Ainsworth v. Boys & Girls Clubs CA1/3

Filed 8/24/23 Ainsworth v. Boys & Girls Clubs 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
BRETT AINSWORTH,
Plaintiff and Respondent, A165472
v. (Sonoma County
BOYS & GIRLS CLUBS OF Super. Ct. No. SCV-269901)
SONOMA VALLEY et al.
Defendants and Appellants.
Defendants Boys and Girls Clubs of Sonoma Valley (the Club) and Cary
Snowden, the Club’s president and chief executive officer, appeal from an
order denying their motion to compel plaintiff Brett Ainsworth, a former
employee, to arbitrate his employment-related and other claims. Ainsworth
signed an employment agreement with the Club; two years later, he signed
an agreement with Oasis Outsourcing (Oasis), which performed human
resources and payroll functions for the Club. Both agreements contained
arbitration clauses. The trial court concluded the later-signed Oasis
agreement supplanted the Club agreement and, because it was procedurally
and substantively unconscionable, the Oasis agreement was unenforceable.
We disagree and reverse.
BACKGROUND
In May 2014, the Club hired Ainsworth as the human resources and
volunteer manager. The day he was hired, Ainsworth signed a two-page
1
employment agreement containing an arbitration clause. The clause was
separated from other paragraphs and titled in bold text, “ARBITRATION
OF DISPUTES.” It required Ainsworth and the Club to arbitrate any claim,
controversy, or dispute arising between them. In addition, the parties had
“the right to discovery in accordance with section 1283.05” of the Code of Civil
Procedure, and the arbitrator must be a retired superior court judge or
licensed attorney, or any other person mutually agreeable to the parties.
Each party agreed to bear its own cost associated with arbitration —
including attorney fees — while evenly splitting the cost of the arbitrator.
The arbitration clause was followed by language in which the Club and
Ainsworth waived their right to a jury trial. It said, this “CONSTITUTES A
WAIVER OF [THE PARTIES’] RIGHT TO A TRIAL BY JURY OF ANY
MATTERS SUBJECT TO ARBITRATION UNDER THIS CONTRACT.” The
initials of Ainsworth and a Club representative appear immediately
underneath the arbitration clause, indicating they understood the arbitration
obligations.
Two years later, the Club hired Oasis to perform human resources and
payroll functions for the Club. Ainsworth signed a one-page document titled
“Employee Acknowledgements.” It stated Oasis would pay Ainsworth, but
the Club would still direct and control his “day-to-day work.” In addition, the
agreement stated the Club and Ainsworth were free to engage in contracts
together but “Oasis is not responsible for these things or for anything
promised [to Ainsworth] by anyone other than Oasis.”
The Oasis agreement also contained an arbitration clause, requiring
Ainsworth to arbitrate “any legal dispute with [the Club], Oasis, or any other
party that may have an employment relationship [with Ainsworth].”
Additionally, arbitration would be conducted by a neutral arbitrator who
2
would abide by federal rules of evidence, the applicable statutes of limitation,
and who was authorized to grant the same remedies as a federal court “but
no more.” It continued, “My agreement to these terms controls any
conflicting dispute resolution agreement, including one entered into after I
sign this document, if the conflicting agreement would prevent a matter in
which Oasis or an insurance policy issued to Oasis is involved from being
arbitrated, does not provide a jury waiver (if the matter is not arbitrated), or
does not include a class action waiver (if the matter is a class action or
potential class action.)” Ainsworth’s signature appears on the agreement —
the Club’s does not.
In March 2018, Snowden terminated Ainsworth’s employment. More
than three years later, Ainsworth filed a lawsuit seeking damages against
defendants for various claims, including wrongful termination, employment
discrimination, and retaliation in violation of the California Fair
Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq.).
Relying on the arbitration provisions in both the Club and Oasis
agreements, defendants moved to compel arbitration and sought a stay of
judicial proceedings. All of Ainsworth’s claims, defendants argued, fell within
the scope of the arbitration provisions. Defendants argued both agreements
were enforceable and, if any provisions were unenforceable, they should be
severed. In opposition, Ainsworth argued the arbitration agreement — not
being specific as to which one — was invalid and unenforceable because it
required “the employee to pay for cost and fees associated with arbitration.”
Relevant here, Ainsworth argued the provision was “ ‘unconscionably
unilateral’ ” both in how it was written and defendants’ delay in enforcement.
The trial court denied defendants’ motion to compel arbitration. It
determined both arbitration agreements were procedurally unconscionable as
3
facially adhesive contracts. The court also concluded the Oasis agreement
featured other hallmarks of procedural unconscionability, such as the
absence of a separate title, section, or place for parties to sign or initial
acknowledging their understanding of the clause. The court determined the
agreement was also substantively unconscionable. Among other things, the
agreement limited recovery to remedies authorized under federal law — the
court concluded those remedies may not be the same as remedies authorized
under California law; the agreement failed to indicate whether discovery was
allowed; and it failed to identify the neutral arbitration service or provide a
copy of the rules. The court did not examine whether the Club agreement
was substantively unconscionable. Finally, the court concluded the Oasis
agreement was “part of a later employment agreement and appears to be the
operative agreement, supplanting the earlier [Club] employment and
arbitration agreements.”
DISCUSSION
Defendants urge us to reverse the denial of its motion to compel
arbitration and stay judicial proceedings because the trial court erred by
finding the Oasis arbitration agreement procedurally and substantively
unconscionable.1
The framework for addressing these issues is as follows. General
contract law principles govern whether parties entered a binding arbitration
agreement. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development
1 To the extent Ainsworth suggests defendants waived their right to
arbitrate, he fails satisfy the heavy burden of proof to establish waiver.
(Burton v. Cruise (2010) 190 Cal.App.4th 939, 945 [waiver not lightly
inferred].) Ainsworth filed his complaint in December 2021 and defendants
filed their motion to compel arbitration two months later. Ainsworth does
not demonstrate defendants unreasonably delayed their arbitration demand
or that he suffered prejudice due to any alleged delay.
4
(US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle).) The “existence of an
enforceable arbitration agreement is established under state law principles
involving formation, revocation and enforcement of contracts generally.”
(Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348,
357.) It is “valid, enforceable and irrevocable” unless revocable on grounds
that exist for any contract, such as unconscionability. (Code Civ. Proc.,
§ 1281; OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (Kho); Lange v. Monster
Energy Co. (2020) 46 Cal.App.5th 436, 445.) The party seeking arbitration
must demonstrate the existence of an agreement. (Serafin v. Balco Properties
Ltd., LLC (2015) 235 Cal.App.4th 165, 172–173.) Where the facts are not in
dispute, we review de novo whether a valid agreement to arbitrate was
formed. (Id. at p. 173.)
Unconscionability includes both procedural and substantive elements.
(Pinnacle, supra, 55 Cal.4th at p. 246.) Procedural unconscionability focuses
on “ ‘ “oppression” ’ or ‘ “surprise” ’ due to unequal bargaining power.”
(Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th
83, 114 (Armendariz).) Substantive unconscionability examines the fairness
of the terms of the agreement and whether it is “ ‘ “overly harsh” ’ or ‘ “one-
sided.” ’ ” (Ibid.) Though an agreement to arbitrate is unenforceable if
elements of both procedural and substantive unconscionability exist, they
need not be present to the same degree. (Ibid.) Like a sliding scale, “the
more substantively oppressive the contract term, the less evidence of
procedural unconscionability is required to come to the conclusion that the
term is unenforceable, and vice versa.” (Ibid.) “While the scale is sliding,
there must be some weight on each side.” (Iyere v. Wise Auto Group (2023)
87 Cal.App.5th 747, 759.)
5
At the outset, defendants contend the trial court erred by finding the
later-executed Oasis agreement controlled the dispute here because it
“supplanted” the earlier Club agreement. We agree.
Generally, provisions of a later-executed agreement can supersede
those of an earlier agreement if they involve the same parties. (E.g.,
Frangipani v. Boecker (1998) 64 Cal.App.4th 860, 863 [“[w]here there is an
inconsistency between two agreements both of which are executed by all of
the parties, the later contract supersedes the former”].) A substitution of a
new obligation for an existing one — a novation — is made “by agreement
and with the intent to extinguish the prior obligation.” (Wells Fargo Bank v.
Bank of America (1995) 32 Cal.App.4th 424, 431; Civ. Code, § 1530.) But it
must clearly appear the parties intended to extinguish their earlier
agreement. (Wells Fargo, at p. 432.)
Defendants did not sign the Oasis agreement. Moreover, nothing in
that agreement clearly indicates the parties — Oasis and Ainsworth —
intended it to bind the Club or to supersede the arbitration agreement signed
by Ainsworth and the Club (even assuming they could do so). (Civ. Code,
§ 1639 [“When a contract is reduced to writing, the intention of the parties is
to be ascertained from the writing alone, if possible”]; Grey v. American
Management Services (2012) 204 Cal.App.4th 803, 807, 809 [an integration
clause “is a key factor in divining” whether the parties “ ‘intended their
writing to serve as the exclusive embodiment of their agreement’ ”].) Indeed,
the Oasis agreement expressly states the Club, not Oasis, directs and
controls Ainsworth’s daily work duties. And it further disavows the existence
of any employment contract between Ainsworth and Oasis.
The statement in the Oasis agreement — that its arbitration
obligations controlled if other agreements failed to include an arbitration
6
clause, a jury waiver if a matter is not arbitrated, or a class action waiver if
the matter was a class action — does not demonstrate any intent to
supersede the agreement into which the Club and Ainsworth entered. For
one thing, the Club agreement contains an arbitration clause, jury waiver,
and Ainsworth’s claims do not involve a class action. Moreover, the plain
language of the Oasis agreement acknowledges the continued existence of the
Club agreement; it is that employment agreement between defendants and
Ainsworth which controls here. Given that conclusion, we need not address
whether the Oasis agreement was unconscionable.
Next, defendants argue the trial court erred in finding the Club
agreement procedurally unconscionable. We agree with defendants —
Ainsworth, as the party opposing arbitration, had the burden of proving the
employment agreement is unconscionable. (Pinnacle, supra, 55 Cal.4th at
p. 247.) He failed to do so.
Ordinarily, the procedural unconscionability analysis starts with
determining whether an agreement is a contract of adhesion — a
standardized contract, given by the party with superior bargaining power,
“ ‘on a take-it-or-leave-it basis.’ ” (Kho, supra, 8 Cal.5th at p. 126.) An
arbitration agreement “imposed as a condition of employment [is] typically
adhesive” with few employees being able to decline employment because of an
arbitration agreement. (Ibid.; Lange v. Monster Energy Co., supra,
46 Cal.App.5th at p. 446.) But whether the contract is adhesive is not
dispositive. (Serpa v. California Surety Investigations, Inc. (2013)
215 Cal.App.4th 695, 704 (Serpa); Peng v. First Republic Bank (2013)
219 Cal.App.4th 1462, 1470.) Adhesion alone only establishes a low degree of
procedural unconscionability. (Davis v. Kozak (2020) 53 Cal.App.5th 897, 907
(Davis).)
7
Instead, we consider whether there was oppression or surprise in the
agreement. (Davis, supra, 53 Cal.App.5th at p. 906.) Oppression exists when
a contract lacked any meaningful choice or negotiations. (Pinnacle, supra,
55 Cal.4th at p. 247.) Relevant factors include the circumstances
surrounding contract negotiations, the signing of the contract, or the amount
of time a party is given to consider the proposed contract. (Kho, supra,8 Cal.5th at pp. 126–127.) Furthermore, we consider the pressure imposed
on a party to sign, the length of the contract and the complexity of the
challenged provision’s language, the education and experience of the party,
and whether an attorney assisted the employee in reviewing the document.
(Id. at p. 127.)
Here, the trial court concluded that the Club agreement — on its
face — was a contract of adhesion. Ainsworth, however, failed to provide any
evidence the agreement was presented to him on a “take-it-or-leave-it
basis” — that he would not be hired if he did not sign the form. (Baltazar v.
Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245; McManus v. CIBC World
Markets Corp. (2003) 109 Cal.App.4th 76, 91.) The agreement did not state
that Ainsworth’s assent to its terms is “ ‘in consideration’ ” of his employment
with the Club. (Davis, supra, 53 Cal.App.5th at p. 906.)
Moreover, Ainsworth failed to present any evidence of oppression. The
record contains no evidence to illustrate the circumstances under which the
Club agreement was signed or whether he was provided a meaningful
opportunity to review or negotiate before signing. (Kho, supra, 8 Cal.5th at
pp. 126–127.) Nor is there evidence the Club exerted any pressure on
Ainsworth to sign or whether an attorney assisted Ainsworth in reviewing
the agreements. (Id. at p. 127.) To the contrary, the only evidence in the
record suggests there was no oppression in the signing of the Club
8
agreement. In his declaration, Ainsworth listed his educational
background — including two graduate degrees and five professional
certificates — which supports the finding that Ainsworth was educated
enough to understand the agreement. (Ibid.) Moreover, the arbitration
provision is short and written in plain language. (Ibid.)
Nor was there evidence of surprise, such as “ ‘ “ ‘where the allegedly
unconscionable provision is hidden within a prolix printed form.’ ” ’ ” (Kho,
supra, 8 Cal.5th at p. 126.) Ainsworth does not argue — nor can he — the
arbitration clause was hidden. The entire employment agreement is less
than two pages long. (Roman v. Superior Court (2009) 172 Cal.App.4th 1462,
1471 [finding no surprise where the arbitration provision was on the last
page of a seven-page employment application].) Additionally, the arbitration
clause was highlighted and contained in its own section titled
“ARBITRATION OF DISPUTES.” (Serafin v. Balco Properties Ltd., LLC,
supra, 235 Cal.App.4th at p. 179 [procedural unconscionability is limited
where an arbitration provision is highlighted for the employee].) Finally,
Ainsworth initialed immediately underneath the arbitration clause indicating
he understood. In sum, Ainsworth has not met his burden of establishing the
Club agreement is procedurally unconscionable beyond being standardized
and on a preprinted form.
Finally, defendants argue that, to the extent the Club agreement
contains substantively unconscionable provisions, the agreement is
nonetheless enforceable because any such provisions can be severed. We
agree.
Even assuming a minimal amount of procedural unconscionability in
the Club agreement, we must find a high level of substantive
unconscionability to render it unenforceable. (Ajamian v. CantorCO2e, L.P.
9
(2012) 203 Cal.App.4th 771, 796.) We do not. “In assessing substantive
unconscionability, the paramount consideration is mutuality.” (Abramson v.
Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 664.) It is insufficient for
an agreement to slightly favor one party. (Pinnacle, supra, 55 Cal.4th at
p. 246.) Rather the agreement must be “ ‘so one-sided as to “shock the
conscience.” ’ ” (Ibid.) To avoid being substantively unconscionable, an
arbitration agreement must meet the following minimum standards: it must
provide for (1) a neutral arbitrator, (2) adequate discovery, (3) a written
decision, (4) the same remedies available in court, and (5) it must limit the
expenses an employee must pay in arbitration. (Armendariz, supra,
24 Cal.4th at p. 102.)
Here, the Club agreement requires both parties to arbitrate their
claims. (Armendariz, supra, 24 Cal.4th at pp. 115–116.) The agreement
further satisfies the neutral arbitration requirement. It mandates an
arbitrator be “a retired Superior Court Judge or a licensed California
attorney, or any other person mutually agreeable to the parties.” Although
the agreement does not explicitly provide the arbitrator must be neutral, it
requires arbitration to proceed in accordance with the California Arbitration
Act (Code Civ. Proc., § 1280 et seq.). That act provides, in relevant part,
“[u]nless the arbitration agreement otherwise provides, . . . [t]he arbitration
shall be by a single neutral arbitrator.” (Id., § 1282, subd. (a).) Because the
agreement does not state otherwise, we conclude it requires the appointment
of a neutral arbitrator.
Similarly, the agreement satisfies both the discovery and written
decision rewards requirements. It states discovery will be allowed in
accordance with Code of Civil Procedure section 1283.05, which has been
deemed adequate for arbitration purposes. (Armendariz, supra, 24 Cal.4th at
10
pp. 105–106 [inferring “that when parties agree to arbitrate statutory claims,
they also implicitly agree, absent express language to the contrary, to such
procedures as are necessary to vindicate that claim”].) And while the
agreement does not state a written decision will be offered, when an
arbitration agreement “covers FEHA claims and is silent as to the minimal
elements of fairness required by Armendariz, courts will infer those terms.”
(Iyere v. Wise Auto Group, supra, 87 Cal.App.5th at p. 761.) Since the
arbitration clause covers “wrongful termination or harassment, and any type
of discrimination” and nothing in the agreement precludes issuing a written
decision, we interpret it to require a written decision.
Defendants, however, concede there are two provisions in the Club
agreement that are substantively unconscionable; we accept their concession.
First, the agreement states “[e]ach party shall bear its own respective costs
and expense, including attorney fees,” regardless of the type of action
brought. This limits Ainsworth’s ability to potentially receive an award of
attorney fees, an award expressly allowed under FEHA. (Gov. Code, § 12965,
subd. (c)(6) [authorizing the court to award the prevailing party “reasonable
attorney’s fees and costs, including expert witness fees”].) Denying an
employee an award of attorney’s fees is substantively unconscionable.
(Serpa, supra, 215 Cal.App.4th at pp. 709–710; Armendariz, supra,24 Cal.4th at pp. 103–104.)
Second, the provision requiring Ainsworth to pay one-half of the
arbitration costs is unconscionable. When mandatory arbitration is a
condition of employment, the arbitration agreement generally cannot require
employees “to bear any type of expense that the employee would not be
required to bear” if they brought the action in court. (Armendariz, supra,24 Cal.4th at pp. 110–111.) This ensures “that employees bringing FEHA
11
claims will not be deterred by costs greater than the usual costs incurred
during litigation, costs that are essentially imposed on an employee by the
employer.” (Id. at p. 111.)
Concluding these provisions are substantively unconscionable does not
require voiding the entire arbitration agreement. Courts have discretion to
sever unconscionable clauses and enforce the remainder of the contract. (Civ.
Code, § 1670.5, subd. (a); Armendariz, supra, 24 Cal.4th at p. 124.) Indeed,
there is a strong preference for courts to sever unconscionable provisions
unless unconscionability permeates the entire agreement. (De Leon v.
Pinnacle Property Management Services, LLC (2021) 72 Cal.App.5th 476,
492.) Specifically, examining the various purposes of the contract, if “the
central purpose of the contract is tainted with illegality, then the contract as
a whole cannot be enforced.” (Armendariz, at p. 124.) But if “the illegality is
collateral to the main purpose of the contract, and the illegal provision can be
extirpated from the contract by means of severance or restriction, then such
severance and restriction are appropriate.” (Ibid.)
Severing the unconscionable attorney fees and arbitration cost
provisions here is appropriate. Both can be removed without having to
reform the Club agreement by augmenting it with additional terms,
indicating unconscionability does not permeate the agreement. (Armendariz,
supra, 24 Cal.4th at pp. 125–126.) Indeed, courts have severed provisions
limiting attorney fees awards — a restriction that has been described as
collateral to the main purpose of the agreement — enforcing the remainder of
the agreement. (Serpa, supra, 215 Cal.App.4th at p. 711.) Doing so here
results in each party being responsible for its own attorney fees unless FEHA
or other statutes compel a different result. (Serpa, at p. 710, fn. 8; Iyere v.
Wise Auto Group, supra, 87 Cal.App.5th at p. 761 [inferring terms where
12
agreement is silent].) Similarly, provisions requiring employees to pay the
costs of arbitration have also been severed. (McManus v. CIBC World
Markets Corp., supra, 109 Cal.App.4th at pp. 101–102.) By striking that
provision, the Club agreement is silent on costs, thus permitting a court to
infer the employer must pay arbitration costs. (Armendariz, at p. 113.)
To the extent Ainsworth contends, relying on Martinez v. Master
Protection Corp. (2004) 118 Cal.App.4th 107, one substantively
unconscionable provision alone renders the entire agreement unenforceable,
we disagree. While courts may indeed find unconscionability permeates an
agreement when there is more than one unconscionable provision and refuse
to enforce it, those are not the circumstances here. (Ramirez v. Charter
Communications, Inc. (2022) 75 Cal.App.5th 365, 386; Lange v. Monster
Energy Co., supra, 46 Cal.App.5th at p. 454.) Both the attorney fees and
arbitration cost provisions are collateral to the main purpose of the
employment agreement and less egregious than other arbitration agreements
containing, for example, unconscionably unilateral arbitration obligations.
(Compare with Armendariz, supra, 24 Cal.4th at p. 124 [severance
inappropriate when the lack of mutuality permeated the agreement]; Davis,
supra, 53 Cal.App.5th at p. 918 [same]; Martinez, at pp. 115, 119 [the cost-
splitting provision, in addition to, the lack of mutuality of the arbitration
provisions, and a six-month statute of limitation provision that unlawfully
restricted an employee’s ability to vindicate rights indicated a “ ‘systemic
effort to impose arbitration on an employee . . . as an inferior forum that
works to the employer’s advantage’ ”].) The agreement does not contain such
unilateral arbitration obligations. And severing two sentences in the
arbitration clause regarding costs and attorney fees cures the substantive
unconscionability. (Armendariz, at p. 125.)
13
Given the Club agreement’s minor, if any, procedural unconscionability
and the fact that substantively unconscionable provisions are collateral to the
purpose of the agreement, the interests of justice are best served by severing
the unconscionable provisions and enforcing the remaining provisions.
DISPOSITION
The order denying defendants’ motion to compel arbitration and to stay
proceedings is reversed. On remand, the trial court shall vacate its order
denying the motion, strike the limitation on the attorney fees provision and
the arbitration cost provision, and enforce the remaining provisions. In the
interests of justice, the parties are to bear their own costs.
14
_________________________
Rodríguez, J.
WE CONCUR:
_________________________
Fujisaki, Acting P. J.
_________________________
Petrou, J.
A165472
15