IKUTA, Circuit Judge:
Plaintiff 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.
Poublon 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 paragraph stated:
The second paragraph stated, in pertinent part:
The fourth paragraph provided:
In 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
In 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.
In 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.
We have 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).
The 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, 131 S.Ct. 1740, 179 L.Ed.2d 742 (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.
Section 2 of the FAA preempts state statutes and state common law principles that "undercut the enforceability of arbitration agreements," unless the savings
Here, 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, 190 Cal.Rptr.3d 812, 353 P.3d 741 (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, 200 Cal.Rptr.3d 7, 367 P.3d 6 (2016); Sanchez, 61 Cal.4th at 911, 190 Cal.Rptr.3d 812, 353 P.3d 741; Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109, 1143-45, 163 Cal.Rptr.3d 269, 311 P.3d 184 (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] standard").
Under 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, 145 Cal.Rptr.3d 514, 282 P.3d 1217 (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, 190 Cal.Rptr.3d 812, 353 P.3d 741. 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, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000)). We therefore must consider both procedural and substantive unconscionability.
The procedural element of unconscionability focuses on "oppression or surprise due to unequal bargaining power." Pinnacle, 55 Cal.4th at 246, 145 Cal.Rptr.3d 514, 282 P.3d 1217. "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, 182 Cal.Rptr.3d 235, 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 the "totality of the circumstances surrounding the negotiation and formation of the contract" that it was oppressive. Id. at 1348, 182 Cal.Rptr.3d 235.
"The term [contract of adhesion] signifies a standardized contract, which,
California courts have articulated numerous standards for determining substantive unconscionability. Courts have held that the agreement must be "overly harsh," "unduly oppressive," "unreasonably favorable," or must "shock the conscience." Sanchez, 61 Cal.4th at 911, 190 Cal.Rptr.3d 812, 353 P.3d 741 (emphasis omitted). "[T]hese formulations, used throughout [California] case law, all mean the same thing." Id. The "central idea" is that "the unconscionability doctrine is concerned not with a simple old-fashioned bad bargain but with terms that are unreasonably favorable to the more powerful party." Baltazar, 62 Cal.4th at 1244, 200 Cal.Rptr.3d 7, 367 P.3d 6 (internal quotation marks and citations omitted). "Not all one-sided contract provisions are unconscionable." Sanchez, 61 Cal.4th at 911, 190 Cal.Rptr.3d 812, 353 P.3d 741.
We now apply these standards to Poublon's claim that the dispute resolution provision in the Incentive Bonus Agreement is procedurally unconscionable to a high degree and contains eight substantively unconscionable provisions.
We begin with the issue of procedural unconscionability. C.H. Robinson concedes that the Incentive Bonus Agreement meets California's definition of an adhesion contract, because there was unequal bargaining power between the employer and employee, and the agreement was presented to Poublon on a take-it-or-leave-it basis. Under California law, "[t]he adhesive nature of the employment contract requires us to be `particularly attuned' to [a former employee's] claim of unconscionability." Baltazar, 62 Cal.4th at 1245, 200 Cal.Rptr.3d 7, 367 P.3d 6. Nevertheless, the adhesive nature of a contract,
Poublon raises two arguments on this point. First, Poublon argues that the dispute resolution provision was oppressive because C.H. Robinson failed to provide her with a copy of the American Arbitration Association's rules or C.H. Robinson's Employment Dispute Mediation/Arbitration Procedure (the "Arbitration Procedure"), which were incorporated by reference in the dispute resolution provision. We disagree. Baltazar rejected an employee's claim that the employer's failure to provide a copy of the American Arbitration Association's rules, which were incorporated by reference in the arbitration agreement, gave rise to a "greater degree of procedural unconscionability." 62 Cal.4th at 1246, 200 Cal.Rptr.3d 7, 367 P.3d 6. While "courts will more closely scrutinize the substantive unconscionability of terms that were `artfully hidden' by the simple expedient of incorporating them by reference rather than including them in or attaching them to the arbitration agreement," incorporation by reference, without more, does not affect the finding of procedural unconscionability. Id. (quoting Harper v. Ultimo, 113 Cal.App.4th 1402, 1406, 7 Cal.Rptr.3d 418 (2003)). Baltazar's holding is consistent with California's general rule that "parties may validly incorporate by reference into their contract the terms of another document" provided certain conditions are met. Slaught v. Bencomo Roofing Co., 25 Cal.App.4th 744, 748, 30 Cal.Rptr.2d 618 (1994) (quoting Baker v. Aubry, 216 Cal.App.3d 1259, 1264, 265 Cal.Rptr. 381 (1989)); see also Lane v. Francis Capital Mgmt. LLC, 224 Cal.App.4th 676, 692, 168 Cal.Rptr.3d 800 (2014) ("Like any other contract, an arbitration agreement may incorporate other documents by reference."). Accordingly, while we may "more closely scrutinize the substantive unconscionability" of terms appearing only in the American Arbitration Association's rules or C.H. Robinson's Arbitration Procedure, Baltazar, 62 Cal.4th at 1246, 200 Cal.Rptr.3d 7, 367 P.3d 6, the incorporation of these documents by reference does not support Poublon's claim that the dispute resolution provision was oppressive.
Second, Poublon states that the dispute resolution provision was oppressive because she believed signing the agreement was necessary not only to receive bonuses, but also to remain employed. This argument fails, because there is no evidence in the record that C.H. Robinson ever stated or suggested that Poublon would be fired for failing to sign the agreement. To the contrary, the record shows that in response to Poublon's question regarding what would happen if she did not sign the agreement, Nelson responded only that she would not receive her bonus. Poublon points to a statement in the Incentive Bonus Agreement that provides: "In consideration for Your continued employment, Your eligibility for a bonus incentive, and the mutual promises set forth in this Agreement, You and the Company hereby agree as follows." But this boilerplate merely establishes there is consideration for the agreement; it does not state that
We now turn to Poublon's argument that eight provisions in the Incentive Bonus Agreement are substantively unconscionable. We first consider the language in the dispute resolution provision itself, and then turn to the language in the Arbitration Procedure, which is incorporated in the dispute resolution provision by reference.
The Judicial Carve-Out Provision. The dispute resolution provision requires employees to submit all claims against C.H. Robinson to arbitration, but preserves C.H. Robinson's right to seek judicial resolution of "any claims by the Company that include a request for injunctive or equitable relief, including," certain restrictive covenants and intellectual property rights. The district court held that the judicial resolution carve-out was substantively unconscionable. On appeal, C.H. Robinson does not contest the district court's holding that the carve-out for equitable or injunctive relief was substantively unconscionable. Accordingly, any argument that the judicial carve-out was not substantively unconscionable has been waived. Martinez-Serrano v. INS, 94 F.3d 1256, 1259-60 (9th Cir. 1996).
Waiver of Representative Claims. The dispute resolution provision states that "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." The parties do not dispute that this provision denies Poublon the right to bring her representative PAGA claim, and we agree. In Iskanian v. CLS Transportation Los Angeles, LLC, the California Supreme Court held that where "an employment agreement compels the waiver of representative claims," whether or not the agreement specifically references PAGA, it "frustrates the PAGA's objectives" and "is contrary to public policy and unenforceable as a matter of state law." 59 Cal.4th 348, 384, 173 Cal.Rptr.3d 289, 327 P.3d 129 (2014). This holding is not preempted by the FAA and is the
Poublon argues that because the waiver of a representative PAGA claim is unenforceable, it is also substantively unconscionable. This is incorrect. Under California law, "[c]ontracts can be contrary to public policy but not unconscionable and vice versa." Sonic-Calabasas A, Inc. v. Moreno, 51 Cal.4th 659, 686-87, 121 Cal.Rptr.3d 58, 247 P.3d 130, cert. granted, judgment vacated on other grounds, 565 U.S. 973, 132 S.Ct. 496, 181 L.Ed.2d 343 (2011) (Sonic I) (internal citations omitted); see also Securitas Sec. Servs. USA, Inc. v. Superior Court, 234 Cal.App.4th 1109, 1123, 184 Cal.Rptr.3d 568 (2015) (holding that the determination "whether an agreement has been validly formed, and whether its terms are adhesive or unconscionable... are different from the determination of whether [the employee] entered into a knowing and intelligent waiver of her right to bring a PAGA claim ... or whether Iskanian compels a conclusion that such a waiver is unenforceable as against public policy"). We are not aware of a California case holding that a PAGA waiver is substantively unconscionable. Nor has Poublon directed us to a case holding that the waiver of a representative claim, other than a PAGA claim, is substantively unconscionable.
By contrast, the Supreme Court has suggested that arbitration agreements can generally waive collective, classwide, and representative claims. In Concepcion, an arbitration agreement "required that claims be brought in the parties' `individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.'" 563 U.S. at 336, 131 S.Ct. 1740. Because the California Supreme Court had developed a rule that such provisions were unconscionable, we denied a company's motion to compel arbitration. Id. at 338, 131 S.Ct. 1740. The Supreme Court reversed, holding that this state court rule was preempted by the FAA, because "[t]he overarching purpose of the FAA ... is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings," and "[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA." Id. at 344, 131 S.Ct. 1740. Accordingly, even if the parties cannot lawfully agree to waive a PAGA representative action, Concepcion weighs sharply against holding that the waiver of other representative, collective or class action claims, as provided in the dispute resolution provision, is unconscionable. Therefore, the unenforceability of the waiver of a PAGA representative action does not make this provision substantively unconscionable.
The Venue Provision. Section II(f) of the Arbitration Procedure, "Venue and Place of Hearing," provides:
Relying on cases decided prior to Sanchez, Poublon claims that this venue provision is substantively unconscionable because it requires her to litigate her California claims in Minnesota, a thousand miles away from her home in California. We have previously rejected this argument. See Tompkins, 840 F.3d at 1027. As we explained, the California Supreme Court has stated that California courts
As in Tompkins, Poublon has not met the burden of proving that the forum selection clause in the Arbitration Procedure is unreasonable. For one, even if the venue provision required arbitration to take place in Hennepin County, Minnesota, the forum is not "unavailable or unable to accomplish substantial justice." See id. Moreover, Poublon's interpretation of this venue provision is wrong: on its face, the provision does not require a Minnesota venue, but allows the parties to agree on a different venue, and allows the arbitrator to select a different venue "for good reason." An arbitrator would have good reason to change the venue if Poublon could demonstrate that Minnesota would be "so gravely difficult and inconvenient that [the plaintiffs] will for all practical purposes be deprived of [their] day in court." Aral v. EarthLink, Inc., 134 Cal.App.4th 544, 561, 36 Cal.Rptr.3d 229 (2005) (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 18, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972)). When determining the validity of an arbitration procedure, "[w]e assume that the arbitrator will operate in a reasonable manner in conformity with the law." Dotson v. Amgen, Inc., 181 Cal.App.4th 975, 984, 104 Cal.Rptr.3d 341 (2010). Accordingly, we conclude that this venue provision in the Arbitration Procedure is not substantively unconscionable.
The Confidentiality Provision. Section II(h) of the Arbitration Procedure, "Confidentiality," provides:
Poublon claims that this provision is substantively unconscionable because keeping the arbitration proceedings secret under threat of a sanction order by the arbitrator unfairly favors employers. In making this argument, Poublon relies on our decision in Pokorny v. Quixtar, Inc., which held that a confidentiality requirement in the arbitration agreement is substantively unconscionable when it (1) allows defendants to learn as "repeat player[s]" in the arbitration process, while preventing employees from learning from similar prior cases, or (2) prevents plaintiffs from investigating or engaging in discovery by limiting contact with other employees. 601 F.3d 987, 1001-03 (9th Cir. 2010).
This holding is directly on point. The confidentiality provisions in both the Arbitration Procedure at issue here and in CarMax are substantially identical: they both require that the arbitration, including the record of the proceeding, be confidential, and they both include the same enumerated exceptions. See id. Moreover, the California Court of Appeal rejected the same policy argument that Poublon makes here, namely that such confidentiality provisions "inhibit employees from discovering evidence from each other." See id.
In the absence of any decision on this issue from the California Supreme Court, we are bound by CarMax, as the ruling of the highest state court issued to date. While the state's Supreme Court is "the final arbiter of what is state law," there are "many rules of decision commonly accepted and acted upon by the bar and inferior courts which are nevertheless laws of the state although the highest court of the state has never passed upon them." West v. Am Tel. & Tel. Co., 311 U.S. 223, 236, 61 S.Ct. 179, 85 L.Ed. 139 (1940). "A state appellate court's announcement of a rule of law is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise." Miller v. Cty. of Santa Cruz, 39 F.3d 1030, 1036 n.5 (9th Cir. 1994), as amended (Dec. 27, 1994) (quoting Hicks v. Feiock, 485 U.S. 624, 630, 108 S.Ct. 1423, 99 L.Ed.2d 721 (1988)) (internal quotation marks omitted). Federal courts are required to "ascertain from all the available data what the state law is and apply it rather than to prescribe a different rule, however superior it may appear from the viewpoint of `general law' and however much the state rule may have departed from prior decisions of the federal courts." Am Tel. & Tel.
Here, there is no "persuasive data," Miller, 39 F.3d at 1036 n.5, that the California Supreme Court would reach a different conclusion than CarMax, and the fact that the California Supreme Court declined to review CarMax supports this conclusion. See Tenneco W., Inc. v. Marathon Oil Co., 756 F.2d 769, 771 (9th Cir. 1985) (noting the importance of relying on a state appellate court's ruling is heightened when "the highest court has refused to review the lower court's decision" (quoting Am Tel & Tel. Co., 311 U.S. at 236, 61 S.Ct. 179)). Poublon does not cite any California case reaching a different conclusion than CarMax.
Moreover, our prior decisions on this issue did not rely on any California law. Rather, in holding that a confidentiality provision was substantively unconscionable, Pokorny relied only on our decisions in Davis v. O'Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007), and Ting v. AT & T, 319 F.3d 1126 (9th Cir. 2003). Davis, in turn, relied on Ting and a decision of the Washington Supreme Court, see Davis, 485 F.3d at 1078-79 (citing Zuver v. Airtouch Commc'ns, Inc., 153 Wn.2d 293, 313, 103 P.3d 753 (2004) (en banc)), while Ting, relied solely on a D.C. Circuit decision, 319 F.3d at 1151-52 (citing Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465 (D.C. Cir. 1997)). Now that we have available data establishing "what the state law is" regarding a closely similar confidentiality provision, we are bound to apply it, even though "the state rule may have departed from prior decisions of the federal courts." Am. Tel & Tel. Co., 311 U.S. at 237, 61 S.Ct. 179.
Sanctions Provision. Section II(p) of the Arbitration Procedure, "Sanctions," states:
Under California law, "[i]n the context of mandatory employment arbitration of unwaivable statutory rights, ... arbitration agreements `cannot generally require the employee to bear any type of
Poublon argues that the sanctions provision violates this rule and is substantively unconscionable for two reasons. First, she argues that the provision permits an award of attorneys' fees in favor of the employer even though under section 1194 of the California Labor Code, only the employee is entitled to attorneys' fees when prevailing on a misclassification claim.
We disagree with both arguments. First, Poublon misconstrues the sanctions provision as authorizing the arbitrator to award attorneys' fees to the prevailing party in the arbitration. On its face, it does not give the arbitrator such power. Rather, the provision authorizes the arbitrator to award attorneys' fees against a party that brought a frivolous or harassing claim, or in the course of the proceeding, engaged in unreasonable delay, failed to cooperate in discovery, or violated confidentiality requirements. In other words, the clause provides for the imposition of attorneys' fees as a sanction for bad behavior. As such, it is consistent with sections 128.7 and 2023.030(a) of the California Code of Civil Procedure, which authorize courts to impose similar sanctions in judicial proceedings. Indeed, Poublon has not identified a circumstance in which the sanctions available under the Arbitration Procedure would not be available in a judicial proceeding.
Second, because the sanctions provision is silent on whether an arbitrator can award attorneys' fees to a prevailing employee, it is not inconsistent with section 1194 of the California Labor Code. Rather, the Arbitration Procedure requires the arbitrator to comply with applicable California law, which would include section 1194 to the extent applicable. See Section II(j), "Applicable Law and Burden of Persuasion," ("The principles of applicable substantive common, decisional and statutory law shall control the disposition of each Dispute."). Accordingly, the sanctions provision is not substantively unconscionable.
Unilateral Modification. Poublon argues that the dispute resolution provision is substantively unconscionable because it unfairly permits C.H. Robinson to change the arbitration rules unilaterally and terms merely by changing its rules on its corporate intranet. Poublon apparently relies on the language in the agreement that "any mediation or arbitration shall be
This claim is meritless. Under California law, a contract and a document incorporated by reference into the contract are read together as a single document, see Standard Iron Works v. Globe Jewelry & Loan, Inc., 164 Cal.App.2d 108, 117, 330 P.2d 271 (1958), and "what is being incorporated must actually exist at the time of the incorporation, so the parties can know exactly what they are incorporating," Gilbert St. Developers, LLC v. La Quinta Homes, LLC, 174 Cal.App.4th 1185, 1194, 94 Cal.Rptr.3d 918 (2009) (emphasis omitted). "Put another way, to have a valid incorporation by reference, the terms of the document being incorporated must be known or easily available to the contracting parties." Id. (internal quotation marks omitted). If a provision or term of an incorporated document "does not exist at the time of incorporation by reference," then it "fails the elementary test of being known or easily available at the time of incorporation." Id. Accordingly, at the time Poublon executed the Incentive Bonus Agreement, it incorporated the then-existing Arbitration Procedure, regardless whether this document was attached to the contract or was posted on the company intranet. See DVD Copy Control Ass'n, Inc. v. Kaleidescape, Inc., 176 Cal.App.4th 697, 714, 97 Cal.Rptr.3d 856 (2009) ("The clear and unequivocal reference to the extrinsic document and the contemporaneous availability of its terms shows that, at the time of contracting, the parties consented to those terms." (emphasis added)); see also Shaw v. Regents of Univ. of Cal., 58 Cal.App.4th 44, 55-56, 67 Cal.Rptr.2d 850 (1997) (holding that a patent agreement between a teacher and university incorporated the terms of a patent policy in effect at the time the teacher signed the agreement). While the parties may agree to incorporate a document as it is updated or amended, see Tompkins, 840 F.3d at 1032 n.9 (construing a contract that expressly permitted the defendant to "make changes to the [contract] from time to time"), the parties did not do so here; nothing in the dispute resolution provision gives C.H. Robinson the authority to modify any part of the agreement unilaterally, including any incorporated document. Moreover, even had C.H. Robinson included a unilateral modification clause, "California courts have held that the implied covenant of good faith and fair dealing prevents a party from exercising its rights under a unilateral modification clause in a way that would make it unconscionable." Id. at 1033. Accordingly, the incorporation provision is not substantively unconscionable.
Discovery Limitations. Both the dispute resolution provision and the Arbitration Procedure address the scope of discovery. The dispute resolution provision includes the following:
Section II(g) of the Arbitration Procedure, "Pre-Hearing Discovery," provides four paragraphs of guidance on the conduct
Poublon argues that these limitations on discovery are substantively unconscionable, because they allow less discovery than the federal rules and are insufficient to allow her to arbitrate her claims.
Again, we reject this argument. The California Supreme Court has made clear that "limitation on discovery is one important component of the `simplicity, informality, and expedition of arbitration.'" Armendariz, 24 Cal.4th 83 at 106 n.11, 99 Cal.Rptr.2d 745, 6 P.3d 669 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 31, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)); see also Dotson, 181 Cal.App.4th at 983, 104 Cal.Rptr.3d 341 (holding that "discovery limitations are an integral and permissible part of the arbitration process"). Because "arbitration is meant to be a streamlined procedure," parties may agree to limit the number of depositions and impose other restrictions. Dotson, 181 Cal.App.4th at 983, 104 Cal.Rptr.3d 341. But while limitations on discovery are permissible in an arbitration agreement, California has made clear that a court must balance the "desirable simplicity" of limiting discovery with employees' need for discovery "sufficient to adequately arbitrate their statutory claim, including access to essential documents and witnesses, as determined by the arbitrator(s) and subject to limited judicial review." Armendariz, 24 Cal.4th at 106, 99 Cal.Rptr.2d 745, 6 P.3d 669.
In finding this balance, California courts look to the amount of discovery permitted, the standard for obtaining additional discovery, and the evidence presented by plaintiffs that the discovery limitations will prevent them from adequately arbitrating their statutory claims. Fitz v. NCR Corp., 118 Cal.App.4th 702, 715-18, 13 Cal.Rptr.3d 88 (2004); CarMax, 224 Cal.App.4th at 404-06, 168 Cal.Rptr.3d 473. In Fitz, the court considered an agreement that limited the plaintiff to two depositions and no written discovery, with additional discovery permitted only if the requesting party could demonstrate a compelling need, meaning that a fair hearing would be impossible without additional discovery. 118 Cal.App.4th at 717-18, 13 Cal.Rptr.3d 88. The employee estimated that she would have to depose eight to ten witnesses in order to vindicate her claim against the employer. Id. at 717, 13 Cal.Rptr.3d 88. The court concluded that the only way the employee could gain access to "necessary information to prove the claim is to get permission from the arbitrator for additional discovery" under the
In CarMax, by contrast, the dispute resolution provision provided for "disclosure of relevant documents and production of the personnel file upon request, with each party under a continuing obligation to supplement its initial disclosure" and limited "each party to 20 interrogatories and three depositions." 224 Cal.App.4th at 404, 168 Cal.Rptr.3d 473. The dispute resolution provision also stated "that on request of any party and a showing of `substantial need,' the arbitrator may allow additional discovery if it `is not unduly burdensome and will not unduly delay the conclusion of the arbitration.'" Id. Further, the employee did not show "how the limitation on discovery would prevent him from vindicating his rights in his particular case." Id. Rather, the employee argued that the substantial need standard was per se too stringent. Id. The California Court of Appeal rejected this argument, noting that in the dispute resolution provision at issue in its case, the discovery provisions were "considerably more liberal" than they were in Fitz, and the employee could get additional discovery merely by showing substantial need, rather than compelling need as in Fitz. Id. at 405, 168 Cal.Rptr.3d 473. CarMax also noted that the employee did not "make any showing that he could not maintain his claim without more discovery than that provided by the agreement." Id. Accordingly, CarMax concluded that the discovery provisions were not substantively unconscionable. Id. at 405-06, 168 Cal.Rptr.3d 473.
Here, the discovery limitations and evidence presented are more similar to those in CarMax than those in Fitz. Reading the dispute resolution provision and the Arbitration Procedure together, Poublon can obtain all "relevant documents," request her personnel records, and take three depositions. Poublon can obtain additional discovery merely by showing good cause, which would include a demonstrated need for discovery "sufficient to adequately arbitrate" her claim. See Armendariz, 24 Cal.4th at 106, 99 Cal.Rptr.2d 745, 6 P.3d 669. Finally, Poublon fails to make any showing that she would be unable to vindicate her rights under the standard provided in the agreement. See CarMax, 224 Cal.App.4th at 405-06, 168 Cal.Rptr.3d 473. Accordingly, the discovery limitations provision is not substantively unconscionable.
Reaffirmation Clause. The final provision in the Incentive Bonus Agreement states: "I reaffirm and agree anew to abide by all of my prior agreements with Company as a necessary condition of receiving the benefits under this Agreement." Poublon contends that this reaffirmation provision means that she is reaffirming an illegal noncompetition agreement with C.H. Robinson. We decline to consider this argument. This provision is not part of the dispute resolution provision, either directly or as incorporated by reference. Our "authority to review portions of the contract outside the arbitration provision is limited." Tompkins, 840 F.3d at 1032. Rent-A-Center, West, Inc. v. Jackson stated that "[i]t may be that" where a plaintiff challenges "the validity under § 2 of the precise agreement to arbitrate at issue" on the ground that certain general contract provisions "as applied" to the
If a California court concludes that a contract contains one or more unconscionable clause, it may: (1) refuse to enforce a contract that was "unconscionable at the time it was made"; (2) "enforce the remainder of the contract without the unconscionable clause"; or (3) "limit the application of any unconscionable clause as to avoid any unconscionable result." Cal. Civ. Code § 1670.5(a). A court may "refuse to enforce the entire agreement" only when it is "`permeated' by unconscionability." Armendariz, 24 Cal.4th at 122, 99 Cal.Rptr.2d 745, 6 P.3d 669 (citing Cal. Civ. Code § 1670.5, Legis. Comm. Comments, n.2); see also Ajamian, 203 Cal.App.4th at 802, 137 Cal.Rptr.3d 773 ("[T]he strong preference is to sever unless the agreement is `permeated' by unconscionability." (emphasis omitted)).
"Where a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest." Cal. Civ. Code § 1599; see also Fair v. Bakhtiari, 195 Cal.App.4th 1135, 1157, 125 Cal.Rptr.3d 765 (2011) ("Civil Code section 1599 codifies the common law doctrine of severability of contracts."). By contrast, a contract is permeated with unlawfulness (and severance is inappropriate) where "[t]he good cannot be separated from the bad, or rather the bad enters into and permeates the whole contract, so that none of it can be said to be good." Keene v. Harling, 61 Cal.2d 318, 322, 38 Cal.Rptr. 513, 392 P.2d 273 (1964) (quoting Santa Clara Val. M. & L. Co. v. Hayes, 76 Cal. 387, 393, 18 P. 391 (1888)). In other words, "[i]f the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced." Marathon Entm't, Inc. v. Blasi, 42 Cal.4th 974, 996, 70 Cal.Rptr.3d 727, 174 P.3d 741 (2008) (internal quotation marks and citations omitted). On the other hand, "[i]f the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate." Id.
In Armendariz, the California Supreme Court considered whether a trial court had abused its discretion in refusing to enforce a contract due to the presence of two unlawful provisions in an arbitration agreement. 24 Cal.4th at 122-27, 99 Cal.Rptr.2d 745, 6 P.3d 669. The court first reiterated the general rule that a court should not enforce a contract if its central purpose is "tainted with illegality," but should enforce the contract if "the illegality is collateral to the main purpose of the contract" and the illegal provisions "can be extirpated from the contract by means of severance or restriction." Id. at 124, 99 Cal.Rptr.2d 745, 6 P.3d 669. Applying this rule, Armendariz concluded that the trial court had not abused its discretion because two factors weighed against severing the unlawful provisions. First, the court noted that the arbitration agreement contained "more than one unlawful provision; it has both an unlawful damages provision and an unconscionably unilateral arbitration clause." Id. According to the court, "[s]uch multiple defects indicate a systematic effort
Poublon argues that an agreement is necessarily permeated by unconscionability if more than one clause in the agreement is unconscionable or illegal. We disagree; California courts have not adopted such a per se rule. Following Armendariz, California courts have held that a factor weighing against severance exists when "the agreement contains more than one objectionable term" which "may indicate a systematic effort to impose arbitration on an employee." Ontiveros v. DHL Exp. (USA), Inc., 164 Cal.App.4th 494, 515, 79 Cal.Rptr.3d 471 (2008) (internal quotation marks omitted). But this is only one of the relevant factors; California courts also consider whether "the central purpose of the contract is tainted with illegality," and whether "there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement." Id.; see also Little v. Auto Stiegler, Inc., 29 Cal.4th 1064, 1074, 130 Cal.Rptr.2d 892, 63 P.3d 979 (2003); Mercuro v. Superior Court, 96 Cal.App.4th 167, 184-85, 116 Cal.Rptr.2d 671 (2002).
In this case, severance is appropriate. Per C.H. Robinson's concession, there is one unconscionable clause in the dispute resolution provision, the portion of the dispute resolution provision that permits C.H. Robinson, but not Poublon, to seek judicial resolution of specified claims. This provision can be extirpated without affecting the remainder of the paragraph and is "collateral to the main purpose of the contract," which is to require arbitration of disputes. Id. Second, the waiver of representative claims is unenforceable to the extent it prevents an employee from bringing a PAGA action. This clause can be limited without affecting the remainder of the agreement. Iskanian, 59 Cal.4th at 391, 173 Cal.Rptr.3d 289, 327 P.3d 129 (holding that an employer "cannot compel
Accordingly, we conclude that the dispute resolution provision is valid and enforceable once the judicial carve-out clause is extirpated and the waiver of representative claims is limited to non-PAGA claims, and the district court erred in holding otherwise.
