Lorrie Poublon, an individual, on behalf of herself, and on behalf of all persons similarly situated, Plaintiff-Appellee,
C.H. Robinson Company; C.H. Robinson Worldwide, Inc., Defendants-Appellants.
and Submitted December 9, 2016 Pasadena, California
from the United States District Court for the Central
District of California Christina A. Snyder, District Judge,
Presiding D.C. No. 2:12-cv-06654-CAS-MAN
S. Sholkoff (argued), Christopher W. Decker, and Kathleen J.
Choi, Ogletree Deakins Nash Smoak & Stewart P.C., Los
Angeles, California, for Defendants-Appellants.
R. Nordrehaug (argued) and Norman B. Blumenthal, Blumenthal
Nordrehaug & Bhowmik, La Jolla, California, for
Before: Consuelo M. Callahan, Carlos T. Bea, and Sandra S.
Ikuta, Circuit Judges.
panel reversed the district court's order denying
defendants' motion to stay proceedings, compel
arbitration of claims arising out of the plaintiff's
employment, and dismiss class and representative claims.
panel reversed the district court's holding that the
dispute resolution provision in an Incentive Bonus Agreement
signed by the plaintiff was both procedurally and
substantively unconscionable under California law. The panel
concluded that, even though the Incentive Bonus Agreement was
an adhesion contract, there was a low degree of procedural
unconscionability. As to substantive unconscionability, the
defendants did not contest the district court's holding
that a judicial carve-out provision was substantively
unconscionable. The panel held that a waiver of
representative claims was not substantively unconscionable
even though the waiver of the plaintiff's claim under
California's Private Attorneys General Act was not
enforceable under California law. A venue provision, a
confidentiality provision, a sanctions provision, a
unilateral modification provision, and limitations on
discovery also were not substantively unconscionable.
panel concluded that the dispute resolution provision was
valid and enforceable once the judicial carve-out was
extirpated and the waiver of representative claims was
limited to non-PAGA claims. The panel remanded the case to
the district court.
Lorrie Poublon entered into an agreement with defendants C.H.
Robinson Co. and C.H. Robinson Worldwide, Inc. (collectively,
"C.H. Robinson") to arbitrate claims arising out of
her employment. In the present action, the district court
denied C.H. Robinson's motion to stay, compel
arbitration, and dismiss class and representative claims,
concluding that the dispute resolution provision was
unconscionable. We hold that the dispute resolution provision
is not tainted with illegality and any invalid portions can
be severed, and therefore reverse.
began working for C.H. Robinson on May 7, 2007, as an Account
Manager in Los Angeles, California. While employed at C.H.
Robinson, Poublon signed an agreement titled "Incentive
Bonus Agreement" each December in order to receive a
financial bonus. The Incentive Bonus Agreement was a short
one-page document with eight provisions. The seventh
provision, which had the heading "Dispute Resolution,
" contained four separate paragraphs. The first
You and the Company agree that, except as provided below, all
Claims the Company might bring against You and all claims You
might bring against the Company and/or any of its officers,
directors, or employees shall be deemed waived unless
submitted to mediation, then, if mediation is unsuccessful,
to final and binding arbitration in accordance with the
Employment Arbitration Rules and Mediation Procedures of the
American Arbitration Association, modified as follows: (1)
the arbitration need not actually be administered by the
American Arbitration Association; (2) any mediation or
arbitration shall be governed by the Company's Employment
Dispute Mediation/Arbitration Procedure, which is available
on the Company intranet; (3) dispositive motions shall be
permissible and not disfavored in any arbitration, and the
standard for deciding such motions shall be the same as under
Rule 56 of the Federal Rules of Civil Procedure; (4) except
on a substantial showing of good cause, discovery will be
limited to the exchange of relevant documents and three
depositions per side; and (5) except as mutually agreed at
the time between You and the Company, neither You nor the
Company may bring any Claim combined with or on behalf of any
other person or entity, whether on a collective,
representative, or class action basis or any other basis. In
the case of any conflict between the rules and procedures for
either mediation or arbitration, the priority and order of
precedence shall be as follows: (1) the rules and procedures
stated herein; (2) the Company's Employment Dispute
Mediation/Arbitration Procedure; (3) the Employment
Arbitration Rules and Mediation Procedures of the American
second paragraph stated, in pertinent part:
This Dispute Resolution Agreement shall not apply to any of
the following: (1) Worker's Compensation claims; (2)
claims related to unemployment insurance; and (3) any claims
by the Company that include a request for injunctive or
equitable relief, including, without limitation, claims
related to its enforcement of any restrictive covenants,
noncompetition obligations, non-solicitation obligations
and/or confidential information provisions contained in any
Company policy and/or employment agreement(s) entered into
between You and the Company and/or any claims to protect the
Company's trade secrets, confidential or proprietary
information, trademarks, copyrights, patents, or other
fourth paragraph provided:
If any portion of this dispute resolution provision is
determined to be void or unenforceable, then the remaining
portions of this Agreement shall continue in full force and
effect, and this Agreement may be modified to the extent
necessary, consistent with its fundamental purpose and
intent, in order to make it enforceable.
December 2011, as in prior years, Poublon met with her
supervisor, Gerry Nelson, to discuss her compensation and
bonuses for the following year. At this meeting, Nelson gave
Poublon the Incentive Bonus Agreement to take home and
review. He told her that the agreement would have to be
signed and returned within a specified time period in order
for her to receive her bonus. Poublon and Nelson did not
discuss the dispute resolution provision. Poublon later asked
Nelson "what would happen if [she] did not sign the
document, " and he responded that "failure to sign
would result in [Poublon] not being paid [her] bonus."
On December 23, 2011, Poublon signed the Incentive Bonus
Agreement and returned it to C.H. Robinson. Poublon's
employment at C.H. Robinson ended in February 2012.
March 2012, Poublon alleged that C.H. Robinson had
misclassified her as exempt from overtime pay requirements
and demanded mediation of her claims pursuant to the terms of
the Incentive Bonus Agreement that she had signed in 2011.
After mediation was unsuccessful, Poublon filed a class
action complaint against C.H. Robinson in Los Angeles County
Superior Court, making the same misclassification claims on
behalf of herself and other employees.
August 2012, C.H. Robinson removed Poublon's action to a
federal district court. Poublon filed a First Amended
Complaint, which added a claim on behalf of California under
the Private Attorneys General Act (PAGA), Cal. Labor Code
§§ 2698-2699.5. The district court denied C.H.
Robinson's motion to compel arbitration, holding that the
dispute resolution provision was both procedurally and
substantively unconscionable, and therefore unenforceable.
C.H. Robinson timely appealed.
jurisdiction under 9 U.S.C. § 16(a)(1). We review the
denial of a motion to compel arbitration de novo. Brown
v. Dillard's, Inc., 430 F.3d 1004, 1009 (9th Cir.
2005). We review factual findings for clear error, Balen
v. Holland Am. Line Inc., 583 F.3d 647, 652 (9th Cir.
2009), and review "[t]he interpretation and meaning of
contract provisions" de novo, Lee v. Intelius
Inc., 737 F.3d 1254, 1258 (9th Cir. 2013).
Federal Arbitration Act (FAA) requires courts to "place
arbitration agreements on an equal footing with other
contracts, and enforce them according to their terms."
AT&T Mobility LLC v. Concepcion, 563 U.S. 333,
339 (2011) (internal citation omitted). Section 2 of the FAA
makes agreements to arbitrate "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 final clause of § 2, generally
referred to as the savings clause, "permits agreements
to arbitrate to be invalidated by 'generally applicable
contract defenses, such as fraud, duress, or
unconscionability, ' but not by defenses that apply only
to arbitration or that derive their meaning from the fact
that an agreement to arbitrate is at issue."
Concepcion, 563 U.S. at 339 (quoting
Doctor's Assocs., Inc. v. Casarotto, 517 U.S.
681, 687 (1996)). "Any doubts about the scope of
arbitrable issues, including applicable contract defenses,
are to be resolved in favor of arbitration."
Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1022 (9th
2 of the FAA preempts state statutes and state common law
principles that "undercut the enforceability of
arbitration agreements, " unless the savings clause
applies. Southland Corp. v. Keating, 465 U.S. 1, 16
(1984); see also Concepcion, 563 U.S. at 343-44;
Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d
425, 432 (9th Cir. 2015). In other words, a court cannot
enforce state laws that apply to agreements to arbitrate but
not to contracts more generally. See Mortensen v. Bresnan
Commc'ns, LLC, 722 F.3d 1151, 1159 (9th Cir. 2013)
("Any general state-law contract defense . . . that has
a disproportionate effect on arbitration is displaced by the
Poublon argues that the dispute resolution provision in the
Incentive Bonus Agreement is unenforceable under
California's unconscionability doctrine. As the
California Supreme Court has noted, California's
"unconscionability standard is, as it must be, the same
for arbitration and nonarbitration agreements."
Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th
899, 912 (2015). Recent California Supreme Court cases have
demonstrated how this principle applies to California's
unconscionability doctrine. See Baltazar v. Forever 21,
Inc., 62 Cal.4th 1237 (2016); Sanchez, 61
Cal.4th at 911; Sonic-Calabasas A, Inc. v. Moreno,
57 Cal.4th 1109, 1143-45 (2013) (Sonic II). In our
evaluation of Poublon's claim, we apply principles
derived from these cases, as well as other precedent
articulating California's general unconscionability
standard. See Tompkins, 840 F.3d at 1024 (holding
that "we are bound by the California Supreme Court's
most recent articulation of its [general unconscionability]
California law, "the party opposing arbitration bears
the burden of proving any defense, such as
unconscionability." Pinnacle Museum Tower Ass'n
v. Pinnacle Mkt. Dev. (US), LLC, 55 Cal.4th 223, 236
(2012). In order to establish such a defense, the party
opposing arbitration must demonstrate that the contract as a
whole or a specific clause in the contract is both
procedurally and substantively unconscionable.
Sanchez, 61 Cal.4th at 910. Procedural and
substantive unconscionability "need not be present in
the same degree." Id. Rather, there is a
sliding scale: "the more substantively oppressive the
contract term, the less evidence of procedural
unconscionability is required to come to the conclusion that
the term is unenforceable, and vice versa." Id.
(quoting Armendariz v. Found. Health Psychcare Servs.,
Inc., 24 Cal.4th 83, 114 (2000)). We therefore must
consider both procedural and substantive unconscionability.
procedural element of unconscionability focuses on
"oppression or surprise due to unequal bargaining
power." Pinnacle, 55 Cal.4th at 246. "The
oppression that creates procedural unconscionability arises
from an inequality of bargaining power that results in no
real negotiation and an absence of meaningful choice."
Grand Prospect Partners, L.P. v. Ross Dress for Less,
Inc., 232 Cal.App.4th 1332, 1347-48, as modified on
denial of reh'g (Feb. 9, 2015). California courts
have held that oppression may be established by showing the
contract was one of adhesion or by showing from ...