Shedrick Collins v. Taco Bell Corp et al

Filing 20

ORDER by Judge David O. Carter, Granting MOTION to Compel Arbitration 7 . The Court hereby GRANTS the Motion and STAYS the case pending the outcome of arbitration. (Made JS-6. Case Terminated.) (twdb)

O

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JS-6

CIVIL MINUTES – GENERAL
Case No. SACV 13-0458 DOC (JPRx)

Date: July 31, 2013

Title: SHEDRICK COLLINS V. TACO BELL CORP.

PRESENT:
THE HONORABLE DAVID O. CARTER, JUDGE
Julie Barrera
Courtroom Clerk
ATTORNEYS PRESENT FOR PLAINTIFF:
DEFENDANT:
None Present

N/A
Court Reporter
ATTORNEYS PRESENT FOR

None Present

PROCEEDINGS (IN CHAMBERS): ORDER GRANTING MOTION TO
COMPEL ARBITRATION
Before the Court is a Motion to Compel Arbitration (Dkt. 7) filed by Defendant
Taco Bell Corporation (“Taco Bell”). For the reasons below, and after considering all
filings, the Court hereby GRANTS the Motion and STAYS the case pending the outcome
of arbitration.1
I.

Background

On April 7, 2008, Plaintiff signed an application for employment that is the form
application for various affiliated companies including, as relevant here, Taco Bell. See
Supplemental Harper Decl. Ex. A (Dkt. 17, hereafter cited to as “Application”).
In a section titled “Agreement,” the application explains conditions of any
employment with Taco Bell. What follows is the relevant language for this Motion, taken
from the fourth and fifth pages of a five-page application. It appears in bold, and in what
appears to be same font size as the rest of the text in the application:

1

The Court finds the matter appropriate for decision without oral argument. Fed R. Civ. P. 78;
Local R. 7-15.

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Agreement to Arbitrate. Because of the delay and expense of the court
systems . . . Taco Bell Corp. . . . and I agree to use confidential binding
arbitration, instead of going to court, for any claims that arise between
me and . . . Taco Bell Corp. . . . . its related companies, and/or their
current or former employees. Without limitation, such claims would
include any concerning compensation, employment (including, but not
limited to, any claims concerning sexual harassment or
discrimination), or termination of employment. Before arbitration, I
agree:
(i) first to present any such claims in full written detail to . . . Taco
Bell Corp. . . .;
(ii) next, to complete any . . . Taco Bell Corp. . . . internal review
process; and
(iii) finally, to complete any external administrative remedy (such as
with the Equal Employment Opportunity Commission). In any
arbitration, the then prevailing employment dispute resolution rules of
the American Arbitration Association will apply, except that . . . Taco
Bell Corp. . . . will pay the arbitrator’s fees, and . . . Taco Bell Corp. . .
. will pay that portion of the arbitration filing fee in excess of the
similar court filing fee had I gone to court.
Application at 4-5. On March 20, 2013, Plaintiff filed his lawsuit alleging state law
claims “all related to the same facts—namely whether Plaintiff performed work and was
not paid overtime wages and whether that failure to pay was willful.” Compl. ¶ 2. The
lawsuit alleges unpaid overtime, improper pay stubs, overtime owed under the Fair Labor
Standards Act, and a violation of the Unfair Competition Law (“UCL”), California
Business and Professions Code § 17200 et seq.
Taco Bell has now moved to enforce the arbitration agreement.
II.

Legal Standard

The Federal Arbitration Act (“FAA”) governs the enforceability of written
arbitration provisions in certain contracts involving interstate commerce. See 9 U.S.C. §
1, et seq.; Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24–26 (1991).

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A party seeking to compel arbitration under the FAA has the burden to show: (1)
the existence of a valid, written agreement to arbitrate in a contract; and (2) that the
agreement to arbitrate encompasses the dispute at issue.3 Cox v. Ocean View Hotel Corp.,
533 F.3d 1114, 1119 (9th Cir. 2008); Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207
F.3d 1126, 1130 (9th Cir. 2000); see also 9 U.S.C. § 2.
The first prong of the FAA’s two-part test – the existence of a valid, written
agreement to arbitrate in a contract – is governed by state contract law. Arthur Andersen
LLP v. Carlisle, 556 U.S. 624, 630-31 (2009); Circuit City Stores, Inc. v. Adams, 279
F.3d 889, 892 (9th Cir. 2002). It is “well settled” that the existence of a valid, written
agreement to arbitrate in a contract is an issue for court, not an arbitrator, to decide.
Granite Rock Co. v. Int’l Broth. of Teamsters, 130 S. Ct. 2847, 2855-56 (2010).
The party moving to compel arbitration bears the burden of showing that a valid
agreement to arbitrate was made. See Bryant v. Serv. Corp. Int’l, 801 F. Supp. 2d 898,
904 (N.D. Cal. 2011); see also Samson v. NAMA Holdings, LLC, 637 F.3d 915, 923-24
(9th Cir. 2010). If there is a factual dispute regarding whether an agreement to arbitrate
was made, the court must try the issue. See 9 U.S.C. § 4 (“If the making of the arbitration
agreement . . . be in issue, the court shall proceed summarily to the trial thereof. . . . [T]he
party alleged to be in default may . . . demand a jury trial of such issue . . . .”); Meyer v.
T-Mobile USA Inc., 836 F. Supp. 2d 994, 1007 (N.D. Cal. 2011) (“District courts in the
Ninth Circuit and the Ninth Circuit itself have allowed a party opposing a motion to
compel arbitration to conduct discovery relevant to the issue . . . .”); Clar Prods., Ltd. v.
Isram Motion Pictures Prod. Servs., Inc., 529 F. Supp. 381, 383 (S.D.N.Y.1982)
(ordering an “evidentiary hearing” because there was an “issue of fact” as to whether a
valid arbitration agreement was formed).
Just as with proving the existence of a valid agreement to arbitrate, the party
seeking to compel arbitration also bears the burden of proving that the dispute at issue is
covered by the arbitration agreement. See Bryant, 801 F. Supp. 2d at 904; Samson, 637
3

The FAA states in full: “A written provision in any maritime transaction or a contract
evidencing a transaction involving commerce to settle by arbitration a controversy thereafter
arising out of such contract or transaction, or the refusal to perform the whole or any part thereof,
or an agreement in writing to submit to arbitration an existing controversy arising out of such a
contract, transaction, or refusal, 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.

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F.3d at 923-24. In determining this issue, the court looks to “whether the party seeking
arbitration is making a claim which on its face is governed by the contract.” United
Steelworkers of Am. v. Am. Mfg. Co., 363 U.S. 564, 568 (1960). “To determine whether a
claim falls within the scope of an arbitration agreement, the focus is on the factual
underpinnings of the claim rather than the legal theory alleged in the complaint.”
Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir.
2001) (citations omitted).
Even if the party seeking to compel arbitration satisfies both prongs of the twopart FAA test, a court will not compel arbitration if the opposing party shows the movant
waived its right to arbitration. Britton v. Co-op Banking Grp., 916 F.2d 1405, 1412 (9th
Cir. 1990). “A party seeking to prove waiver of a right to arbitrate must demonstrate: (1)
knowledge of an existing right to compel arbitration; (2) acts inconsistent with that
existing right; and (3) prejudice to the party opposing arbitration resulting from such
inconsistent acts.” Id. The party arguing waiver “bears a heavy burden of proof.” Id.;
Sovak v. Chugai Pharm. Co., 280 F.3d 1266, 1270 (9th Cir. 2002).
“Although it is often said that there is a federal policy in favor of arbitration,
federal law places arbitration clauses on equal footing with other contracts, not above
them.” Janiga v. Questar Capital Corp., 615 F.3d 735, 740 (7th Cir. 2010). Thus, “[a]ny
‘preference’ for arbitration is reserved for the interpretation of the scope of a valid
arbitration clause.” Id. The “liberal federal policy regarding the scope of arbitrable
issues is inapposite” to the first prong of the FAA test: the existence of a valid, written
agreement to arbitrate in contract. Comer v. Micor, Inc., 436 F.3d 1098, 1104 n.11 (9th
Cir. 2006).
The policy favoring arbitration applies only to the second prong of the FAA’s twopart test because the FAA reflects both a “liberal federal policy favoring arbitration” and
the “fundamental principle that arbitration is a matter of contract.” See AT & T Mobility
LLC v. Concepcion, 131 S. Ct. 1745 (2011); see also AT & T Technologies, Inc. v.
Communications Workers of America, 475 US 643, 648 (1986) (“Arbitration is a matter
of contract and a party cannot be required to submit to arbitration any dispute which he
has not agreed so to submit.”); Bd. of Trustees of City of Delray Beach Police &
Firefighters Ret. Sys. v. Citigroup Global Markets, Inc., 622 F.3d 1335, 1342 (11th Cir.
2010) (“Contrary to the suggestion of [movant], we resolve this issue without a thumb on
the scale in favor of arbitration because the ‘federal policy favoring arbitration does not

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apply to the determination of whether there is a valid agreement to arbitrate between the
parties.’”); Dumais v. Am. Golf Corp., 299 F.3d 1216, 1220 (10th Cir. 2002) (“The
presumption in favor of arbitration is properly applied in interpreting the scope of an
arbitration agreement; however, this presumption disappears when the parties dispute the
existence of a valid arbitration agreement.”); Fleetwood Enters., Inc. v. Gaskamp, 280
F.3d 1069, 1073 (5th Cir.2002) (same).
III.

Analysis
a. Only the validity of the agreement is at issue

The Court notes at the outset that of the two steps that Taco Bell must show—a
valid written agreement to arbitrate, and that the agreement encompasses the dispute—
only the first step, the validity of the agreement, is in contention here.
This is because Plaintiff signed an employment application in which he agreed to
arbitrate “any claims that arise between me and” Taco Bell, and the agreement spells out
that “such claims would include any concerning compensation” as well as any claims
concerning “employment.” Plaintiff’s complaint is based on not being paid overtime
wages for work performed, and all his causes of action are based on that premise. See
Compl. ¶ 2. Compensation would clearly cover being paid for overtime, and Plaintiff
makes no convincing argument to the contrary.2 Plaintiff also does not argue that Taco
Bell waived any right to arbitration; he raises only the argument that the agreement is
unconscionable.
b. Armendariz does apply
As the California Supreme Court explained in Armendariz v. Foundation Health
Psychcare Services, Inc., “unconscionability has both a procedural and a substantive
element, the former focusing on oppression or surprise due to unequal bargaining power,
the latter on overly harsh or one-sided results.” 24 Cal. 4th 83, 114 (2000) (quotation
marks omitted). While both procedural and substantive unconscionability must be
present, “they need not be present in the same degree.” Id. “The more substantively
2

See below, Section III.d.ii, for discussion of Plaintiff’s brief argument that statutory claims are not in the scope of
the agreement because they are not specifically mentioned. Plaintiff makes this argument to show that the agreement
is unconscionable, but it is properly an (unconvincing) argument about the agreement’s scope.

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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.
Taco Bell argues that AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1746
(2011) abrogates the principles of unconscionability applied by the California Supreme
Court in Armendariz. This Court has previously rejected that argument, Hagan v. Emp’rs
Res. Mgmt. Co., SA CV 12-1185 DOC (ANx), Order Denying Motion to Dismiss (Dkt.
22), (C.D. Cal. Dec. 19, 2012), and Taco Bell’s citations to the contrary are wholly
unconvincing.3
The Court will consider Plaintiff’s unconscionability arguments in turn.
c. Procedural unconscionability
Procedural unconscionability requires either “‘oppression’ or ‘surprise.’”
Goodridge v. KDF Automotive Group, Inc., 209 Cal. App. 4th 325, 337 (2012)
(describing “controlling California case law regarding the doctrine of unconscionability
as it applies to contracts in general”); Pokorny v. Quixtar, Inc., 601 F.3d 987, 996 (9th
Cir. 2010).
Oppression exists “[w]here the parties to a contract have unequal bargaining
power and the contract is not the result of real negotiation or meaningful choice.”
Goodridge, 209 Cal. App. 4th at 337. When the weaker party is presented the clause and
told to “take it or leave it” without the opportunity for meaningful negotiation,
oppression, and therefore procedural unconscionability, are present. Nagrampa v.
3

Taco Bell cites the following cases: Oguejiofor v. Nissan, C-11-0544 EMC, 2011 WL 3879482
(N.D. Cal. Sept. 2, 2011) (noting in a parenthetical that Armendariz was abrogated in part,
without elaboration); Ruhe v. Masimo Corp., 2011 WL 4442790 at *2 (C.D. Cal. Sept. 16, 2011)
(noting that by defendant’s interpretation of Armendariz, it “would appear to be preempted,” but
not deciding the issue); Burnett v. Macy's W. Stores, Inc., 2011 WL 4770614 (E.D. Cal. Oct. 7,
2011) (noting that some courts have wondered about the viability of Armendariz but not deciding
the issue). In Hagan this Court followed the “numerous courts” that “have found that
Concepcion does not preclude the application of the California unconscionability principles as
stated in Armendariz.” SA CV 12-1185 DOC (ANx), Order Denying Motion to Dismiss (Dkt.
22) at 22 (citing Cisneros v. Am. Gen. Fin. Servs., 2012 U.S. Dist. LEXIS 102948, *15-16 (N.D.
Cal. July 23, 2012) (listing numerous cases)).

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MailCoups, Inc., 469 F.3d 1257, 1282 (9th Cir. 2006). Surprise exists where “the
supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted
by the party seeking to enforce the disputed terms.” Goodridge, 209 Cal. App. 4th at
337.
i. This take-it-or-leave-it contract is procedurally
unconscionable
The Court agrees with Plaintiff that this boilerplate employment application does
not afford him any meaningful negotiation or choice. It is “well settled” that this type of
contract is typically procedurally unconscionable. Serpa v. California Sur. Investigations,
Inc., 215 Cal. App. 4th 695, 704, 155 Cal. Rptr. 3d 506, 512 (2013), as modified (Apr.
26, 2013) (citing Armendariz, 24 Cal.4th at 115 (“In 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 agreement.”)). Taco Bell’s argument on this point is
simple to minimize the procedural unconscionability. See Reply at 5-6.
ii. Failing to provide a copy of the arbitration rules also
supports finding procedural unconscionability
Plaintiff’s next argument, also well-taken, is that Taco Bell’s application
references two sets of rules without providing either for the applicant. Opp’n at 4.
“Numerous cases have held that the failure to provide a copy of the arbitration rules to
which the employee would be bound . . . support[s] a finding of procedural
unconscionability.” Sparks v. Vista Del Mar Child & Family Services, 207 Cal. App. 4th
1511, 1523 (2012), as modified on denial of reh’g (Aug. 20, 2012).4 Taco Bell has not
4

Pokorny v. Quixtar, Inc., 601 F.3d 987, 996-97 (9th Cir. 2010) (holding that arbitration
agreements were unconscionable where, among other factors, the defendant “failed to attach” the
full terms of those agreements); Zullo v. Superior Court, 197 Cal. App. 4th 477, 486 (2011)
(vacating motion to compel arbitration and holding that arbitration agreement which failed to
attach documents containing the terms of arbitration was procedurally unconscionable because it
“was oppressive to require the party to make an independent inquiry to find the applicable rules
in order to fully understand what she was about to sign”); Trivedi v. Curexo Technology Corp.,
189 Cal.App.4th 387, 393, 393 n.1 (2010) (collecting cases); Fitz v. NCR Corp., 118 Cal.App.4th

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put forward any evidence about the internal review process that the arbitration agreement
would require Plaintiff to complete. The designation of the “then prevailing employment
dispute resolution rules of the American Arbitration Association [‘AAA’],” Application
at 4, is a clear reference, but no side here contends that Plaintiff saw these rules before
signing.
Plaintiff further argues that the AAA’s rules are hard to find and subject to change,
which furthers the showing of unconscionability. Opp’n at 4-5. This is less convincing.
Searching for “employment dispute resolution rules American Arbitration Association”
readily leads to the rules through a simple Internet search. Plaintiff cites the Ross
Declaration (Dkt. 13-1 through 13-3) for three versions of the AAA rules that would be
“then prevailing” at different times of Plaintiff’s employment. He does not highlight any
major changes, however, and his argument ignores the fact that the rules themselves
resolve what version applies: “These rules, and any amendment of them, shall apply in
the form in effect at the time the demand for arbitration or submission is received by the
AAA.” Request for Judicial Notice Ex. A at 17 (Dkt. 703). In the absence of an argument
that a substantive provision changed from the time Plaintiff signed the agreement, the
Court does not find procedural unconscionability in the mere fact that the rules could be
updated. See Collins v. Diamond Pet Food Processors of California, LLC, 2013 WL
1791926 at *6 (E.D. Cal. Apr. 26, 2013).
//
//
702, 721 (2004) (holding arbitration agreement was procedurally unconscionable where it
incorporated “arbitration rules that were not attached and require[d] the other party to go to
another source in order to learn the full ramifications of the arbitration agreement”); Chavarria v.
Ralphs Grocer Co., 812 F. Supp. 2d 1079, 1085 (C.D. Cal. 2011) (holding that arbitration
agreement was procedurally unconscionable where defendant failed to attached full terms, even
though the full terms were “available” at another “location” when plaintiff signed the arbitration
agreement); Cisneros v. Am. Gen. Fin. Servs., No. C 11-02869 CRB, 2012 U.S. Dist. LEXIS
102948, *22 (N.D. Cal. July 23, 2012) (denying motion to compel arbitration and holding that
arbitration agreement which failed to attach documents containing the arbitration terms was
procedurally unconscionable because California “[c]ourts have found oppression where
arbitration rules are referenced but not attached in the signed agreement in both employment and
non-employment contexts”).

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iii. Conclusion on procedural unconscionability
For the reasons above, the Court finds the Application is procedurally
unconscionable.
d. Substantive unconscionability
Substantive unconscionability exists where an arbitration agreement provides for
“one-sided” relief; this form of one-sided relief is also often described as a lack of
“bilaterality.” See Armendariz, 24 Cal. 4th 83, 121 (2000); see also Goodridge v. KDF
Automotive Group, Inc., 209 Cal. App. 4th 325, 337 (2012) (citing the “one-sided”
standard from Armendariz as “controlling California case law regarding the doctrine of
unconscionability as it applies to contracts in general”); Smith v. Americredit Fin. Servs.,
CASE NO. 09cv1076 DMS (BLM), 2012 U.S. Dist. LEXIS 32895, *11 (S.D. Cal. Mar.
12, 2012) (holding that the “issue of bilaterality,” even after Concepcion, “remains at the
core of substantive unconscionability under California law, and it has not been preempted
by the FAA”).
An adhesion contract is substantively unconscionable even if it only “potentially”
imposes a burden on the weaker party, the employee, greater than that imposed on the
stronger party, the employer; the employee need not show that she will actually be
subjected to a greater burden. Lima v. Gateway, Inc., Case No. SACV 09-01366 DMG
(MLGx), 2012 U.S. Dist. LEXIS 120964, *33-35 (C.D. Cal. Aug. 7, 2012); Ferguson v.
Countrywide Credit Indus., 298 F.3d 778, 785, n.8 (9th Cir. Cal. 2002) (holding that
defendant’s arbitration provision was “unconscionable” and explaining that this
conclusion “is not affected by the fact that” agreement provided arbitrator with
“discretion” to forego the unconscionable term because “there is no guarantee that the
[plaintiff] will, in fact,” avoid being subjected to the unconscionable term).
i. Plaintiff wrongly argues that he would have no way to
enforce arbitration against Taco Bell
Plaintiff argues that if he ever wished to require Taco Bell to arbitrate, he could
not because contract is not signed by a Taco Bell corporate representative, and thus it is
unenforceable under the statute of frauds. Opp’n at 5 (citing Cal. Civ. Code § 1624). But
Plaintiff does not tie the application to any of the types of contract that Section 1624
requires to be in writing. Defendant correctly notes that this type of argument does not fit

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within Section 1624, and such an argument, if accepted by courts, would threaten a body
of law that allows employees to hold employers liable for breaches of contract even if the
employer does not sign the agreement, such as contracts implied by certain employer
policy documents. See, e.g., Guz v. Vechtel Nat’l Inc., 24 Cal. 4th 317, 344 (2000).
Here, Plaintiff signed an application provided by Taco Bell that provided that
“Taco Bell Corp. . . . and I agree to use confidential binding arbitration, instead of going
to court, for any claims that arise between me and . . . Taco Bell Corp. . . . . its related
companies, and/or their current or former employees.” Application at 4.
The language in Plaintiff’s employment application makes it clear that both sides
promise to use arbitration. California case law has held that even when an arbitration
provision says “I agree”—and does not say that the employer also agrees—this does not
“vitiate an otherwise bilateral obligation to arbitrate ‘all disputes and claims that might
arise out of my employment.’” Serpa, 215 Cal. App. 4th 695 (quoting Roman v. Superior
Court, 172 Cal. App. 4th 1462, 1466-67, 1471 (2009)). Here, in contrast to Roman, Taco
Bell is named in the agreement. The company falls “within the categorical description” of
parties bound, and it would be subject to arbitration of the same types of claims that
Plaintiff must arbitrate even though Taco Bell did not sign. See Izzi v. Mesquite Country
Club, 186 Cal. App. 3d 1309, 1319 (1986); see also Michaelis v. Schori, 20 Cal. App. 4th
133, 139 (1993).5
//

5

See also Perkins v. Rent-A-Ctr., Inc., 2004 WL 1047919 (D. Kan. May 5, 2004) (holding that a
defendant need not have signed an arbitration agreement to be bound by it). To the extent Taco
Bell here argues for the benefits of an arbitration, but elsewhere might argue that it cannot be
held to this agreement, equitable estoppel should prevent such unfairness. See Goldman v.
KPMG LLP, 173 Cal. App. 4th 209, 220 n.5 (2009) (citing Int’l Paper Co. Schwabedissen
Machinen & Anlagen GMBH, 206 F.3d 411, 418 (4th Cir. 2000). As a general rule, equitable
estoppel precludes a party from asserting rights he otherwise would have had against another,
when his own conduct makes asserting such rights contrary to equity. Goldman 173 Cal. App.
4th at 220 (quotations and citations omitted). The “linchpin for equitable estoppel is equity—
fairness.” Id. (quoting Grigson v. Creative Artists Agency, LLC, 210 F.3d 524, 528 (5th Cir.
2000).

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ii. Plaintiff is also incorrect in his argument that the arbitration
does not cover statutory violations because it does not
specifically mention them, and this argument is not one that
goes to unconscionability
Plaintiff cites Vasquez v. Superior Court, 80 Cal. App. 4th 430, 434 (2000), for the
proposition that an arbitration agreement must be particularly clear if it includes statutory
claims. “[N]owhere in the arbitration agreement is it mentioned that statutory claims will
be arbitrated,” Plaintiff argues. Opp’n at 7. Whether the agreement covers statutory
claims is properly an argument about the scope of agreement, not its initial validity. See
Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (noting two steps
for enforcement of an arbitration clause).
Further, Vasquez is about agreements to arbitrate statutory claims in the collective
bargaining context. See 80 Cal. App. 4th at 434.6 The agreement here states that it covers
“any claims that arise between me” and Taco Bell, and further that “such claims would
include any concerning compensation,” and “employment.” Plaintiff does not
convincingly attack the clarity of the agreement language, nor does he argue against the
cases that Taco Bell cites that have compelled arbitration of statutory claims. See Reply
at 2 (citing, among other cases, Kuehner v. Dickinson & Co., 84 F.3d 316, 319-20 (9th
Cir. 1996)). Thus, to the extent Plaintiff challenges the scope of the agreement, his
argument fails.
iii. The agreement is not unconscionable based on Armendariz
An arbitration agreement covering statutory rights established “for a public
reason,” must be subjected to particular scrutiny by the courts, Armendariz, 24 Cal.4th
83, 100–01 (2000), and is lawful only if it:
(1) provides for neutral arbitrators;
6

Plaintiff quotes from the second of the following three sentences in the opinion: “Although
ordinarily a presumption of arbitrability applies to contractual disputes arising out of a collective
bargaining agreement, the presumption is not applicable to statutory violations. Indeed a
requirement to arbitrate statutory claims ‘must be particularly clear.’ A union-negotiated waiver
of employees' statutory rights to a judicial forum for claims of employment discrimination must
be 'clear and unmistakable.’”

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(2) provides for more than minimal discovery;
(3) requires a written award;
(4) provides all the types of relief that would otherwise be available in court; and
(5) does not require employees to pay unreasonable costs or any arbitrator's fees or
expenses as a condition of access to the arbitration forum.
Id. at 102 (quoting Cole v. Burns Int'l Security Servs., 105 F.3d 1465, 1482
(D.C.Cir.1997)). Plaintiff does not address whether the agreement here meets the
Armendariz requirements but the Court concludes that it does. The AAA Rules provide
for a neutral arbitrator (Rule 12, particularly parts b.(ii) and c.), more than minimal
discovery (Rules 9 and 30), a written award (Rule 39(c)), and all relief available in court
(Rule 39(d)).7 The agreement further provides that Taco Bell will pay the arbitrator’s
fees, and pay the part of the arbitration filing fee that exceeds the fee that Plaintiff would
pay had he filed in court. Agreement at 5.
e. The Court shall strike one clause
As the Court noted previously, an adhesion contract is substantively
unconscionable even if it only “potentially” imposes a burden on the weaker party, the
employee, greater than that imposed on the stronger party, the employer; the employee
need not show that she will actually be subjected to a greater burden. Lima, 2012 U.S.
Dist. LEXIS 120964 at *33-35; Ferguson, 298 F.3d at 785, n.8 (holding that defendant’s
arbitration provision was “unconscionable” and explaining that this conclusion “is not
affected by the fact that” agreement provided arbitrator with “discretion” to forego the
unconscionable term because “there is no guarantee that the [plaintiff] will, in fact,”
avoid being subjected to the unconscionable term).
Here, the agreement provides that Plaintiff must complete “any . . . Taco Bell
Corp. . . . internal review process,” Agreement at 4, but says nothing about what that
process is. Taco Bell does not address Plaintiff’s argument that it is unfair for him to hold
him to an agreement to complete an internal review process before filing for arbitration,
Opp’n at 5, when Plaintiff had no idea what those internal rules are. While Plaintiff does
not frame his argument as one of substantive unconscionability, the agreement requires
him to complete the internal review process, without imposing a similar obligation on

7

The AAA Rules relevant here are in the Request for Judicial Notice (Dkt. 7-3).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 13-0458 DOC (JPRx)

Date: July 31, 2013
Page 13

Taco Bell, see Agreement at 4-5, and there is nothing in the record about the substantive
terms of this internal complaint review.
A court has the power to strike a clause or limit an unconscionable clause “so as to
avoid unconscionable results.” Armendariz, 24 Cal. 4th at 122. It can also determine that
an agreement is “permeated” by unconscionability and thus refuse to enforce the entire
agreement. Id. This second option makes sense when, for example, an agreement has
more than one unlawful provision. This suggests a “systematic effort to impose
arbitration on an employee not simply as an alternative to litigation, but as an inferior
forum that works to the employer’s advantage.” Id. at 124-25.
Here, the Court’s concern is with an internal review process that only Plaintiff
must complete, with rules that Taco Bell has not presented to the Court. For those
reasons, the Court strikes clause (ii) in the Agreement that requires Plaintiff to complete
any Taco Bell internal review process before filing for arbitration.
f. Conclusion on substantive and procedural unconscionability
With clause (ii) struck, the agreement is not unconscionable. The Court reaches
this conclusion by weighing the procedural unconscionability and the general absence of
substantively unconscionable provisions. The Court will enforce the remainder of the
agreement and stay the case pursuant to 9 U.S.C. § 3
IV.

Disposition

For the above reasons, the Court GRANTS the Motion to Compel Arbitration,
with the one change—striking clause (ii) that requires Plaintiff to complete any Taco Bell
internal review process. The case is STAYED pending the completion of arbitration
proceedings. Taco Bell is ORDERED to file an update on arbitration proceedings every
four months from the date of this order.

MINUTES FORM 11
CIVIL-GEN

Initials of Deputy Clerk: jcb