California Mediation and Arbitration

Arbitration/Employment/Unconscionability: Second District, Div. 7, Reverses Trial Court, and Finds Employment Agreement Arbitration Requirement Is Not Unconscionable

Court Uses Full Bag Of Tools To Save Arbitration Provision

     Life boat drill.  Between ca. 1910 and ca. 1915.  Library of Congress.

     The Courts of Appeal have many tools for interpreting arbitration provisions, including sliding scales for weighing unconscionability, incorporation by reference, application of the implied covenant of good faith and fair dealing, severability, and “reasonable” interpretation of an undefined term.  All those tools were applied to save an arbitration provision from unenforceability in the following employment case, Serpa v. California Surety Investigations, Inc., Case No. B237363 (2nd Dist. Div. 7 April 19, 2013; mod’d April 26, without changing judgment) (Perluss, J., author 3:0) (published).

     Plaintiff Serpa sued her employer CSI alleging FEHA claims for sexual harassment, gender discrimination, retaliation, and other employment related claims.  The trial court denied the employer’s motion to compel arbitration on the ground that the arbitration provision was unconscionable and therefore unenforceable.  The employer appealed.

     First, applying the sliding scale of unconscionability, the Court of Appeal found that the contract was indeed one of adhesion, and therefore at least somewhat procedurally unconscionable.  However, with a low degree of procedural unconscionability, the degree of substantive unconscionability would have to be high to make the arbitration provision unconscionable. 

     Second, there was a question as to whether the arbitration provision was written broadly enough so as to result in a mutual obligation to arbitrate.  Here, incorporation by reference helped the employer, because the arbitration provision incorporated an employee handbook that evidenced an intent to arbitrate “any dispute” arising out of the employment.

     Third, the arbitration provision, which allowed the employer to alter the terms of any policy contained in the handbook at its sole discretion and without notice appeared to be illusory.  Not so, said the Court of Appeal, relying on the covenant of good faith and fair dealing implied in every contract.  The party with the authority to alter the contract may not change it in such a manner as to frustrate its purpose.

     Fourth, the contract explicitly provided that each party would bear its own attorney’s fees.  That, said the Court of Appeal, was unconscionable, because it deprived Serpa of an unwaivable statutory remedy to recover fees if she prevailed on her FEHA claims in arbitration.  Not to worry – the unconscionable provision could be severed. 

     Fifth, the Court applied a reasonable interpretation to a seemingly vague provision in the agreement.  The agreement required the employee to submit her dispute informally to the company before seeking arbitration.  Serpa argued that this unfairly gave her employer a “a free peek” at her case.  But the Court interpreted “informal internal efforts”, which were not defined, to mean nothing more “than some informal notice of a grievance before proceeding to arbitration.” 

    Thus, the Court of Appeal rescued the arbitration provision, finding that it was not unconscionable, and reversing the trial court’s denial of the employer’s motion to arbitrate.

Arbitration/Consumers/FAA/Unconscionability: 9th Circuit Holds Arbitration Clause In Consumer Credit Contract Lacking “Holder Rule” Language Is Not Unconscionable, And Doesn’t Fall Under “Public Injunction” Exception to Arb

Dissenting Judge Pregerson Attaches “Dense, Small Print, And Blurry Nine-Page Contract” As Appendix

     We posted on December 16, 2012 about the Kilgore v. Keybank oral argument to the Ninth Circuit, sitting en banc.  The case involves a putative class action by former students of a failed helicopter flight-training school seeking injunctive relief against the bank that originated their student loans and the loan servicer.  The complaint alleged defendants violated the California Unfair Competition Law (UCL), because the Note and contracts with students failed to include language required by the Federal Trade Commission’s “Holder Rule.”  This rule requires consumer credit contracts to include language that a holder of the consumer credit contract is subject to claims and defenses which the debtor could assert against the seller of goods or services.  In the case of the flight school, students took out loans that the lender quickly resold on the secondary market, and the students of the failed school were left “holding the bag.”  The district court found the contractual arbitration clause to be unconscionable.  The Court of Appeals, sitting en banc, has now reversed, holding that the arbitration requirement, which includes a class waiver, is not unconscionable, and does not fit into the narrow “public injunction” exception to the arbitration requirement.  Kilgore v. Keybank, No. 09-16703 (9th Cir. April 11, 2013) (Hurwitz, J., author) (for publication).

     The en banc majority rejected the argument that the Note’s ban on class arbitration is substantively unconscionable under California law; that issue was foreclosed by AT&T Moblility v. Concepcion, 131 S.Ct. 1740 (2011).  The risk that students will be saddled with prohibitive arbitration costs was rejected as “too speculative”.  The procedural unconscionability argument was also rejected, primarily because the arbitration clause allowed “students to reject arbitration within sixty days of signing the Note.” 

      A carve-out from the arbitration requirement has been judicially created in Broughton v. Cigna Healthplans of Cal., 988 P.2d 67 (Cal. 1999).  Where plaintiffs function as a private attorney general, enjoining future deceptive practices on behalf of the general public, injunction claims are not arbitrable.  The hot issue is whether Broughton has also been preempted by the Federal Arbitration Act and Concepcion.  However, the Court avoided deciding this important issue by determining that the students were acting to further their own interests, and the action complained about was past rather than prospective action.  

     Judge Pregerson, dissenting, attaches an an Appendix “the dense, small print, and blurry nine-page contract that Silver State thrust on the students at career fairs and open houses.” 

       Among the points made by Judge Pregerson are that this is a “take it or leave it” consumer contract introducing at least some procedural unconscionability under the circumstances.  Of course, there is the 60 day provision allowing for an opt-out – tough to get around, and never mind that students don’t read the provisions.  As to “substantive unconscionability”, a confidentiality provision requires the parties to maintain confidentiality of any claim they arbitrate.  This works against plaintiffs who can’t share information, and in favor of the defendant that gets to arbitrate separately with each plaintiff.  Filing a civil action costs less than $500; filing the same claim in arbitration runs more than $4000.  Finally – and this is interesting – one of the two arbitrators named in the contract ruled in favor of banks and credit card companies, and against consumers 94 % of the time.  Judge Pregerson is alone in his dissent.

Arbitration/Automobiles/Unconscionability: Arbitration Provision In Automobile Purchase Held Procedurally But Not Substantively Unconscionable

“Sliding Scale” Unconscionability Analysis Saves Arbitration Provision

      In a published decision, the Court of Appeal reverses the trial court’s denial of a petition to compel arbitration based on an automobile purchase contract.  Vasquez v. Greene Motors, Inc., Case No. A134289 (1st Dist. Div. 1 March 27, 2013) (Margulies, Acting P.J., author 3:0) (published).

      These contracts will be found procedurally unconscionable to some degree, because they are “take it or leave it” contracts of adhesion.  “In light of the minimal level of procedural unconscionability and the absence of significant substantive unconscionability, however, we reverse the trial court’s denial of the petition to compel.” 

      So what was the “minimal level” of substantive unconscionability here? 

      First, the first $2,500 in costs fell upon the seller, after which the buyer was responsible, subject to cost shifting by the arbitrator at the end of the proceeding.  Unconscionable?  Outside the area of employment, said the Court, it is not unconscionable for the plaintiff to pay costs.

      Second, an appeal to three arbitrators was possible if the award was zero, or over $100,000.  Unconscionable?  No, said the Court.  The buyer was most likely to appeal awards of zero, and the seller was most likely to appeal awards over $100,000.  So there were advantages and disadvantages to each.

      Third, self-help and small claims were exempted from arbitration.  Unconscionable?  No, said the Court, because the self-help exemption benefited sellers, and the small claim exemption benefited buyers.

      Fourth, the contract required class action waivers and arbitration of statutory claims.  Unconscionable?  No, said the Court, AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011) (Concepcion) permits waiver of class action claims in arbitration.  I note that Concepcion does not expressly address arbitration of statutory claims.   (While the Court of Appeal says that the same rationale applies to permitting waiver of class action claims and to “preemption of the statutory ban on class action waivers,” what is not clear to me is whether arbitration here required arbitrating other statutory claims.)

      Bottom line:  the order denying the petition to compel arbitration is reversed.

Arbitration/Employment/Unconscionability: Second District, Division 8 Tanks Employment Arbitration Provision On Basis of Unconscionability

Main Problem is One-Sidedness of Arbitration Provision

     Compton v. Superior Court, Case No. BC448343 (2nd Dist. Div. 8 March 19, 2013) (published) starkly presents the conflicting views of judges confronted with deciding whether an employment arbitration provision is unconscionable.

      Leasa Compton appealed the order granting her former employer, American Management Services’s (AMS’s) petition compelling her to arbitrate her class action complaint for violations of Labor Code provisions governing payment of wages.  Appellant Compton raised two issues:  (1) the employer had waived arbitration by litigating extensively; (2) the arbitration provision was unconscionable. 

      Justice Rubin, with Justice Flier concurring, authored the opinion reversing the trial court’s order.  The first issue – waiver of the right to arbitrate through delay – was not addressed, perhaps because the employer sought arbitration, after extensive litigation, but immediately after Concepcion was decided by the United States Supreme Court, opening up the argument for employer that it would have been futile for it to seek arbitration before Concepcion was decided, holding class action waivers in arbitration are not per se unenforceable.  In any case, the issue of delay and waiver did not need to be addressed, because Justice Rubin disposed of the enforceability of the arbitration provision issue on the grounds of procedural and substantive unconscionability.

      The trial court’s decision was reviewed on a de novo standard, as there appeared to be no facts in dispute.  The provision was procedurally unconscionable, presented on a “take it or leave it” basis, as a condition for unemployment, unaccompanied by the applicable arbitration rules.  Substantive unconscionability resulted because the provision required employees to arbitrate claims they were most likely to bring, while allowing the employer to go the judicial route for certain claims it was more likely to bring; statutory rights to attorney’s fees might not be applied in arbitration; and the statute of limitations provisions seemed to favor the employer.

      Justice Bigelow, dissenting, believes that Concepcion has changed the landscape, and that the Majority failed to pay it proper homage.    She concludes that the arbitration provision is not "so ‘tainted with illegality’ as to render it wholly unenforceable”, that an injunctive relief carve-out for litigating trade secret and unfair competition cases “could be easily severed”, and that she is not “offended by the procedural path to litigation here.”

      Plenty to chew on here for advocates on both sides.

Arbitration/Unconscionability/Arbitrability: Sixth District Rules Tort Claims, Including Battery, Are Arbitrable

Decision Reversing Trial Court’s Findings of Unconscionability and Non-Arbitrability of Tort Claims is Very Fact Specific – But Ruling On Tort Claims Is Worth Noting

      Bigler v. The Harker School, Case No. H037450 (6th Dist. February 6, 2013) (Elia, J., author 3:0) (published) is a reminder judicial determinations of unconscionability and arbitrability are often nuanced and fact specific, and the burden of proof may tip the balance in reaching an outcome.  Here, the Court of Appeal signaled the outcome twice, by emphasizing that the party opposing arbitration “had the burden of proving the defense of unconsionability”, and the burden to “demonstrate than an arbitration clause cannot be interpreted to require arbitration of the dispute.”  The superior court thought the plaintiff, who sued her private school, met the burden for opposing arbitration, but the Court of Appeal held otherwise.

     Plaintiff Shivani, enrolled as a student in The Harker School, sued the school alleging she had been wrongfully accused of an honor code violation, and that a teacher who humiliated her, had pushed her to the ground.  The school petitioned to compel arbitration, under a broad-based arbitration clause.  The superior court denied the petition, finding the contract unconscionable, and finding that it was “highly unlikely” that the plaintiffs agreed to arbitrate, expecting tort claims would be included in the process.

     On the issue of unconscionability, here are examples of what I mean by “nuanced” and “fact specific”:  The Court of Appeal agreed that the failure to attach AAA rules is “of minor significance”; was “less convinced than the superior court that the other circumstances indicate procedural unconscionability” and was “not as troubled as was the superior court” by a carve-out of tuition disputes from arbitration.  Put this all on a scale and weigh it, and it is the burden of proof that tips the scale against plaintiff.

      What probably made this case worthy of publication is the Court of Appeal’s effort to distinguish other cases, holding that tort claims were not arbitrable, Victoria v. Superior Court, 40 Cal.3d 734 (1985) and RN Solution, Inc. v. Catholic Healthcare West, 165 Cal.App.4th 1511 (2008):  “In each of these cases, the lawsuit focused on conduct that was so removed from the professional relationship between the parties that it could not have been contemplated when they executed their agreement to arbitrate disputes.”  Here, however, alleged battery, negligent infliction of emotional distress, defamation, and negligent hiring, took place on the school campus, with students present, and/or related to the student’s relationship with the school.  Indeed, the plaintiffs were somewhat hoist by their own pleading, having alleged that torts were committed by persons “acting in the course and scope of their employment and agency . . . “

     And if that’s not enough, there is always the burden of proof.

     The Court of Appeal opinion ends:  “Harker may well be found liable under the parties’ contract, on a tort theory, or both, but it is the arbitrator who must resolve the questions presented in Shivani’s complaint.”  “Well”?  Is that an oblique caution, or what?

    

    

Arbitration/Unconscionability/Severability: First District, Division 1 Affirms Denial Of Petition To Arbitrate Car Sales Contract Dispute On Grounds Of Unconscionability

The Issue Is Also Pending In The California Supreme Court

     The latest in the crop of cases concerning car sales contracts and petitions to compel arbitration is Natalini v. Import Motors, Inc., Case No. A133236 (1st Dist. Div. 1 January 7, 2013) (Simons, J., author) (unpublished).  The Court had no trouble affirming the denial of the petition to arbitrate on grounds of procedural and substantive unconscionability.  As recently as New Year’s Day, I posted about arbitration, unconscionability, and an auto sales contract involving a Dodge Avenger in another case. 

      The analysis here in Natalini fits the template for these cases:  the contract is an adhesive “take it or leave it” contract, and there is an element of surprise, because the arbitration provision is not particularly conspicuous, on the back of a form, and not pointed out to the buyer.  That satisfies the “procedural unconscionability” prong. 

     As to the “substantive unconscionability” prong, the arbitration provision shares characteristics of other one-sided arbitration provisions designed to favor the car dealer in car sales contracts.  Thus, the arbitration provision authorizes an appeal resulting in new arbitration before a three-arbitrator panel only for an award of $0 or in excess of $100,000, the provision authorizes an appeal resulting in a new arbitration before a three-arbitrator panel if the award includes injunctive relief, and the provision exempts self-help remedies, perhaps the car dealer’s most significant remedies.  Those provisions, treated as one-sided in other cases, added up to substantive unfairness.  And because the arbitration provision can be considered “permeated by unconscionability” if it has more than one unlawful provision, the trial court does not abuse its discretion by declining to sever unconscionable aspects of provision.

      Keep in mind that Sanchez v. Valencia Holding Company (S199119) is pending before the California Supreme Court.  The issue presented in Sanchez is: “Does the Federal Arbitration Act . . . as interpreted in AT&T Mobility LLC v. Concepcion . . . preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable.”

Arbitration/Consumers/Unconscionability: Second Dist. Div. 3 Affirms Order Denying Petition To Compel Arbitration Of Consumer Dispute Over Used Car

Procedural and Substantive Unconscionability Drive The Result

     Arbitration clauses, automobile purchases and leases provide a ripe area for dispute.  In 2012, I reported on a number of those disputes.  See my posts of April 12, 2012 (Kolev v. Euromoters West/The Auto Gallery; opinion withdrawn by 9th Cir.), August 1, 2012 (Caron v. Mercedes-Benz Financial Services USA LLC), August 26, 2012 (Goodridge v. KOI Automotive), and October 16, 2012 (Sherf v. Rusnak/Westlake).  In our next case, the purchaser sued after encountering problems with his used Dodge Avenger.  Defendants, the finance corporation and dealership, appealed the denial of their petition to compel arbitration.  Norton v. Ford of Santa Monica, et al., Case No. B237273 (2nd Dist. Div. 3 Dec. 28, 2012) (Kitching, J., author) (unpublished). 

     These consumer cases typically turn now on the issue of whether the arbitration clause is “unconscionable.”  In Norton, the arbitration provision crashed.

 

 

 

Used cars for sale.  Marion Post Wolcott, photographer.  Dec. 1940.  Library of Congress

     The arbitration clause was procedurally unconscionable because it contained “elements of surprise.”  Specifically, the arbitration clause was “inconspicuous” because it was located on the back side of a page, and did not have to be initialed.  The dealer did not draw the buyer’s attention to the clause.

     Substantive unconscionability resulted from the one-side nature of the arbitration provision – though it might appear superficially neutral on its face, it primarily benefited the dealer.  Example:  “A car buyer does not benefit from a provision allowing the dealership to seek a new arbitration of an award of more than $100,000 because the buyer, not the dealer, will be the party more likely to recover an award of that size. If the buyer obtains an award under the $100,000 threshold but believes it is too low, the buyer has no option to request a new arbitration unless the award is $0.”  Additionally, the “arbitration provision requiring the party requesting a new arbitration to advance filing fees and arbitration costs is unconscionable because it allows a financially strong automobile dealership to request a new arbitration while discouraging or preventing a cash-strapped consumer from doing so.”

     Thus, the Court of Appeal readily affirmed the trial court’s order denying the petition to arbitrate, based on procedural and substantive unconscionability.

Arbitration/Employment/Enforceability/FAA/CCP 1281.8: Second District, Div. 1 Reverses Order Denying Motion To Compel Arbitration – Mutuality Of Employer/Employee Provisions Is Key

“In particular, we do not find unconscionable a provision in the arbitration agreement allowing either party to seek provisional remedies . . . “

     For the practitioner, Baltazar v. Forever 21, Inc., Case No. B237173 (2nd Dist. Div. 1 Dec. 20, 2012) (Mallano, J.) (published), is worth reading because it provides employers and employees with an example of a “final and binding” arbitration provision that survives various challenges and passes muster with the Court of Appeal.

     Maribel Baltazar sued her former employer, Forever 21, Inc., for racial and sexual harassment and other employment-related wrongs.  Employer and two employees filed a motion to compel arbitration, which motion the employee opposed, arguing the arbitration agreement was unconscionable.  The trial court denied defendants’ motion, and defendants appealed.

     Agreeing that the “take it or leave it” employment contract was one of adhesion, the Court of Appeal nevertheless held that it was not substantively unconscionable. 

     Preliminarily, the Court of Appeal concluded that the agreement was governed by the California Arbitration Act, not the Federal Arbitration Act, because no evidence was offered that the employment or any pertinent transaction involved interstate commerce.  This preliminary conclusion supported the Court’s analysis that carving out provisional equitable relief from the arbitration agreement was entirely permissible.

     Because California Arbitration Act applied, Cal. Code of Civ. Proc. section 1281.8 necessarily applied to the agreement.  And section 1281.8 allows either party to the arbitration provision to apply to the court for a provisional remedy in connection with an arbitrable controversy.  (We note in passing that sometimes other contractual arbitration provisions include carve-outs for provisional relief.  Seeking provisional relief from an arbitrator may be unwieldy, because it must be enforced quickly and through a court.  For example, the standard California Association of Realtors contracts for the purchase and sale of real estate typically have ADR provisions requiring mediation and arbitration with a carve-out for provisional remedies, allowing recourse to the court).

      The Court also rejected the employee’s argument that the carve-out for provisional remedies did not result in a lack of mutuality.  Here, the carve-out did not exempt claims more likely to be brought only by the employer.  For example, of the employee’s nine claims, virtually all could be a source of injunctive relief.  Thus, while ‘[a]n arbitration agreement is substantively unconscionable if employees are required to submit their disputes to arbitration while the employer remains free to pursue its claims in any forum,” such was not the case here.

     The employee also argued that a provision allowing for all necessary steps to be taken to protect trade secrets and proprietary and confidential information from public disclosure was unduly harsh and one-sided.  One-sided, perhaps, but not unreasonable.  After all, the provision was limited to protecting trade secret or similar provision, “consistent with the duties imposed by the Uniform Trade Secrets Act (Civ. Code, sections 3426-3426.11)”.  Besides, “courts have upheld confidentiality and nondisclosure agreements of general application,” allowing the Court to invoke the maxim that “the greater contains the less.”

     Concluding that the agreement to arbitrate was not unconscionable, the Court of appeal reversed the order denying arbitration, ordering the trial court on remand to enter a new order granting the motion to compel arbitration.

Arbitration/Employment/Unconscionability: Implied Restriction On Employer’s Express Right To Unilaterally Change Arbitration Agreement Saves Arbitration Agreement From Unconscionability Attack

Arbitration Requirement In Employment Contract of Casino Security Director Survives Unconscionability Attack

    Plaintiff Gatewood sued his former employee Hustler Casino and its owner El Dorado Enterprises, Inc., for various employment-related claims.  The employer moved successfully to compel arbitration.  Apparently unsatisfied with the arbitration award, Mr. Gatewood appealed the award and the order compelling arbitration on grounds of substantive and procedural unconscionability.  Gatewood v. El Dorado Enterprises, Inc., et al., B237435 (2nd Dist. Div. 4 November 6, 2012) (Manella, J.) (unpublished).

     The Court of Appeal first analyzed enforceability of the arbitration agreement under the four “minimum requirements for the arbitration of nonwaivable statutory claims” set forth in Armendariz v. Foundation Health Psychare Services, Inc., 24 Cal.4th 83 (2000).  Three of the four requirements were “indisputably” satisfied:  no limit on statutorily imposed remedies such as punitive damages and attorney’s fees; a written arbitration decision allowing for review; the employer bears any type of expense the employee would not be required to bear in a court action.  While there was a disagreement about a fourth factor, adequate discovery, the Court believed this issue had been forfeited, or else satisfied by a provision stating “[e]ach party shall have the right to conduct reasonable discovery, as determined by the arbitrator as provided in [the] California Code of Civil Procedure.”

     The Court found “minimum elements of procedural unconscionability” to be present, because signing the agreement was required to obtain the job.  But the agreement was not so one-sided as to create the substantive unconscionability also necessary to find an agreement unconscionable. 

     The most interesting one-sidedness issue arose because the language permitted Hustler Casino to “change in [its] sole discretion” all the policies, procedures and conditions of employment.  But the employer’s discretionary power to modify the terms of the employment agreement “indisputably carries with it the duty to exercise that right fairly and in good faith.”  24 Hour Fitness, Inc. v. Superior Court, 66 Cal.App.4th 1199, 1214 (1998).

     The Court distinguished another “unilateral modification” case that we have posted about on April 18, 2012:  Peleg v. Neiman Marcus Group, Inc., 204 Cal.App.4th 1425 (2012).  In Peleg, Texas law governed.  The “unilateral modification arbitration agreement” was invalid, because Texas law requires an express carve-out of claims from the employer’s ability to unilaterally modify, whereas, “[u]nder California law, a court may imply such a restriction if an arbitration agreement is silent on the issue.” Peleg at p. 1466.  This is an instance in which Texas law is “more demanding than California law.” Id. at pp. 1466-1467.

     The judgment was affirmed.

Arbitration/Unconscionability/Severability/Standard of Review: Law Firm Partnership Agreement That Is Functionally An Employment Agreement Is Subject To Armendariz Unconscionability Analysis

 

Court of Appeal Rejects Employer’s Contention that AT&T Mobility v. Concepcion Overruled Armendariz Unconscionability Analysis

     Plaintiff Erika Brenner, an attorney, sued her “employer” Glenn Johnson Law, LLP and its principal, attorney Glenn Johnson, for wrongful discharge and other employment-related claims.  Defendants moved to compel arbitration under a contractual arbitration provision.  Brenner opposed, arguing that the arbitration provision was unconscionable under the analysis set forth in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000).  Defendants argued Armendariz had no application, because Brenner was a partner, not an employee.  Agreeing with Brenner that the agreement was unconscionable, the trial court denied Defendants’ motion to compel arbitration.  Defendants appealed.  Brenner v. Glenn Johnson Law, LLP et al., Case No. G046532 (4th Dist. Div. 3 November 5, 2012) (Rylaarsdam, Acting P.J.) (unpublished).

     The Court of Appeal agreed that the trial court’s finding that the partnership agreement was “the functional equivalent of an employment agreement” was supported by substantial evidence; thus, there was no reason to disturb the trial court’s finding.   Brenner had a 5% interest, and Johnson had a 95% interest, Johnson dictated the terms, and the agreement set forth the terms of the employment relationship. 

     “Unconscionability” analysis requires an examination of two prongs:  substantive and procedural unconscionability.  The source of substantive unconscionability here was that the agreement, which purported to cover FEHA claims, did not require the employer to bear costs unique to arbitration, nor did it contain a limitation that the employee, if she her suit, could not be burdened with fees and costs unless the employee’s suit was brought frivolously or in bad faith.  While Plaintiff and Defendants disagreed as to whether the agreement was “take it or leave it”, there was substantial evidence that Brenner did not have a meaningful opportunity to negotiate the terms – enough to support a finding of procedural unconscionability, the second prong.

     Finally, there was an issue as to whether the provision for shifting of costs and fees to the prevailing party, if unconscionable, could be severed in order to save the arbitration provision.  Because there were two problems with the unlawful fees provision, the Court concluded it was not required to reform an agreement that was “permeated” by unconscionability.  Besides, Defendants failed to ask the superior court to exercise its discretion to sever.

     Affirmed.