Ramirez v. Charter Commc'ns, Inc.

• Decision Date: 18 February 2022
• Docket Number: B309408
• Citation: 75 Cal.App.5th 365,290 Cal.Rptr.3d 429
• Parties: Angelica RAMIREZ, Plaintiff and Respondent, v. CHARTER COMMUNICATIONS, INC., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

75 Cal.App.5th 365

290 Cal.Rptr.3d 429

Angelica RAMIREZ, Plaintiff and Respondent,

v.CHARTER COMMUNICATIONS, INC., Defendant and Appellant.

B309408

Court of Appeal, Second District, Division 4, California.

Filed February 18, 2022

Hill, Farrer & Burrill, James A. Bowles and Casey L. Morris, Los Angeles, for Defendant and Appellant.

Panitz Law Group and Eric A. Panitz, Long Beach, for Plaintiff and Respondent.

WILLHITE, J.

Plaintiff Angelica Ramirez and defendant Charter Communications, Inc. (Charter) are parties to an arbitration agreement. After Charter terminated Ramirez's employment, Ramirez filed suit alleging claims under the Fair Employment and Housing Act ( Gov. Code, § 12940, et. seq. ; FEHA)¹ against Charter, and Charter filed a motion to compel arbitration. Finding the arbitration agreement unconscionable, the trial court denied Charter's motion, and Charter appealed. On appeal, Charter contends the trial court erred in concluding the arbitration agreement is unconscionable and in refusing to sever any provisions the court considered unconscionable.

We affirm the trial court's order denying the motion to compel arbitration (though we disagree with certain particulars of the trial court's reasoning). In affirming, we also disagree with Patterson v. Superior Court (2021) 70 Cal.App.5th 473, 285 Cal.Rptr.3d 420 ( Patterson ), which considered the enforceability of a provision in the same arbitration agreement at issue here that awards attorney fees to the prevailing party on a motion to compel arbitration. After concluding that the provision is not enforceable as written, the court in Patterson incorporated an implied term bringing the provision into accord with the asymmetrical attorney fee standard of FEHA under section 12965, subdivision (c)(6) (a prevailing defendant is entitled to attorney fees only if the employee's action was frivolous, unreasonable, or groundless.)² With that implied term, the court in Patterson found the provision enforceable. As we explain in detail below, we disagree with Patterson's analysis and find the provision unconscionable.

FACTUAL AND PROCEDURAL BACKGROUND

In 2017, Charter created a program for resolving and ultimately arbitrating employment-related disputes, called Solution Channel. All individuals applying for a position with Charter were required to agree to participate in Solution Channel as well as agree to Charter's mutual arbitration agreement (arbitration agreement). Individuals who applied and received an offer from Charter were then required to complete a web-based onboarding process as a condition of employment. Prospective employees were prompted to review and accept various policies and agreements, including the arbitration agreement and the Solution Channel program guidelines (guidelines).

After agreeing to submit all employment-related disputes with Charter to arbitration, Ramirez was hired as an employee in July 2019. In May 2020, Charter terminated Ramirez. In July 2020, Ramirez filed suit, alleging multiple causes of action under FEHA and wrongful discharge in violation of public policy.

Charter filed a motion to compel arbitration and sought attorney fees in connection with its motion pursuant to the arbitration agreement. In opposition, Ramirez argued that the arbitration agreement was procedurally unconscionable because it was a contract of adhesion. She argued the agreement was substantively unconscionable for several reasons, including that it shortened the statute of limitations, broadened the employer's ability to recover attorney fees against an employee, unduly limited discovery, and favored the employer in defining the scope of the claims covered. She also argued that because unconscionability permeated the agreement, severance was not permissible. Lastly, Ramirez contended Charter was not entitled to attorney fees and in any event, the request for fees was itself substantially unconscionable. Charter responded that the arbitration agreement's terms were not unconscionable and, even if specific terms were unconscionable, the trial court should sever them and enforce the parties’ agreement to arbitrate.

Prior to the hearing on the motion, the court issued a tentative ruling granting Charter's motion to compel. The tentative ruling found that there was minimal procedural unconscionability from the adhesive nature of the contract, and two points of substantive unconscionability—the restriction on timing for arbitration of FEHA claims and the remedy provision for prevailing party fees—were severable. The tentative ruling denied Charter's request for attorney fees in connection with the motion to compel pursuant to the arbitration agreement.

At the November 16, 2020 hearing, counsel for Ramirez noted that in the tentative ruling the court "found minimal procedural unconscionability because there was a forced arbitration agreement as a condition of employment." But there were in fact three, not two, points of substantive unconscionability that were part of the tentative: the restriction on timing for arbitration of FEHA claims; the remedy provision for prevailing party fees; and the attorney fee provision regarding a party bringing a successful motion to compel. Counsel further argued the arbitration agreement lacked mutuality and that the 90 days to complete discovery was also substantively unconscionable. Counsel emphasized that unconscionability must be analyzed at the time the parties entered into the agreement, instead of at the time of Ramirez's lawsuit. In response, counsel for Charter argued the agreement was not substantively unconscionable. However, severance would be appropriate as the disputed terms do not specifically affect Ramirez. The court took the matter under submission.

On November 25, 2020, the court issued a final written ruling denying Charter's motion to compel. The court noted that it was undisputed the arbitration agreement was an adhesion contract as a mandatory condition of employment. However, adhesion alone establishes only a minimum degree of procedural unconscionability. But the court further found the agreement was substantively unconscionable because it shortened the statute of limitations for FEHA claims, failed to restrict attorney fee recovery to only frivolous or bad faith FEHA claims (contrary to FEHA), and impermissibly provided for an interim fee award for a party successfully compelling arbitration. The court did not find the limited discovery or the exclusion of certain claims under the agreement substantially unconscionable. The court concluded the arbitration agreement is "permeated with unconscionability" and therefore, severance was improper.

Charter filed a timely notice of appeal.

DISCUSSION

Charter contends the trial court erred in denying its motion to compel because the arbitration agreement is neither procedurally nor substantively unconscionable. And even if it were, the trial court should have severed the substantively unconscionable provisions, upheld the agreement, and ordered the parties to arbitration. Ramirez responds that the arbitration agreement is procedurally and substantively unconscionable and the trial court's decision to find the entire agreement unconscionable, rather than severing the unconscionable provisions, should not be disturbed on appeal.

We conclude the arbitration agreement was a contract of adhesion, which establishes a minimal degree of procedural unconscionability. We further conclude the agreement contained a high degree of substantive unconscionability based on the restriction of the statute of limitations for FEHA claims, the provision granting an award of attorney fees for a prevailing party in compelling arbitration, the lack of mutuality, and the limitation on discovery. Therefore, we hold the arbitration agreement is permeated by unconscionability and cannot be enforced.

A. Standard of Review and Applicable Law

An order denying a motion to compel arbitration is appealable. ( Code Civ. Proc., § 1294, subd. (a).) "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, 275 Cal.Rptr.3d 741.)

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, 99 Cal.Rptr.2d 745, 6 P.3d 669 ( Armendariz ); Sandoval-Ryan v. Oleander Holdings LLC (2020) 58 Cal.App.5th 217, 222, 272 Cal.Rptr.3d 314.) "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, 221 Cal.Rptr.3d 225 ); Civ. Code, § 1670.5, subd. (a) ["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"].

The doctrine of unconscionability has both a procedural and a substantive element. ( Baltazar v. Forever 21, Inc . (2016) 62 Cal.4th 1237, 1243–1244, 200 Cal.Rptr.3d 7, 367 P.3d 6 ( 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, 130 Cal.Rptr.2d 892, 63 P.3d 979.)

But the two elements need not exist to the same degree. The more one is present, the less the other is required. ( Arm...