Ojeda v. Vahi, Inc. CA2/4 ( 2022 )

Filed 8/16/22 Ojeda v. Vahi, Inc. et al. CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not
certified for publication or ordered published, except as specified by rule 8.1115(a). This opinion has not
been certified for publication or ordered published for purposes of rule 8.1115(a).
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
LAWRENCE OJEDA, B313717
Plaintiff and Appellant, (Los Angeles County
v.
VAHI, INC., dba VALLEY HI Super. Ct. No.
TOYOTA, et al., 21STCV00471)
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Dennis J. Landin, Judge. Affirmed.
Fisher & Phillips, Nicole Golob, Victoria Shin, and Megan E.
Walker for Vahi, Inc. dba Valley Hi Toyota, Dick Browning, Inc.,
Todd Stokes, and Mike Mitsch.
Bosko and David Bosko for Lawrence Ojeda.
INTRODUCTION
Vahi, Inc. dba Valley Hi Toyota, Dick Browning, Inc., Todd
Stokes, and Mike Mitsch (collectively, the Dealership) appeal
from an order denying their motion to compel plaintiff Lawrence
Ojeda to arbitrate his employment-related claims against the
Dealership. The Dealership contends the trial court erred in
determining the arbitration agreements between the parties were
unconscionable, and in refusing to sever any provisions the trial
court considered unconscionable. For the reasons discussed
below, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Ojeda worked at the Dealership from approximately 2007
to 2020. He began as a sales associate, and was later promoted to
a finance manager. During his employment, Ojeda signed several
arbitration agreements.
Ojeda executed the first arbitration agreement on July 24,
2008, as part of his new-hire packet. Less than a month later, on
August 19, 2008, Ojeda executed a second arbitration agreement
included with a handbook acknowledgement. That agreement
states that it “is the entire agreement between the Company and
[Ojeda] regarding dispute resolution, the length of [Ojeda’s]
employment, and the reasons for termination of employment, and
this agreement supersedes any and all prior agreements
regarding these issues to the extent that they differ from the
foregoing.”
On November 6, 2015, Ojeda executed an “Employee
Acknowledgment and Agreement [and] Agreement to Arbitrate”
(the November 6, 2015 Agreement). The section regarding
arbitration is 76 lines single-spaced and appears as the third
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section of a six-section, four-page employment agreement. The
November 6, 2015 Agreement states it is “the entire agreement
between [Ojeda] and the Dealership regarding the matters
addressed in this agreement and this agreement supersedes any
and all prior agreements regarding these issues.”
Eleven days later, on November 17, 2015, Ojeda signed a
“Finance Manager Pay Plan,” which includes an arbitration
agreement at the end of the five-page document. This agreement,
signed after the November 6, 2015 Agreement, purportedly took
effect on November 1, 2015 (i.e., before the November 6, 2015
Agreement).
In February 2020, the Dealership terminated Ojeda. In
January 2021, Ojeda filed a complaint against the Dealership,
alleging claims for wrongful termination, discrimination,
harassment, retaliation, failure to prevent discrimination and
harassment, and intentional infliction of emotional distress.
In response to the complaint, the Dealership moved to
compel Ojeda to arbitrate his claims based on the November 6,
2015 Agreement. In opposition, Ojeda argued no agreement to
arbitrate exists between Ojeda and the Dealership because Ojeda
is the only named party in the November 6, 2015 Agreement.
Alternatively, he argued that even assuming the November 6,
2015 Agreement is the operative agreement, it is procedurally
and substantively unconscionable. In support of his opposition,
Ojeda submitted a declaration stating, in part, that he had to
sign and return the arbitration form the same day he received it,
and when he asked questions to his managers about any of the
forms he received during his employment at the Dealership, he
was given answers, such as “‘shut up and sign it,’” or “‘sign it if
you want to keep working here.’”
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After a hearing, the court issued an order denying the
Dealership’s motion to compel arbitration. The court held the
Dealership met its burden of establishing the existence of an
arbitration agreement. Rather than determining which
arbitration agreement is the operative agreement, the trial court
explained the “broad language of the arbitration provisions [in all
agreements Ojeda signed throughout his employment] expressly
covers the claims in the instant action . . . .” It held none of the
agreements were enforceable, however, based on its finding of a
“high degree of procedural unconscionability” and a “modest
degree of substantive unconscionability.” With respect to
procedural unconscionability, the trial court found “the records
show that [Ojeda] actively inquired about the nature of the forms
but was not only denied any explanation but also was ridiculed
and insulted for asking the questions”; “some [of the] agreements
contain[ed] a long, single-spaced paragraph filled with statutory
references and legal jargon”; and “with respect to arbitration
costs, while the Arbitration Agreements references [sic] case law
exceptions to Code of Civil Procedure section 1284.2’s default
rule, [the Dealership’s] obligation to pay arbitration-related costs
would not be evident to anyone without legal knowledge or access
to the relevant authorities.” The trial court then found
substantive unconscionability on three bases: (1) the Dealership’s
unilateral right to change the arbitration agreement’s terms; (2)
the existence of multiple arbitration agreements with conflicting
terms; and (3) the right to appeal a potential arbitration award.
Thus, the trial court concluded that “[u]nder the sliding
scale approach, . . . [Ojeda] made a strong showing of both
procedural and substantive unconscionability to render the
[a]rbitration [a]greements unenforceable.”
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The Dealership timely appealed. Ojeda cross-appealed,
contending the trial court erred in holding a valid arbitration
agreement exists between the parties.1
DISCUSSION
A. Applicable Law and Standard of Review
A written agreement to submit a controversy to arbitration
is valid and enforceable, absent a reason under state law, such as
unconscionability, that would render any contract revocable.
(Code Civ. Proc., § 1281; Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz);
Sandoval-Ryan v. Oleander Holdings LLC (2020) 58 Cal.App.5th
217, 222.) “The party seeking to compel arbitration bears the
burden of proving the existence of an arbitration agreement,
while the party opposing the petition bears the burden of
establishing a defense to the agreement’s enforcement.
[Citation.]” (Aanderud v. Superior Court (2017) 13 Cal.App.5th
880, 890.)
Unconscionability is such a defense. The doctrine of
unconscionability has both a procedural and a substantive
1 We note this argument is simply an additional,
independent ground on which, Ojeda argues, we should affirm
the trial court’s order. It therefore could have been made in
Ojeda’s opposition brief as opposed to bringing a separate cross-
appeal. (See State Water Resources Control Bd. Cases (2006) 136
Cal.App.4th 674, 828 fn. 61 [“A party who advocates the
affirmance of a judgment does not have to file a cross-appeal to
assert the judgment was correct on grounds other than the one on
which the trial court relied. [Citation.]”].) In any event, in light of
our conclusion that the November 6, 2015 Agreement is
unconscionable (as discussed below), the cross-appeal is moot.
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element. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237,
1243-1244 (Baltazar).) “‘[T]he former focus[es] on “‘oppression’” or
“‘surprise’” due to unequal bargaining power, the latter on
“‘overly harsh’” or “‘one-sided’” results.’ [Citation.]” (Little v. Auto
Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071 (Little).) But the two
elements need not exist to the same degree. The more one is
present, the less the other is required to invalidate an agreement.
(Armendariz, supra, 24 Cal.4th at p. 114 [unconscionability is
measured on a sliding scale in which greater procedural
unconscionability requires less substantive unconscionability,
and vice versa].)
If a court finds a clause within a contract to have been
unconscionable at the time it was made, the court may refuse to
enforce the contract, or instead sever the unconscionable clause
and enforce the remainder of the contract. (Civ. Code, § 1670.5,
subd. (a); Armendariz, supra, 24 Cal.4th at p. 122.)
“Standards of review of orders on a motion to compel
arbitration are not uniform. [Citation.] Generally, if the trial
court’s order rests on a factual determination, the appellate court
adopts a substantial evidence standard. If the court’s decision
rests solely on an interpretation of law, then we employ the de
novo standard of review. [Citation.]” (Contreras v. Superior
Court (2021) 61 Cal.App.5th 461, 468.) “We review a trial court’s
order declining to sever the unconscionable provisions from an
arbitration agreement for abuse of discretion.” (Lange v. Monster
Energy Co. (2020) 46 Cal.App.5th 436, 453, citing Armendariz,
supra, 24 Cal.4th at p. 124.)
B. Operative Agreement
As a threshold matter, we first address which arbitration
agreement is the operative agreement between the parties. The
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Dealership contends the operative agreement is the November 6,
2015 Agreement. It argues that although Ojeda signed the
“Finance Manager Pay Plan,” which included an arbitration
agreement, after the November 6, 2015 Agreement, the Finance
Manager Pay Plan took effect before the November 6, 2015
Agreement. It follows, according to the Dealership, that the
November 6, 2015 Agreement superseded the arbitration
agreement contained in the Finance Manager Pay Plan.
In arguing the issue of unconscionability in the trial court,
Ojeda too focused on the November 6, 2015 Agreement.2 The trial
court, however, made findings of procedural and substantive
unconscionability with respect to all arbitration agreements
executed by Ojeda during his employment. As discussed below,
even assuming (without deciding) the November 6, 2015
Agreement is the operative agreement, we conclude that
agreement is unconscionable, rendering it unenforceable.
C. Procedural Unconscionability
The trial court found the execution of all arbitration
agreements throughout Ojeda’s employment involved a “high
degree” of procedural unconscionability. Focusing solely on the
execution of the November 6, 2015 Agreement, we agree.
“A procedural unconscionability analysis ‘begins with an
inquiry into whether the contract is one of adhesion.’ [Citation.]
An adhesive contract is standardized . . . and offered by the party
2 We acknowledge Ojeda argues he was forced to sign
multiple confusing and inconsistent arbitration agreements. The
bulk of his argument regarding both procedural and substantive
unconscionability, however, focuses on the November 6, 2015
Agreement.
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with superior bargaining power ‘on a take-it-or-leave-it basis.’
[Citations.] Arbitration contracts imposed as a condition of
employment are typically adhesive . . . .” (OTO, L.L.C. v.
Kho (2019) 8 Cal.5th 111, 126 (OTO).) The Dealership does not
deny the November 6, 2015 Agreement is an adhesive contract.3
“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. [Citation.]
‘“‘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.’”’
[Citations.]” (OTO, supra, 8 Cal.5th at p. 126.) The record
demonstrates both surprise and oppression.
Our Supreme Court in OTO found the record supported the
trial court’s finding of surprise where the arbitration agreement
consisted of a “single dense paragraph” of “51 lines,” and the text
was “‘visually impenetrable’ and ‘challenge[d] the limits of
legibility.’” (OTO, supra, 8 Cal.5th at p. 128.) The “substance of
the agreement” was “similarly opaque” because the sentences
were “complex, filled with statutory references and legal jargon.”
(Ibid.)
Similarly, here, the November 6, 2015 Agreement is long,
dense, and complex. As the trial court noted, the November 6,
2015 Agreement is 76 lines long, made up of 8 single-spaced
paragraphs. Like the agreement in OTO, the agreement here also
3 The Dealership notes the November 6, 2015 Agreement is
silent regarding whether Ojeda was required to sign the
agreement. But it provides no evidence contradicting Ojeda’s
evidence that he was required to sign the agreement to keep his
job.
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contains several statutory references to, for example, Title VII of
the Civil Rights Act of 1964, unspecified “state or federal laws or
regulations,” and six different sections of the California Civil
Code and Code of Civil Procedure. Thus, as stated in OTO, a
layperson trying to navigate this text “would not have an easy
journey.” (OTO, supra, 8 Cal.5th at p. 128.)
Moreover, the OTO court also found the element of surprise
in the arbitration agreement based on a cost provision that is
identical to the one in the November 6, 2015 Agreement. (OTO,
supra, 8 Cal.5th at pp. 128-129.) Like in OTO, the November 6,
2015 Agreement states: “If [Code of Civil Procedure] section
1284.2 conflicts with other substantive statutory provisions or
controlling case law, the allocation of costs and arbitrator fees
shall be governed by said statutory provisions or controlling case
law instead of [Code of Civil Procedure] section 1284.2.” As the
OTO court explained: “Although the agreement anticipates that
the ‘controlling case law’ of Armendariz[4] would prevail over the
statutory default rule, [the employer’s] obligation to pay
arbitration-related costs would not be evident to anyone without
legal knowledge or access to the relevant authorities.” (OTO,
supra, 8 Cal.5th at pp. 128-129.)
The record also supports the trial court’s finding of
oppression. “‘The circumstances relevant to establishing
oppression include, but are not limited to (1) the amount of time
4 Code of Civil Procedure section 1284.2 states a default rule
that, unless the agreement specifies otherwise, parties to an
arbitration will bear their own expenses. Armendariz created an
exception to this general rule for arbitrations of employment-
related disputes, however. (See Armendariz, supra, 24 Cal.4th at
pp. 110-111.)
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the party is given to consider the proposed contract; (2) the
amount and type of pressure exerted on the party to sign the
proposed contract; (3) the length of the proposed contract and the
length and complexity of the challenged provision; (4) the
education and experience of the party; and (5) whether the
party’s review of the proposed contract was aided by an attorney.’
[Citation.].” (OTO, supra, 8 Cal.5th at pp. 126-127.) Substantial
evidence of all five factors of oppression is present here: (1) the
Dealership required Ojeda to sign and return the agreement the
same day he received it; (2) Ojeda declared that when he asked
questions about any forms he was given to sign at the Dealership,
his managers would “dismiss [him],” “make fun of [him], and tell
him to “‘shut up and sign it’” or “‘sign it if [he] want[ed] to keep
working here’”; (3) as discussed above, the November 6, 2015
Agreement is 76 lines long, 8 single-spaced paragraphs, and
complex to a lay person; (4) Ojeda has no college degree and no
legal knowledge or experience; and (5) Ojeda had no assistance
from, nor an opportunity to seek assistance from, an attorney.
Further, Ojeda had been an employee of the Dealership eight
years at the time he was presented with the November 6, 2015
Agreement. As the trial court noted, “[the] economic pressure can
also be substantial when employees are required to accept an
arbitration agreement in order to keep their job[s].” (See OTO,
supra, 8 Cal.5th at p. 127 [“Employees who have worked in a job
for a substantial length of time likely come to rely on the benefits
of employment.”].)
The Dealership’s attempt to distinguish OTO is unavailing.
It argues that unlike the employee in OTO who was required to
execute the arbitration agreement “immediately,” Ojeda was
“simply told to return the signed policies the same day.” But
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Ojeda could not have reasonably reviewed the arbitration
agreement. Had he done so, he would have lost opportunities for
commission because a “majority of [his] pay was based on
commissions for [his] involvement in sales.” And, in any event,
Ojeda declared he had “no understanding of what an arbitration
was”; therefore, a cursory, independent review of the document
during his shift, without a lawyer, would have been a futile
exercise.
Accordingly, we conclude the record contains substantial
evidence of a high degree of procedural unconscionability.
D. Substantive Unconscionability
“Substantive unconscionability examines the fairness of a
contract’s terms. . . . [The] ‘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.]” (OTO, supra, 8 Cal.5th at pp. 129-130.)
“Substantive 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.’ [Citation].” (OTO, supra, 8 Cal.5th at p. 130.)
Given the “demonstrably oppressive” procedure imposed on
Ojeda in connection with his execution of the November 6, 2015
Agreement, we conclude several terms in the agreement are
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sufficiently one-sided that, taken together, they render the
agreement substantively unconscionable.
First, the November 6, 2015 Agreement provides that “[t]he
Dealership retains the right to add, change or delete wages,
benefits, policies, and all other working conditions at any time
(except the policy of ‘at-will employment’ and the arbitration
agreement, which may not be changed, altered, revised, or
modified without a writing signed by the President).” Thus, the
Dealership has the unilateral right to change or modify the
agreement at any time, and without notice to Ojeda, as long as
the modification is in writing signed by the President.
Second, the November 6, 2015 Agreement permits an
appeal to a second arbitrator upon either party’s written request.
In Little, supra, 29 Cal.4th 1064, 1074, our Supreme Court held a
provision in an arbitration agreement that permitted either party
to appeal an arbitration award of more than $50,000 was
“unconscionably one-sided.” Although the Little court focused on
the $50,000 threshold, explaining it “inordinately benefits
defendants,” (id. at p. 1073), the court was also concerned with
the delay and expense associated with appellate arbitral review.
The Little court stated: “[Defendant employer] also argues that
an arbitration appeal is less objectionable than a second
arbitration . . . because it is not permitting a wholly new
proceeding, making the first arbitration illusory, but only
permitting limited appellate review of the arbitral award. We fail
to perceive a significant difference. Each of these provisions is
geared toward giving the arbitral defendant a substantial
opportunity to overturn a sizable arbitration award. Indeed, in
some respects appellate review is more favorable to the employer
attempting to protect its interests. It is unlikely that an
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arbitrator who merely acts in an appellate capacity will increase
an award against the employer, whereas a trial or arbitration de
novo at least runs the risk that the employer would become liable
for an even larger sum than that awarded in the initial
arbitration.” (Id. at pp. 1073-1074.) Thus, the appellate arbitral
review provision in the November 6, 2015 Agreement, even
without a threshold dollar amount, presents the same concerns
as that in Little: “If the employee receives a substantial award,
the employer can seek appellate arbitral review and thereby
increase the expense and possibly the length of time required for
the employee to obtain confirmation of her award, and do so with
very little risk to itself.” (Alvarez v. Altamed Health Services
Corp. (2021) 60 Cal.App.5th 572, 595 [holding an arbitral appeal
provision was unconscionable despite the absence of a dollar
threshold].)
Third, the November 6, 2015 Agreement permits the
Dealership to file dispositive motions during the arbitration
including a demurrer, motion for judgment on the pleadings, and
motion for summary judgment. The arbitrator “shall extend the
times set by the [California Arbitration Act] for giving of notices
and setting of hearings.” These provisions, read together, favor
the employer. Defendants are more likely to bring dispositive
motions, and the arbitrator may extend the time of the
arbitration to allow the defendant to do so, which lengthens the
arbitration process and increases expense for the employee.
We conclude these provisions, read against the backdrop of
the demonstrably oppressive procedure imposed on Ojeda to sign
the agreement, render the November 6, 2015 Agreement
substantively unconscionable. (See OTO, supra, 8 Cal.5th at p.
130 [“We hold that, given the substantial procedural
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unconscionability here, even a relatively low degree of
substantive unconscionability may suffice to render the
agreement unenforceable. [Citation.]”].)
E. Severance
The Dealership contends severance is appropriate, and the
court abused its discretion by failing to sever the unconscionable
provisions. We affirm the denial of severance.
“An unconscionable contractual term may be severed and
the resulting agreement enforced, unless the agreement is
permeated by an unlawful purpose, or severance would require a
court to augment the agreement with additional terms.
[Citation.]” (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205,
223.) Severance may be properly denied when the agreement
contains more than one unconscionable provision, and “‘there is
no single provision a court can strike or restrict in order to
remove the unconscionable taint from the agreement.’ [Citation.]”
(Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th
713, 738.)
As discussed above, the November 6, 2015 Agreement
contains more than one substantively unconscionable provision.
“Such 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.” (Armendariz, supra, 24 Cal.4th at p. 124.)
Accordingly, we conclude the trial court did not abuse its
discretion in declining to sever the unconscionable provisions.
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DISPOSITION
The order is affirmed. Ojeda is awarded his costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
CURREY, J.
We concur:
WILLHITE, Acting P.J.
COLLINS, J.
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