Nunez v. Cycad Management LLC ( 2022 )

Filed 3/18/22; Certified for Publication 4/11/22 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
JOSE MERCED NUNEZ, B306986
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No.
v. 19STCV30365)
CYCAD MANAGEMENT LLC,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los Angeles
County, Dennis J. Landin, Judge. Affirmed.
David Weiss Law and Nicholas A. Weiss for Defendant and
Appellant.
Alireza Alivandivafa; Light Law Group and Azad M. Marvazy for
Plaintiff and Respondent.
________________________________________
Appellant Cycad Management LLC moved to compel arbitration
of respondent Jose Merced Nunez’s lawsuit. (Code Civ. Proc., § 1281.2.)
In support of the motion, Cycad offered a “Mutual Arbitration
Agreement” (Agreement). The trial court found the Agreement
unconscionable and refused to enforce it.
Substantial evidence supports factual findings that the
Agreement is adhesive because it was presented to Nunez as a
nonnegotiable condition of his employment. It is procedurally
unconscionable because it was given to Nunez in English, which he
cannot read, without adequate explanation or a fee schedule. It is
substantively unconscionable because it allows the arbitrator to shift
attorney fees and costs onto Nunez and drastically limits his ability to
conduct discovery. We affirm the denial of Cycad’s motion to compel
arbitration.
FACTS AND PROCEDURAL HISTORY
Cycad hired Nunez as a gardener in 2018. It required him to sign
the Agreement, which mandates arbitration of “all disputes between
Employee and Company relating, in any manner whatsoever, to the
employment or termination” of the employee. It encompasses wage,
tort, statutory, discrimination, and contract claims. It limits discovery
to “three depositions and an aggregate of thirty (30) discovery requests
of any kind, including sub-parts.”
Nunez filed suit on August 27, 2019. 1 Cycad answered the
complaint and initiated discovery. In April 2020, Cycad’s attorney
1 The complaint is not in our record. Cycad states that Nunez
asserts claims for battery; assault; violation of the Ralph Civil Rights
Act of 1976 (Civ. Code, § 51.7); violation of the Tom Bane Civil Rights
Act (Civ. Code, § 52.1); failure to provide a safe workplace; violation of
right to protection from bodily harm; violation of the Whistleblower
Protection Act; violations of Labor Code sections 201–203, 1198.5, and
6310; infliction of emotional distress; and wrongful termination in
violation of public policy. Defendant Bassam Alghanim joined Cycad’s
motion to arbitrate but did not appeal. Defendant Wennington
Corporation, N.V. did not join the motion or file a notice of appeal.
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found the Agreement and demanded arbitration. Nunez rebuffed the
demand, asserting that Cycad waived its right to arbitrate; that he did
not sign the Agreement or signed without informed consent; and the
Agreement is unconscionable.
Cycad filed a motion to stay the litigation and compel arbitration,
asserting that the Agreement is enforceable, covers the dispute and is
not unconscionable. It argued that it did not waive arbitration by
answering the complaint or serving discovery requests.
In opposition, Nunez’s counsel declared that arbitration is “an
unfair forum” for employees. Moreover, Cycad served discovery
requests that far exceed the limit imposed in the Agreement. Cycad did
not prove the existence of an arbitration agreement: The signature
page is separate from the rest of the Agreement, which was not
authenticated. The Agreement is unconscionable because it is adhesive
and is in a language (English) that Nunez cannot read.
Nunez declared that he is “a native Spanish speaker with limited
spoken English skills and an even more limited ability to read and
write in English.” He speaks only Spanish at home. Cycad presented
him “with a bunch of documents to sign, rushed, while I was working,
where I was told that the documents simply referred to a change of
company.” Nunez had no opportunity to review the documents or idea
they included a waiver of his right to sue his employer. He declared, “I
could not understand the documents that were provided in English, as I
could not read or understand English well enough to understand such
documents, a fact that the Defendants were unquestionably aware of”
because they used bilingual coworkers to translate work orders and
requests for him and gave him language lessons with a tutor.
Nunez declared that the documents were forced on him by
manager Dilip Rodrigo, whose assistant told Nunez in Spanish “that I
should sign the documents, or my employment would be terminated.”
Nunez did not receive a copy of the documents, “which could have
allowed me to translate them at home” with the help of family
members, and “[t]here was never a meeting where the concept and
content of the documents, including the alleged arbitration agreement,
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were explained to me in English or Spanish.” No one gave him the
American Arbitration Association (AAA) rules, which govern the
Agreement. He believed he “had no choice but to sign these documents
in order to have and keep [his] job.”
In reply, Rodrigo declared that he handed Nunez an offer of
employment that referred to the Agreement. He did not tell Nunez to
sign the documents immediately or be terminated. Instead, he
instructed Nunez to take the documents home. Nunez returned the
signed employment offer and Agreement 12 days later, and never asked
Rodrigo to explain any part of them. Rodrigo does not state that he
gave Nunez a copy of the AAA rules and fee schedule.
Cycad cited Rodrigo’s declaration to prove Nunez was not rushed
or forced to sign the Agreement without having a chance to understand
its contents. The Agreement is not unconscionable because Nunez had
time to seek translation of it into Spanish by his family or bilingual
employees at Cycad.
The Court’s Ruling
The court issued a written ruling on July 6, 2020. It
acknowledged a strong public policy favoring arbitration and found
Cycad proved the existence of an arbitration agreement bearing
Nunez’s signature agreeing to submit all disputes, claims, or
controversies arising from his employment to arbitration. It rejected
Nunez’s claim questioning his signature because it is on a separate
page from the body of the Agreement.
The court determined that the Agreement is procedurally
unconscionable because it “was presented to Plaintiff in a manner that
renders it a contract of adhesion, oppression and surprise, especially
due to unequal bargaining power.” Cycad drafted it and “no evidence
suggests that employees could either reject or negotiate the terms of
the provision,” which was “a condition of Plaintiff’s employment.”
Further, “despite knowing Plaintiff was not proficient in English,
Cycad did not explain the arbitration provision in Spanish or provide a
Spanish-language copy of it,” which constitutes oppression and
surprise. “Cycad failed to draw Plaintiff’s attention to the arbitration
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provision or explain its import” and “[t]here is inadequate evidence that
Plaintiff was instructed to ask questions or seek assistance.”
The court found substantive unconscionability because the
Agreement “unfairly assigns arbitration fees and costs to Plaintiff and
imposes limitations on discovery.” It “does not limit the amount of
arbitration fees or provide for waiver of fees” if they are unaffordable.
Discovery limitations work to the advantage of employers, who possess
most of the evidence, and curtail employees’ ability to substantiate
claims.
The court concluded, “In light of the pervasiveness of the
unconscionable provisions related to arbitration and the fact that the
purported scope of the arbitration provisions exceeded the plaintiff’s
reasonable expectations, there are no isolated provisions that can be
severed and the arbitration provisions as a whole are unenforceable.”
The court denied the motion to compel arbitration.
DISCUSSION
1. Appeal and Review
“Arbitration is favored in this state as a voluntary means of
resolving disputes, and this voluntariness has been its bedrock
justification.” (Armendariz v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal.4th 83, 115 (Armendariz).) Arbitration agreements
are “valid, enforceable and irrevocable, save upon such grounds as exist
for the revocation of any contract.” (Code Civ. Proc., § 1281.) The court
may refuse to enforce an unconscionable contract. (Civ. Code,
§ 1670.5.) The denial of a petition to arbitrate is appealable. (Code
Civ. Proc., § 1294, subd. (a).)
“The unconscionability of an arbitration agreement is a question
of law that we review de novo, applying general principles of California
contract law to determine the agreement’s enforceability. (Carmona v.
Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 82
[(Carmona)].) To the extent the trial court relied on contested facts in
making its determination, we review the court’s factual determinations
for substantial evidence. (Ibid.) We will only reverse a trial court’s
refusal to sever any unconscionable portions upon a showing of abuse of
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discretion.” (Dougherty v. Roseville Heritage Partners (2020) 47
Cal.App.5th 93, 102.)
2. Unconscionability
“Unconscionability analysis begins with an inquiry into whether
the contract is one of adhesion. [Citation.] ‘The term [contract of
adhesion] signifies a standardized contract, which, imposed and drafted
by the party of superior bargaining strength, relegates to the
subscribing party only the opportunity to adhere to the contract or
reject it.’ [Citation.] If the contract is adhesive, the court must then
determine whether ‘other factors are present which, under established
legal rules—legislative or judicial—operate to render it
[unenforceable].’ ” (Armendariz, supra, 24 Cal.4th at p. 113.)
To declare an agreement unenforceable, a court must find both
procedural and substantive unconscionability. Procedural
unconscionability focuses on oppression or surprise due to unequal
bargaining power; substantive unconscionability looks at overly harsh
or one-sided results. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th
1237, 1243; AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333,
340.)
a. Procedural Unconscionability
Cycad has superior bargaining power over gardeners who work
for it. It drafted the Agreement and presented it to Nunez as a
condition of employment, on a take it or leave it basis. Cycad concedes
the Agreement is a contract of adhesion but claims there is “ ‘no other
indication of oppression or surprise’ ” and Nunez had “ample time” to
review the contract, ask questions, and have his family or Cycad
translate it to Spanish.
By contrast, Nunez declares that he had no opportunity to review
the Agreement, which was forced on him in a rush while he was
working. He was told the English-language Agreement involved a
change of company, not that it waived his right to a jury trial, and was
instructed to sign it or be fired. (Compare to Alvarez v. Altamed Health
Services Corp. (2021) 60 Cal.App.5th 572, 591 [arbitration contract was
6
mailed to plaintiff before she began employment with defendant, she
had time to review it and did not claim inability to read English].)
The trial court resolved the facts against Cycad. When the court
weighs conflicting declarations, we defer to its factual determinations;
we have no authority to make new credibility findings. (Shamblin v.
Brattain (1988) 44 Cal.3d 474, 479.)
The court found the Agreement “was presented to [Nunez] in a
manner that renders it a contract of adhesion, oppression and
surprise.” Circumstances showing oppression include (1) the amount of
time an employee is given to consider a contract; (2) the pressure
exerted on him to sign it; (3) its length and complexity; (4) his
education and experience; and (5) whether he had legal assistance.
(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126–127.) Significant
oppression is shown when, as here, an arbitration agreement is
presented to an employee while he is working, along with other
documents, neither its contents nor its significance are explained, and
the employee is told he must sign the agreement to keep his job. (Id. at
p. 127.)
The court found it unconscionable that “despite knowing Plaintiff
was not proficient in English, Cycad did not explain the arbitration
provision in Spanish or provide a Spanish-language copy of it.”
Procedural unconscionability arises when an arbitration agreement
“was neither provided in a Spanish-language copy nor explained to
respondents who did not understand written English.” (Penilla v.
Westmont Corp. (2016) 3 Cal.App.5th 205, 209 (Penilla).)
It is undisputed that Nunez does not read English and Cycad did
not provide a Spanish version of the Agreement. The Agreement is
seven pages long and the AAA rules attached to the motion to compel
are 41 single-spaced pages. It is untenable for Cycad to argue that
Nunez’s family or a coworker could translate 48 pages of legalese into
Spanish while Nunez listened to a translation that might not be
correct, depending on the proficiency of the translator. (See Carmona,
supra, 226 Cal.App.4th at p. 85 [arbitration clause was unconscionable
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where it was not translated into Spanish for employees who did not
read English].)
Rodrigo handed Nunez the Agreement without explaining its
import. It allows the arbitrator to award attorney fees to the prevailing
party and to allocate between the parties the cost of filing,
administrative, and arbitrator’s fees. The potential cost of the
arbitration was an unknown surprise to Nunez because Cycad failed to
provide the AAA fee schedule. Failure to provide documentation of
arbitration fees supports a finding of unconscionability because it
causes surprise. (Penilla, supra, 3 Cal.App.5th at p. 217.)
Cycad’s failure to provide a Spanish version of the Agreement or
a fee schedule shows oppression and surprise amounting to procedural
unconscionability. Cycad insists that Nunez was not rushed into
signing the Agreement or face termination, but the court did not
believe Cycad’s claim.
b. Substantive Unconscionability
Substantive unconscionability examines the fairness of a
contract’s terms to ensure that a contract of adhesion does not impose
terms that are overly harsh, unduly oppressive, or unfairly one-sided.
(OTO, L.L.C. v. Kho, supra, 8 Cal.5th at pp. 129–130.) The court
focuses on terms that unreasonably favor the more powerful party,
impair the integrity of the bargaining process, contravene public
interest or policy, or attempt to impermissibly alter fundamental legal
duties. This includes unreasonable or harsh terms or ones that
undermine the nondrafting party’s reasonable expectations. (Id. at p.
130.) Where there is substantial procedural unconscionability, “even a
relatively low degree of substantive unconscionability may suffice to
render the agreement unenforceable.” (Ibid.) This is particularly true
if an employer used “deceptive or coercive” tactics. (Id. at pp. 125–126.)
Substantive aspects of the Agreement militate against
enforcement, when combined with unfair and deceptive tactics of giving
Nunez an English contract and misrepresenting its contents.
The Agreement enables the arbitrator to impose on Nunez all
attorney fees plus filing, administrative, and arbitrator’s fees. When
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employment is conditioned on mandatory arbitration, the employee
cannot be forced to pay costs that would not be incurred if the case were
litigated in court. (Armendariz, supra, 24 Cal.4th at pp. 110–111.)
Absent the Agreement, Nunez could litigate without the prospect of
paying Cycad’s attorney fees.
Nunez alleges violations of civil rights laws. (See fn. 1, ante.)
They confer unwaivable statutory rights and prohibit an arbitrator’s
imposition of attorney fees and costs because it would deter the filing of
hate crimes claims. (D.C. v. Harvard-Westlake School (2009) 176
Cal.App.4th 836, 839.) By empowering the arbitrator to impose
arbitration and attorney fees on the losing party, the Agreement
violates Armendariz. (Wherry v. Award, Inc. (2011) 192 Cal.App.4th
1242, 1248–1249 (Wherry).)
The Agreement limits discovery to “three depositions and an
aggregate of thirty (30) discovery requests of any kind, including sub-
parts.” This places an employee “at a disadvantage in proving her
claim while [the employer] is likely to possess many of the relevant
documents and employ many of the relevant witnesses,” unfairly
preventing Nunez from vindicating statutory claims. (Fitz v. NCR
Corp. (2004) 118 Cal.App.4th 702, 717; Kinney v. United Healthcare
Servs. (1999) 70 Cal.App.4th 1322, 1332 [because an employer “is
presumably in possession of the vast majority of evidence that would be
relevant to employment-related claims against it, the limitations on
discovery, although equally applicable to both parties, work to curtail
the employee’s ability to substantiate any claim”]; De Leon v. Pinnacle
Property Management Services, LLC (2021) 72 Cal.App.5th 476, 487–
488 [arbitration provision in employment contract limiting parties to 20
interrogatories and three depositions was unfair to employee].)
3. Severability
A court may sever unconscionable provisions and enforce the
remainder of the agreement, or it may “refuse to enforce the contract.”
(Civ. Code, § 1670.5, subd. (a).) The interests of justice govern
severance. (Armendariz, supra, 24 Cal.4th at p. 124.) “[M]ultiple
defects indicate a systematic effort to impose arbitration on [a weaker
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party] . . . as an inferior forum that works to [the stronger party’s]
advantage.” (Ibid.)
Cycad presented Nunez with an arbitration agreement in a
language he cannot read, misrepresented the nature of the document,
denied him an opportunity to review it, included unfair and onerous
provisions limiting discovery, and chilled his ability to claim civil rights
violations by dangling the financial risk of paying Cycad’s attorney fees
if he loses.
Though public policy generally favors arbitration, “when the
agreement is rife with unconscionability, as here, the overriding policy
requires that the arbitration be rejected (Armendariz, supra, 24 Cal.4th
at p. 127).” (Wherry, supra, 192 Cal.App.4th at p. 1250.) Eliminating
unfair clauses in the Agreement cannot save it: Nunez never knew
what he signed in the first place, having done so under compulsion,
threatened with termination if he failed to sign a document in a foreign
language on the spot. The Agreement is not a voluntary means of
resolving disputes between the parties. (Armendariz, at p. 115.)
Accordingly, we decline Cycad’s invitation to remand the case for
reconsideration due to “changed circumstances.” 2
2 Given our conclusion that the Agreement is unconscionable, we
do not reach Nunez’s contentions that it is not properly authenticated,
lacks mutual consent, or that third party defendants did not sign it and
Cycad waived arbitration by failing to promptly invoke it. The trial
court made no factual findings on these issues.
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DISPOSITION
The order denying appellant’s motion to compel arbitration is
affirmed. Appellant to bear all costs on appeal.
LUI, P. J.
We concur:
ASHMANN-GERST, J.
CHAVEZ, J.
11
Filed 4/11/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
JOSE MERCED NUNEZ, B306986
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No.
v. 19STCV30365)
CYCAD MANAGEMENT LLC, ORDER CERTIFYING
OPINION FOR
Defendant and Appellant. PUBLICATION
THE COURT:
The opinion filed in the above-entitled matter on March 18, 2022,
was not certified for publication in the Official Reports. For good cause
it now appears that the opinion should be published in the Official
Reports, and it is so ordered.
LUI, P. J. ASHMANN-GERST, J. CHAVEZ, J.