Cook v. University of Southern California

Filed 5/24/24   Opinion following order vacating prior opinion


                          CERTIFIED FOR PUBLICATION




       IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                            SECOND APPELLATE DISTRICT

                                       DIVISION FOUR


 PAMELA COOK,                                             B330640

         Plaintiff and Respondent,                        (Los Angeles County
                                                           Super. Ct. No. 22STCV21534)
         v.

 UNIVERSITY OF SOUTHERN
 CALIFORNIA et al.,

         Defendants and Appellants.



       APPEAL from a judgment of the Superior Court of Los Angeles County,
Anne Richardson, Judge. Affirmed.
       CDF Labor Law, Wanja S. Guy and John R. Giovannone for Defendants
and Appellants.
       Cummings & Franck, Scott O. Cummings and Lee Franck for Plaintiff
and Respondent.
                              INTRODUCTION
      An arbitration agreement of infinite duration requires an employee to
arbitrate all claims against the employer, its agents, affiliates, and employees
irrespective of whether they arise from the employment relationship. We
hold such an arbitration agreement is unconscionable. Plaintiff filed a
lawsuit against her employer and two coworkers alleging discrimination and
harassment in the course of her employment. The defendants collectively
moved to compel arbitration under an arbitration agreement signed by the
plaintiff as a condition of employment. The trial court denied the motion to
compel arbitration, finding the arbitration agreement was permeated by
unconscionability, which could not be severed from the agreement. The
defendants appeal the trial court’s denial of their motion to compel
arbitration. We affirm.


            FACTUAL AND PROCEDURAL BACKGROUND
A.    Cook’s Complaint
      On July 1, 2022, plaintiff and respondent Pamela Cook (Cook) filed a
complaint against defendants and appellants the University of Southern
California (USC), Fatima Manuao, and “Lorena (Last Name Unknown)”
(collectively USC). Cook’s complaint asserts 18 causes of action, all of which
arise from her employment with USC. Cook alleges she was subjected to
disparate treatment by USC based on her race. Cook also alleges USC failed
to accommodate a variety of health-related time-off requests. She also
alleges she was subjected to retaliatory harassment when she reported the
discrimination and failure to accommodate her disabilities. She asserts she
was “actually and/or constructively” terminated from her employment on
August 24, 2021.


                                       2
B.    Motion to Compel Arbitration
      On October 24, 2022, USC filed a motion to compel all of Cook’s claims
to arbitration. USC claimed Cook’s employment “offer was contingent upon
Plaintiff executing an employment agreement and arbitration agreement.”
      The arbitration agreement attached to the motion states in pertinent
part: “Therefore, the University and the faculty or staff member named below
(‘Employee’) agree to the resolution by arbitration of all claims, whether or
not arising out of Employee’s University employment, remuneration or
termination, that Employee may have against the University or any of its
related entities, including but not limited to faculty practice plans, or its or
their officers, trustees, administrators, employees or agents, in their capacity
as such or otherwise; and all claims that the University may have against
Employee. . . . The claims covered by this Agreement include, but are not
limited to, claims for wages or other compensation due; claims for breach of
any contract or covenant (express or implied); claims for personal, physical,
or emotional injury, or for any tort; claims for discrimination or harassment
(including, but not limited to, race, sex, religion, national origin, age, marital
status, sexual orientation, gender identity or expression, military and
veteran status, or medical condition or disability); claims for ‘whistleblowing’
or retaliation; and claims for violation of any federal, state or other
governmental law, statute, regulation, or ordinance.” The arbitration
agreement also provides that it “supersedes any prior or contemporaneous
agreement on the subject, shall survive the termination of Employee’s
employment, and may only be revoked or modified in a written document
that expressly refers to the ‘Agreement to Arbitrate Claims’ and is signed by




                                        3
the President of the University.” USC stated Cook electronically signed this
stand-alone arbitration agreement on or about May 7, 2021.
      USC argued the claims in Cook’s complaint all fell within the scope of
the agreement. In asserting the agreement was not substantively
unconscionable, USC claimed the agreement was not “one-sided in favor of
the employer without sufficient justification.” It also argued the agreement
was mutual and afforded Cook the same rights and remedies that would be
available to her in court proceedings.
      In opposition, Cook argued USC did not establish she electronically
signed the arbitration agreement. Cook also asserted that many of her
claims were not subject to arbitration. Cook argued the arbitration
agreement was procedurally unconscionable because it was a contract of
adhesion that was made a condition of her employment. She also alleged the
agreement was substantively unconscionable because it contained an infinite
scope that covered her claims regardless of whether they related to her
employment relationship with USC and survived the termination of that
relationship for an indefinite period.
      In its reply, USC submitted a supplemental declaration to support the
claim that Cook electronically signed the agreement. It also argued none of
Cook’s claims were exempt from arbitration. USC contested Cook’s claims of
procedural and substantive unconscionability. However, USC did not
address the infinite duration of the agreement.
      On April 18, 2023, the trial court issued a comprehensive and well-
reasoned order denying the motion to compel arbitration. The court
determined USC had demonstrated the existence of an agreement to
arbitrate that was electronically signed by Cook on May 7, 2021. The trial
court rejected Cook’s claims that certain of her causes of action were not


                                         4
subject to arbitration as a matter of law and found “the arbitration
agreement encompasses all eighteen claims advanced by Plaintiff Cook.”
      Turning to Cook’s argument of unconscionability, the trial court
determined the arbitration agreement “exhibits some procedural
unconscionability” due to the “adhesive and non-negotiable nature of the
arbitration agreement as a condition of employment with USC.” The court
also found the agreement was substantively unconscionable because it was
infinite in scope and duration. The agreement specifically provides that it
would survive the termination of Cook’s employment and could only be
revoked in a writing signed by Cook and the president of USC. It also
applied to “all” of Cook’s claims regardless of whether they arose from her
employment. The trial court noted that “for the rest of her life, if Plaintiff
were to suffer an injury related to USC or its related entities, Plaintiff could
be ordered to arbitrate such claims.” The court found this would include
claims completely unrelated to her employment, stating that if Cook was “the
victim of a botched surgery in a USC hospital in 15 years, her claims could be
subject to the arbitration agreement.”
      The trial court also held the agreement lacked mutuality because it
required Cook to arbitrate her claims against USC and all of USC’s “related
entities” including officers, trustees, administrators, employees, and agents.
However, in contrast, the agreement only required USC to arbitrate its
claims against Cook but did not require USC’s “related entities” to arbitrate
their claims against Cook. The trial court concluded “This lack of mutuality
renders the arbitration agreement substantively unconscionable because it
provides the employer more rights and greater remedies than would
otherwise be available and concomitantly deprives Plaintiff of significant
rights and remedies that she would normally enjoy, for example, in a judicial


                                         5
forum. . . . [¶] Overall, the Court thus finds that the wide scope of the
arbitration agreement (all claims between the parties), its duration
(surviving termination of employment and applicable unless rescinded by
both parties), and its lack of mutuality (claims that can be petitioned for
arbitration) support a finding that substantial substantive unconscionability
exists in the terms of the arbitration agreement.”
      The trial court determined the unconscionable terms could not be
severed from the agreement. The court found the agreement was “permeated
by unconscionability and cannot, in the interests of justice, be severed.” The
court noted that to cure the unconscionability by making the agreement
mutual to both parties, it would need to rewrite the scope of the agreement,
redefine the duration, and enlarge the scope of claims that Cook could compel
to arbitration. The court found these revisions “would substantially alter the
nature and character of the agreement entered by the parties.” The trial
court also held that severing the unconscionable provisions would favor USC
by giving it “the possible windfall of drafting an unconscionable contract but
nevertheless still receiving the benefit of arbitration through severance.”
      The court denied the motion to compel, finding Cook successfully raised
the defense of unconscionability.


C.    Appeal
      USC filed a timely appeal of the court’s denial of its motion to compel
arbitration. On appeal, it argues the trial court erred in finding the
arbitration agreement unconscionable and unenforceable.


                                DISCUSSION
A.    Legal Standards


                                       6
      A written agreement to submit a controversy to arbitration is valid and
enforceable, absent a reason under state law, such as unconscionability, that
would render any contract revocable. (Code Civ. Proc., § 1281; Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114
(Armendariz); Sandoval-Ryan v. Oleander Holdings LLC (2020) 58
Cal.App.5th 217, 222.) “The party seeking to compel arbitration bears the
burden of proving the existence of an arbitration agreement.” (Aanderud v.
Superior Court (2017) 13 Cal.App.5th 880, 890.) “[T]he party opposing
arbitration bears the burden of proving by a preponderance of the evidence
any defense, such as unconscionability. [Citations.]” (Peng v. First Republic
Bank (2013) 219 Cal.App.4th 1462, 1468 (Peng).)
      Unconscionable terms in an arbitration agreement cannot be enforced.
(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 118.) “‘[U]nconscionability 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. [Citation.] ‘The prevailing view is
that [procedural and substantive unconscionability] must both be present in
order for a court to exercise its discretion to refuse to enforce a contract or
clause under the doctrine of unconscionability.’ [Citation.] But they need not
be present in the same degree. ‘Essentially a sliding scale is invoked which
disregards the regularity of the procedural process of the contract formation,
that creates the terms, in proportion to the greater harshness or
unreasonableness of the substantive terms themselves.’ [Citations.] In other
words, the more substantively oppressive the contract term, the less evidence
of procedural unconscionability is required to come to the conclusion that the
term is unenforceable, and vice versa.” (Armendariz, supra, 24 Cal.4th at p.
114, italics omitted.)


                                         7
      “The procedural element of an unconscionable contract generally takes
the form of a contract of adhesion.” (Little v. Auto Stiegler, Inc. (2003) 29
Cal.4th 1064, 1071 (Little).) An adhesive contract is defined as “‘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.]” (Armendariz, supra, 24
Cal.4th at p. 113.) Substantive unconscionability “typically is found in the
employment context when the arbitration agreement is ‘one-sided’ in favor of
the employer without sufficient justification.” (Peng, supra, 219 Cal.App.4th
at pp. 1472–1473.) However, “[s]ome courts have imposed a higher standard:
the terms must be ‘“so one-sided as to shock the conscience.” [Citation.]’
[Citation.] Where a party with superior bargaining power has imposed
contractual terms on another, courts must carefully assess claims that one or
more of these provisions are one-sided and unreasonable.” (Gutierrez v.
Autowest, Inc. (2003) 114 Cal.App.4th 77, 88.)
      If a court finds a clause within a contract to have been unconscionable
at the time it was made, the court may refuse to enforce the contract, or
instead sever the unconscionable clause and enforce the remainder of the
contract. (Civ. Code, § 1670.5, subd. (a); Armendariz, supra, 24 Cal.4th at p.
122; Davis v. Kozak (2020) 53 Cal.App.5th 897, 905.) Where, as here, no
disputed factual issue bears upon our unconscionability analysis, we review
unconscionability de novo. (Pinela v. Neiman Marcus Group, Inc. (2015) 238
Cal.App.4th 227, 241 [reviewing de novo “the legal question of
unconscionability here, in the first instance” when there were “no facts in
dispute”].)




                                        8
B.    The Trial Court Did Not Err in Finding the Arbitration Agreement is
      Unconscionable

      1.    Procedural Unconscionability
      The trial court found a low degree of procedural unconscionability due
to the adhesive nature of the agreement. Neither side contests this finding
on appeal. Therefore, only a high degree of substantive unconscionability
would render the agreement unconscionable. (See, e.g., Ramirez v. Charter
Communications, Inc. (2022) 75 Cal.App.5th 365, 373, review granted June 1,
2022, S273802 (Ramirez) [“When, as here, the degree of procedural
unconscionability is low, the agreement must be enforced unless the degree of
substantive unconscionability is high”].)


      2.    Substantive Unconscionability
      The trial court found the arbitration agreement was substantively
unconscionable for three reasons: (1) the broad scope of the agreement, (2) the
infinite duration, and (3) the lack of mutuality in the claims that were
covered by the agreement. We discuss each basis in turn.


            a.    Scope
      By its express terms, the agreement requires the arbitration of “all
claims, whether or not arising out of Employee’s University employment,
remuneration or termination, that Employee may have against the
University or any of its related entities, including but not limited to faculty
practice plans, or its or their officers, trustees, administrators, employees or
agents, in their capacity as such or otherwise; and all claims that the
University may have against Employee.” The plain language of the


                                        9
agreement requires Cook to arbitrate claims that are unrelated to her
employment with USC.
      USC argues that regardless of the agreement’s express language to the
contrary, the arbitration agreement must be construed to apply only to
disputes arising from Cook’s employment at USC because absurd results
would otherwise ensue.1 In other words, USC appears to concede the scope of
the agreement—as written—is unconscionably broad and must be construed
to mean other than what it plainly states to avoid unreasonable results.
Courts have rejected similar arguments. (See, e.g., Samaniego v. Empire
Today, LLC (2012) 205 Cal.App.4th 1138, 1147 [rejecting the argument that
a unilateral fee-shifting provision did not render an arbitration agreement
substantively unconscionable because the provision violated the Labor Code
and could not actually be enforced against the employee as written];
Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74,
88–89 [rejecting the argument that a unilateral fee-shifting provision in an
arbitration agreement was conscionable because Civ. Code, § 1717 could
provide the employee relief from the provision’s one-sidedness]; Martinez v.
Master Protection Corp. (2004) 118 Cal.App.4th 107, 116–117 [holding an
arbitration provision requiring the parties to split the arbitration costs and to




1     We note USC took the opposite position in its briefing below. In the
motion to compel, USC stated, “The Agreement expressly applies to all
claims, whether or not they arise out of Plaintiff’s employment.”

                                       10
post fees in advance was unconscionable even though the employer stated it
was willing to modify the agreement and bear the cost of arbitration].)2
      USC relies on Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231
(Tiri), Roman v. Superior Court (2009) 172 Cal.App.4th 1462 (Roman), Little,
supra, 29 Cal.4th 1064, and Western Bagel Co., Inc. v. Superior Court (2021)
66 Cal.App.5th 649 (Western Bagel) as enforcing arbitration agreements
which are analogous to the agreement at issue here. We find these cases are
inapplicable.
      In Tiri, an employee signed an arbitration agreement with her
employer, Lucky Chances, Inc. (Tiri, supra, 226 Cal.App.4th at p. 236.) The
full terms of the agreement were not set forth in the court’s opinion, but the
court summarized the agreement as relating “solely to resolving claims
between Tiri and Lucky Chances.” (Id. at p. 237.) The agreement also
contained “an explicit provision that delegates to the arbitrator issues
regarding the agreement’s enforceability.” (Ibid.) The only question on
appeal was “whether the trial court properly denied Lucky Chances’s petition
to compel arbitration in light of the delegation clause, which gives the
arbitrator the authority to decide whether the arbitration agreement is
enforceable.” (Id. at p. 238.) The court noted that to avoid enforcement of the


2     USC suggests that the broad scope of the arbitration agreement is of no
consequence because the claims raised by Cook in this action all relate to her
employment. We disagree. Unconscionability is judged “at the time [the
contract is] made.” (Civ. Code, § 1670.5, subd. (a); see also Ramirez, supra,
75 Cal.App.5th at p. 384 [“the unconscionability analysis evaluates whether
the agreement is bilateral ‘at the time it was made’ rather than as applied to
a specific plaintiff”]; Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d
1165, 1175 [concluding that a prohibition against class-wide arbitration of
employment disputes in an arbitration agreement was “patently one-sided,”
and substantively unconscionable, despite the fact that the employee had not
brought a class action lawsuit].)
                                        11
delegation clause, the employee had to show the delegation clause itself was
unconscionable. (Id. at p. 244 [“any claim of unconscionability must be
specific to the delegation clause”].) The court examined the delegation clause
in question and determined it could “find nothing in the delegation clause
upon which to conclude that it lacks mutuality or is otherwise unreasonably
favorable to Lucky Chances.” (Id. at p. 247.) The court did not address the
employee’s other claims of unconscionability because those “arguments are
not specific to the delegation clause.” (Id. at pp. 247–248.) Instead, the
arbitrator would address all other unconscionability arguments pursuant to
the delegation clause. (Id. at p. 250.)
      USC claims the Tiri court rejected the “argument [that an] arbitration
agreement requiring arbitration for ‘any and all differences and/or legal
disputes’ lacked mutuality.” We disagree with this characterization of Tiri.
Tiri was concerned exclusively with the enforceability of a delegation clause.
It did not address whether the scope of the arbitration agreement was
otherwise unconscionable. Cases do not stand for propositions not considered
therein. (People v. Harris (1989) 47 Cal.3d 1047, 1071 [“It is axiomatic, of
course, that a decision does not stand for a proposition not considered by the
court”].)
      USC’s reliance on Roman fares no better. In Roman, unlike here, the
arbitration clause in question was expressly limited to claims arising from
the employee’s job application and subsequent employment. “The arbitration
provision, contained in a separate paragraph initialed by Roman, provided, ‘I
hereby agree to submit to binding arbitration all disputes and claims arising
out of the submission of this application. I further agree, in the event that I
am hired by the company, that all disputes that cannot be resolved by
informal internal resolution which might arise out of my employment with the


                                          12
company, whether during or after that employment, will be submitted to
binding arbitration.’” (Roman, supra, 172 Cal.App.4th at p. 1467, italics
added.)
      The same is true of the arbitration agreement at issue in Little. The
arbitration agreement in that case stated, in pertinent part, “I agree that any
claim, dispute, or controversy (including, but not limited to, any and all
claims of discrimination and harassment) which would otherwise require or
allow resort to any court or other governmental dispute resolution forum
between myself and the Company (or its owners, directors, and officers, and
parties affiliated with its employee benefit and health plans) arising from,
related to, or having any relationship or connection whatsoever with my
seeking employment with, employment by, or other association with, the
Company, whether based on tort, contract, statutory, or equitable law, or
otherwise, shall be submitted to and determined exclusively by binding
arbitration under the Federal Arbitration Act.” (Little, supra, 29 Cal.4th at
pp. 1069–1070, italics added.)
      The Roman and Little courts each concerned the enforceability of an
employment arbitration agreement which was expressly limited to claims
arising from or related to employment. They did not address the
conscionability of an arbitration agreement in which an employee was bound
to arbitrate any and all claims, whether or not they arose from the
employee/employer relationship. For this reason, we find these cases
unpersuasive in establishing the conscionability of Cook’s arbitration
agreement.
      As for Western Bagel, we are unable to determine the extent to which
the agreement at issue in that case is similar to Cook’s. The court in Western
Bagel did not provide the relevant text of the arbitration agreement in full.


                                       13
Instead, it summarized it as follows: “Paragraph 1 of the Spanish MAAC
provides in pertinent part: ‘To the maximum extent permitted by law,
[Western Bagel] and I mutually agree to resolution through binding
arbitration for all claims or causes of action . . . that [Western Bagel] may
bring against me or that I may bring against [Western Bagel] . . . .’ In
addition, paragraph 1 states that ‘[c]laims covered by this Agreement include,
[inter alia], . . . any claim arising under . . . state and local anti-
discrimination laws, fair employment laws and labor laws, including but not
limited to . . . the California Labor Code.’” (Western Bagel, supra, 66
Cal.App.5th at p. 656.) The court’s use of ellipses renders it impossible for us
to determine whether that arbitration agreement sought to apply to all
claims, whether or not they arose from the plaintiff’s employment or
termination. Western Bagel is thus not instructive in determining whether
Cook’s arbitration agreement is unconscionable.
      We recognize that employment contracts can provide a “margin of
safety” that grants extra protection to the party with superior bargaining
power if there is a legitimate commercial need for doing so. (Stirlen v.
Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1536 (Stirlen).) However, unless
the “business realities” that give rise to that special need are explained in the
contract itself, they must be factually established. (Ibid.) USC attempts to
avail itself of this margin of safety. It argues the broad scope of Cook’s
agreement is justified because if the scope were limited to claims arising out
of Cook’s employment, then “important categories of future claims, such as
post-termination retaliation or defamation” would be excluded from the
agreement.
      When the claimed justification is not spelled out in the arbitration
agreement and was not raised as an issue before the trial court by way of


                                          14
either argument or evidence, the argument will not be considered for the first
time on appeal. (In re Marriage of Nassimi (2016) 3 Cal.App.5th 667, 695
[“‘“theories not raised in the trial court cannot be asserted for the first time
on appeal”’”]; Bocanegra v. Jakubowski (2015) 241 Cal.App.4th 848, 857 [“‘“a
party is not permitted to change its position on appeal and raise new issues
not presented in the trial court”’”].) Here, the arbitration agreement does not
spell out any need for the broad scope and USC did not make any attempt to
factually establish this need in the trial court. Accordingly, USC has not
established a legitimate justification for the broad scope of the arbitration
agreement.
      Even considering this argument on its merits, we find it unpersuasive.
The arbitration agreement drafted by USC applies to all claims “whether or
not arising out of Employee’s University employment, remuneration or
termination.” If USC had been concerned about capturing termination or
retaliation claims related to Cook’s employment, it simply could have limited
the scope of the agreement to claims arising out of or relating to her
employment or termination. It is difficult to see how it is justified to expect
Cook—as a condition of her employment at the university—to give up the
right to ever sue a USC employee in court for defamatory statements or other
claims that are completely unrelated to Cook’s employment.
      We find the trial court did not err in holding that the agreement’s
broad scope is substantively unconscionable.


             b.    Duration
      The trial court also found the arbitration agreement was
unconscionable because it survived indefinitely following Cook’s termination
from USC. The agreement expressly states that it “shall survive the


                                        15
termination of Employee’s employment, and may only be revoked or modified
in a written document that expressly refers to the ‘Agreement to Arbitrate
Claims’ and is signed by the President of the University.”
      On appeal, USC argues the agreement cannot be construed as
indefinite and instead should be construed to be terminable at will after a
“reasonable time.” USC has forfeited this argument by failing to raise it in
the trial court. As USC recognizes in its opening brief on appeal, “‘Failure to
raise specific challenges in the trial court forfeits the claim on appeal.’
Premier Medical Management Systems, Inc. v. California Ins. Guarantee
Assn. (2008) 163 Cal.App.4th 550, 564.”
      Addressing the substance of this argument would not help USC. In
making this argument, it relies on Reigelsperger v. Siller (2007) 40 Cal.4th
574, 580 (Reigelsperger) to demonstrate contracts that do not specify a term
of duration are terminable at will. We do not dispute the accuracy of this
general statement. However, USC has not shown the rule applies to the
arbitration agreement here. The Reigelsperger court relied on Zee Medical
Distributor Assn. Inc. v. Zee Medical, Inc. (2000) 80 Cal.App.4th 1 (Zee),
which is instructive. Zee stated the general rule that a contract will only be
deemed terminable at will after a reasonable period of time if it has neither
an express nor implied term of duration. (Id. at p. 10.) The contract at issue
in Zee contained a provision stating the contract “shall continue” until
specified grounds for termination arose. (Ibid.) The court rejected the
argument that the contract was terminable at will because it did not identify
a specific end date and instead held the contract contained “a valid, express
contractual term of duration.” (Ibid.) The Zee court also noted that the
termination provisions in the contract “clearly indicate the parties did not
contemplate termination at will.” (Id. at p. 11.)


                                        16
      The same is true here. The arbitration agreement specifically provides
that it will survive unless and until Cook and USC’s president specifically
terminate the agreement in a writing, signed by both parties, which expressly
mentions the arbitration agreement. As in Zee, this is an express term of
duration; thus Reigelsperger does not apply. However, the inclusion of such
language also shows the parties did not contemplate that the arbitration
agreement would be terminable at will.
      We reject the argument that the arbitration agreement is terminable at
will after a reasonable time and find the trial court did not err in holding the
duration of the arbitration agreement is substantively unconscionable.


             c.    Lack of Mutuality
      The trial court also found the agreement was unconscionable because it
lacked mutuality. The agreement requires Cook to arbitrate any and all
claims she may have against USC “or any of its related entities, including but
not limited to faculty practice plans, or its or their officers, trustees,
administrators, employees or agents, in their capacity as such or otherwise.”
However, the agreement does not require USC’s “related entities” to arbitrate
their claims against Cook.
      USC argues that both federal and California caselaw have recognized
that nonsignatories may enforce arbitration agreements as third-party
beneficiaries, and the agreement cannot be unconscionable simply because it
provides benefits to third parties. The concern here is not that the
arbitration agreement provides ancillary benefits to third parties. The
concern is that the agreement provides benefits to broad swaths of third-
party beneficiaries only in favor of USC without any showing of justification
for this one-sided treatment. This confers a benefit on USC and its broadly-


                                         17
defined “related entities” that is not mutually afforded to Cook. USC does
not attempt to justify this one-sidedness. No explanation is offered as to why
Cook should be required to give up the ability to ever bring claims in court
against a USC employee that are unrelated to USC or her employment there.
      Seizing on language from Armendariz, USC argues the arbitration
agreement contains a “modicum of bilaterality” because USC itself has
agreed to arbitrate its claims against Cook. The Armendariz court adopted
the modicum of bilaterality rule enunciated in Stirlen. (Armendariz, supra,
24 Cal.4th at p. 118.) Stirlen, in turn, borrowed the phrase from Saika v.
Gold (1996) 49 Cal.App.4th 1074 (Saika). (Stirlen, supra, 51 Cal.App.4th at
p. 1542.) Saika concerned an arbitration agreement between a doctor and a
patient. (Saika, 49 Cal.App.4th at p. 1076.) The agreement contained a trial
de novo clause which allowed either party to disregard the results of the
arbitration and litigate in the courts when the arbitration award exceeded
$25,000. (Ibid.) The court found the clause afforded the parties with a
“modicum of bilaterality” because either the patient or the doctor could
enforce it. (Id. at p. 1079.) However, the court determined the provision was
nonetheless unconscionable because the clause was “virtually meaningless” to
patients because—absent certain rare circumstances—they would have little
incentive to seek a trial de novo when they had won an award of damages in
arbitration. (Ibid.) The trial de novo clause was, for all practical purposes,
one-sided in favor of the doctor.
      Under Armendariz, a modicum of bilaterality is required in arbitration
agreements. Still, nothing in Armendariz supports the conclusion that the
presence of a modicum of bilaterality renders an agreement per se
conscionable. The presence of a modicum of bilaterality will not save a clause
that is, in practical effect, unjustifiably one-sided. There is no question that


                                       18
it is more difficult for a party to enforce an arbitration agreement against a
nonsignatory than it is for a nonsignatory to enforce an arbitration
agreement against a party. This is intentional, as arbitration is “a voluntary
means of resolving disputes, and this voluntariness has been its bedrock
justification.” (Armendariz, supra, 24 Cal.4th at p. 115.) “Arbitration is
consensual in nature. The fundamental assumption of arbitration is that it
may be invoked as an alternative to the settlement of disputes by means
other than the judicial process solely because all parties have chosen to
arbitrate them. [Citations.] Even the strong public policy in favor of
arbitration does not extend to those who are not parties to an arbitration
agreement or who have not authorized anyone to act for them in executing
such an agreement.” (County of Contra Costa v. Kaiser Foundation Health
Plan, Inc. (1996) 47 Cal.App.4th 237, 244–245 (Contra Costa).)
      As a result, nonsignatories may enforce an arbitration agreement
against a party to the agreement simply by showing they are intended third-
party beneficiaries of the arbitration agreement. (Ford Motor Warranty
Cases (2023) 89 Cal.App.5th 1324, 1336–1337.) Where the agreement
requires arbitration of claims against certain classes of third parties,
nonsignatories can make “a prima facie showing sufficient to allow them to
enforce the arbitration clause as third party beneficiaries” simply by showing
they fall within one of the classes of beneficiaries identified by the contract.
(Ronay Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 839
[holding nonsignatories could enforce arbitration agreement because they
acted as agents and representatives of a signatory and the agreement
expressly required arbitration of claims against such agents and
representatives].)




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        Conversely, for Cook to enforce the arbitration agreement against
USC’s agents or employees as third-party beneficiaries, she would have to
show they actually accepted a benefit under the agreement. (See, e.g.,
NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 78; Contra
Costa, supra, 47 Cal.App.4th at p. 242; Suh v. Superior Court (2010) 181
Cal.App.4th 1504, 1513; Medical Staff of Doctors Medical Center in Modesto
v. Kamil (2005) 132 Cal.App.4th 679, 686.) It is difficult to imagine how Cook
could carry this burden to compel USC’s employees and agents to arbitration
unless those specific agents or employees first moved to compel arbitration
under the agreement. While it is theoretically possible for Cook to make this
showing, it is unlikely. (Saika, 49 Cal.App.4th at p. 1079 [holding a bilateral
trial de novo clause was unconscionable where it was unlikely to provide any
benefit to one side of the contract].)
        The plain language of the arbitration agreement thus provides a
significant benefit to USC’s related entities without any reciprocal benefit to
Cook.
        USC has offered no justification for this one-sided treatment.
(Armendariz, supra, 24 Cal.4th at pp. 117–118 [“As has been recognized
‘“unconscionability turns not only on a ‘one-sided’ result, but also on an
absence of ‘justification’ for it.”’”].) We find the trial court did not err in
holding the arbitration agreement was substantively unconscionable for lack
of mutuality in the claims that are subject to arbitration.


C.      Severability
        “An unconscionable contractual term may be severed and the resulting
agreement enforced, unless the agreement is permeated by an unlawful
purpose, or severance would require a court to augment the agreement with


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additional terms. [Citation.]” (Penilla v. Westmont Corp. (2016) 3
Cal.App.5th 205, 223.) Severance may be properly denied when the
agreement contains more than one unconscionable provision, and “‘there is no
single provision a court can strike or restrict in order to remove the
unconscionable taint from the agreement.’ [Citation.]” (Baxter v. Genworth
North America Corp. (2017) 16 Cal.App.5th 713, 738.) “We review a trial
court’s order declining to sever the unconscionable provisions from an
arbitration agreement for abuse of discretion.” (Lange v. Monster Energy Co.
(2020) 46 Cal.App.5th 436, 453, citing Armendariz, supra, 24 Cal.4th at p.
124.) “‘A ruling amounts to an abuse of discretion when it exceeds the
bounds of reason, and the burden is on the party complaining to establish
that discretion was abused.’” (Workman v. Colichman (2019) 33 Cal.App.5th
1039, 1056.)
      As discussed above, three aspects of the agreement are unconscionable.
USC argues the trial court abused its discretion in refusing to sever the
unconscionable provisions and enforce the remainder of the arbitration
agreement. It contends the trial court abused its discretion in finding the
number of unconscionable terms to be dispositive on the issue of severance.
It argues the trial court erred in not considering whether the central purpose
of the agreement could be preserved through severance. We find these
arguments unpersuasive.
      As an initial matter, we disagree with USC’s characterization of the
agreement’s purpose. It claims “the central purpose of the Arbitration
Agreement is to have nearly all employment related disputes resolved
through arbitration.” This characterization is expressly belied by the plain
language of the agreement itself. The agreement’s purpose is not directed




                                       21
only at disputes related to Cook’s employment but instead requires Cook to
arbitrate claims that do not relate to her employment or her employer.
      We also disagree with USC’s characterization of the trial court’s ruling.
The court did not simply end its severability analysis at finding there were
multiple unconscionable provisions in the agreement. Rather, the court
expressly considered the central purpose of the agreement in determining it
was permeated with unconscionability, stating “as it stands, the arbitration
agreement is tainted with unconscionability because its central purpose
appears to be the ability for the parties to arbitrate all possible disputes
between each other, for an indefinite period of time, with USC able to move
for arbitration of claims against it and its related entities, but Plaintiff only
able to move for arbitration of claims by USC against her.” There is no
question that the trial court explicitly considered the central purpose of the
agreement in ruling on severability.
      The trial court also determined that curing the unconscionable
provisions would require substantive rewriting of the arbitration agreement
to contradict its plain language, and that severance would provide a windfall
to USC. We find the trial court could have reasonably concluded that “[s]uch
multiple defects indicate 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.” (Armendariz, supra, 24 Cal.4th 83
at p. 124.) The trial court’s finding that unconscionability permeated the
arbitration agreement as a whole, and its refusal to sever the unconscionable
provisions, was a reasonable exercise of its discretion. The trial court was not
required to sever the offending provisions and enforce the remainder of the
arbitration agreement.




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                              DISPOSITION
     The trial court’s order denying USC’s motion to compel arbitration is
affirmed. Cook is awarded her costs on appeal.
     CERTIFIED FOR PUBLICATION



                                         ZUKIN, J.

     WE CONCUR:



     COLLINS, Acting P. J.



     MORI, J.




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