Poublon v. C.H. Robinson Co., 15-55143

• Citation: 846 F.3d 1251
• Decision Date: 03 February 2017
• Docket Number: No. 15-55143,15-55143
• Parties: Lorrie POUBLON, an individual, on behalf of herself, and on behalf of all persons similarly situated, Plaintiff–Appellee, v. C.H. ROBINSON COMPANY; C.H. Robinson Worldwide, Inc., Defendants–Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

846 F.3d 1251

Lorrie POUBLON, an individual, on behalf of herself, and on behalf of all persons similarly situated, Plaintiff–Appellee,

v.C.H. ROBINSON COMPANY; C.H. Robinson Worldwide, Inc., Defendants–Appellants.

No. 15-55143

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 9, 2016 Pasadena, California

Filed February 3, 2017

Jack S. Sholkoff (argued), Christopher W. Decker, and Kathleen J. Choi, Ogletree Deakins Nash Smoak & Stewart P.C., Los Angeles, California, for Defendants-Appellants.

Kyle R. Nordrehaug (argued) and Norman B. Blumenthal, Blumenthal Nordrehaug & Bhowmik, La Jolla, California, for Plaintiff-Appellee.

Before: Consuelo M. Callahan, Carlos T. Bea, and Sandra S. Ikuta, Circuit Judges.

OPINION

IKUTA, Circuit Judge:

Plaintiff Lorrie Poublon entered into an agreement with defendants C.H. Robinson Co. and C.H. Robinson Worldwide, Inc. (collectively, "C.H. Robinson") to arbitrate claims arising out of her employment. In the present action, the district court denied C.H. Robinson's motion to stay, compel arbitration, and dismiss class and representative claims, concluding that the dispute resolution provision was unconscionable. We hold that the dispute resolution provision is not tainted with illegality and any invalid portions can be severed, and therefore reverse.

I

Poublon began working for C.H. Robinson on May 7, 2007, as an Account Manager in Los Angeles, California. While employed at C.H. Robinson, Poublon signed an agreement titled "Incentive Bonus Agreement" each December in order to receive a financial bonus. The Incentive Bonus Agreement was a short one-page document with eight provisions. The seventh provision, which had the heading "Dispute Resolution," contained four separate paragraphs. The first paragraph stated:

You and the Company agree that, except as provided below, all Claims the Company might bring against You and all claims You might bring against the Company and/or any of its officers, directors, or employees shall be deemed waived unless submitted to mediation, then, if mediation is unsuccessful, to final and binding arbitration in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association, modified as follows: (1) the arbitration need not actually be administered by the American Arbitration Association; (2) any mediation or arbitration shall be governed by the Company's Employment Dispute Mediation/Arbitration Procedure, which is available on the Company intranet; (3) dispositive motions shall be permissible and not disfavored in any arbitration, and the standard for deciding such motions shall be the same as under Rule 56 of the Federal Rules of Civil Procedure ; (4) except on a substantial showing of good cause, discovery will be limited to the exchange of relevant documents and three depositions per side; and (5) except as mutually agreed at the time between You and the Company, neither You nor the Company may bring any Claim combined with or on behalf of any other person or entity, whether on a collective, representative, or class action basis or any other basis. In the case of any conflict between the rules and procedures for either mediation or arbitration, the priority and order of precedence shall be as follows: (1) the rules and procedures stated herein; (2) the Company's Employment Dispute Mediation/Arbitration Procedure; (3) the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association.

The second paragraph stated, in pertinent part:

This Dispute Resolution Agreement shall not apply to any of the following: (1) Worker's Compensation claims; (2) claims related to unemployment insurance; and (3) any claims by the Company that include a request for injunctive or equitable relief, including, without limitation, claims related to its enforcement of any restrictive covenants, noncompetition obligations, non-solicitation obligations and/or confidential information provisions contained in any Company policy and/or employment agreement(s) entered into between You and the Company and/or any claims to protect the Company's trade secrets, confidential or proprietary information, trademarks, copyrights, patents, or other intellectual property.

The fourth paragraph provided:

If any portion of this dispute resolution provision is determined to be void or unenforceable, then the remaining portions of this Agreement shall continue in full force and effect, and this Agreement may be modified to the extent necessary, consistent with its fundamental purpose and intent, in order to make it enforceable.

In December 2011, as in prior years, Poublon met with her supervisor, Gerry Nelson, to discuss her compensation and bonuses for the following year. At this meeting, Nelson gave Poublon the Incentive Bonus Agreement to take home and review. He told her that the agreement would have to be signed and returned within a specified time period in order for her to receive her bonus. Poublon and Nelson did not discuss the dispute resolution provision. Poublon later asked Nelson "what would happen if [she] did not sign the document," and he responded that "failure to sign would result in [Poublon] not being paid [her] bonus." On December 23, 2011, Poublon signed the Incentive Bonus Agreement and returned it to C.H. Robinson. Poublon's employment at C.H. Robinson ended in February 2012.

In March 2012, Poublon alleged that C.H. Robinson had misclassified her as exempt from overtime pay requirements and demanded mediation of her claims pursuant to the terms of the Incentive Bonus Agreement that she had signed in 2011. After mediation was unsuccessful, Poublon filed a class action complaint against C.H. Robinson in Los Angeles County Superior Court, making the same misclassification claims on behalf of herself and other employees.

In August 2012, C.H. Robinson removed Poublon's action to a federal district court. Poublon filed a First Amended Complaint, which added a claim on behalf of California under the Private Attorneys General Act (PAGA), Cal. Labor Code §§ 2698 –2699.5. The district court denied C.H. Robinson's motion to compel arbitration, holding that the dispute resolution provision was both procedurally and substantively unconscionable, and therefore unenforceable. C.H. Robinson timely appealed.

II

A

We have jurisdiction under 9 U.S.C. § 16(a)(1). We review the denial of a motion to compel arbitration de novo. Brown v. Dillard's, Inc. , 430 F.3d 1004, 1009 (9th Cir. 2005). We review factual findings for clear error, Balen v. Holland Am. Line Inc. , 583 F.3d 647, 652 (9th Cir. 2009), and review "[t]he interpretation and meaning of contract provisions" de novo, Lee v. Intelius Inc. , 737 F.3d 1254, 1258 (9th Cir. 2013).

B

The Federal Arbitration Act (FAA) requires courts to "place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms." AT&T Mobility LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (internal citation omitted). Section 2 of the FAA makes agreements to arbitrate "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2.¹ The final clause of § 2, generally referred to as the savings clause, "permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue." Concepcion , 563 U.S. at 339, 131 S.Ct. 1740 (quoting Doctor's Assocs., Inc. v. Casarotto , 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) ). "Any doubts about the scope of arbitrable issues, including applicable contract defenses, are to be resolved in favor of arbitration." Tompkins v. 23andMe, Inc. , 840 F.3d 1016, 1022 (9th Cir. 2016).

Section 2 of the FAA preempts state statutes and state common law principles that "undercut the enforceability of arbitration agreements," unless the savings clause applies. Southland Corp. v. Keating , 465 U.S. 1, 16, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) ; see also Concepcion , 563 U.S. at 343–44, 131 S.Ct. 1740 ; Sakkab v. Luxottica Retail N. Am., Inc. , 803 F.3d 425, 432 (9th Cir. 2015). In other words, a court cannot enforce state laws that apply to agreements to arbitrate but not to contracts more generally. See Mortensen v. Bresnan Commc'ns, LLC , 722 F.3d 1151, 1159 (9th Cir. 2013) ("Any general state-law contract defense ... that has a disproportionate effect on arbitration is displaced by the FAA.").

Here, Poublon argues that the dispute resolution provision in the Incentive Bonus Agreement is unenforceable under California's unconscionability doctrine. As the California Supreme Court has noted, California's "unconscionability standard is, as it must be, the same for arbitration and nonarbitration agreements." Sanchez v. Valencia Holding Co., LLC , 61 Cal.4th 899, 912, 190 Cal.Rptr.3d 812, 353 P.3d 741 (2015). Recent California Supreme Court cases have demonstrated how this principle applies to California's unconscionability doctrine. See Baltazar v. Forever 21, Inc. , 62 Cal.4th 1237, 200 Cal.Rptr.3d 7, 367 P.3d 6 (2016) ; Sanchez , 61 Cal.4th at 911, 190 Cal.Rptr.3d 812, 353 P.3d 741 ; Sonic-Calabasas A, Inc. v. Moreno , 57 Cal.4th 1109, 1143–45, 163 Cal.Rptr.3d 269, 311 P.3d 184 (2013) (Sonic II ). In our evaluation of Poublon's claim, we apply principles derived from these cases, as well as other precedent articulating California's general unconscionability standard. See Tompkins , 840 F.3d at 1024 (holding that "we are bound by the California Supreme Court's most recent articulation of its [general unconscionability] standard").

Under California law, "the party opposing arbitration bears the burden of proving any defense, such as unconscionability." Pinnacle Museum Tower Ass'n v. Pinnacle Mkt. Dev. ...