Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_10-cv-00743/USCOURTS-cand-3_10-cv-00743-1/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 42:2000e Job Discrimination (Employment)

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1 NO. C 10‐743RS 

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United 

States District 

Court

For the Northern District of California 

**E-filed 07/12/2010** 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

ANN DAVIS, 

 Plaintiff, 

 v. 

GAZILLION, INC., 

 

 Defendant. 

____________________________________/

No. C 10-743 RS 

ORDER GRANTING MOTION TO 

COMPEL ARBITRATION

I. INTRODUCTION 

 In the Spring of 2008, plaintiff Anne Davis was hired as an accountant by defendant 

Gazillion, Inc. (under its prior name of NR2B Research, Inc.). As a condition of her employment, 

she was required to sign an agreement that included provisions requiring arbitration of any dispute 

that might arise between her and Gazillion. Davis was terminated in January of this year. She filed 

this action alleging age and race discrimination, and for retaliation against her for previously raising 

such claims. Gazillion moves to enforce the arbitration agreement. Davis opposes, arguing the 

provision is procedurally and substantively unconscionable, and therefore unenforceable. The 

motion to compel arbitration will be granted, although certain provisions of the agreement will be 

stricken. 

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II. DISCUSSION 

 Under the Federal Arbitration Act (FAA), arbitration agreements “shall be valid, irrevocable, 

and enforceable, save upon such grounds as exist at law or in equity for the revocation of any 

contract.” 9 U.S.C. § 2. Federal policy favors arbitration. Gilmer v. Inter-state/Johnson Lane Corp., 

500 U.S. 20, 25 (1991). Under California law, a contractual clause is unenforceable only if it is both 

procedurally and substantively unconscionable. See Armendariz v. Found. Health Psychcare Servs.,

Inc., 24 Cal.4th 83 (2000); Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1280 (9th Cir. 2006).

 Courts apply a sliding scale: “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, 24 Cal.4th at 114. Still, “both [must] be present in 

order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine 

of unconscionability.” Id. 

1. Procedural unconscionability

 Gazillion argues there was no procedural unconscionability because the arbitration provision 

was conspicuously disclosed and was presented to Davis before she accepted employment. 

Gazillion is likely correct that the circumstances here are less unconscionable than cases where 

arbitration provisions are forced on existing employees, but Ninth Circuit and California case law is 

clear that any arbitration provision presented on a “take it or leave it” basis implicates 

unconscionability. See Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1172 (9th Cir. 2003) 

(following the reasoning in Szetela v. Discover Bank, 97 Cal.App.4th 1094 (2002), in which the 

California Court of Appeal held that the availability of other options does not bear on whether a 

contract is procedurally unconscionable.) See also, Ferguson v. Countrywide Credit Industries, 

Inc., 298 F.3d 778, 784 (9th Cir. 2002) (“[W]hether the plaintiff had an opportunity to decline the 

defendant’s contract and instead enter into a contract with another party that does not include the 

offending terms is not the relevant test for procedural unconscionability.”) Accordingly, because 

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Davis did not have a meaningful opportunity to “opt out,” there was at least some procedural 

unconscionability here. 

 2. Substantive unconscionability

 An arbitration provision is substantively unconscionable if it is “overly harsh” or generates 

“one-sided results.” Armendariz, 24 Cal.4th at 114. “[T]he paramount consideration in assessing 

conscionability is mutuality.” Abramson v. Juniper Networks, Inc., 115 Cal.App.4th 638, 657, 

(2004). California law requires an arbitration agreement to have a “modicum of bilaterality,” 

Armendariz, 24 Cal.4th at 117. 

 Davis contends five aspects of the arbitration agreement are unconscionable. 

First, paragraph D of the agreement provides that either side may resort to the courts for injunctive 

relief notwithstanding the arbitration agreement. Despite this apparent mutuality, Davis argues that 

as a practical matter, only the employer can take advantage of this clause, because while it might be 

common for an employer to seek to enjoin a departing employee from disclosing trade secrets, there 

would be few, if any, circumstances where an employee would pursue an injunction precluding the 

employer from taking an adverse employment action. California Code of Civil Procedure §1281.8 

already gives parties to arbitration agreements the right to seek provisional relief in court, so it is not 

immediately clear whether this contractual clause gives either party any more rights than it would 

have were it simply omitted. The Ninth Circuit, however, has drawn a distinction between the 

statutory right of §1281.8, and the inclusion of such a provision in an arbitration agreement. See

Nagrampa, supra, 469 F.3d at 1286-1287. Although the contractual clause in Nagrampa was 

unilateral on its face in a way the one here is not, the courts generally do reject contractual 

provisions that would have the practical effect of being invoked only, or far more often, by the 

employer. See, e.g., Martinez v. Master Protection Corp. 118 Cal.App.4th 107 (2004). The more 

cautious route, therefore, and one to which Gazillion does not strenuously object, is simply to sever 

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paragraph D. While it does not appear that either side had any intention to invoke paragraph D in 

this action, they both will retain such rights as may be provided by §1281.8. 

 Davis next contends that the arbitration agreement does not provide for appeal or judicial 

review of the decision. She is reading too much, however, into a clause that says the arbitration is 

the “sole, exclusive, and final” remedy. The arbitrator is required to issue a “written decision,” 

which would then be subject to the ordinary process of court confirmation. That is all Armendariz

requires. “All we hold today is that in order for such judicial review to be successfully 

accomplished, an arbitrator in a FEHA case must issue a written arbitration decision that will reveal, 

however briefly, the essential findings and conclusions on which the award is based.” Armendariz, 

24 Cal.4th at 27. 

 Davis further challenges the final sentence of paragraph C, which states: “Notwithstanding, 

the arbitrator will not have the authority to disregard or refuse to enforce any lawful company 

policy, and the arbitrator shall not order or require the company to adopt a policy not otherwise 

required by law which the company has not adopted.” It is entirely unclear what this sentence is 

intended to mean. It could be seen simply as a limit on the arbitrator’s authority to mandate general 

company policy, or it could be read as a limit on what the arbitrator may order in this particular 

case. The former interpretation might well be benign, but the latter would be problematic. 

Accordingly, because the sentence is ambiguous and could be seen by an arbitrator as imposing 

unilateral limitations on his or her power that favor Gazillion, it will be stricken. 

 Davis also complains the agreement does not expressly authorize the arbitrator to award 

equitable relief. Paragraph A, however, authorizes “any remedies . . . available under applicable 

law.” Paragraph D and the final sentence of paragraph C have been stricken. Nothing remaining in 

Paragraph C (or elsewhere in the agreement) operates to foreclose equitable remedies if they are 

available under applicable law. 

 Finally, Davis contends the agreement authorizes the arbitrator to award attorney fees 

without recognition of the law that limits the circumstances under which such awards can be made. 

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Not so. The agreement requires the arbitrator to follow the applicable law, in all respects. It need 

not describe in further detail when the law does and does not allow attorney fees to be awarded. 

III. CONCLUSION 

 The final sentence of paragraph C and Paragraph D are stricken from the arbitration 

agreement between the parties. With that proviso, the motion to compel arbitration is granted. 

As there is no dispute that all the claims in this action are within the scope of the arbitration clause, 

the action is dismissed, without prejudice. The Clerk is directed to close the file. 

IT IS SO ORDERED. 

Dated: 07/12/2010 

RICHARD SEEBORG 

UNITED STATES DISTRICT JUDGE 

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