Opinion

Nathaniel v. Greene Motors CA1/1

Court: California Court of Appeal
Filed: May 25, 2023
Status: Unpublished
Cited by: 0 cases
Authority: More cited than 23.4%

The opinion

Filed 5/25/23 Nathaniel v. Greene Motors CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

VIRGIL NATHANIEL,

Plaintiff and Respondent,

A165056

GREENE MOTORS, INC., (Solano County

Super. Ct. No. FCS056974)

Defendant and Appellant.

Appellant Greene Motors, Inc., prevailed before the state Labor

Commissioner on wage claims brought by respondent employee Virgil

Nathaniel. When Nathaniel sought a de novo review of the commissioner’s

order, Greene Motors filed a petition to arbitrate the matter. The trial court

found that the parties’ arbitration agreement was procedurally and

substantively unconscionable and thus unenforceable, and Greene Motors

appealed. We affirm.

FACTUAL AND PROCEDURAL

BACKGROUND

The record in this case is sparse and contains little detail about

Nathaniel’s employment relationship with Greene Motors, a car dealership

known as Avery Greene Honda in Vallejo. What we know is that Nathaniel

applied for a job as a “Service–Advisor” with Greene Motors in fall 2015. He

signed an arbitration agreement printed on his form employment application,

as all applicants are required to do. The font size of the agreement and the

low quality of the copy in the appellate record make it difficult to discern each

word of the clause governing alternative dispute resolution.

Nathaniel was hired and in December 2015 he signed a second

arbitration agreement as part of the “onboarding process,” again because he

was required to do so to work for Greene Motors. We gather from the parties’

briefing in the trial court that this agreement was identical, “or nearly so,” to

the one contained in Nathaniel’s employment application. A copy of the

arbitration agreement Nathaniel signed in December 2015 appears in the

record on a single page titled “AGREEMENTS.” Nathaniel’s signature

appears after a paragraph titled “At Will Employment Agreement” that

stated he agreed his employment and compensation were terminable at will.

The remaining three-quarters of the page is filled with a single paragraph

titled “Binding Arbitration Agreement.” As with the arbitration agreement

Nathaniel signed when he applied for the job, the font size and low quality of

the copy of this agreement in the record make it difficult to discern each word

of the agreement. No evidence was presented in the trial court describing

whether or how the original agreement Nathaniel signed differed from the

copy as it appears in the record.

In the petition to compel arbitration, however, the text of the

agreement was set forth, and we quote it in its entirety:

“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 expense 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 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 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 through 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., including section 1283.05[1] 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 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[2] procedures, the arbitrator shall extend the times set by the Act

for the giving of notices and settings of hearings. Awards shall include

the arbitrator’s written reasoned opinion. If Section 1284.2 of the Code

of Civil Procedure 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 Section 1284.2. Both the Company and I agree that any arbitration

1 Code of Civil Procedure section 1283.05 provides for obtaining

depositions and other discovery if the parties incorporate the statute’s

provisions into their arbitration agreement (Code Civ. Proc., § 1283.1,

subd. (b)). All undesignated statutory references are to the Code of Civil

Procedure.

2By this point the agreement had named six legislative acts, but none

of them were specifically defined as “Act.” It appears this was a reference to

the California Arbitration Act.

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

proceeding despite the provisions of California Code of Civil

Procedure 1281.2(c).”

Below this paragraph are the following two acknowledgements:

“I UNDERSTAND BY AGREEING TO THIS BINDING

ARBITRATION PROVISION, BOTH I AND THE COMPANY GIVE UP

OUR RIGHTS TO TRIAL BY JURY.”

“Should any term or provision, or portion thereof, be declared void or

unenforceable it shall be severed and the remainder of this agreement

shall be enforced. I hereby acknowledge that I have read the above

statements and understand the same.”

A copy of the original one-page agreement is attached as Exhibit A to

Greene Motors’s petition to arbitrate, and Nathaniel’s signature appears at

the bottom of the page.

The human resources administrator for Greene Motors attested that

Nathaniel “was given all the time he needed to review these documents,” and

he “was not rushed in signing these arbitration agreements, was provided an

opportunity to ask questions about the agreement, and was free to seek

outside counsel in connection with signing the arbitration agreement.”

Nathaniel did not ask questions about the agreements or seek additional

advice about signing them.

At some point Nathaniel raised complaints about overtime wages,

meal-period premium wages, liquidated damages, and waiting-time

penalties. All we know about those complaints is that a Berman hearing was

held before the Labor Commission, which denied relief to Nathaniel in an

order dated April 29, 2021. So far as this court can tell, neither party sought

to arbitrate the matter in lieu of the Berman hearing.

In the order denying relief, Nathaniel was notified that the order would

“become final and enforceable as a judgment in a court of law unless either or

both parties exercise their right to appeal to the appropriate court [which was

identified as the Solano County Superior Court] within ten (10) days.” (Lab.

Code, § 98.2, subd. (a).) Using a state-approved form, Nathaniel filed an

appeal for a de novo review of the order in the Solano County Superior Court.

Greene Motors then filed a petition to compel arbitration in the trial

court, arguing that Nathaniel’s “filing of his appeal in this Court was

squarely inconsistent with an intent to submit his disputes to binding

arbitration.” Nathaniel opposed the petition, arguing that the arbitration

provisions were procedurally and substantively unconscionable. The trial

court agreed with Nathaniel and denied the petition to compel.

II.

DISCUSSION

Greene Motors argues that the trial court erred when it denied the

petition to compel arbitration. We are not persuaded.

A. General Principles and the Standard of Review.

The Federal Arbitration Act (FAA, 9 U.S.C. § 1 et seq.) provides that a

written agreement to arbitrate “shall be valid, irrevocable, and enforceable,

save upon such grounds as exist at law or in equity for the revocation of any

contract.” (9 U.S.C. § 2.) The FAA expresses favor for arbitration

agreements. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development

(US), LLC (2012) 55 Cal.4th 223, 235 (Pinnacle).) “In determining the rights

of parties to enforce an arbitration agreement within the FAA’s scope, courts

apply state contract law while giving due regard to the federal policy favoring

arbitration.” (Id. at p. 236.)

“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, supra, 55 Cal.4th at p. 236.) Nathaniel does not dispute that he

signed an arbitration agreement with Greene Motors or that if the agreement

were valid it would cover his claims. He argues solely that the agreement

was unconscionable.3

“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. [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

3 In Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I)

our State Supreme Court held that arbitration agreements requiring

employees to waive Berman hearings were categorically unconscionable. But

the Court also held that arbitration agreements could be enforced on appeals

from Berman rulings. (Id. at p. 669.) The judgment in Sonic I was vacated

by the United States Supreme Court, and the matter was remanded for

consideration in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S.

333. On remand, our Supreme Court held that an arbitration agreement is

not categorically unconscionable solely because it entails a waiver of the

Berman procedure, and that an agreement to arbitrate wage disputes can be

enforceable so long as it provides an accessible and affordable process for

resolving those disputes. (Sonic-Calabasas A, Inc. v. Moreno (2013)

57 Cal.4th 1109, 1146.) The parties do not argue, and we therefore do not

decide, whether employers may forfeit their right to compel arbitration of a

Berman appeal when they fail, as Greene Motors failed here, to seek to

compel arbitration of the Berman hearing.

whether they are overly harsh or one-sided.’ ” (OTO, L.L.C. v. Kho (2019)

8 Cal.5th 111, 125.) Both procedural and substantive unconscionability must

be shown to establish the defense. (Ibid.)

The doctrine of unconscionability ensures that contracts, particularly

those of adhesion, do not impose terms that are overly harsh, unduly

oppressive, or are so one-sided as to shock the conscience. (Sanchez v.

Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910 (Sanchez).) It does not,

however, encompass a simple bad bargain. (Id. at p. 911.) “An evaluation of

unconscionability is highly dependent on context.” (Ibid.) “The doctrine often

requires inquiry into the ‘commercial setting, purpose, and effect’ of the

contract or contract provision.” (Ibid.) “[T]he substantive unfairness of the

terms must be considered in light of any procedural unconscionability. 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.” (Id. at p. 912.)

“Where, as here, the evidence is not in conflict, we review the trial

court’s denial of arbitration de novo.” (Pinnacle, supra, 55 Cal.4th at p. 236.)

We review the trial court’s order denying arbitration and not its reasoning,

affirming it if it is correct on any theory that may be found in the record.

(Ramos v. Westlake Services LLC (2015) 242 Cal.App.4th 674, 686.)

B. The Trial Court Correctly Found Procedural Unconscionability.

Greene Motors first argues that Nathaniel “failed to establish a high

degree of procedural unconscionability.” (Formatting omitted.) Even if we

agreed that the level of procedural unconscionability was not extreme, we

conclude that Nathaniel established sufficient procedural unconscionability.

“A procedural unconscionability analysis ‘begins with an inquiry into

whether the contract is one of adhesion.’ [Citation.] An adhesive contract is

standardized, generally on a preprinted form, and offered by the party with

superior bargaining power ‘on a take-it-or-leave-it basis.’ [Citations.]

Arbitration contracts imposed as a condition of employment are typically

adhesive.” (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 126.) The question

then becomes “whether circumstances of the contract’s formation created

such oppression or surprise that closer scrutiny of its overall fairness is

required. (Ibid.) “ ‘ “ ‘Oppression occurs where a contract involves lack of

negotiation and meaningful choice, surprise where the allegedly

unconscionable provision is hidden within a prolix printed form.’ ” ’ ” (Ibid.)

Where a party had no ability to individually negotiate a contract’s terms,

could not opt out of an arbitration provision, and thus had no meaningful

choice but to accept an arbitration provision as drafted by the other party,

this establishes at least a minimal level of procedural unconscionability.

(Bakersfield College v. California Community College Athletic Assn. (2019)

41 Cal.App.5th 753, 762–763.) “[I]n the case of preemployment arbitration

contracts, the economic pressure exerted by employers on all but the most

sought-after employees may be particularly acute, for the arbitration

agreement stands between the employee and necessary employment, and few

employees are in a position to refuse a job because of an arbitration

requirement.” (Armendariz v. Foundation Health Psychcare Services, Inc.

(2000) 24 Cal.4th 83, 115 (Armendariz).)

The trial court acknowledged that Nathaniel did not produce evidence

about the circumstances under which he was presented with the arbitration

agreements and asked to sign them. The court concluded, though, that “a

facial review” of the agreements revealed “that both are complex, difficult to

read and contain lengthy run-on sentences that are not separated by topic or

paragraph. Each utilizes a small font. The language itself is replete with

significant legal[ese] and numerous references to state and federal statutes.

The language utilized is intended for lawyers, not an unsophisticated

applicant or employee.” The court concluded that “[t]he document speaks for

itself,” and its language and presentation supported a finding of procedural

unconscionability.

On appeal, Greene Motors does not dispute that the agreements

Nathaniel signed were adhesive. It acknowledges that the agreements

“therefore bear some degree of procedural unconscionability.” Rather than

directly addressing the trial court’s reasons for finding procedural

unconscionability, the company focuses on the arguments Nathaniel made

below when he opposed the petition to compel arbitration.

It may be true that the long, run-on, legalistic second agreement that

Nathaniel signed is clearly titled “Binding Arbitration Agreement,” as Greene

Motors stresses. And the acknowledgement at the bottom of the document

that Nathaniel gives up his right to jury trial is in bold text and is legible, in

contrast to the substantive terms of the agreement that are in small type.

But these arguments sidestep the actual reasons the trial court articulated in

concluding that the agreement is procedurally unconscionable. We agree

with the trial court that the agreement Nathaniel signed is printed in small

font, the run-on sentences are poorly organized, and the text is written for

lawyers, not layperson job applicants. These facts support a finding of

surprise. (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 128 [agreement was “a

paragon of prolixity,” was “written in an extremely small font,” and the

“single dense paragraph” was “ ‘visually impenetrable’ and ‘challenge[d] the

limits of legibility’ ”].) Because Greene Motors acknowledges some procedural

unconscionability and does not challenge the trial court’s findings that also

support finding procedural unconscionability, we proceed to examine whether

the agreement was substantively unconscionable.

C. The Trial Court Correctly Found Substantive Unconscionability.

Greene Motors contends that the trial court also erred when it

concluded that the arbitration agreement was substantively unconscionable.

Although this is a closer question, we are guided by OTO, L.L.C. v. Kho,

supra, 8 Cal.5th 111, and agree with the trial court that the agreement is

substantively unconscionable.

“Substantive unconscionability pertains to the fairness of an

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

harsh or one-sided. [Citations.] A contract term is not substantively

unconscionable when it merely gives one side a greater benefit; rather, the

term must be ‘so one-sided as to “shock the conscience.” ’ ” (Pinnacle, supra,

55 Cal.4th at p. 246.) Under Armendariz, arbitration of claims under the

California Fair Employment and Housing Act (FEHA, Gov. Code, § 12900 et

seq.) is subject to certain minimal requirements: (1) the arbitration

agreement may not limit damages otherwise available under the statute,

(2) there must be sufficient discovery to adequately arbitrate the claim,

(3) there must be a written arbitration decision with judicial review sufficient

to ensure that arbitrators comply with statutory requirements, and (4) the

employer must pay all types of costs that are unique to arbitration.

(Armendariz, supra, 24 Cal.4th at pp. 103, 106, 113.) These requirements

apply to wage claims. (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 128 &

fn. 9.)

The trial court concluded that the arbitration agreement was

substantively unconscionable because it failed to address where to initiate

arbitration, failed to afford discovery, and impermissibly shifted the expense

of arbitration to the employee while preserving Greene Motors’s right to file

costly and extensive motions (i.e., demurrer and motion for summary

judgment). Although we agree with Greene Motors that the agreement’s

reference to section 1283.05 (covering depositions and other discovery in

arbitration) and its “mandatory and permissive rights to discovery” provided

sufficient discovery rights,4 we conclude that other reasons cited by the trial

court properly support a determination that the agreement is substantively

unconscionable.

To begin with, we agree with the trial court that the arbitration

agreement’s failure to specify where or how the employee is to initiate

arbitration supports a determination of substantive unconscionability. The

agreement asserts that Greene Motors “utilizes a system of alternative

dispute resolution which involves binding arbitration,” but it provides no

explanation on how the employee is supposed to access any such system.

Greene Motors maintains there is generally no requirement for such a

specification and that parties may petition the court to select an arbitrator

when they are uncertain how to engage one. (§ 1281.6; see American Home

Assurance Co. v. Benowitz (1991) 234 Cal.App.3d 192, 199.) But this ignores

that the Supreme Court has made clear that circumstances and context are

particularly important in evaluating unconscionability in cases, such as this

4 Nathaniel contends that section 1283.05 is “limited by” section 1283.1.

Section 1283.1 mandates that section 1283.05 be conclusively incorporated

into any arbitration agreement covering wrongful death of another, whether

or not the statute is specifically mentioned. (§ 1283.1, subd. (b).) But an

agreement can specifically incorporate the terms of section 1283.05, which

was done here. (§ 1283.1, subd. (b).) True, section 1283.05 may not provide

“the full panoply of discovery,” as Nathaniel argues. But even in the

employment context, parties to arbitration are “permitted to agree to

something less than the full panoply of discovery provided in Code of Civil

Procedure section 1283.05.” (Armendariz, supra, 24 Cal.4th at pp. 105–106.)

one, involving an employee’s wage claim. (OTO, L.L.C. v. Kho, supra,

8 Cal.5th at p. 136; see Sanchez, supra, 61 Cal.4th at p. 911.)

OTO, L.L.C. v. Kho, supra, 8 Cal.5th 111, provides significant guidance

on how to evaluate the agreement here because it involved the fairness of an

agreement, strikingly similar to the one at issue here, that was used to try

and compel the arbitration of an employee’s wage claims in lieu of a Berman

hearing. (Id. at pp. 117–118.) OTO concluded that the agreement’s failure to

explain how to initiate arbitration or to specify a commercial arbitration

provider were significant factors causing the agreement to be substantively

unconscionable. (Id. at p. 131.) The court observed that the “agreement does

not mention how to bring a dispute to arbitration, nor does it suggest where

that information might be found. Commercial arbitration providers, for

example, frequently provide standardized forms to start the process.

Employees can also contact the provider for information on claim initiation.

The agreement here, however, identifies no commercial providers. In fact, it

does not mention that such providers exist.” (Ibid, fn. omitted.) In addition,

the court observed that the agreement “mandates that the arbitrator be a

‘retired California Superior Court Judge’ but gives no indication how an

employee might find such a person, let alone one willing to arbitrate a wage

claim.” (Ibid.) The arbitration agreement here has the same omissions and

includes the identical reference to a retired superior court judge. As the court

in OTO pointed out, these omissions and references reflect substantive

unconscionability because they mean that some employees “may be so

confused by the agreement that they are deterred from bringing their wage

claims at all.” (Ibid.)

The confusing nature of the terms here was exacerbated by other

circumstances in this case. Greene Motors did not seek to compel arbitration

in lieu of the Berman hearing itself, leaving the impression that it was not

interested in pursuing arbitration. And, under the order resulting from the

Berman hearing, Nathaniel was correctly told that he was required under

Labor Code section 98.2 to file a notice of appeal within 10 days or the order

issued after the Berman hearing would have become a final and enforceable

judgment.

Under these circumstances, Nathaniel cannot reasonably have been

expected to discern, much less navigate, the arbitration agreement’s murky

arbitral procedures. Greene Motors itself seems uncertain on precisely what

Nathaniel should have done. In its petition in the trial court, it took the

position that Nathaniel’s filing of the notice of appeal was in “repudiation” of

the arbitration agreement, suggesting that Nathaniel should not have filed

the notice. We flatly reject any such suggestion since Labor Code

section 98.2, subdivision (a) requires the filing of a notice of appeal to

preserve a challenge to an order resulting from a Berman hearing.

We also agree with the trial court that the arbitration agreement’s cost

provision evinces substantive unconscionability. The provision is convoluted

and drafted in a way to favor Greene Motors. To reiterate, the agreement

provides that “[i]f Section 1284.2 of the Code of Civil Procedure [providing

that parties to arbitration pay their own share of costs] 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 Section 1284.2.” Section 1284.2 states,

“Unless the arbitration agreement provides or the parties to the arbitration

otherwise agree, each party to the arbitration shall pay his pro rata share of

the expenses and fees of the neutral arbitrator, together with other expenses

of the arbitration incurred or approved by the neutral arbitrator, not

including counsel fees or witness fees or other expenses incurred by a party

for his own benefit.” But under Armendariz, section 1284.2’s cost-sharing

terms do not apply in employment cases, such as this one. (Armendariz,

supra, 24 Cal.4th at p. 113.)

Thus, the agreement’s passage creates both procedural and substantive

unconscionability concerns. In discussing the procedural unconscionability of

an identical term, OTO explained that “[i]t is difficult to envision that [the

employee] would have had any idea what the cited code section says or that a

13-year-old case creates a relevant exception to it. . . . It would have been

nearly impossible to understand the contract’s meaning without legal

training and access to the many statutes it references.”5 (OTO, L.L.C. v. Kho,

8 Cal.5th at p. 129.) In addition to procedural unconscionability, the

provision evinces substantive unconscionability. The convoluted passage’s

references to section 1284.2 and the mandatory use of a retired superior court

judge deter employees from filing arbitration claims because they incorrectly

suggest that the employees might be required to pay a portion of arbitration

costs.

We recognize that a Berman hearing took place in this case and

rendered a decision in favor of Greene Motors. We accept the company’s

point that the procedural posture of this case is thus different from the

procedural posture in OTO, L.L.C. v. Kho, supra, 8 Cal.5th 111, which makes

this case perhaps a closer call. Greene Motors contends the distinction

This may be what the trial court was getting at when it found that the

agreement “inappropriately shifts the expense of an arbitration to the

employee.” In other words, one possible interpretation of the agreement is

that the employee must bear his or her costs. We agree with Greene Motors

that, taking into account the caselaw not mentioned in the agreement, the

clause cannot be fairly read to shift expenses to Nathaniel.

means it did not use the arbitration agreements “to effectuate a waiver of

Berman rights or the replacement of simplified administrative claims with

the complexities of civil litigation.” But the procedures in a de novo review

have some apparent advantages for the employee that do not appear

available in Greene Motors’s opaque “system of alternative dispute

resolution.” (See, e.g., OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 123

[procedures permit “the [Labor C]ommissioner to represent claimants on

appeal and facilitate award collection”].) We reject the notion that the

arbitration agreement, which under OTO clearly would have been

unenforceable at the Berman hearing stage of the proceedings, has somehow

become enforceable at the de novo stage of the proceedings.6

Finally, it does not appear that Greene Motors requested in the trial

court that any part of the arbitration agreement be severed in the event that

the court found unconscionability. And since the company likewise has not

advanced any severance argument in this court, we need not consider the

issue.

III.

DISPOSITION

The trial court’s order denying the petition to arbitrate is affirmed.

Nathaniel shall recover his costs on appeal.

After briefing was complete in this case, Division Eight of the Second

Appellate District filed two cases enforcing arbitration agreements between

car dealerships and their employees because the agreements lacked

substantive unconscionability. (Basith v. Lithia Motors, Inc. (2023)

90 Cal.App.5th 951, 953; Fuentes v. Empire Nissan, Inc. (2023)

90 Cal.App.5th 919, 923.) These cases are distinguishable because they did

not involve wage claims or implicate the Berman process. (Basith at p. 953

[plaintiff sued dealership “for firing him”]; Fuentes at p. 926 [plaintiff sued

“for discrimination and wrongful termination”].)

_________________________

Humes, P.J.

WE CONCUR:

_________________________

Banke, J.

_________________________

Swope, J.*

*Judge of the Superior Court of the County of San Mateo, assigned by

the Chief Justice pursuant to article VI, section 6 of the California

Constitution.

Nathaniel v. Green Motors, Inc. A165056

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.