The opinion
Filed 2/28/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
PAVEL GOSTEV,
Plaintiff and Respondent,
A164407
v.
SKILLZ PLATFORM, INC., (San Francisco County
Super. Ct. No. CGC-21-589818)
Defendant and Appellant.
Defendant Skillz Platform, Inc. (Skillz) appeals from an order denying
its petition to compel arbitration. Skillz contends the trial court erred, first,
by not referring questions of arbitrability to arbitration and, second, by
finding the arbitration agreement unconscionable.
We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The Parties and the Terms of Service
Skillz provides a mobile platform that hosts games in which players
can pay to compete against each other for cash prizes. To play games on its
platform, a user must establish a player account, and to participate in paid-
entry competitions, a user must save the player account. To save a player
account, a user must provide an email address and verify age by entering the
user’s date of birth; after entering a date of birth, the user must tap a box
with the word “Next” on it. Below the “Next” box is the advisory statement,
“By tapping ‘Next,’ I agree to the Terms of Service and the Privacy Policy.”
1
The underlined text is a hyperlink, which, if tapped, takes the user to the
Skillz’ terms of service.
Gostev is a resident of the state of Washington who played the Skillz
game “Solitaire Cube” on his mobile device. He saved a Skillz player account
in July 2019. The version of the “User Terms and Conditions of Service”
(Terms of Service)1 then in effect begins: “Welcome to Skillz! We hope you’ll
enjoying being a part of our community by participating in our online gaming
challenges, competitions and tournaments (collectively, ‘Competitions’) and
using other applications, tools and services that we may provide from time to
time (together with Competitions, the ‘Services’).” It goes on to explain that
by registering an account or using Skillz’ services, the user agrees to be
bound by the terms (with “Terms” defined as “these Terms and Conditions of
Service, the terms of any policy incorporated herein, and the Rules”).
The Agreement to Arbitrate in the Terms of Service
The 15-page Terms of Service has 15 sections. The first section begins:
“1. GENERAL TERMS
“1.1. Arbitration. TO THE MAXIMUM EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY CLAIM, DISPUTE OR CONTROVERSY OF
WHATEVER NATURE (‘CLAIM’) ARISING OUT OF OR RELATING TO
THESE TERMS AND/OR OUR SOFTWARE OR SERVICES MUST BE
RESOLVED BY FINAL AND BINDING ARBITRATION IN ACCORDANCE
WITH THE PROCESS DESCRIBED IN SECTION 14 BELOW. PLEASE
READ SECTION 14 CAREFULLY. To the maximum extent permitted under
1 A copy of the “User Terms and Conditions of Service” was attached as
an exhibit to the declaration of Joseph Asaro filed in support of Skillz’
petition to compel arbitration. On appeal, Gostev agrees this document
represents the applicable Terms of Service.
2
applicable law, you are giving up the right to litigate (or participate in as a
party or class member) all disputes in court before a judge or jury.”
Section 14, “DISPUTE RESOLUTION AND ARBITRATION,” starts at
page 13: “14.1. General. This Section applies to any Dispute except for
Disputes relating to the enforcement or validity of our intellectual property
rights. The term ‘Dispute’ means any dispute, action, or other controversy
between you and us concerning these Terms, the Services or any product,
service or information we make available to you, whether in contract,
warranty, tort, statute, regulation, ordinance, or any other legal or equitable
basis. ‘Dispute’ will be given the broadest possible meaning allowable under
law.”2
Subsection 14.1 requires written notice of a dispute and “informal
negotiation” after which either party may commence arbitration.
Alternatively, the parties may bring claims that qualify for its jurisdiction in
small claims court. Subsection 14.2 provides, “If you and we do not resolve
Elsewhere in the Terms of Service, however, Skillz appears to reserve
2
for itself the ability to sue users in court for claims that could be understood
to be “Disputes.” Section 7, “ACCEPTABLE USE POLICY,” requires users,
among other things, to refrain from engaging in “behavior that may be
interpreted, in [Skillz’] sole discretion, as unfair methods in participating in
Services or using the Software.” Subsection 7.3 provides, “Without limiting
our other available remedies, we may institute or seek any injunctive relief,
civil and/or criminal proceedings against you and/or any of your co-
conspirators arising out of or related to your commission of Abuse, including
without limitation recovering all of our fees and expenses (including
reasonable attorneys’ fees) in connection with such efforts.” (Italics added.)
Section 8 addresses account funds and payments. Subsection 8.10 provides,
“Any attempt to defraud through the use of credit cards or other methods of
payment, regardless of the outcome, or any failure by you to honor legitimate
charges or requests for payment, will result in immediate termination of your
Account, forfeiture of Winnings, and pursuit of civil litigation and/or criminal
prosecution.” (Italics added.)
3
any Dispute by informal negotiation or in small claims court, any other effort
to resolve the Dispute will be conducted exclusively by binding arbitration as
described in this Section.” Subsection 14.3 includes waivers of the rights to
bring class actions and representative actions.
Subsection 14.4. requires arbitration to be “conducted by the American
Arbitration Association (the ‘AAA’) under its Commercial Arbitration Rules”
and commenced “only in San Francisco, California, USA.” It limits the
arbitrator’s authority to award damages or injunctive relief, requires splitting
the costs of arbitration, and authorizes the arbitrator to award attorney fees
to the prevailing party.3
Subsection 14.5 provides that all claims “must be filed within one year,”
and any claim or dispute that is not filed within one year is “permanently
barred.”4 Subsection 14.6, “Equitable Relief,” provides: “You agree that we
3 Subsection 14.4 provides in part, “The arbitrator may award the same
damages to you individually as a court could. The arbitrator may award
declaratory or injunctive relief only to you individually, and only to the extent
required to satisfy your individual claim. These Terms govern to the extent
they conflict with the arbitrators’ commercial rules. The arbitrator may
award compensatory damages, but shall NOT be authorized to award non-
economic damages, such as for emotional distress, or pain and suffering or
punitive or indirect, incidental or consequential damages. Each party shall
bear its own attorneys’ fees, costs and disbursements arising out of the
arbitration, and shall pay an equal share of the fees and costs of the
arbitrator and AAA; however, the arbitrator may award to the prevailing
party reimbursement of its reasonable attorneys’ fees and costs (including, for
example, expert witness fees and travel expenses), and/or the fees and costs
of the arbitrator.”
4Claims against Skillz of billing error are further time-limited.
Subsection 8.2 of the Terms of Service requires users to notify Skillz of errors
on their bills within 120 days. It provides, “If you don’t tell us within that
time, we’ll not be liable for any losses resulting from the error and we won’t
be required to correct the error or provide a refund.” It also provides that
users “must pay for all reasonable costs [Skillz] incur[s] to collect any past
4
would be irreparably damaged if these Terms were not specifically enforced.
Therefore, in addition to any other remedy we may have at law, and
notwithstanding our agreement to arbitrate Disputes, we are entitled
without bond, other security, or proof of damages, to seek appropriate
equitable remedies with respect to your violation of these Terms in any court
of competent jurisdiction.”
The Terms of Service also limits Skillz’ liability in various ways.5
Gostev’s Lawsuit
In February 2021, Gostev sued Skillz in San Francisco County Superior
Court. In the operative complaint, he alleged Skillz’ games constitute
gambling games in violation of California and federal law and, “in carrying
out its gambling enterprise, Skillz engages in predatory and unlawful
due amounts, including without limitation reasonable attorneys’ fees and
other legal fees and costs.”
5 Section 13, “Limitations of Liability,” for example, provides: “To the
maximum extent permitted under applicable law, neither we, nor our
suppliers or licensors, will be liable to you or any third party for any indirect,
special, punitive, consequential (including, without limitation, lost profits,
lost data or loss of goodwill), or incidental damages, arising out of or relating
to these terms, the website, or any information, services, products or software
made available or accessible to you, whether based on a claim or action of
contract, warranty, negligence, strict liability, or other tort, breach of any
statutory duty, indemnity or contribution, or otherwise, even if we or our
third party suppliers or licensors have been advised of the possibility of such
liability. [¶] To the maximum extent permitted under applicable law, our
maximum liability to you arising out of or in any way connected to these
terms shall not exceed U.S. $ 50.00. The existence of one or more claims by
you will not increase our liability. In no event shall our suppliers or licensors
have any liability arising out of or in any way connected to our products,
information or services. [¶] Certain jurisdictions do not allow limitations of
liability for incidental, consequential or certain other types of damages; as
such, the limitations and exclusions set forth in this Section may not apply to
you.” (Capitalization omitted.)
5
practices to take advantage of their customers.” He brought claims of
violation of the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.;
UCL), violation of the Consumers Legal Remedies Act (Civ. Code, § 1750 et
seq.; CLRA), and unjust enrichment, and he sought declaratory, injunctive,
and equitable relief, including restitution.
Gostev was aware of the arbitration provision in the Terms of Service
when he filed his lawsuit, and he addressed it in his complaint, alleging the
agreement to arbitrate was unenforceable because it prohibited public
injunctive relief in violation of McGill v. Citibank, N.A. (2017) 2 Cal.5th 945
(McGill), and because it was unconscionable.6
Skillz’ Petition to Compel Arbitration
Skillz petitioned to compel arbitration. Skillz argued that, as a
threshold matter, Gostev’s challenges to the enforceability of the arbitration
provision had to be submitted to an arbitrator and, substantively, the
arbitration provision was valid and covered Gostev’s claims. Opposing the
petition, Gostev argued there was no clear and unmistakable evidence the
parties intended an arbitrator would decide the threshold question of
arbitrability; there was no enforceable agreement to the Terms of Service;
and the arbitration provision was procedurally and substantively
unconscionable.
The Court’s Ruling
In its written order and statement of decision, the trial court found
Skillz demonstrated the existence of an arbitration agreement but rejected
6 Gostev also alleged Skillz waived its ability to enforce the arbitration
provision because Gostev demanded arbitration on February 9, 2020, and
Skillz “did not honor its arbitration clause, or even respond.” On appeal,
Gostev no longer claims Skillz waived its right to arbitrate by failing to
respond to his demand.
6
Skillz’ argument that the parties delegated the issue of arbitrability to the
arbitrator. The court went on to find the arbitration agreement procedurally
and substantively unconscionable. At the hearing on the petition, the court
observed, “I’ve got to say that we’ve look[ed] at a lot of these arbitration cases
and . . . this is the longest list of unconscionable features that I think I’ve
ever seen.” In its written decision, the court identified as substantively
unconscionable provisions, “inter alia, that plaintiff’s damages are limited,
the arbitration must occur in San Francisco, plaintiff only has one year to
bring his claim, the parties must split the arbitration fees and costs, and
defendant can obtain equitable relief without posting a bond or security.”
Finding that “unconscionability permeates the agreement such that
severance is unavailable,” the court denied the petition to compel arbitration.
Skillz timely appealed.
DISCUSSION
A. Standard of review
“The party seeking arbitration bears the burden of proving the
existence of an arbitration agreement, and the party opposing arbitration
bears the burden of proving any defense, such as unconscionability.”
(Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC
(2012) 55 Cal.4th 223, 236.) When the evidence is not in conflict, we review
the trial court’s denial of a petition to compel arbitration de novo. (Ibid.) We
review the trial court’s findings of disputed fact for substantial evidence; we
review its finding of unconscionability based on those facts de novo.
(Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795 (Ajamian).)
B. Who Decides the Threshold Question of Enforceability?
The usual presumption is that a court, not an arbitrator, will decide in
the first instance whether a dispute is arbitrable. (Ajamian, supra, 203
7
Cal.App.4th at p. 781; Dennison v. Rosland Capital LLC (2020) 47
Cal.App.5th 204, 209 (Dennison).) The parties may agree to delegate
authority to the arbitrator to decide arbitrability, but given the contrary
presumption, evidence that the parties intended such a delegation must be
“ ‘clear and unmistakable’ ” before a court will enforce a delegation provision.
(Ajamian, supra, at p. 781; Dennison, supra, at p. 209.) “This is a ‘heightened
standard,’ higher than the evidentiary standard applicable to other matters
of interpreting an arbitration agreement.” (Ajamian, supra, at p. 790.)
Skillz contends it has met this heightened evidentiary standard
because (1) the parties “expressly agree[d]” to delegate arbitrability and
(2) the parties incorporated the AAA Commercial Arbitration Rules into their
arbitration agreement. We are not persuaded.
1. No Express Agreement
Skillz relies on the following language in Section 14 of the Terms of
Service: “The term ‘Dispute’ means any dispute, action, or other controversy
between you and us concerning these Terms, the Services or any product,
service or information we make available to you, whether in contract,
warranty, tort, statute, regulation, ordinance, or any other legal or equitable
basis. ‘Dispute’ will be given the broadest possible meaning allowable under
law.” (Italics added.) Skillz argues, “By expressly agreeing to arbitrate any
‘dispute[s]’ and ‘controvers[ies]’ about the Terms of Service, the parties
clearly and unmistakably agreed to arbitrate questions such as whether
certain of those Terms are unconscionable and thus unenforceable.” We
disagree.
In Ajamian, the plaintiff brought employment claims against her
former employers, the defendants petitioned to compel arbitration, and the
trial court denied arbitration on the ground the agreement was
8
unconscionable. (Ajamian, supra, 203 Cal.App.4th at pp. 775, 779.) On
appeal, the defendants argued the question of unconscionability should have
been decided in arbitration. The arbitration provision in that case provided,
“ ‘Any disputes, differences or controversies arising under this Agreement
shall be settled and finally determined by arbitration,’ ” and “ ‘It is expressly
agreed that arbitration as provided herein shall be the exclusive means for
determination of all matters arising in connection with this Agreement and
neither party hereto shall institute any action or proceeding in any court of
law or equity other than to request enforcement of the arbitrators’ award
hereunder. The foregoing sentence shall be a bona fide defense to any action
or proceeding instituted contrary to this Agreement.’ ” (Ajamian, supra, 203
Cal.App.4th at p. 783, italics added.)
The Court of Appeal rejected the defendants’ delegation argument. The
court reasoned: “It is true that one reasonable inference from this language is
that the parties, in designating arbitration as the exclusive means for
determining ‘[a]ny disputes, differences or controversies’ (and precluding
court actions and providing a defense to them on this ground) intended that
even threshold issues of unconscionability would be decided by the
arbitration panel. But another reasonable inference is that all of this
language is only intended to bring within the exclusive scope of arbitration
all substantive disputes, claims or controversies on which a court action
might otherwise be brought, while the enforceability of the arbitration
provision itself remains a matter for determination by a court. Indeed,
because that is the usual expectancy of the parties, the absence of any
express language pertaining to threshold enforceability questions either
reinforces that proposition or at least fails to cure the ambiguity. In light of
the possibility of these two conflicting inferences, the language fails to meet
9
the test of clear and unmistakable evidence.” (Ajamian, supra, 203
Cal.App.4th at p. 783.)
The Ajamian court further explained: “Language such as ‘any disputes,
differences or controversies’ may well be adequate and necessary for the
parties to express their intention to arbitrate all substantive claims, since the
number and diversity of potential future substantive claims is so great as to
defy a specific enumeration of each type. But the issue of who would decide
the enforceability of the arbitration clause itself is a horse of a different color.
It is a distinct issue that could and would be easily addressed—if the parties
actually contemplated it at the time of contracting—by stating expressly that
the arbitrator shall decide questions of the enforceability of the arbitration
provision. Because such issues are normally decided by the court, parties
who consider the matter and want the issues to be decided instead by the
arbitrator would most likely spell out their unusual intention in the
arbitration provision. The absence of such express language (or extrinsic
evidence to the same effect) therefore gives rise to the inference that the
parties did not consider the matter. Indeed, because the issue is arcane and
not likely contemplated by the parties, silence or ambiguity as to who would
decide the enforceability of the arbitration provision suggests it was not a
matter on which the parties mutually agreed and, therefore, the
enforceability issue cannot be arbitrated—no matter how much public policy
favors the notion of arbitration generally.” (Ajamian, supra, 203 Cal.App.4th
at pp. 786–787.)
Similarly, in Nelson v. Dual Diagnosis Treatment Center, Inc. (2022) 77
Cal.App.5th 643, 655 (Nelson), the proponent of an arbitration agreement
argued delegation to the arbitrator to decide arbitrability was reflected “in
the broad language of their arbitration clause which states a general desire
10
for disputes to be resolved ‘without litigation,’ ” including language
expressing the parties’ “ ‘desire to resolve any dispute, whether based on
contract, tort, statute or other legal or equitable theory arising out of or
related to this Agreement . . . or the breach or termination of this Agreement
. . . without litigation.’ ” The appellate court rejected the delegation
argument: “While this language might permit an inference the parties
intended that an arbitrator should resolve arbitrability questions (i.e., ‘any
dispute’), such an intent is not clear and unmistakable. The clause does not
mention arbitrability, nor is it mentioned anywhere else in the agreement.”
(Ibid., some italics added.)
We find the reasoning of Ajamian and Nelson persuasive.7 Here, Skillz
does not point to any language that clearly and unmistakably authorizes the
arbitrator to decide threshold questions of arbitrability. The language that
the word “dispute” in the Terms of Service includes “any dispute . . .
concerning these Terms” and “will be given the broadest possible meaning
allowable under law” could reasonably be understood to express no more than
the parties’ “intention to arbitrate all substantive claims, since the number
and diversity of potential future substantive claims is so great as to defy a
specific enumeration of each type.” (Ajamian, supra, 203 Cal.App.4th at p.
786.) Because the usual expectation of the parties would be that a court, not
an arbitrator, decides threshold issues of arbitrability, “the absence of any
express language pertaining to threshold enforceability questions . . . fails to
cure the ambiguity.” (Id. at p. 783.)
7Accordingly, we decline Skillz’ invitation to follow contrary federal
authority. “[W]e are not bound by decisions of the lower federal courts, even
on federal questions.” (Etcheverry v. Tri-Ag Service, Inc. (2000) 22 Cal.4th
316, 320.)
11
Skillz has not shown the parties expressly agreed to delegate questions
of arbitrability to arbitration.
2. Reference to AAA Commercial Arbitration Rules is Not Enough
Subsection 14.4 of the Terms of Service specifies that for users in the
United States, “any arbitration will be conducted by the American
Arbitration Association (the ‘AAA’) under its Commercial Arbitration Rules.”
These rules, in turn, provide, “The arbitrator shall have the power to rule on
his or her own jurisdiction, including any objections with respect to the
existence, scope, or validity of the arbitration agreement or to the
arbitrability of any claim or counterclaim.” (AAA Commercial Arbitration
Rules, R-7, subd. (a).)
For its position that the reference to the AAA Commercial Arbitration
Rules alone proves the parties’ intent to delegate threshold questions of
enforceability to the arbitrator, Skillz relies on Dream Theater, Inc. v. Dream
Theater (2004) 124 Cal.App.4th 547, 557 (Dream Theater). There, the Court
of Appeal held that when a “[c]ontract provides for arbitration in conformance
with rules that specify the arbitrator will decide the scope of his or her own
jurisdiction, the parties’ intent is clear and unmistakable, even without a
recital in the contract that the arbitrator will decide any dispute over
arbitrability.” (Id. at p. 557.)
Notably, Dream Theater involved a purchase agreement and
subsequent business dispute between corporate buyers and sellers of an
Internet-based multimedia and entertainment business. (Dream Theater,
supra, 124 Cal.App.4th at p. 550.) Thus, the disputants were sophisticated
parties of reasonably equal bargaining power. But here we are evaluating an
arbitration provision found in the terms of service between a mobile
application business and a user of its service. As one district court observed,
12
“Although incorporation [of AAA arbitration rules] by reference may fairly be
deemed a clear and unmistakable delegation where there are sophisticated
parties, a different result may obtain where one party is unsophisticated. For
an unsophisticated plaintiff to discover she had agreed to delegate gateway
questions of arbitrability, she would need to locate the arbitration rules at
issue, find and read the relevant rules governing delegation, and then
understand the importance of a specific rule granting the arbitrator
jurisdiction over questions of validity—a question the Supreme Court itself
has deemed ‘ “rather arcane.” ’ ” (Eiess v. USAA Federal Savings Bank (N.D.
Cal. 2019) 404 F.Supp.3d 1240, 1253 (Eiess).)
In Eiess, a deposit agreement between a bank and a customer
incorporated by reference “JAMS and/or AAA’s rules,” both of which included
rules that disputes over contract formation and validity were to be decided by
the arbitrator. (404 F.Supp.3d at pp. 1245, 1248, 1252.) The bank argued
the gateway issue of whether the deposit agreement was valid was for the
arbitrator to decide, but the district court concluded the incorporation
language was insufficient to show the customer “clearly and unmistakably
agreed to delegation, particularly in the absence of any evidence that she
possesses a heightened level of sophistication.” (Id. at p. 1254.)
The Ajamian court also declined to follow Dream Theater in the context
of an employment agreement. Considering the same argument Skillz makes
now, the court reasoned: “In our view, while the incorporation of AAA rules
into an agreement might be sufficient indication of the parties’ intent in other
contexts, we seriously question how it provides clear and unmistakable
evidence that an employer and an employee intended to submit the issue of
the unconscionability of the arbitration provision to the arbitrator, as
opposed to the court. There are many reasons for stating that the arbitration
13
will proceed by particular rules, and doing so does not indicate that the
parties’ motivation was to announce who would decide threshold issues of
enforceability.” (Ajamian, supra, 203 Cal.App.4th at p. 790.)
The Ajamian court continued: “[W]e must be mindful of what the
United States Supreme Court has emphasized unflinchingly for decades:
notwithstanding the public policy favoring arbitration, arbitration can be
imposed only as to issues the parties agreed to arbitrate; given the slim
likelihood that the parties actually contemplated who would determine
threshold enforceability issues, as well as the default presumption that such
issues would be determined by the court, those threshold issues must be
decided by the court absent clear and unmistakable proof to the contrary.
This is a ‘heightened standard,’ higher than the evidentiary standard
applicable to other matters of interpreting an arbitration agreement. (Rent–
A–Center, [West, Inc. v. Jackson (2010) 561 U.S. 63, 69], fn. 1; First Options
[of Chicago, Inc. v. Kaplan (1995)] 514 U.S. [938,] 944 [contrasting ‘ordinary
state-law principles that govern the formation of contracts’ with the clear and
unmistakable rule].) As the court cogently explained in Gilbert Street
[Developers, LLC v. La Quinta Homes, LLC (2009) 174 Cal.App.4th [1185,]
1191–1192: ‘[I]t is not enough that ordinary rules of contract interpretation
simply yield the result that arbitrators have power to decide their own
jurisdiction. Rather, the result must be clear and unmistakable, because the
law is solicitous of the parties actually focusing on the issue. Hence silence or
ambiguity is not enough.’ ” (Ajamian, supra, 203 Cal.App.4th at pp. 790–
791.)
Likewise, in Beco v. Fast Auto Loans, Inc. (2022) 86 Cal.App.5th 292
(Beco), an employment agreement incorporated AAA rules but did not attach
the rules or provide a means of locating and reading them before the
14
employee signed the agreement. In that circumstance, the court observed,
“Concluding that [the employee] actually considered and consciously agreed
to delegate the issue of arbitrability would be a complete fiction. While such
fictions might be permissible in other areas of arbitration law, that is not the
case with delegation, which requires meeting a ‘ “ ‘heightened standard.’ ” ’ ”
(Id. at p. 306.) We believe Gostev is more like the former employees in
Ajamian and Beco and the bank customer Eiess than the corporate seller in
Dream Theater. We also agree with the reasoning of Ajamian, Beco, and
Eiess and therefore conclude the incorporation by reference of AAA
Commercial Arbitration Rules does not provide clear and unmistakable
evidence the parties intended to delegate to the arbitrator the question of
unconscionability in this case.
We do not find the federal authority cited by Skillz persuasive. (E.g.,
G.G. v. Valve Corporation (9th Cir. 2020) 799 Fed.Appx. 557, 558 [under
Washington state law, “teenagers clearly and unmistakably agreed to
arbitrate questions of arbitrability because the arbitration agreement
incorporates AAA rules”], but see Cooper v. Agrify Corporation (W.D. Wash.,
June 2, 2022, No. C21-0061RSL-JRC) 2022 WL 2374587, at *3 & fn.2
[declining “to presume knowledge on the part of an unsophisticated party
where there is no evidence that he was familiar with the referenced [AAA]
rules or had any reason to suspect that the reference was in fact a separate
contractual obligation requiring review and assent”].) And, as we have noted,
we are not bound by the decisions of the lower federal courts. (Etcheverry v.
Tri-Ag Service, Inc., supra, 22 Cal.4th at p. 320.) Skillz argues that parties
are presumed to have existing law in mind when they execute their contracts,
suggesting the parties here would have assumed federal authority such as
Brennan v. Opus Bank (9th Cir. 2015) 796 F.3d 1125 (Brennan), applied to
15
the Terms of Service.8 Yet, Ajamian was also existing law in California when
Gostev agreed to the Terms of Service. The Ajamian court explained, “There
are many reasons for stating that the arbitration will proceed by particular
rules, and doing so does not indicate that the parties’ motivation was to
announce who would decide threshold issues of enforceability.” (Ajamian,
supra, 203 Cal.App.4th at p. 790.) Skillz, which drafted the Terms of Service
and was presumably aware of Ajamian, could have expressly stated in the
arbitration provision that threshold questions of enforcement were to be
delegated to the arbitrator, but it did not do so.
In short, Skillz has failed to establish the parties clearly and
unmistakably delegated threshold issues of arbitrability to the arbitrator.9
8 In Brennan, the Ninth Circuit Court of Appeals held “that
incorporation of the AAA rules constitutes clear and unmistakable evidence
that contracting parties agreed to arbitrate arbitrability” on the facts of the
case (796 F.3d at p 1130), but the court expressly did not decide “ ‘the effect
[if any] of incorporating [AAA] arbitration rules into consumer contracts’ or
into contracts of any nature between ‘unsophisticated’ parties” (id. at p.
1131).
9 Skillz argues at length that the trial court’s finding of no clear and
unmistakable delegation conflicts with Aanderud v. Superior Court (2017) 13
Cal.App.5th 880. Generally, when a contract includes a severability clause
stating a “court of competent jurisdiction” may excise an unenforceable
provision, the reference to a court creates an ambiguity about who will decide
threshold issues of arbitrability and precludes a finding of clear and
unmistakable delegation to arbitration. (See Dennison, supra, 47
Cal.App.5th at pp. 209–210.) Here, the trial court described the Dennison
holding and noted the Terms of Service contains such a severability clause.
But in Aanderud, the court held a severability clause referring to a court of
competent jurisdiction did not create an ambiguity where (1) there was an
express delegation clause (which the appellants conceded) and (2) the
arbitration provision also permitted certain claims to be brought in small
claims court. (Aanderud, supra, 13 Cal.App.5th at pp. 891, 893–894.) Skillz
points out that the arbitration provision in this case also allows claims to be
heard in small claims court. Aanderud is distinguishable because, here, the
16
C. Unconscionability
“Under both federal and state law, arbitration agreements are valid
and enforceable, unless they are revocable for reasons under state law that
would render any contract revocable,” such as the contract defenses of fraud,
duress, or unconscionability. (Tiri v. Lucky Chances, Inc. (2014) 226
Cal.App.4th 231, 239.)
“The unconscionability doctrine ensures that contracts, particularly
contracts of adhesion,[10] do not impose terms that have been variously
described as ‘ “ ‘overly harsh’ ” ’ [citation], ‘ “ ‘unduly oppressive’ ” ’ [citation],
‘ “so one-sided as to ‘shock the conscience’ ” ’ [citation], or ‘unfairly one-sided’
[citation]. All of these formulations point to the central idea that the
unconscionability doctrine is concerned not with ‘a simple old-fashioned bad
bargain’ [citation], but with terms that are ‘unreasonably favorable to the
more powerful party’ [citation]. These include ‘terms that impair the
integrity of the bargaining process or otherwise contravene the public
interest or public policy; terms (usually of an adhesion or boilerplate nature)
that attempt to alter in an impermissible manner fundamental duties
otherwise imposed by the law, fine-print terms, or provisions that seek to
negate the reasonable expectations of the nondrafting party, or unreasonably
and unexpectedly harsh terms having to do with price or other central
Terms of Service contains no express delegation language. And, in any event,
we have concluded Skillz failed to show clear and unmistakable delegation of
threshold issues to the arbitrator without considering the severability clause.
Skillz’ argument regarding Aanderud is unavailing.
10Contracts of adhesion refers to a standardized contract “offered by
the party with superior bargaining power ‘on a take-it-or-leave-it basis.’ ”
(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (OTO).)
17
aspects of the transaction.’ ” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57
Cal.4th 1109, 1145 (Sonic).)
“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. [Citation.] Under this standard,
the 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.’ ” (OTO, supra, 8 Cal.5th at p.
125.)
“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.] ‘[T]he more substantively oppressive the contract term, the less
evidence of procedural unconscionability is required to’ conclude that the
term is unenforceable[, and] . . . the more deceptive or coercive the bargaining
tactics employed, the less substantive unfairness is required. [Citations.] . . .
‘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.’ ” (OTO, supra, 8 Cal.5th at pp. 125–126.)
1. Procedural Unconscionability
“ ‘[T]here are degrees of procedural unconscionability. At one end of
the spectrum are contracts that have been freely negotiated by roughly equal
parties, in which there is no procedural unconscionability. . . . Contracts of
adhesion that involve surprise or other sharp practices lie on the other end of
18
the spectrum. [Citation.] Ordinary contracts of adhesion, although they are
indispensable facts of modern life that are generally enforced [citation],
contain a degree of procedural unconscionability even without any notable
surprises, and “bear within them the clear danger of oppression and
overreaching.” ’ ” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244
(Baltazar).)
Here, the Terms of Service is a consumer contract that was offered on a
take-it-or-leave-it basis, which, in itself, “is sufficient to establish some
degree of procedural unconscionability.” (Sanchez v. Valencia Holding Co.,
LLC (2015) 61 Cal.4th 899, 915 (Sanchez).)
In addition, “ ‘[p]rocedural unconscionability focuses on oppression or
unfair surprise,’ ” (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205, 214),
and an arbitration clause that is “confusing” and “contradictory” may
constitute unfair surprise (id. at p. 216). Gostev points to confusing and
contradictory provisions in the Terms of Service regarding arbitration. For
example, subsection 1.1’s statement that “any claim, dispute or controversy”
relating to “these terms and/or our software or services must be resolved by
final and binding arbitration,” appears to be contradicted by subsection 7.4,
which specifies that any interference “with procedures or performance of . . .
Software . . . is subject to civil . . . prosecution,” and subsection 8.10, which
contemplates that Skillz will pursue “civil litigation” if a user fails to honor a
request for payment. Gostev also argues users would be surprised to find
that, according to a AAA fee schedule effective May 2018, the filing fee for
nonmonetary claims is $6,250 (and this fee does not include arbitrator
19
compensation).11 We are satisfied that Gostev has established procedural
unconscionability.
“Yet ‘a finding of procedural unconscionability does not mean that a
contract will not be enforced’ ”; rather, it means “ ‘that courts will scrutinize
the substantive terms of the contract to ensure they are not manifestly unfair
or one-sided.’ ” (Sanchez, supra, 61 Cal.4th at p. 915.) Accordingly, we
consider Gostev’s claims of substantive unconscionability.
2. Substantive Unconscionability
Gostev contends the arbitration provision in this case is substantively
unconscionable because: (1) the terms are not mutual, (2) the provision
precludes public injunctive relief, (3) it shortens limitations periods, (4) it
requires arbitration in San Francisco, California, and (5) the attorneys’ fees
and costs provisions contravene the CLRA and impose excessive costs. We
have no difficulty concluding the arbitration provision is substantively
unconscionable.
a. One-Sided and Non-Mutual Terms
Mutuality is the “ ‘paramount consideration’ ” in assessing substantive
conscionability. (Davis v. Kozak (2020) 53 Cal.App.5th 897, 910.)
“ ‘Agreements to arbitrate must contain at least “ ‘a modicum of bilaterality’ ”
to avoid unconscionability.’ ” (Ibid.)
11 In Nelson, supra, 77 Cal.App.5th at pages 660–661, the Court of
Appeal recognized the degree of procedural unconscionability may “ ‘rise[ ] to
a moderate level’ when the party drafting the agreement fails to provide a
copy of the applicable arbitration rules” and the nondrafting party claims to
be surprised by an element of the AAA rules. The Terms of Service neither
lists the filing fees associated with AAA arbitration nor describes how to find
the fee schedule, and a user of Skillz’ platform would likely be surprised to
find that arbitration entailed filing fees so much higher than court filing fees.
20
Gostev points out the requirement to arbitrate disputes in this case is
not mutual. The arbitration provision excludes from arbitration claims
related to Skillz’ (but not users’) intellectual property rights.12 It grants
Skillz (but not users) authority “to seek appropriate equitable remedies with
respect to your [i.e., users’] violation of these Terms in any court of competent
jurisdiction” “without bond, other security, or proof of damages.” It provides
that Skillz (but not users) may institute “civil” proceedings for claims related
to billing and alleged “unfair methods in participating in Services or using
the Software.” (See fn. 2, ante.)
Skillz’ defense of these non-mutual terms is not persuasive. It relies on
Tompkins v. 23andMe, Inc. (9th Cir. 2016) 840 F.3d 1016, 1031, in which the
Ninth Circuit Court of Appeals, applying California’s unconscionability
doctrine, concluded a provision “excluding intellectual property claims from
mandatory arbitration is not unconscionable.” Tompkins is distinguishable
because the exclusion in that case was mutual; it excepted from arbitration
any “dispute relating to intellectual property rights, obligations, or any
infringement claims” (id. at p. 1021), not disputes related solely to the
drafter’s intellectual property rights. (See Perez v. DirecTV Group Holdings,
LLC (C.D. Cal. 2017) 251 F.Supp.3d 1328, 1347 (Perez) [“in Tompkins, the
provision at issue allowed 23andMe’s customers to retain intellectual
property rights, including rights in user-generated content and genetic
information, and to bring suit in court against 23andMe to vindicate those
rights”; thus “the intellectual property provision contained ‘more than [the]
“modicum of bilaterality” ’ required for a valid contract”].)
12 Section 14 on arbitration provides that “[t]his Section applies to any
Dispute except for Disputes relating to the enforcement or validity of our [i.e.,
Skillz’] intellectual property rights.” (Italics added.)
21
Next, Skillz argues there is no problem with an agreement that allows
the drafting party alone the right to seek equitable relief in court because the
nondrafting party can seek equitable relief in arbitration. While it is true
that “[b]oth California and federal law treat the substitution of arbitration for
litigation as the mere replacement of one dispute resolution forum for
another, resulting in no inherent disadvantage” (Sonic, supra, 57 Cal.4th
1109, 1152), Skillz cites no case approving an arbitration provision that is
one-sided in this manner. To the contrary, we have held a provision such as
this one “reflects an attempt to improperly insert a unilateral carve out in the
arbitration provision that favors [the drafting party], which demonstrates
substantive unconscionability.” (Ali v. Daylight Transport, LLC (2020) 59
Cal.App.5th 462, 479–480 [assessing an “arbitration provision purporting to
allow only [the drafting party] to request a provisional remedy in court”].)13
Finally, Skillz relies on our high court’s observation that “ ‘ “[a] contract
can provide a ‘margin of safety’ that provides the party with superior
bargaining strength a type of extra protection for which it has a legitimate
commercial need without being unconscionable.” ’ ” (Baltazar, supra, 62
Cal.4th at p. 1250, quoting Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83, 117.) But the drafter of a one-sided
arbitration provision must provide “at least some reasonable justification for
such one-sidedness based on ‘business realities.’ ” (Armendariz, supra, 24
Cal.4th at p. 117.) Skillz, however, does not attempt to justify, for example,
the provision requiring users to arbitrate their billing disputes (that do not
13 Indeed, while the law does not assume litigation is inherently
advantageous to arbitration, Skillz seems to. “[W]here a drafter of a contract
of adhesion believes that arbitration is ‘good enough’ for all consumer claims
but not for any claims it may bring, it is the drafter who holds an aversion to
arbitration.” (Perez, supra, 251 F.Supp.3d at p. 1348, italics omitted.)
22
qualify for small claims court) while permitting Skillz to pursue civil
litigation for its billing claims against users.
We conclude the lack of mutuality in the promises to arbitrate in the
Terms of Service is substantively unconscionable.14
Gostev also cites the $50 cap on liability (see fn. 5), waiver of liability
for injury due to hacking, and indemnification clause as non-mutual and one-
sided.15 These terms are one-sided and inform our assessment of the
arbitration provision’s substantive unconscionability. (See, e.g., Nelson,
supra, 77 Cal.App.5th at pp. 663–664 [limiting damages to $2,500 was “ ‘ “yet
another version of a ‘heads I win, tails you lose’ . . . clause that has met with
14 Here, we pause to emphasize that “[s]ubstantive unconscionability
focuses on the actual terms of the agreement and evaluates whether they
create ‘ “ ‘overly harsh’ ” ’ or ‘ “ ‘one-sided’ ” results’ [citation], that is, whether
contractual provisions reallocate risks in an objectively unreasonable or
unexpected manner.” (Wayne v. Staples, Inc. (2006) 135 Cal.App.4th 466,
480, italics added.) Skillz argues Gostev has presented “no evidence” that
any term is substantively unconscionable as to him. But Gostev correctly
responds that the Terms of Service itself is “evidence of the contract terms
and their unconscionability.”
15 Subsection 7.4 provides, “You acknowledge that we are not
responsible for any damage, loss or injury resulting from hacking, tampering
or other unauthorized access or use of the Services or your Account.”
Subsection 5, “YOUR INDEMNIFICATION OF US,” provides, “You will, at
your own cost and expense, indemnify and hold us and our directors, officers,
employees and agents harmless from and against any and all claims,
disputes, liabilities, judgments, settlements, actions, debts or rights of action,
losses of whatever kind, and all costs and fees, including reasonable legal and
attorneys’ fees, arising out of or relating to (i) your breach of these Terms; (ii)
any use of your Account, the Website, the Software and the Services by any
person including yourself; (iii) your violation of Applicable Laws; and/or (iv)
your negligence or misconduct; and, if we instruct you in writing, you will, at
your cost and expense, defend us from any of the foregoing using counsel
reasonably acceptable to us.”
23
uniform judicial opprobrium” ’ ”; the “unilateral release of almost any
conceivable claim” was “ ‘significantly harsh and one-sided’ ”]; Lhotka v.
Geographic Expeditions, Inc. (2010) 181 Cal.App.4th 816, 825 (Lhotka)
[provision limiting damages “guaranteed that plaintiffs could not possibly
obtain anything approaching full recompense for their harm”; nonreciprocal
limitation on damages and indemnification obligations contributed to the
conclusion the arbitration clause was “so one-sided as to be substantively
unconscionable”].)
b. Availability of Public Injunctive Relief
Public injunctive relief is relief that “benefits the general public” and
benefits an individual plaintiff only incidentally “or as ‘a member of the
general public.’ ” (McGill, supra, 2 Cal.5th at p. 955.) (In contrast, private
injunctive relief “primarily ‘resolve[s] a private dispute’ between the parties
[citation] and ‘rectif[ies] individual wrongs.’ ” (Ibid.)) Public injunctive relief
is a remedy available to private plaintiffs under the CLRA and the UCL. (Id.
at p. 961.) In McGill, the California Supreme Court held that an arbitration
provision was “invalid and unenforceable under state law insofar as it
purport[ed] to waive [the plaintiff’s] statutory right to seek” public injunctive
relief under these statutes. (Ibid.)
Here, the arbitration provision specifies the “arbitrator may award
declaratory or injunctive relief only to you individually, and only to the extent
required to satisfy your individual claim.” Gostev argues this provision
violates McGill.
Gostev relies on MacClelland v. Cellco Partnership (N.D. Cal., July 1,
2022, No. 21-CV-08592-EMC) ___F.Supp.3d.___, ___ [2022 WL 2390997, at
*8] (MacClelland), which considered an agreement that similarly limited the
injunctive relief the arbitrator could award to “injunctive relief only in favor
24
of the individual party seeking relief and only to the extent necessary to
provide relief warranted by that party’s individual claim.” (Italics added.)
The district court found this provision “preclud[ed] injunctive relief
benefitting anyone other than the individual claimant” and therefore
prevented the plaintiffs “from seeking public injunctive relief in any forum, a
right which cannot be denied whether in arbitration or otherwise.” (Id. at p.
___ [2022 WL 2390997, at *8])16 As a result, the court determined the
provision was unenforceable under McGill. (Id. at p. ___ [2022 WL 2390997,
at *10.)
Skillz responds that its arbitration provision does not preclude public
injunctive relief because the arbitrator is authorized to award injunctive
relief for an “individual claim” and public injunctive relief is available for
individual claims under the UCL and CLRA. In McGill, our high court
recognized that a “private individual” who has “ ‘suffered injury in fact and
has lost money or property as a result of’ a violation of the UCL” may bring a
private action and, as part of that action, may request public injunctive relief.
(McGill, supra, 2 Cal.5th at p. 959.) Such an action is filed on the person’s
own behalf, “not ‘on behalf of the general public.’ ” (Ibid.) Thus, according to
Skillz, the limitation that an arbitrator may award “injunctive relief only to
you individually, and only to the extent required to satisfy your individual
16Similarly, in Blair v. Rent-A-Center, Inc. (9th Cir. 2019) 928 F.3d
819, 831, the arbitration agreement at issue prohibited “the arbitrator from
awarding ‘relief that would affect [customers] other than you,’ and
eliminate[d] any ‘right or authority for any dispute to be brought, heard, or
arbitrated as a class, collective, mass, private attorney general, or
representative action.’ ” The federal appellate court found this provision
“thus precludes the arbitrator from awarding public injunctive relief.” (Ibid.)
25
claim” does not preclude the arbitrator from awarding public injunctive relief
because that relief is available as part of a person’s individual claim.
“A contract must receive such an interpretation as will make it lawful,
operative, definite, reasonable, and capable of being carried into effect, if it
can be done without violating the intention of the parties.” (Civ. Code,
§ 1643.) Given the myriad limitations in the Terms of Service favoring Skillz,
it seems likely that Skillz intended the language at issue would prevent the
award of injunctive relief benefitting anyone other than the individual user,
but we need not resolve this question of contract interpretation. Even
assuming the arbitration provision allows the arbitrator to award public
injunctive relief, other terms cited by Gostev render the arbitration provision
substantively unconscionable.
c. Shortened Limitations Periods
By statute, the limitations period for a CLRA claim is three years (Civ.
Code, § 1783), and the limitations period for a UCL claim is four years (Bus.
& Prof. Code, § 17208), but the arbitration provision in this case limits all
claims to a one-year statute of limitations.
Parties may contract to a shortened limitations period so long as the
limitation is reasonable. (Ellis v. U.S. Security Associates (2014) 224
Cal.App.4th 1213, 1222–1223.) However, contractually shortened limitations
periods have not been “ ‘recognized outside the context of straightforward
transactions in which the triggering event for either a breach of a contract or
for the accrual of a right is immediate and obvious.’ ” (Id. at p. 1223, quoting
Moreno v. Sanchez (2003) 106 Cal.App.4th 1415, 1430.)
In Fisher v. MoneyGram International, Inc. (2021) 66 Cal.App.5th 1084,
1105 (Fisher), the Court of Appeal found substantively unconscionable an
arbitration provision’s one-year limitations period, which was “considerably
26
shorter than the otherwise applicable four-year limitations period [for the
plaintiff’s UCL claim] and [wa]s inherently one-sided against complaining
consumers.” And, in Magno v. The College Network, Inc. (2016) 1 Cal.App.5th
277 (Magno), the court observed, “An arbitral limitations period that is
shorter than the otherwise applicable period is one factor that supports a
finding of substantive unconscionability.” (Id. at p. 291 [arbitration provision
was substantively unconscionable where, among other things, it required all
claims to be filed within a year of accrual].)
Here, the shortened limitations period (reducing the applicable
limitations period by up to 75 percent of the statutory limitations period) is
another factor supporting our conclusion that the arbitration provision is
substantively unconscionable.
d. Mandating Arbitration in San Francisco
Gostev, who lives in Washington, contends it is substantively
unconscionable to require him to arbitrate in San Francisco, California. He
argues the requirement that arbitration occur out of his home state and
hundreds of miles away “is, like many of the provision[s] in this contract,
designed solely to discourage Skillz’s customers from pursing legitimate
claims.”
In response, Skillz cites Intershop Communications v. Superior Court
(2002) 104 Cal.App.4th 191, 201–202, for the proposition, “A forum selection
clause within an adhesion contract will be enforced ‘as long as the clause
provided adequate notice to the [party] that he was agreeing to the
jurisdiction cited in the contract.’ ” But Intershop also provides, “contractual
forum selection clauses are valid and should be given effect unless
enforcement of the clause would be unreasonable” (id. at p. 196, italics added),
and requiring all users of a mobile app to arbitrate their claims in San
27
Francisco regardless of where the users are located strikes us as
unreasonable. The forum selection clause contributes to our assessment that
the arbitration provision in this case is substantively unconscionable. (See
Magno, supra, 1 Cal.App.5th at pp. 288–289 [requiring college-aged students
to travel from San Diego to Indiana to arbitrate claims against a company
that solicited their business in California was substantively unconscionable];
Lhotka, supra, 181 Cal.App.4th 816, 825 [requiring residents of Colorado to
mediate and arbitrate in San Francisco contributed to the substantive
unconscionability of the arbitration clause].)
e. Attorney’s Fee and Costs Provisions
The arbitration provision states, “Each party . . . shall pay an equal
share of the fees and costs of the arbitrator and AAA” and “the arbitrator
may award to the prevailing party reimbursement of its reasonable attorneys’
fees and costs (including, for example, expert witness fees and travel
expenses), and/or the fees and costs of the arbitrator.”
In Newton v. American Debt Services, Inc. (N.D. Cal. 2012) 854
F.Supp.2d 712, 725, the district court explained the problem with a generic
clause authorizing awards of costs and fees to the prevailing party: “This
provision contravenes California’s Consumers Legal Remedies Act, which
requires that court costs and attorney’s fees be awarded to a prevailing
plaintiff but only permits attorney’s fees to a prevailing defendant ‘upon a
finding by the court that the plaintiff’s prosecution of the action was not in
good faith.’ [(Civ. Code § 1780.)] By eliminating this protection for
customers, this provision would expose potential plaintiffs to the risk of
having to pay Defendants’ attorney’s fees even if they brought suit in good
faith. By permitting exposure to Defendant’s attorney’s fees and litigation
costs, the Agreements may deter customers with legitimate disputes from
28
bringing suit in contravention of their statutory rights.” (See also Ajamian,
supra, 203 Cal.App.4th at p. 800 [attorney’s fee provision was unconscionable
where, among other things it imposed an obligation to pay the employer’s
attorney fees “where [the plaintiff] would have no such obligation under at
least one of her California statutory claims”].)
Further, an “arbitration clause should not impose excessive costs
relative to the recovery sought.” (Gutierrez v. Autowest, Inc. (2003) 114
Cal.App.4th 77, 89, fn. 9.) As we have mentioned, the arbitration filing fee
for Gostev’s nonmonetary claim is $6,250, while the Terms of Service purport
to limit damages to $50.
These provisions contribute to our conclusion the arbitration provision
is “ ‘unreasonably favorable to the more powerful party.’ ” (Sonic, supra, 57
Cal.4th at p. 1145.)
D. Severance
“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, or it may enforce the remainder of the contract
without the unconscionable clause, or it may so limit the application of any
unconscionable clause as to avoid any unconscionable result.” (Civ. Code,
§ 1670.5, subd. (a).)
In this case, the trial court found the unconscionability of the
arbitration provision permeated the agreement such that severance was
unavailable. We review the trial court’s determination for abuse of
discretion. (Nelson, supra, 77 Cal.App.5th at p. 664.) “ ‘The trial court has
discretion under this statute to refuse to enforce an entire agreement if the
agreement is ‘permeated’ by unconscionability.’ [Citation.] An agreement
may be ‘permeated with too high a degree of unconscionability for severance
29
to rehabilitate.’ [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.” ’ ” (Ibid.)
Having catalogued the many ways the arbitration provision at issue is
one-sided, unfair, and designed to discourage users from bringing claims
against Skillz, we now conclude the trial court did not abuse its discretion in
refusing to enforce it. “There is no single provision [the court] could strike to
eliminate its unconscionable taint.” (Fisher, supra, 66 Cal.App.5th at p.
1108; see also Navas v. Fresh Venture Foods, LLC (2022) 85 Cal.App.5th 626,
637 [“Given the number of challenged provisions, the court could reasonably
find severance was not an acceptable option”]; Beco, supra, 86 Cal.App.5th at
p. 313 [where “ ‘multiple defects indicate a systematic effort to impose
arbitration . . . not simply as an alternative to litigation, but as an inferior
forum that works to the [drafter]’s advantage,’ ” there is no abuse of
discretion in the trial court’s decision not to sever the numerous
unconscionable provisions]; Magno, supra, 1 Cal.App.5th at p. 292 [“If ‘the
court would have to, in effect, reform the contract, not through severance or
restriction, but by augmenting it with additional terms,’ the court must void
the entire agreement”]; Nelson, supra, 77 Cal.App.5th at p. 666 [severing the
arbitration agreement’s unconscionable terms “was not a reasonable option”
where the agreement “was rife with unconscionable terms”].)
DISPOSITION
The order denying the petition to compel arbitration is affirmed.
30
_________________________
Miller, J.
WE CONCUR:
_________________________
Stewart, P.J.
_________________________
Richman, J.
A164407, Gostev v. Skillz Platform, Inc.
31
Court: San Francisco County Superior Court
Trial Judge: Hon. Richard Ulmer, Jr.; Hon. Samuel K. Feng
Quinn, Emanuel Urquhart & Sullivan, William B. Adams, Meredith M.
Shaw, Xuemeng Wang, Dylan C. Bonfigly, for Defendant and Appellant
Blood Hurst & O’Reardon, Timothy G. Blood, Leslie E. Hurst, Thomas J.
O’Reardon, Craig W. Straub; The Law Offices of Andrew J. Brown, Andrew
J.Brown; Ellsworth Law Firm, Brian J. Ellsworth, for Plaintiff and
Respondent
A164407, Gostev v. Skillz Platform, Inc.
32