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

Filed 10/31/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
BAKERSFIELD COLLEGE et al., C085099
Plaintiffs and Appellants, (Super. Ct. No.
34201380001636)
v.
CALIFORNIA COMMUNITY COLLEGE
ATHLETIC ASSOCIATION et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Sacramento County,
Christopher E. Krueger, Judge. Reversed.
Foster Employment Law and Maloney Employment Law and C. Christine
Maloney for Plaintiffs and Appellants.
Matheny Sears Linkert & Jaime and Ronald E. Enabnit for Defendant and
Respondent California Community College Athletic Association.
Clousespaniac Attorneys and Richard R. Clouse and Erin A. Halas for Defendant
and Respondent Southern California Football Association.
In this case, we are asked to determine the enforceability of an arbitration
agreement under the law of unconscionability. “Unconscionability consists of both
procedural and substantive elements. [Citation.] Procedural unconscionability
1
‘addresses the circumstances of contract negotiation and formation, focusing on
oppression or surprise due to unequal bargaining power.’ [Citation.] ‘Substantive
unconscionability pertains to the fairness of an agreement’s actual terms and to
assessments of whether they are overly harsh or one-sided.’ [Citation.] Both elements
must be present for a court to refuse to enforce an arbitration agreement. [Citation.]
However, the elements do not need to be present in the same degree and are evaluated on
a ‘ “ ‘sliding scale.’ ” ’ [Citation.] ‘ “ ‘[T]he 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.’ ” ’ [Citation.] ‘The ultimate
issue in every case is whether the terms of the contract are sufficiently unfair, in view of
all relevant circumstances, that a court should withhold enforcement.’ ” (Magno v. The
College Network, Inc. (2016) 1 Cal.App.5th 277, 284-285.)
Defendant California Community College Athletic Association (Athletic
Association) administers intercollegiate athletics for the California community college
system. The parties agree that, as a condition of participating in the intercollegiate
football league, plaintiff Bakersfield College (the College) agreed to be bound by the
Athletic Association’s bylaws and constitution, including a provision requiring the
College to resolve any sanctions and penalty disputes by binding arbitration. Instead of
proceeding through binding arbitration to challenge the sanctions and penalty decisions
issued by the Athletic Association and codefendant the Southern California Football
Association (the Football Association) (collectively defendants) against the College, the
College and coplaintiffs Jeffrey Chudy1 and the Kern Community College District2
1 Chudy is a faculty member at the College and the head coach of the College’s
football team.
2 Kern Community College District governs and operates the College.
2
(collectively plaintiffs) elected to file civil litigation. Plaintiffs argued they were excused
from pursuing binding arbitration because the arbitration provision was unconscionable.
The trial court said the “issue [wa]s close,” but ultimately, after severing the one-
sided attorney fees subsections, found the arbitration provision was not unconscionable.
The trial court, therefore, found plaintiffs’ litigation was barred by the failure to exhaust
their administrative remedies.
We agree with the trial court that this was a close case but conclude the arbitration
provision was unconscionable. Accordingly, we reverse.
FACTUAL AND PROCEDURAL BACKGROUND
I
The Contract
The Football Association is a football conference organized under the Athletic
Association’s constitution and bylaws to regulate intercollegiate football competition
among 37 California community colleges within its geographic boundaries. Pursuant to
the Athletic Association’s constitution, the Football Association, as a conference, or its
conference commissioner may impose sanctions on the Athletic Association’s member
colleges. The College is one such member college.
Each member college is required to follow and is subject to the Athletic
Association’s constitution and bylaws. As is pertinent here, article 7 of the Athletic
Association’s constitution sets forth an appeals process. The appeals process applies to
an appeal defined as “a written request by the college president requesting a review of an
inferior body’s interpretation of the rules and/or the enforcement of a penalty.” The
process starts with a ruling by a conference commissioner, who is “responsible for the
first level interpretation, ruling, and enforcement of th[e] Constitution and Bylaws.”
“The conference commissioner shall interpret and rule on the provisions of the
Constitution and Bylaws for colleges, students, college administrators, and employees of
member schools in his/her conference.”
3
An appeal from a conference commissioner’s ruling flows as follows: first to the
conference appeals board (here, the Football Association), then to the Athletic
Association appeals board, then to the Athletic Association board, and finally to binding
arbitration before a three-person panel. The appeals are generally decided based on the
original materials submitted at the first level of appeal and no additional materials may be
provided at the next level of appeal.
The binding arbitration provision provides a panel shall be established to “include
approximately twelve individuals who are familiar with the California Community
Colleges, their procedures, their intercollegiate athletic programs and the [Athletic
Association].” The panel members are appointed for three-year terms in a rotating
manner.
The panel members shall be nominated by the Athletic Association’s executive
and the executive director of the Community College League of California (the League).
Member colleges may also nominate a person to serve on the panel and “shall have a
reasonable voice in the selection of the persons appointed to the Panel.” The Athletic
Association’s executive director and the League’s executive director “shall make the final
decision regarding appointment.”
When a college wishes to pursue binding arbitration, it must submit the arbitration
request in writing to the Athletic Association’s executive director within five working
days of the Athletic Association board’s denial of an appeal. At the same time, the
college must give written notice of the “facts and issues to be determined” in arbitration.
A party to the arbitration has the right to be represented by an attorney at any proceeding
or hearing; “[h]owever, to minimize the expense and to encourage cooperation and
collegiality, it is desired that the services of legal counsel not be over-utilized.”
Within five working days after receiving a request for arbitration, the Athletic
Association’s executive director shall present a list of panel members to the Athletic
Association board and the president of the appealing college. The Athletic Association
4
board and the president of the appealing college shall thereafter agree to three panelists to
preside over the arbitration within five working days. If the appealing college does not
timely participate, the Athletic Association board shall appoint the panelists.
The selected arbitration panel shall meet to hear the appeal no later than 18
working days after the panel selects a chair. “The colleges agree that they have waived
the right to a testimonial hearing, to present evidence, and to cross-examine witnesses at
the arbitration hearing.” The arbitration panel has sole discretion to determine whether to
hold a hearing, call for testimony, or receive evidence.
The arbitration panel’s decision “shall be final and binding on the parties. There
will be no further appeals and no court proceeding.” “[I]f an appealing college does not
prevail in its arbitration, the three (3)-member Arbitration Panel shall be authorized to
award costs and fees against the college in favor of the [Athletic Association].” Further,
“[i]f a college does not exhaust its rights under the stated appellate process, including
binding arbitration, and instead commences litigation, it shall be liable for [the Athletic
Association’s] fees and costs of that litigation, unless the college is the prevailing party.”
II
The Litigation
In May 2013, defendants sanctioned and penalized the College for several
violations of the Athletic Association’s bylaws because the College had provided football
players with meals and access to work and housing opportunities not available to other
students. The College filed an appeal of the decisions and proceeded through the first
three steps of the appeals process. Its appeal was denied by the Football Association
appeals board, the Athletic Association appeals board, and the Athletic Association
board.
After its appeal was denied by the Athletic Association appeals board and before it
appealed to the Athletic Association board, the College requested a copy of the 12-
member arbitration panel master list. The Athletic Association denied the request
5
because it does not disclose the list to any member college until there is a demand for
arbitration.
The College did not pursue binding arbitration and plaintiffs instead filed a
petition for writ of mandate and complaint for breach of contract, violation of the fair
procedure doctrine, and injunctive relief.
Plaintiffs thereafter filed a motion for judgment on the writ of mandate. In their
opposition, defendants argued, among other things, that plaintiffs had failed to exhaust
their administrative remedies by foregoing the binding arbitration process. Plaintiffs
maintained they were excused from proceeding through binding arbitration because the
arbitration provision was unconscionable. The trial court disagreed; plaintiffs appeal.
DISCUSSION
“The determination of arbitrability is a legal question subject to de novo review.
[Citation.] We will uphold the trial court’s resolution of disputed facts if supported by
substantial evidence. [Citation.] Where, however, there is no disputed extrinsic evidence
considered by the trial court, we will review its arbitrability decision de novo.” (Nyulassy
v. Lockheed Martin Corp. (2004) 120 Cal. App. 4th 1267, 1277.) The party resisting
arbitration, here the College, bears the burden of proving unconscionability. (Pinnacle
Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal. 4th 223,
247.)
I
Procedural Unconscionability
“Procedural unconscionability pertains to the making of the agreement and
requires oppression or surprise. [Citations.] ‘ “ ‘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.’ ” ’ ” (Magno v. The
College Network, Inc., supra, 1 Cal.App.5th at p. 285.) “ ‘[T]here are degrees of
procedural unconscionability. At one end of the spectrum are contracts that have been
6
freely negotiated by roughly equal parties, in which there is no procedural
unconscionability. . . . Contracts of adhesion that involve surprise or other sharp
practices lie on the other end of the spectrum.’ ” (Baltazar v. Forever 21, Inc. (2016) 62
Cal. 4th 1237, 1244.)
“The California Supreme Court has consistently stated that ‘ “[t]he procedural
element of an unconscionable contract generally takes the form of a contract of
adhesion . . . .” ’ ” (Walnut Producers of California v. Diamond Foods, Inc. (2010) 187
Cal. App. 4th 634, 646.) The unconscionability analysis, therefore, “begins with an
inquiry into whether the contract is one of adhesion” (Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 113) and a finding of a contract of
adhesion is essentially a finding of procedural unconscionability (see ibid.; Stirlen v.
Supercuts, Inc. (1997) 51 Cal. App. 4th 1519, 1533 [“the threshold question is whether the
subject arbitration clause is part of a contract of adhesion, thereby establishing the
necessary element of procedural unconscionability”]; Marin Storage & Trucking, Inc. v.
Benco Contracting & Engineering, Inc. (2001) 89 Cal. App. 4th 1042, 1054 [finding no
error in trial court’s conclusion the contract “was a contract of adhesion and, hence,
procedurally unconscionable”]).
The trial court made the following undisputed factual findings pertinent to the
procedural unconscionability analysis: “(1) the arbitration provision was drafted entirety
by [the Athletic Association]; (2) the College had no ability to individually negotiate its
terms; (3) it could not opt-out of the provisions; and (4) it thus had no meaningful choice
but to accept the provision as drafted by [the Athletic Association].” The trial court also
noted “the College is a large institution with its own general counsel and is thus
presumably not a weak party that is unable to look out for its own interests.”
Nonetheless, the trial court explained, “[a]lthough the College is a large institution, it had
to accept [the Athletic Association’s] constitution and bylaws as written if it wanted to
participate in intercollegiate athletics.” The trial court also found “that [the Athletic
7
Association’s] members, including the College, have the right a right [sic] to propose and
vote on amendments to the constitution and bylaws, and thus to propose and vote on
amendments to the challenged arbitration provision.”
The trial court’s “at least a minimal degree of procedural unconscionability”
finding rested on the following synopsis of its reasoning: “[The provision] was drafted
by [the Athletic Association], the College had no ability to individually negotiate or reject
its terms, and its only real option was to agree to it or opt out of intercollegiate athletics
entirely. Once it joined [the Athletic Association], however, the College gained the
option of trying to amend the provision. If ‘the determination of procedural
unconscionability may turn on the absence of meaningful choice,’ then surely it may also
be affected by the presence of a meaningful voice. [Citation.] Here, the College had
(and has) at least some voice in amending the arbitration provision, which lessens, even if
it does not entirely eliminate, the procedural unconscionability in this case.”
Plaintiffs agree with the trial court’s procedural unconscionability finding that
there was at least a minimal degree of procedural unconscionability; they argue the error
arose from the trial court’s substantive unconscionability analysis. Defendants assert
there was no evidence of procedural unconscionability because the College had the
ability to propose amendments to the arbitration provision once it became a member, and
it failed to do so. The Athletic Association also argues the Athletic Association and the
member institutions share the same interests and do not have an adversarial relationship,
and article 7 exists for the benefit of the athletics programs of the member institutions.
The Football Association adds the College was a sophisticated party, cannot argue
surprise, and “it cannot be argued that [it] did not understand or appreciate the
significance of the arbitration terms or understand that the College was bound by its
provisions.”
We disagree with the trial court’s finding that “the right to propose and vote on
amendments to the constitution and bylaws lessens (if not eliminates) the adhesive nature
8
of the arbitration provision” and reject defendants’ argument in that regard as well. That
the College had the ability to propose amendments to the arbitration provision in the
Athletic Association’s constitution after it became a member and after the contract was
formed is irrelevant to the unconscionability analysis.
“ ‘In determining unconscionability, our inquiry is into whether a contract
provision was “unconscionable at the time it was made” ’ ” -- we are not concerned with
what could have occurred thereafter. (Sonic-Calabasas A, Inc. v. Moreno (2013) 57
Cal. 4th 1109, 1134.) “Procedural unconscionability focuses on the manner in which the
disputed clause is presented to the party in the weaker bargaining position. 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.” (Szetela v. Discover Bank (2002) 97 Cal. App. 4th 1094,
1100.) Thus, although the ability to negotiate the terms of the contract is important and
relevant to the procedural unconscionability analysis, the pertinent question is whether
the College had the ability to negotiate the terms of the arbitration provision when it
became a member, i.e., when it became subject to the arbitration provision. The answer
to that question is “no.”
The Football Association cites Trend Homes for the proposition that “[w]here a
party fails to present evidence that it attempted to negotiate a provision and were
‘rebuffed,’ it is inappropriate to find procedural unconscionability.” (Trend Homes, Inc.
v. Superior Court (2005) 131 Cal. App. 4th 950, overruled on other grounds in Tarrant
Bell Property, LLC v. Superior Court (2011) 51 Cal. 4th 538, 545, fn. 5.) The court, in
Trend Homes, however, actually said: “Here, the evidence does not support the
conclusion the provision is procedurally unconscionable. First, the record does not
support the trial court’s finding that the agreements are adhesive. Real parties offered no
evidence that they attempted to negotiate the provision and were rebuffed, or they had no
meaningful choice but to agree to the provision. The only evidence real parties presented
9
on this issue was their statements that they were never told the provision was negotiable
or could be stricken. This does not establish, however, that Trend would not have
stricken the provision had real parties objected. Notably, the seller was also required to
initial the judicial reference provision, which supports the conclusion that the clause was
negotiable.” (Id. at p. 958, italics added.) The case therefore does not stand for the
proposition advanced by the Football Association.
The undisputed facts, as stated by the trial court, are that the College had no ability
to individually negotiate the terms of the contract at the time it was made, it could not
opt-out of the arbitration provision, and it thus had no meaningful choice but to accept the
arbitration provision as drafted by the Athletic Association. The uncontroverted evidence
supports a finding of procedural unconscionability. This is especially true given the
superior bargaining strength of the Athletic Association. As the trial court explained, the
College had to accept the Athletic Association’s terms if it wanted to participate in
intercollegiate athletics. The ability to participate in intercollegiate athletic competitions
is of substantial importance to both educational institutions and their students. (See
California State University, Hayward v. National Collegiate Athletic Assn. (1975) 47
Cal. App. 3d 533, 542 [“the opportunity to participate in intercollegiate athletics is of
substantial economic value to many students”].) To provide this opportunity to its
students, the College had no other alternative -- it had to be a member of the Athletic
Association.
The arbitration provision was part of “ ‘a standardized contract, which, imposed
and drafted by the party of superior bargaining strength [the Athletic Association],
relegate[d] to the subscribing party [the College] only the opportunity to adhere to the
contract or reject it.’ ” (Armendariz v. Foundation Health Psychcare Services, Inc.,
supra, 24 Cal.4th at p. 113.) Unlike Trend Homes, the arbitration provision was not
separately initialed by the parties; instead, the provision was inconspicuous and located
on pages 34 through 36 of the 48-page constitution and the 158-page combined document
10
consisting of the constitution and bylaws. This supports the conclusion that the
arbitration provision was presented on a take-it-or-leave-it basis.
We disagree with the Football Association’s assertion that the College’s
sophistication as a party supports a finding of no procedural unconscionability. As the
trial court aptly explained: “Courts have held that the unconscionability doctrine applies
to business contracts as well as consumer contracts because ‘even large business entities
may have relatively little bargaining power, depending on the identity of the other
contracting party and the commercial circumstances surrounding the agreement.’ ” (See
A & M Produce Co. v. FMC Corp. (1982) 135 Cal. App. 3d 473, 489-490; see also
Graham v. Scissor-Tail, Inc. (1981) 28 Cal. 3d 807, 818, fn. 13 [“Although most of the
[unconscionability] cases have arisen in the consumer context, adhesion contracts are also
found in a commercial setting. [Citations.] The inquiry is simply whether the requisite
characteristics (e.g., inequality of bargaining power) are present”].) Here, “[a]lthough the
College is a large institution, it had to accept [the Athletic Association’s] constitution and
bylaws as written if it wanted to participate in intercollegiate athletics.”
The Football Association’s reliance on lack of surprise also does not alter the
analysis. “ ‘Where an adhesive contract is oppressive, surprise need not be shown’ ” to
establish procedural unconscionability. (Nyulassy v. Lockheed Martin Corp., supra, 120
Cal.App.4th at p. 1281.) We further fail to see the relevance of the parties’ non-
adversarial relationship, as the Athletic Association contends, to the unconscionability
analysis. Contracting parties are generally not adversarial to one another at the time of
contracting. That does not mean, however, that the contract is enforceable per se when a
dispute later arises in the parties’ relationship.
Having found procedural unconscionability, we next scrutinize the substantive
terms of the arbitration provision. (Baltazar v. Forever 21, Inc., supra, 62 Cal.4th at
p. 1244 [“ ‘[A] finding of procedural unconscionability does not mean that a contract will
11
not be enforced, but rather that courts will scrutinize the substantive terms of the contract
to ensure they are not manifestly unfair or one-sided’ ”].)
II
Substantive Unconscionability
The substantive element of the unconscionability analysis “looks to the actual
terms of the parties’ agreement to ‘ensure[] that contracts, particularly contracts of
adhesion, do not impose terms that have been variously described as “ ‘ “overly
harsh” ’ ” [citation], “ ‘unduly oppressive’ ” [citation], “ ‘so one-sided as to “shock the
conscience” ’ ” [citation], or “unfairly one-sided.” ’ [Citation.] These formulations ‘all
mean the same thing.’ [Citation.] Substantive unconscionability ‘ “is concerned not with
‘a simple old-fashioned bad bargain’ [citation], but with terms that are ‘unreasonably
favorable to the more powerful party.’ ” ’ [Citation.] ‘The substantive component of
unconscionability looks to whether the contract allocates the risks of the bargain in an
objectively unreasonable or unexpected manner.’ [Citation.] While private arbitration
may resolve disputes faster and cheaper than judicial proceedings, it ‘ “may also become
an instrument of injustice imposed on a ‘take it or leave it’ basis.” ’ [Citation.] ‘ “The
courts must distinguish the former from the latter, to ensure that private arbitration
systems resolve disputes not only with speed and economy but also with fairness.” ’ ”
(Magno v. The College Network, Inc., supra, 1 Cal.App.5th at pp. 287-288.)
“ ‘[T]he paramount consideration in assessing [substantive] unconscionability is
mutuality.’ ” (Nyulassy v. Lockheed Martin Corp., supra, 120 Cal.App.4th at p. 1281.)
An arbitration agreement requires a “ ‘modicum of bilaterality,’ ” meaning the drafter
cannot require another to submit to arbitration to pursue a claim but not accept the same
limitation when it would act as the plaintiff, “without at least some reasonable
justification for such one-sidedness based on ‘business realities.’ ” (Armendariz v.
Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 117.) “When only
the weaker party’s claims are subject to arbitration, and there is no reasonable
12
justification for that lack of symmetry, the agreement lacks the requisite degree of
mutuality. [Citations.] As our [Supreme Court] recognized in Armendariz, ‘an
arbitration agreement imposed in an adhesive context lacks basic fairness and mutuality if
it requires one contracting party, but not the other, to arbitrate all claims arising out of the
same transaction or occurrence or series of transactions or occurrences.’ [Citation.] As
the court also recognized, ‘lack of mutuality can be manifested as much by what the
agreement does not provide as by what it does.’ ” (Abramson v. Juniper Networks, Inc.
(2004) 115 Cal. App. 4th 638, 657.)
Here, the binding arbitration provision limits the universe of covered disputes to
those a member college or its students or employees could bring against the Athletic
Association. The agreement provides the appeals process, including the binding
arbitration requirement, applies to “a written request by the college president requesting a
review of an inferior body’s interpretation of the rules and/or the enforcement of a
penalty.” The appeals process commences when an appeal by “[a] member college, a
student of the member college, or employees of the college” challenges a conference
commissioner’s decision to the conference appeals board.3 A conference commissioner’s
role is to “interpret and rule on the provisions of the Constitution and Bylaws for
colleges, students, college administrators, and employees of member schools in his/her
conference.”
Certainly, the Athletic Association would not bring the appeals subject to the
appeals process. The arbitration provision thus lacks mutuality because the Athletic
Association, as the drafter of the provision, would not accept the same limitation imposed
on the College when it would act as the appellant or plaintiff. (Armendariz v. Foundation
Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 117.) The Athletic Association
3 Any appeal by a student, coach, or college representative “must have the support
of the member college as indicated by the signature of the college president.”
13
has provided no justification, much less reasonable justification, for such one-sidedness
based on “ ‘business realities.’ ” (Ibid.)
Defendants argue the College forfeited the mutuality argument because it failed to
raise it in the trial court. We disagree. In its second amended petition, the College
alleged: “The [Athletic Association’s] binding arbitration procedure is grossly one-sided
and substantively unconscionable. The binding arbitration procedure applies only to
appeals by member colleges of penalties and sanctions decisions. It is not an alternative
dispute procedure applied evenhandedly to all disputes between the parties. The binding
arbitration procedure does not compel the [Athletic Association] to submit any claims it
might have against member colleges to arbitration and lacks mutuality. The arbitration
provision contains other one-sided terms as well.” The College also raised the one-
sidedness of various subsections of the arbitration provision in its motion for judgment on
writ of mandate. Moreover, unconscionability is ultimately a question of law, which we
review de novo.
The Football Association further argues the provision is bilateral because it applies
to “[t]hose wishing to use binding arbitration (Appellant)” -- meaning it could apply to an
appeal brought by the Athletic Association. To construe the provision in the manner
advanced would require us to read the sentence fragment in isolation, ignoring the
remainder of the sentence and the preceding provisions establishing the scope of the
appeals process. We decline to do so. The remainder of the quoted sentence states the
arbitration request shall be made “in writing within five (5) working days of the denial of
an appeal by the [Athletic Association] Board.” As the Athletic Association concedes in
its brief, the Athletic Association cannot appeal decisions made by its own board, and it
is, therefore, clearly not subject to the provision. As to the scope of the appeals process,
the constitution clearly establishes that the four-step appeals process applies solely to
appeals signed by a college president; a college president would have no authority nor
reason to sign an appeal on behalf of the Athletic Association.
14
The arbitration procedure lacks mutuality in other ways as well, perpetuating the
one-sided and unreasonable nature of the provision. We provide a few examples, but do
not analyze and discuss each individual subsection of the provision.
One example is the attorney fees and costs subsections, which the trial court
severed. The first subsection authorizes the arbitration panel “to award costs and fees
against the college in favor of the [Athletic Association],” if the college does not prevail
in arbitration; the second provides a college “shall be liable for [the Athletic
Association’s] fees and costs of that litigation, unless the college is the prevailing party,”
if the college pursues civil litigation rather than proceeding through the appeals process.
The procedure contains no reciprocal allowance for an award of attorney fees and costs
against the Athletic Association if a college prevails.
The Football Association argues “Civil Code 1717 renders these provisions mutual
as it would entitle any prevailing party to reasonable attorney’s fees.” The Athletic
Association echoes this position. It is true Civil Code section 1717 “ ‘was enacted to
make all parties to a contract, especially an “adhesion contract,” equally liable for
attorney’s fees and other necessary disbursements.’ ” (System Investment Corp. v. Union
Bank (1971) 21 Cal. App. 3d 137, 163.) Indeed, “[t]he statute was designed to establish
mutuality of remedy when a contractual provision makes recovery of attorney fees
available to only one party, and to prevent the oppressive use of one-sided attorney fee
provisions.” (Trope v. Katz (1995) 11 Cal. 4th 274, 285, italics added.) This does not,
however, change the unconscionable nature of the one-sided provisions as written by the
Athletic Association. (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226
Cal. App. 4th 74, 88 [“the attorney fee provision is not conscionable merely because Civil
Code section 1717 might provide employees relief from the provision’s one-sidedness”].)
The very short limitations period -- five working days from the denial of an appeal
by the Athletic Association board -- is another indicator of substantive
15
unconscionability.4 (Magno v. The College Network, Inc., supra, 1 Cal.App.5th at p. 291
[“An arbitral limitations period that is shorter than the otherwise applicable period is one
factor that supports a finding of substantive unconscionability”]; Nyulassy v. Lockheed
Martin Corp., supra, 120 Cal.App.4th at p. 1283, fn. 12 [“the shortened limitations
period . . . is one factor leading us to hold that the contract is substantively
unconscionable”].) Not only must an appellant file a request for arbitration within five
days, it must “give written notice of the facts and issues to be determined” at the same
time. A five-day limitations period is an extremely short time to request arbitration,
especially with the attendant requirement of providing notice of the facts and issues to be
determined. As the trial court noted, it “is extremely [short even] by [the Athletic
Association’s] standards, because its constitution and bylaws allow ten days to request
the first three levels of appeal, but only five days to request arbitration.”
The Athletic Association argues the College simply needed to send an e-mail or
letter to request an extension of time to file the appeal and, because the Athletic
Association “had previously granted the College an extension of time to file an earlier
appeal[,] there is no reason to believe that such a request from the College regarding the
five-day limitation would have been denied.” That may well be true, however, we
determine whether a contract provision was “ ‘ “unconscionable at the time it was made.”
’ ” (Sonic-Calabasas A, Inc. v. Moreno, supra, 57 Cal.4th at p. 1134.)
The arbitration panel selection process is yet another indicator of substantive
unconscionability. The three individuals to preside over an arbitration must be selected
from the pre-established 12-person master list. The constitution provides the 12 panel
4 The Athletic Association argues the College forfeited any reliance on this
subsection to support its unconscionability argument because it did not rely on the
subsection in the trial court. We review all provisions of the arbitration provision de
novo to determine unconscionability, including the limitations period subsection that
forms part of the challenged arbitration provision.
16
members are nominated by the Athletic Association’s and the League’s executive
directors and they “shall make the final decision regarding appointment.” The selection
procedure delineates no standards or requirements to ensure impartiality or neutrality of
the candidates. Further, although the constitution allows colleges to nominate a person to
serve on the panel and provides the colleges “shall have a reasonable voice in the
selection of the persons appointed to the Panel,” such purported accommodations were
illusory at the time the contract was made.
The trial court found, and no party disputes that, “in practice, the entire master list
was solicited, and appointed, solely by the [Athletic Association’s] Executive Director,
with no input from member colleges.” In his deposition, the executive director testified
he never solicited feedback from member colleges before placing someone on the master
list, there was no process to facilitate nominations from colleges, “[t]here [wa]s no such
process established as to how the members would be able to offer or provide a reasonable
voice,” and the list was kept secret unless and until a college actually submitted an appeal
to arbitration. Indeed, the College requested a copy of the master list of arbitrators in the
absence of filing a request for arbitration, and the Athletic Association denied its request.
The deposition testimony of the Athletic Association’s executive director shows that this
panel selection procedure has been in place since well before July 2012, the edition date
of the constitution (i.e., the contract) at issue here.
In reality, the Athletic Association unilaterally selected all individuals on the
master arbitration panel list and did so in secrecy, precluding the colleges from
commenting on or objecting to any potentially biased panel member. A college would
also have no way of knowing when to submit a nomination to fill a vacancy. This
procedure does not achieve the “minimum levels of integrity” required to enforce an
agreement to arbitrate. (See Graham v. Scissor-Tail, Inc., supra, 28 Cal.3d at p. 825; see
also Magno v. The College Network, Inc., supra, 1 Cal.App.5th at p. 291 [procedure
allowing party imposing arbitration provision to unilaterally select arbitrator and limiting
17
the subscribing party to providing or “reasonably” withholding consent was indicia of
substantive unconscionability]; American Home Assurance Co. v. Benowitz (1991) 234
Cal. App. 3d 192, 203-204 [provision allowing one party to unilaterally select arbitrator is
unconscionable and unenforceable; such a process creates “a presumptive bias in favor of
the party who made the selection”]; Armendariz v. Foundation Health Psychcare
Services, Inc., supra, 24 Cal.4th at p. 103 [neutral arbitrator requirement “essential to
ensuring the integrity of the arbitration process”].)
III
The Unconscionable Provisions Cannot Be Severed
The final question is whether the unconscionable provisions warrant a refusal to
enforce the entire arbitration agreement, or whether the offending provisions may be
limited or severed to avoid an unfair result. (Civ. Code, § 1670.5, subd. (a); Armendariz
v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 124.) “In deciding
whether to sever terms rather than to preclude enforcement of the provision altogether,
the overarching inquiry is whether the interests of justice would be furthered by
severance; the strong preference is to sever unless the agreement is ‘permeated’ by
unconscionability.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal. App. 4th 771, 802.)
“An agreement to arbitrate is considered ‘permeated’ by unconscionability where
it contains more than one unconscionable provision. [Citation.] ‘Such multiple defects
indicate a systematic effort to impose arbitration on [the nondrafting party] not simply as
an alternative to litigation, but as an inferior forum that works to the [drafting party’s]
advantage.’ [Citation.] An arbitration agreement is also deemed ‘permeated’ by
unconscionability if ‘there is no single provision a court can strike or restrict in order to
remove the unconscionable taint from the agreement.’ [Citation.] If ‘the court would
have to, in effect, reform the contract, not through severance or restriction, but by
augmenting it with additional terms,’ the court must void the entire agreement.” (Magno
v. The College Network, Inc., supra, 1 Cal.App.5th at p. 292.)
18
As noted above, the arbitration agreement contains several serious defects -- most
significantly the lack of mutuality. The procedural unconscionability coupled with the
substantive unconscionability renders the arbitration agreement so “ ‘permeated’ by
unconscionability [it] could only be saved, if at all, by a reformation beyond our
authority.” (Mercuro v. Superior Court (2002) 96 Cal. App. 4th 167, 182.) The
arbitration agreement is therefore unenforceable, and the trial court erred in compelling
arbitration of the College’s claims.
DISPOSITION
The judgment is reversed. Plaintiffs shall recover their costs on appeal. (Cal.
Rules of Court, rule 8.278(a)(1) & (2).)
/s/
Robie, Acting P. J.
We concur:
/s/
Duarte, J.
/s/
Renner, J.
19