Trivedi v. Curexo Tech. Corp.

• Decision Date: 28 September 2010
• Docket Number: No. A127283.,A127283.
• Citation: 160 Lab.Cas. P 61, 073,116 Cal.Rptr.3d 804,189 Cal.App.4th 387,10 Cal. Daily Op. Serv. 13, 366,2 0 1
• Parties: Ramesh C. TRIVEDI, Plaintiff and Respondent, v. CUREXO TECHNOLOGY CORPORATION, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

189 Cal.App.4th 387 116 Cal.Rptr.3d 804 160 Lab.Cas. P 61,073 10 Cal. Daily Op. Serv. 13,366 2010 Daily Journal D.A.R. 16,092 Ramesh C. TRIVEDI, Plaintiff and Respondent, v. CUREXO TECHNOLOGY CORPORATION, Defendant and Appellant. No. A127283. Court of Appeal, First District, Division 4, California. Sept. 28, 2010.

**806 Therese Marie Lawless, Kate Solodky, Lawless & Lawless, San Francisco, CA, for Plaintiff and Respondent.

Victor T. Fu, Richardson & Patel LLP, Los Angeles, CA, for Defendant and Appellant.

RUVOLO, P.J.

*390 I.

INTRODUCTION

Appellant Curexo Technology Corporation (Curexo) appeals from the denial of its motion to compel arbitration of employment-related claims brought by Curexo's former employee, respondent Ramesh C. Trivedi (Trivedi). Curexo contends the trial court erred in finding that the arbitration clause contained in the parties' employment agreement was both procedurally and substantively unconscionable. Alternatively, Curexo argues that if the arbitration clause was properly found unconscionable, the trial court abused its discretion in refusing to sever the offending provisions of the arbitration clause and to enforce the remainder. We affirm.

II.

PROCEDURAL AND FACTUAL BACKGROUNDS

On June 25, 2009, Trivedi filed a complaint against Curexo and others asserting 10 separate causes of action. All causes of action arise out of his termination as president and chief executive officer (CEO) of Curexo on October 31, 2008. The causes of action included one alleging age discrimination in violation of Fair Employment and Housing Act (FEHA), race and color discrimination in violation of FEHA, national origin discrimination in violation of FEHA, and unlawful business practices, within the meaning of Business and Professions Code section 17200. In addition, the complaint asserted claims for breach of the parties' employment contract, bad faith, intentional infliction of emotional distress, and three causes of action for employment discharge in violation of California public policy. As to damages, Trivedi sought compensatory and punitive damages, declaratory relief, and attorney fees.

Accompanying the complaint was a copy of the parties' employment agreement. Paragraph 12 of the agreement was an arbitration clause under which the parties agreed, among other matters as discussed below, to resolve "[a]ny dispute arising out of or relating to this Agreement or any act which would violate any provision of this Agreement ... to arbitration ... before a sole arbitrator (the 'arbitrator') selected from the American Arbitration Association ('AAA') pursuant to the AAA's National Rules for the Resolution *391 of Employment Disputes...." In the complaint, under the heading "Declaratory Relief," Trivedi acknowledged that he and Curexo "may have entered into an agreement to arbitrate**807 certain disputes which arise from the employment relationship." However, Trivedi alleged that enforcement of the arbitration obligation would be unconscionable and requested that the "[c]ourt stay enforcement of the agreement and allow plaintiff to proceed to jury trial."

Thereafter, Curexo filed a motion to compel arbitration and to dismiss or stay the action, which Trivedi opposed. A hearing on the motion was set for November 19, 2009. However, neither side challenged the published tentative ruling, which then became the order of the court. That order denied Curexo's motion to compel arbitration, finding the arbitration clause to be both procedurally and substantively unconscionable. The trial court declined to sever the "problematic provisions," and therefore concluded that the arbitration clause was unenforceable. This appeal followed.

III.

ANALYSIS

A. Standard of Review

Acknowledging that the facts underlying its motion to compel arbitration were undisputed, Curexo asserts that the standard of review of the court's denial of its motion is de novo. Trivedi does not contend otherwise. (See Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284, 58 Cal.Rptr.3d 5.)

Unconscionability, as contemplated in judicial review of a contractual arbitration clause, has two components; procedural unconscionability and substantive unconscionability. ( Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 160, 30 Cal.Rptr.3d 76, 113 P.3d 1100.) The court here found the arbitration clause in the underlying employment agreement to be both procedurally and substantively unconscionable. Indeed, both forms of unconscionability must be present for an arbitration provision to be deemed unenforceable, although there is a sliding scale. "In other words, 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." ( Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 ( Armendariz ).)

*392 With these general principles in mind, we turn to the evidence adduced in connection with Curexo's motion to compel arbitration, and the trial court's findings relating to each required showing.

B. The Arbitration Clause Was Procedurally Unconscionable

We begin by reciting Paragraph 12, the arbitration clause, in full ¹:

"12. Arbitration. Any dispute arising out of or relating to this Agreement or any act which would violate any provision in this Agreement shall be submitted to arbitration in the County in California in which the Company's headquarter office is located before a sole arbitrator (the 'Arbitrator') selected from the American Arbitration Association ('AAA') pursuant to the AAA's National Rules for the Resolution of Employment Disputes as the exclusive method of resolving such dispute; provided, however, that provisional injunctive relief may, but need not, be sought in a court of law while arbitration proceedings are **808 pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief which the Arbitrator deems just and equitable and within the scope of this Agreement, including permanent injunctive relief or specific performance or both, and the Arbitrator is hereby empowered to award such relief. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction. The prevailing party shall be entitled to recover from the other party all costs, expenses and reasonable attorney[ ] fees incurred in any arbitration arising out of or relating to this Agreement, and in any legal action or administrative proceeding to enforce any arbitration award or relief."

In support of its motion to compel, Curexo relied solely on the text of the agreement itself, and the AAA rules referenced therein.² Trivedi opposed the motion with his own declaration. In it, he stated that the agreement, which was prepared by Curexo, was never discussed or explained at the time he signed it or later during his employment. The arbitration clause was a mandatory part of the employment agreement, and he was not given a copy of the AAA arbitration rules referenced in the clause.

*393 The trial court found the clause to be procedurally unconscionable for three reasons—"the agreement was prepared by [Curexo], it was a mandatory part of the agreement and [Trivedi] was not given a copy of the AAA Rules." We agree that each and all of these uncontroverted factors support the court's ruling.

Procedural unconscionability occurs when the stronger party drafts the contract and presents it to the weaker party on a "take it or leave it basis." ( Armendariz, supra, 24 Cal.4th at pp. 113-114, 99 Cal.Rptr.2d 745, 6 P.3d 669.) ³ This is what the trial court found happened here, and this finding is supported by substantial evidence.

Numerous cases have held that the failure to provide a copy of the arbitration rules to which the employee would be bound, supported a finding of procedural unconscionability. ( Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 721, 13 Cal.Rptr.3d 88 [NCR's "employee-dispute resolution policy, known as Addressing Concerns Together (ACT)," incorporated "arbitration rules that were not attached and require[d] the other party to go to another source in order to learn the full ramifications of the arbitration agreement"]; Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1406-1407, 7 Cal.Rptr.3d 418 ["inability to receive full relief is artfully hidden by merely referencing the Better Business Bureau arbitration rules, and not attaching those rules to the contract for the customer to review[,]" which forced the customer to go to another source to learn that the arbitration agreement curtailed his ability to receive full relief]; Gutierrez v. Autowest, Inc., supra, 114 Cal.App.4th at pp. 84, 89, 7 Cal.Rptr.3d 267 [Gutierrez "never given or shown a copy of the arbitration **809 rules of the American Arbitration Association (AAA), the designated arbitration provider" nor required to initial arbitration clause]; Patterson v. ITT Consumer Financial Corp. (1993) 14 Cal.App.4th 1659, 1665, 18 Cal.Rptr.2d 563 [at signing, "borrowers were not given a copy of the procedural rules of the National Arbitration Forum (NAF); the rules were sent to the borrowers only once ITT had initiated a claim against them"].) ⁴

For these reasons, we affirm the trial court's finding that the subject arbitration clause was procedurally unconscionable.

C. The Arbitration Clause Was Substantively Unconscionable

The trial judge's determination that the clause also was substantively unconscionable was anchored by two separate conclusions. First, the court *394 concluded the fact that the arbitration clause included a mandatory attorney fee and cost provision in favor of the prevailing party was unconscionable because it placed Trivedi at greater risk...