Williams v. Sonic Automotive CA1/3

Filed 4/29/22 Williams v. Sonic Automotive 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or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

ANTHONY WILLIAMS,

Plaintiff and Respondent, A162007

v.

SONIC AUTOMOTIVE, INC. et al., (San Francisco City & County

Defendants and Appellants. Super. Ct. No. CGC-20-583846)

MEMORANDUM OPINION1

Defendants Sonic Automotive, Inc., FAA Concord H, Inc., and

FirstAmerica Automotive, Inc. (collectively, defendants) appeal from a trial

court order denying their petition to compel arbitration of a lawsuit filed by

plaintiff Anthony Williams. We affirm.

I.

Williams worked as a salesperson at FAA Concord H, Inc. (Concord

Honda), a car dealership, from January to August 2019. After his

employment ended, Williams filed a lawsuit against defendants. The

operative first amended complaint alleged putative class claims for wage and

We resolve this case by memorandum opinion pursuant to California

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Standards of Judicial Administration, section 8.1(2), which urges use of

abbreviated opinions in appeals “determined by a controlling decision which

does not require a reexamination or restatement of its principles or rules.”

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hour violations and a representative claim under the Private Attorneys

General Act of 2004 (Lab. Code § 2698 et seq.; PAGA).

Defendants petitioned to compel arbitration. They averred Williams

signed three arbitration agreements: one in late December 2018 when he

applied for a job, a second in early January 2019 after he was hired, and

a third in mid-January when he began work. The language of the

agreements varies, but all three agreements contain lengthy, single-spaced

paragraphs in small font. We focus on the third agreement — entitled

“Comprehensive Agreement Employment At-Will and Arbitration”

(agreement) — as it contains an integration clause.

The agreement is two pages in length and consists of five single-spaced

paragraphs in small font. The arbitration provision, which is in the second

paragraph of the agreement, is 45 lines (in the original) and contains 955

words. It provides in full:

“I also acknowledge that the Company utilizes a system of

alternative dispute resolution which involves binding arbitration

to resolve all disputes which may arise out of the employment

context. Because of the mutual benefits (such as reduced

expenses and increased efficiency) which private binding

arbitration can provide both the Company and myself, I and the

Company both agree that any claim, dispute, and/or controversy

that either party may have against one another (including, but

not limited to, any claims of discrimination and harassment,

whether they be based on the California Fair Employment and

Housing Act, Title VII of the Civil Rights Act of 1964, as

amended, as well as all other applicable state or federal laws or

regulations) which would otherwise require or allow resort to any

court or other governmental dispute resolution forum between

myself and the Company (or its owners, directors, officers,

managers, employees, agents, and parties affiliated with its

employee benefit and health plans) arising from, related to, or

having any relationship or connection whatsoever with my

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seeking employment with, employment by, or other association

with the Company, whether based on tort, contract, statutory, or

equitable law, or otherwise, (with the sole exception of claims

arising under the National Labor Relations Act which are

brought before the National Labor Relations Board, claims for

medical and disability benefits under the California Workers’

Compensation Act, and Employment Development Department

claims) shall be submitted to and determined exclusively by

binding arbitration. In order to provide for the efficient and

timely adjudication of claims, the arbitrator is prohibited from

consolidating the claims of others into one proceeding. This

means that an arbitrator will hear only my individual claims and

does not have the authority to fashion a proceeding as a class or

collective action or to award relief to a group of employees in one

proceeding. Thus, the Company has the right to defeat any

attempt by me to file or join other employees in a class, collective,

representative, or joint action lawsuit or arbitration (collectively

‘class claims’). I and the Company both agree that any challenge

to the prohibition against consolidating the claims of others into

a single proceeding, whether as a class, a representative action or

otherwise, is a gateway issue and shall be determined by the

Superior Court; and any substantive claims shall not be decided

by the arbitrator until after the gateway determination is made

by the Court. I further understand that I will not be disciplined,

discharged, or otherwise retaliated against for exercising my

rights under Section 7 of the National Labor Relations Act,

including but not limited to challenging the limitation on a class,

collective, representative, or joint action. I understand and agree

that nothing in this agreement shall be construed so as to

preclude me from filing any administrative charge with, or from

participating in any investigation of a charge conducted by, any

government agency such as the Department of Fair Employment

and Housing and/or the Equal Employment Opportunity

Commission; however, after I exhaust such administrative

process/investigation, I understand and agree that I must pursue

any such claims though this binding arbitration procedure. I

acknowledge that the Company’s business and the nature of my

employment in that business affect interstate commerce. I agree

that the arbitration and this Agreement shall be controlled by the

Federal Arbitration Act, in conformity with the procedures of the

California Arbitration Act (Cal. Code Civ. Proc. sec 1280 et seq.,

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including section 1283.05 and all of the Act’s other mandatory

and permissive rights to discovery). However, in addition to

requirements imposed by law, any arbitrator herein shall be

a retired California Superior Court Judge and shall be subject to

disqualification on the same grounds as would apply to a judge of

such court. To the extent applicable in civil actions in California

courts, the following shall apply and be observed: all rules of

pleading (including the right of demurrer), all rules of evidence,

all rights to resolution of the dispute by means of motions for

summary judgment, judgment on the pleadings, and judgment

under Code of Civil Procedure Section 631.8. Resolution of the

dispute shall be based solely upon the law governing the claims

and defenses pleaded, and the arbitrator may not invoke any

basis (including, but not limited to, notions of ‘just cause’) other

than such controlling law. The arbitrator shall have the

immunity of a judicial officer from civil liability when acting in

the capacity of an arbitrator, which immunity supplements any

other existing immunity. Likewise, all communications during or

in connection with the arbitration proceedings are privileged in

accordance with Cal. Civil Code Section 47(b). As reasonably

required to allow full use and benefit of this Agreement’s

modifications to the Act’s procedures, the arbitrator shall extend

the times set by the Act for the giving of notices and setting of

hearings. Awards shall include the arbitrator’s written reasoned

opinion. If CCP § 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 CCP § 1284.2. Both the

Company and I agree that any arbitration proceeding must move

forward under the Federal Arbitration Act (9 U.S.C. §§ 3-4) even

though the claims may also involve or relate to parties who are

not parties to the arbitration agreement and/or claims that are

not subject to arbitration, thus, the court may not refuse to

enforce this arbitration agreement and may not stay the

arbitration proceedings despite the provisions of California Code

of Civil Procedure § 1281.2(c).

“I UNDERSTAND BY AGREEING TO THIS BINDING

ARBITRATION PROVISION, BOTH I AND THE COMPANY

GIVE UP OUR RIGHTS TO TRIAL BY JURY.”

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Defendants alleged Williams signed the agreement — which was

contained in a “litany of new-hire paperwork” — shortly after he began work,

pursuant to “company policy” requiring all employees to participate in

alternative dispute resolution. The agreement, defendants argued, was

enforceable notwithstanding the fact that it was adhesive, printed in small

font, and prohibited Williams from bringing a class or representative action.

In opposition, Williams insisted the agreement was procedurally and

substantively unconscionable. Williams offered a supporting declaration

indicating he did not recall signing the agreement, that he was “surprised” to

learn he had agreed to arbitrate employment-related disputes, and that had

he known he would be giving up his right “to file a lawsuit against

[d]efendants in court,” he would have obtained advice from an attorney, as he

did “not have the ability to understand the legal consequences” of the

“agreement on [his] own.” Williams did not recall receiving the new hire

paperwork and alleged that had he received such paperwork, he was not

“given the opportunity nor the time to review or negotiate the contents of it.

No one . . . reviewed the arbitration agreement” with him.

The trial court denied the petition to compel arbitration. It deemed the

agreement procedurally and substantively unconscionable and detailed the

reasons: the agreement was adhesive, printed in extremely small font, and

filled with opaque language and legal jargon. In addition, the agreement

lacked mutuality, contained confusing and contradictory language obscuring

the rules and procedures that would govern the arbitration proceeding, and

also included language that could be construed to prohibit Williams from

bringing a PAGA claim.

The agreement, the trial court observed, was “substantively identical”

to the unconscionable arbitration agreements propounded by the car

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dealerships in OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111 (Kho) and Davis v.

TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662 (Davis). The court

characterized defendants’ attempt to distinguish Kho and Davis as

“groundless” — and verging “on the frivolous” — and noted defendants “and

their counsel do not appear to have learned anything from their losses” in

those cases. (The car dealerships in Kho and Davis were represented by the

law firm representing defendants.)

II.

We proceed on the basis that there was an agreement to arbitrate.

(Davis, supra, 41 Cal.App.5th at p. 670, fn. 4.) “California law strongly favors

arbitration” and “establishes ‘a presumption in favor of arbitrability.’

[Citation.] An agreement to submit disputes to arbitration ‘is valid,

enforceable and irrevocable, save upon such grounds as exist for the

revocation of any contract.’ ” (Kho, supra, 8 Cal.5th at p. 125.)

“ ‘ “[G]enerally applicable contract defenses, such as . . . unconscionability,

may be applied to invalidate arbitration agreements.” ’ ” (Ibid.) “The burden

of proving unconscionability rests upon the party asserting it.” (Id. at p. 126.)

“The general principles of unconscionability are well established.

A contract is unconscionable if one of the parties lacked a meaningful choice

in deciding whether to agree and the contract contains terms that are

unreasonably favorable to the other party. . . . [T]he unconscionability

doctrine ‘ “has both a procedural and a substantive element.” ’ [Citation.]

‘The procedural element addresses the circumstances of contract negotiation

and formation, focusing on oppression or surprise due to unequal bargaining

power. [Citations.] Substantive unconscionability pertains to the fairness of

an agreement’s actual terms and to assessments of whether they are overly

harsh or one-sided.’ ” (Kho, supra, 8 Cal.5th at p. 125.)

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“Both procedural and substantive unconscionability must be shown for

the defense to be established, but ‘they need not be present in the same

degree.’ [Citation.] Instead, they are evaluated on ‘ “a sliding scale.” ’

[Citation.]” “ ‘The ultimate issue in every case is whether the terms of the

contract are sufficiently unfair, in view of all relevant circumstances, that

a court should withhold enforcement.’ ” (Kho, supra, 8 Cal.5th at pp. 125–

126.) “On appeal from an order denying a petition to compel arbitration, we

review the trial court’s factual determinations under the substantial evidence

standard, and . . . the legal issues independently.” (Jarboe v. Hanlees Auto

Group (2020) 53 Cal.App.5th 539, 547; Kho, at p. 126.)

Guided by Kho, supra, 8 Cal.5th 111 and Davis, supra, 41 Cal.App.5th

662 — which concerned arbitration agreements that defendants concede are

almost identical to the one at issue here — we conclude the agreement is

procedurally and substantively unconscionable.

We begin with procedural unconscionability. It is undisputed the

agreement, imposed as a condition of employment, is adhesive. (Kho, supra,

8 Cal.5th at p. 126.) The circumstances surrounding the formation of the

agreement also evince significant oppression. (Id. at pp. 126–127 [listing

factors].) The economic pressure on Williams to sign the agreement was

“ ‘acute,’ ” as the record supports an inference that he was not in a position to

refuse the job because of the arbitration requirement. (Id. at p. 127.)

Williams indicated he did not have an opportunity to review the agreement or

negotiate its terms, and that no one explained the agreement to him. And

the agreement was buried in a mountain of paperwork Williams received

shortly after beginning work. The record also reveals surprise: the

“agreement is a paragon of prolixity, only slightly more than a page long

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but written in an extremely small font.” (Id. at p. 128; Davis, supra,

41 Cal.App.5th at p. 667.) The text of the agreement “is ‘visually

impenetrable’ and ‘challenge[s] the limits of legibility’ ” and the “substance of

the agreement is similarly opaque. The sentences are complex, filled with

statutory references and legal jargon.” (Kho, at p. 128.)2

In sum, we conclude the agreement and the circumstances surrounding

its execution involve “an ‘extraordinarily high’ degree of procedural

unconscionability.” (Kho, supra, 8 Cal.5th at p. 126; Davis, supra,

41 Cal.App.5th at p. 671; Fisher v. MoneyGram Internat., Inc. (2021)

66 Cal.App.5th 1084, 1090, 1095–1104 [arbitration agreement printed in

6-point font and located in an inconspicuous place demonstrated an “extreme

assessment of procedural unconscionability”].)

Next, we turn to substantive unconscionability. As stated above,

substantive unconscionability focuses on the fairness of contractual terms.

(Davis, supra, 41 Cal.App.5th at p. 673.) This analysis ensures that

contracts, particularly adhesive contracts, do not impose terms that are

overly harsh, unduly oppressive, or unfairly one-sided. (Id. at pp. 673–674.)

Unconscionable terms “ ‘may include fine-print terms, unreasonably or

unexpectedly harsh terms regarding price or other central aspects of the

transaction, and terms that undermine the nondrafting party’s reasonable

2 Defendants contend the agreement clearly specifies the rules and

procedures that would govern the arbitration. We disagree. (See Davis,

supra, 41 Cal.App.5th at p. 675 [agreement’s references to “ ‘CCP § 1284.2’ ”

and “ ‘Federal Arbitration Act (9 U.S.C. §§ 3–4)’ ” were “confusing” and had

“nothing to do with the rules or procedures that would govern arbitration”].)

We conclude the lack of clarity regarding the governing rules and procedures

“exacerbated the procedural unconscionability of the [agreement] by adding

an element of surprise to the already oppressive circumstances of its

formation.” (Ali v. Daylight Transport, LLC (2020) 59 Cal.App.5th 462, 476–

477.)

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expectations.’ ” (Id. at p. 674.) When — as here — an agreement displays

substantial procedural unconscionability, “a relatively low degree of

substantive unconscionability may suffice to render the agreement

unenforceable.” (Kho, supra, 8 Cal.5th at pp. 129–130.)

Defendants maintain the agreement is devoid of any degree of

substantive unconscionability, but they acknowledge the agreement is almost

identical to the agreements deemed substantively unconscionable in Kho,

supra, 8 Cal.5th 111, and Davis, supra, 41 Cal.App.5th 662. Here, the record

contains ample evidence supporting the trial court’s findings — both explicit

and implied — that the agreement displays elements of substantive

unconscionability. (Nelson v. Dual Diagnosis Treatment Center, Inc. (Apr. 19,

2022, G059565) __ Cal.App.5th __ [2022 Cal.App. Lexis 325, 17, 23–24].)

Defendants do not dispute that the agreement can be read to preclude

a “Berman hearing” and related procedures designed to assist in the recovery

of unpaid wages. (See Kho, at pp. 118, 121–123.) While the waiver of

Berman procedures does not, by itself, render an arbitration agreement

unconscionable, “the arbitral scheme must offer employees effective means to

pursue claims for unpaid wages, and not impose unfair costs or risks on them

or erect other barriers to the vindication of their statutory rights. [Citation.]

When imposed in a procedurally unconscionable fashion, such barriers to the

vindication of rights may become unenforceable.” (Id. at pp. 133–134.) In

Kho, our high court held that an arbitration agreement requiring an

employee to surrender “the benefits and efficiencies of the Berman process”

without gaining “any of the efficiencies or cost savings often associated with

arbitration” — when imposed under coercive circumstances — “was

sufficiently one sided as to render the agreement unenforceable.” (Id. at

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pp. 133, 136–137.) So too here. We are bound by Kho. (Auto Equity Sales,

Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.)3

As in Kho, we conclude the agreement, made in an “unusually coercive

setting,” was “sufficiently one-sided as to render the agreement

unenforceable.” (Kho, supra, 8 Cal.5th at pp. 136–137; see also Davis, supra,

41 Cal.App.5th at pp. 674–676; Fisher v. MoneyGram Internat., Inc., supra,

66 Cal.App.5th at p. 1107.) Having reached this result, we need not

determine whether the agreement’s PAGA waiver weighs in favor of a finding

of substantive unconscionability. We also decline to address defendants’

contention that “[s]everance of any unconscionable provisions is appropriate.”

This argument, which was not raised in the trial court or in defendants’

opening brief on appeal, is forfeited. (Gund v. County of Trinity (2020) 10

Cal.5th 503, 525.)

DISPOSITION

The order denying defendants’ petition to compel arbitration is

affirmed. Williams is awarded costs on appeal. (Cal. Rules of Court, rule

8.278(a).)

3The agreement’s “fine-print terms,” which are “ ‘so small as to

challenge the limits of legibility’ ” (Kho, supra, 8 Cal.5th at p. 130; Davis,

supra, 41 Cal.App.5th at p. 671), and the “existence of the three separate

agreements to arbitrate” — which “contain several inconsistencies, if not

downright contradictions” — also contribute to a finding of substantive

unconscionability. (Davis, at p. 675.)

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_________________________

Rodríguez, J.

WE CONCUR:

_________________________

Tucher, P. J.

_________________________

Petrou, J.

A162007

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