.D or XVIII.” Section VI.D is a confidentiality clause prohibiting
the reproduction or disclosure of “the information and materials which
Franchisor provides to Franchisee.” Section XVIII is the UFA’s non-
competition provision. Section XXVIII, the injunction clause, provides that,
in the event of “any non-compliance by the Franchisee with the terms of this
Agreement, or any unauthorized or improper use of the Stratus Building
Solution franchise system or the Marks by the Franchisee,” “the Franchisor
will be entitled to both temporary and permanent injunctive relief against the
Franchisee from any court of competent jurisdiction, in addition to all other
remedies which the Franchisor may have at law.”
SBS describes these carve-outs as merely applying to its “intellectual
property and unfair competition claims,” but that is not accurate. Section
XXVIII exempts not just claims related to its marks, but also claims for “any
non-compliance by the Franchisee with the terms of this Agreement,” and
authorizes not just injunctive relief, but “all other remedies which the
Franchisor may have at law.” Even if we were to accept SBS’s
characterization of the carve-outs, they are problematic since claims
concerning its intellectual property, confidential information, and non-
compete clause are the claims most likely to be brought by SBS against its
“franchisees.” (See Ramirez, 16 Cal.5th at p. 498 [unconscionable lack of
mutuality where “claims related to intellectual property rights and severance
or noncompete agreements, claims for equitable relief related to unfair
competition or the disclosure of trade secrets or confidential information, and
claims for theft or embezzlement” were excluded because those claims are
27
“more likely to be employer-initiated”].) The one-sided nature of the
arbitration provision is substantively unconscionable. (Ibid.)
SBS argues the carve-outs and injunctive relief exception are not
unconscionable because SBS has a business justification for these one-sided
provisions—essentially that its trademarks and confidential information are
important. SBS, however, never explains how its business justification
negates the provisions’ unconscionability. This purported justification, as the
plaintiffs assert, is merely a statement of SBS’s reasons for wanting to
pursue its claims in court, not arbitration. If anything, it shows SBS views
arbitration “less as a forum for neutral dispute resolution and more as a
means of maximizing employer advantage.” (Ramirez, supra, 16 Cal.5th at
p. 495.)
The trial court’s finding that the arbitration provision’s shortening of
the statute of limitations to one year for all claims is substantively
unconscionable was also appropriate. The UFA provides that all claims are
“barred” unless they are filed in arbitration within one year from the date the
party asserting the claim “knew or should have known of the facts giving rise
to such claims.”8 This provision is plainly unconscionable. (See Ramirez,
supra, 16 Cal.5th at p. 502 [“’[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’ ”]; see also Jenkins v. Dermatology Management,
LLC (2024) 107 Cal.App.5th 633, 644 [“ ‘[t]he shortened [one-year] limitations
8 The mediation clause also requires a party to submit all claims to
mediation within 20 days after a claim arises. We do not read the clause to
forfeit the party’s right to bring a claim in arbitration within one year,
however, if mediation is not pursued within 20 days of the dispute arising.
28
period provided by [appellant’s] arbitration agreement is unconscionable and
insufficient to protect its employees’ right to vindicate their statutory
rights”]; Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227,
254 [“in the context of statutory claims such as the wage-and-hour claims …,
a provision in an arbitration agreement shortening the statutory limitations
period is substantively unconscionable. ‘The Labor Code ... affords employees
three or four years to assert [wage-and-hour claims]. [Citations.] Where, as
in this case, arbitration provisions undermine statutory protections, courts
have readily found unconscionability’ ”].)
SBS argues that the provision is not unconscionable because “PAGA
claims have a one-year statute of limitations,” so “this limitation has zero
impact on the claims asserted by Respondents.” But, again, the contract is
viewed at the time the contracting parties entered the agreement, not from
the time when the parties are later litigating the enforceability of the
provision. (Ramirez, supra, 16 Cal.5th at p. 503.) “[W]hether a contract
‘works unconscionable hardship is determined with reference to the time
when the contract was made.’ ” (Ibid.) The shortened statute of limitations
contained in SBS’s arbitration agreement is a classic example of substantive
unconscionability.
Lastly, the trial court found that SBS’s arbitration agreement’s
allowance for an award of attorneys fee against plaintiffs is substantively
unconscionable. The UFA creates an asymmetric fee-shifting agreement in
SBS’s favor if a franchisee attempts to avoid arbitration. The agreement
states, if a party “is required to enforce this Agreement in a judicial or other
legal proceeding, the party prevailing in such proceeding will be entitled to
reimbursement of its costs and expenses, including reasonable accounting
fees, expert witness fees and legal fees.” The provision also states that “[i]f
29
[SBS] incurs legal fees or other expenses as a result of any breach by
Franchisee of its obligations under this Agreement, then Franchisor will be
entitled to recover from Franchisee the amount of all such legal fees and
other expenses.”
This provision is equivalent to the attorneys fees clause found to be
substantively unconscionable in Ramirez. That clause provided that a party
resisting arbitration “will be required to pay to the other party all costs, fees
and expenses that they incur in compelling.” (Ramirez, supra, 16 Cal.5th at
p. 507.) PAGA contains one-way fee-shifting rules comparable to the Fair
Employment and Housing Act rules discussed in Ramirez. (See id. at
pp. 507–508; Lab. Code, § 2699, subd. (g)(1).) Here, as in Ramirez, the
“potential effect” of the fee-shifting clauses is that Solorio and Covarrubias
would be required to pay SBS’s fees even if they successfully argued that
parts of the agreement are unenforceable, and the trial court severed those
terms. (Ramirez, supra, 16 Cal.5th at pp. 508–509.) Even the “possibility of
such an outcome could chill an employee’s right to challenge the
enforceability of an arbitration agreement,” establishing the clause’s
substantive unconscionability. (Id. at p. 509.)
SBS recognizes the unconscionability of the provision, stating that “the
arbitrator could either sever or restrict the application of any provision which
it determined contravened California law.” It also argues that the attorneys
fee provisions are proper because they “apply to the ‘Franchisees,’ and
Respondents are not the Franchisee—they are the owners and agents of the
Franchisee.” This argument is without merit. As owners of the fictitious
business, Solorio and Covarrubias would be personally liable for any award
against their partnership. (See Friedman et al., Cal. Practice Guide:
Corporations (The Rutter Group 2025) ¶ 2:12, p. 3 [“a general partnership is
30
simply a form of co-ownership by several persons; i.e., the partners together
own the business assets and (except in a limited liability partnership … are
personally liable for all business debts. [Corps. Code, § 16306, subd. (a)]”];
and Myrick v. Mastagni (2010) 185 Cal.App.4th 1082, 1091 [“all partners are
jointly and severally liable for partnership obligations”].)
In sum, we agree with the trial court that Solorio and Covarrubias met
their burden to show that the arbitration provision is unenforceable because
it is highly procedurally unconscionable and imposes multiple substantively
unconscionable terms.
E
Severance
SBS’s final assertion is that the trial court abused its discretion by
declining to sever the arbitration agreement’s unconscionable provisions and
enforce the rest of the agreement. We disagree. “Civil Code section 1670.5,
enacted in 1979, ‘codifie[s] the principle that a court can refuse to enforce an
unconscionable provision in a contract.’ (Armendariz, supra, 24 Cal.4th at
p. 114.) It provides: ‘If the court as a matter of law finds the 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.’ (Civ. Code, § 1670.5, subd. (a).) … The ‘strong legislative and
judicial preference is to sever the offending term and enforce the balance of
the agreement.’ [Citation.] Though the ‘statute appears to give a trial court
some discretion as to whether to sever or restrict the unconscionable
provision or whether to refuse to enforce the entire agreement,’ it ‘also
appears to contemplate the latter course only when an agreement is
31
‘permeated’ by unconscionability.’ (Armendariz, supra, 24 Cal.4th at p. 122.)
The trial court’s decision to act as Civil Code section 1670.5 permits is
reviewed for abuse of discretion.” (Ramirez, supra, 16 Cal.5th at p. 513.)
The trial court found that the arbitration agreement was permeated by
such unconscionability that severance of the unconscionable terms was
inappropriate. The court also concluded that severing certain provisions,
such as the damage limitation, would encourage SBS to include
unconscionable terms knowing the only consequence would be severing of the
term. Finally, the court found it was not possible to cure certain
unconscionable terms without rewriting them, explaining “[f]or example, the
imposition of arbitral fees and costs stems from the AAA rules. Severing the
provision selecting those rules ‘would require reforming the contract with
additional terms,’ which is not permitted. (See Armendariz, supra, 24
Cal.4th at pp. 124–125.)”
“[N]o 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 …. 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. (See
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,’ then severance or restriction is the
32
preferred course 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.)
“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. (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 impose 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
question is yes, the court should refuse to enforce the agreement.” (Ramirez,
supra, 16 Cal.5th at pp. 516–517.)
We agree with Solorio and Covarrubias that the trial court did not
abuse its discretion by deciding not to sever the arbitration agreement’s
substantively unconscionable provisions. As an initial matter, the provision
limits its workers’ remedies and claims, restricts the statute of limitations,
imposes high costs to arbitrate, and exempts only SBS from arbitration for
the claims it is most likely to assert against its franchisees. In combination
with the procedural unconscionability of the agreement, these substantively
unconscionable provisions “indicate that the stronger party engaged in a
systematic effort to impose arbitration on the weaker party not simply as an
alternative to litigation, but to secure a forum that works to the stronger
33
party’s advantage.” (Ramirez, supra, 16 Cal.5th at pp. 516–517.) This alone
permitted the court to refuse to sever the unconscionable terms of the
arbitration agreement. (Ibid.)
In addition, some of the provisions at issue cannot be cured by
severance, particularly the application of the AAA commercial rules. Rather,
severance would require the court to reform the contract, a task the court is
not required or suited to undertake. (See Penilla v. Westmont Corp. (2016) 3
Cal.App.5th 205, 223 [severance is not appropriate when it “would require a
court to augment the agreement with additional terms”].) Further, as the
trial court found, severance would “create an incentive for an employer to
draft a one-sided arbitration agreement in the hope employees would not
challenge the unlawful provisions,” while being assured that “if they do, the
court would simply modify the agreement to include the bilateral terms the
employer should have included in the first place.” (Mills v. Facility Solutions
Group, Inc. (2022) 84 Cal.App.5th 1035, 1045; see also Ramirez v. Charter
Communications (2025) 108 Cal.App.5th 1297, 1306 [applying this rule and
refusing to sever unconscionable terms].) Given the relatively high level of
procedural unconscionability and many substantively unconscionable terms,
the trial court did not abuse its discretion by concluding severance was not in
the interests of justice.
34
DISPOSITION
The order is affirmed. Respondents are awarded the costs of appeal.
MCCONNELL, P. J.
WE CONCUR:
DO, J.
KELETY, J.
35