Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-15-55143/USCOURTS-ca9-15-55143-0/pdf.json

Parties Involved:
C.H. Robinson Company
Appellant
C.H. Robinson Worldwide, Inc.
Appellant
Lorrie Poublon
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LORRIE POUBLON, an individual, on

behalf of herself, and on behalf of all

persons similarly situated,

Plaintiff-Appellee,

v.

C.H. ROBINSON COMPANY; C.H.

ROBINSON WORLDWIDE, INC.,

Defendants-Appellants.

No. 15-55143

D.C. No.

2:12-cv-06654-

CAS-MAN

OPINION

Appeal from the United States District Court

for the Central District of California

Christina A. Snyder, District Judge, Presiding

Argued and Submitted December 9, 2016

Pasadena, California

Filed February 3, 2017

Before: Consuelo M. Callahan, Carlos T. Bea,

and Sandra S. Ikuta, Circuit Judges.

Opinion by Judge Ikuta

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2 POUBLON V. C.H. ROBINSON

SUMMARY*

Arbitration

The panel reversed the district court’s order denying

defendants’ motion to stayproceedings, compel arbitration of

claims arising out of the plaintiff’s employment, and dismiss

class and representative claims.

The panel reversed the district court’s holding that the

dispute resolution provision in an Incentive Bonus Agreement

signed by the plaintiff was both procedurally and

substantively unconscionable under California law. The

panel concluded that, even though the Incentive Bonus

Agreement was an adhesion contract, there was a low degree

of procedural unconscionability. As to substantive

unconscionability, the defendants did not contest the district

court’s holding that a judicial carve-out provision was

substantively unconscionable. The panel held that a waiver

ofrepresentative claims was not substantivelyunconscionable

even though the waiver of the plaintiff’s claim under

California’s Private Attorneys General Act was not

enforceable under California law. A venue provision, a

confidentiality provision, a sanctions provision, a unilateral

modification provision, and limitations on discovery also

were not substantively unconscionable. 

The panel concluded that the dispute resolution provision

was valid and enforceable once the judicial carve-out was

extirpated and the waiver of representative claims was

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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POUBLON V. C.H. ROBINSON 3

limited to non-PAGA claims. The panel remanded the case

to the district court.

COUNSEL

Jack S. Sholkoff (argued), Christopher W. Decker, and

Kathleen J. Choi, Ogletree Deakins Nash Smoak & Stewart

P.C., Los Angeles, California, for Defendants-Appellants.

Kyle R. Nordrehaug (argued) and Norman B. Blumenthal,

Blumenthal Nordrehaug&Bhowmik, La Jolla, California,for

Plaintiff-Appellee.

OPINION

IKUTA, Circuit Judge:

Plaintiff Lorrie Poublon entered into an agreement with

defendants C.H. Robinson Co. and C.H. Robinson

Worldwide, Inc. (collectively, “C.H. Robinson”) to arbitrate

claims arising out of her employment. In the present action,

the district court denied C.H. Robinson’s motion to stay,

compel arbitration, and dismiss class and representative

claims, concluding that the dispute resolution provision was

unconscionable. We hold that the dispute resolution

provision is not tainted with illegality and any invalid

portions can be severed, and therefore reverse.

I

Poublon began working for C.H. Robinson on May 7,

2007, as an Account Manager in Los Angeles, California. 

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4 POUBLON V. C.H. ROBINSON

While employed at C.H. Robinson, Poublon signed an

agreement titled “Incentive Bonus Agreement” each

December in order to receive a financial bonus. The

Incentive Bonus Agreement was a short one-page document

with eight provisions. The seventh provision, which had the

heading “Dispute Resolution,” contained four separate

paragraphs. The first paragraph stated:

You and the Company agree that, except as

provided below, all Claims the Company

might bring against You and all claims You

might bring against the Company and/or any

of its officers, directors, or employees shall be

deemed waived unless submitted to

mediation, then, if mediation is unsuccessful,

to final and binding arbitration in accordance

with the Employment Arbitration Rules and

Mediation Procedures of the American

Arbitration Association, modified as follows:

(1) the arbitration need not actually be

administered by the American Arbitration

Association; (2) any mediation or arbitration

shall be governed by the Company’s

Employment Dispute Mediation/Arbitration

Procedure, which is available on the Company

intranet; (3) dispositive motions shall be

permissible and not disfavored in any

arbitration, and the standard for deciding such

motions shall be the same as under Rule 56 of

the Federal Rules of Civil Procedure;

(4) except on a substantial showing of good

cause, discovery will be limited to the

exchange of relevant documents and three

depositions per side; and (5) except as

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POUBLON V. C.H. ROBINSON 5

mutually agreed at the time between You and

the Company, neither You nor the Company

may bring any Claim combined with or on

behalf of any other person or entity, whether

on a collective, representative, or class action

basis or any other basis. In the case of any

conflict between the rules and procedures for

either mediation or arbitration, the priority

and order of precedence shall be as follows:

(1) the rules and procedures stated herein;

(2) the Company’s Employment Dispute

Mediation/Arbitration Procedure; (3) the

Employment Arbitration Rules and Mediation

Procedures of the American Arbitration

Association.

The second paragraph stated, in pertinent part:

This Dispute Resolution Agreement shall not

apply to any of the following: (1) Worker’s

Compensation claims; (2) claims related to

unemployment insurance; and (3) any claims

by the Company that include a request for

injunctive or equitable relief, including,

without limitation, claims related to its

enforcement of anyrestrictive covenants, noncompetition obligations, non-solicitation

obligations and/or confidential information

provisions contained in any Company policy

and/or employment agreement(s) entered into

between You and the Company and/or any

claims to protect the Company’s trade secrets,

confidential or proprietary information,

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6 POUBLON V. C.H. ROBINSON

trademarks, copyrights, patents, or other

intellectual property.

The fourth paragraph provided:

If any portion of this dispute resolution

provision is determined to be void or

unenforceable, then the remaining portions of

this Agreement shall continue in full force and

effect, and this Agreement may be modified to

the extent necessary, consistent with its

fundamental purpose and intent, in order to

make it enforceable.

In December 2011, as in prior years, Poublon met with

her supervisor, Gerry Nelson, to discuss her compensation

and bonuses for the following year. At this meeting, Nelson

gave Poublon the Incentive Bonus Agreement to take home

and review. He told her that the agreement would have to be

signed and returned within a specified time period in order for

her to receive her bonus. Poublon and Nelson did not discuss

the dispute resolution provision. Poublon later asked Nelson

“what would happen if [she] did not sign the document,” and

he responded that “failure to sign would result in [Poublon]

not being paid [her] bonus.” On December 23, 2011, Poublon

signed the Incentive Bonus Agreement and returned it to C.H.

Robinson. Poublon’s employment at C.H. Robinson ended in

February 2012.

In March 2012, Poublon alleged that C.H. Robinson had

misclassified her as exempt from overtime pay requirements

and demanded mediation of her claims pursuant to the terms

of the Incentive Bonus Agreement that she had signed in

2011. After mediation was unsuccessful, Poublon filed a

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POUBLON V. C.H. ROBINSON 7

class action complaint against C.H. Robinson in Los Angeles

County Superior Court, making the same misclassification

claims on behalf of herself and other employees.

In August 2012, C.H. Robinson removed Poublon’s

action to a federal district court. Poublon filed a First

Amended Complaint, which added a claim on behalf of

California under the Private Attorneys General Act (PAGA),

Cal. Labor Code §§ 2698–2699.5. The district court denied

C.H. Robinson’s motion to compel arbitration, holding that

the dispute resolution provision was both procedurally and

substantively unconscionable, and therefore unenforceable. 

C.H. Robinson timely appealed.

II

A

We have jurisdiction under 9 U.S.C. § 16(a)(1). We

review the denial of a motion to compel arbitration de novo. 

Brown v. Dillard’s, Inc., 430 F.3d 1004, 1009 (9th Cir. 2005). 

We review factual findings for clear error, Balen v. Holland

Am. Line Inc., 583 F.3d 647, 652 (9th Cir. 2009), and review

“[t]he interpretation and meaning of contract provisions” de

novo, Lee v. Intelius Inc., 737 F.3d 1254, 1258 (9th Cir.

2013).

B

The Federal Arbitration Act (FAA) requires courts to

“place arbitration agreements on an equal footing with other

contracts, and enforce them according to their terms.” AT&T

Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)

(internal citation omitted). Section 2 of the FAA makes

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8 POUBLON V. C.H. ROBINSON

agreements to arbitrate “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. § 2.1 The final clause

of § 2, generally referred to as the savings clause, “permits

agreements to arbitrate to be invalidated by ‘generally

applicable contract defenses, such as fraud, duress, or

unconscionability,’ but not by defenses that apply only to

arbitration or that derive their meaning from the fact that an

agreement to arbitrate is at issue.” Concepcion, 563 U.S. at

339 (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S.

681, 687 (1996)). “Any doubts about the scope of arbitrable

issues, including applicable contract defenses, are to be

resolved in favor of arbitration.” Tompkins v. 23andMe, Inc.,

840 F.3d 1016, 1022 (9th Cir. 2016).

Section 2 of the FAA preempts state statutes and state

common law principles that “undercut the enforceability of

arbitration agreements,” unless the savings clause applies. 

Southland Corp. v. Keating, 465 U.S. 1, 16 (1984); see also

Concepcion, 563 U.S. at 343–44; Sakkab v. Luxottica Retail

N. Am., Inc., 803 F.3d 425, 432 (9th Cir. 2015). In other

words, a court cannot enforce state laws that apply to

1

 9 U.S.C. § 2 states, in full:

A written provision in any maritime transaction or a

contract evidencing a transaction involving commerce

to settle by arbitration a controversy thereafter arising

out of such contract or transaction, or the refusal to

perform the whole or any part thereof, or an agreement

in writing to submit to arbitration an existing

controversy arising out of such a contract, transaction,

or refusal, shall be valid, irrevocable, and enforceable,

save upon such grounds as exist at law or in equity for

the revocation of any contract.

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POUBLON V. C.H. ROBINSON 9

agreements to arbitrate but not to contracts more generally. 

See Mortensen v. Bresnan Commc’ns, LLC, 722 F.3d 1151,

1159 (9th Cir. 2013) (“Any general state-law contract defense

. . . that has a disproportionate effect on arbitration is

displaced by the FAA.”).

Here, Poublon argues that the dispute resolution provision

in the Incentive Bonus Agreement is unenforceable under

California’s unconscionability doctrine. As the California

Supreme Court has noted, California’s “unconscionability

standard is, as it must be, the same for arbitration and

nonarbitration agreements.” Sanchez v. Valencia Holding

Co., LLC, 61 Cal. 4th 899, 912 (2015). Recent California

Supreme Court cases have demonstrated how this principle

applies to California’s unconscionability doctrine. See

Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237 (2016);

Sanchez, 61 Cal. 4th at 911; Sonic-Calabasas A, Inc. v.

Moreno, 57 Cal. 4th 1109, 1143–45 (2013) (Sonic II). In our

evaluation of Poublon’s claim, we apply principles derived

from these cases, as well as other precedent articulating

California’s general unconscionability standard. See

Tompkins, 840 F.3d at 1024 (holding that “we are bound by

the California Supreme Court’s most recent articulation of its

[general unconscionability] standard”).

Under California law, “the party opposing arbitration

bears the burden of proving any defense, such as

unconscionability.” Pinnacle Museum Tower Ass’n v.

Pinnacle Mkt. Dev. (US), LLC, 55 Cal. 4th 223, 236 (2012). 

In order to establish such a defense, the party opposing

arbitration must demonstrate that the contract as a whole or

a specific clause in the contract is both procedurally and

substantively unconscionable. Sanchez, 61 Cal. 4th at 910.

Procedural and substantive unconscionability “need not be

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10 POUBLON V. C.H. ROBINSON

present in the same degree.” Id. Rather, there is 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.” Id. (quoting Armendariz v. Found. Health

Psychcare Servs., Inc., 24 Cal. 4th 83, 114 (2000)). We

therefore must consider both procedural and substantive

unconscionability.

The procedural element of unconscionability focuses on

“oppression or surprise due to unequal bargaining power.” 

Pinnacle, 55 Cal. 4th at 246. “The oppression that creates

procedural unconscionability arises from an inequality of

bargaining power that results in no real negotiation and an

absence of meaningful choice.” Grand Prospect Partners,

L.P. v. Ross Dress for Less, Inc., 232 Cal. App. 4th 1332,

1347–48, as modified on denial of reh’g (Feb. 9, 2015). 

California courts have held that oppression may be

established by showing the contract was one of adhesion or

by showing from the “totality of the circumstances

surrounding the negotiation and formation of the contract”

that it was oppressive. Id. at 1348.

“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.”

Armendariz, 24 Cal. 4th at 113 (quoting Neal v. State Farm

Ins. Cos., 188 Cal. App. 2d 690, 694 (1961)). While

California courts have found that “the adhesive nature of the

contract is sufficient to establish some degree of procedural

unconscionability” in a range of circumstances, Sanchez, 61

Cal. 4th at 915, the California Supreme Court has not adopted

a rule that an adhesion contract is per se unconscionable, see

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POUBLON V. C.H. ROBINSON 11

id. at 914–15; see also Morris v. Redwood Empire Bancorp,

128 Cal. App. 4th 1305, 1320 (2005) (“Although adhesion

contracts often are procedurally oppressive, this is not always

the case.”). In the employment context, if an employee must

sign a non-negotiable employment agreement as a condition

of employment but “there is no other indication of oppression

or surprise,”2

then “the agreement will be enforceable unless

the degree of substantive unconscionability is high.” Serpa

v. Cal. Sur. Investigations, Inc., 215 Cal. App. 4th 695, 704,

as modified (Apr. 19, 2013), as modified (Apr. 26, 2013)

(internal quotation marks omitted); see also Ajamian v.

CantorCO2e, L.P., 203 Cal. App. 4th 771, 796 (2012).

California courts have articulated numerous standards for

determining substantive unconscionability. Courts have held

that the agreement must be “overly harsh,” “unduly

oppressive,” “unreasonably favorable,” or must “shock the

conscience.” Sanchez, 61 Cal. 4th at 911 (emphasis omitted). 

“[T]hese formulations, used throughout [California] case law,

all mean the same thing.” Id. The “central idea” is that “the

unconscionability doctrine is concerned not with a simple

old-fashioned bad bargain but with terms that are

unreasonably favorable to the more powerful party.”

Baltazar, 62 Cal. 4th at 1244 (internal quotation marks and

citations omitted). “Not all one-sided contract provisions are

unconscionable.” Sanchez, 61 Cal. 4th at 911.

2 For purposes of determining procedural unconscionability, the

California Supreme Court has held that “surprise or other sharp practices”

may arise when a party with less bargaining power is not told about an

unusual provision, or the party is otherwise “lied to, placed under duress,

or otherwise manipulated into signing the arbitration agreement.” 

Baltazar, 62 Cal. 4th at 1245.

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12 POUBLON V. C.H. ROBINSON

III

We now apply these standards to Poublon’s claim that the

dispute resolution provision in the Incentive Bonus

Agreement is procedurally unconscionable to a high degree

and contains eight substantively unconscionable provisions.

A

We begin with the issue of procedural unconscionability. 

C.H. Robinson concedes that the Incentive Bonus Agreement

meets California’s definition of an adhesion contract, because

there was unequal bargaining power between the employer

and employee, and the agreement was presented to Poublon

on a take-it-or-leave-it basis. Under California law, “[t]he

adhesive nature of the employment contract requires us to be

‘particularly attuned’ to [a former employee’s] claim of

unconscionability.” Baltazar, 62 Cal. 4th at 1245. 

Nevertheless, the adhesive nature of a contract, without more,

would give rise to a low degree of procedural

unconscionability at most. See id. (stating that the court does

not subject a typical employment contract or other adhesion

contract “to the same degree of scrutiny as ‘[c]ontracts of

adhesion that involve surprise or other sharp practices’”

(quoting Gentry v. Superior Court, 42 Cal. 4th 443, 469

(2007))); see also Serpa, 215 Cal. App. 4th at 704; Ajamian,

203 Cal. App. 4th at 796. We therefore turn to the question

whether there are other indications of oppression or surprise

that would lead California courts to conclude that the degree

of procedural unconscionability is high.

Poublon raises two arguments on this point. First,

Poublon argues that the dispute resolution provision was

oppressive because C.H. Robinson failed to provide her with

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POUBLON V. C.H. ROBINSON 13

a copy of the American Arbitration Association’s rules or

C.H. Robinson’s Employment Dispute Mediation/Arbitration

Procedure (the “Arbitration Procedure”), which were

incorporated by reference in the dispute resolution provision. 

We disagree. Baltazar rejected an employee’s claim that the

employer’s failure to provide a copy of the American

Arbitration Association’s rules, which were incorporated by

reference in the arbitration agreement, gave rise to a “greater

degree of procedural unconscionability.” 62 Cal. 4th at 1246. 

While “courts will more closely scrutinize the substantive

unconscionability of terms that were ‘artfully hidden’ by the

simple expedient of incorporating them by reference rather

than including them in or attaching them to the arbitration

agreement,” incorporation by reference, without more, does

not affect the finding of procedural unconscionability. Id.

(quoting Harper v. Ultimo, 113 Cal. App. 4th 1402, 1406

(2003)). Baltazar’s holding is consistent with California’s

general rule that “parties may validly incorporate by

reference into their contract the terms of another document”

provided certain conditions are met. Slaught v. Bencomo

Roofing Co., 25 Cal. App. 4th 744, 748 (1994) (quotingBaker

v. Aubry, 216 Cal. App. 3d 1259, 1264 (1989)); see also Lane

v. Francis Capital Mgmt. LLC, 224 Cal. App. 4th 676, 692

(2014) (“Like any other contract, an arbitration agreement

may incorporate other documents by reference.”). 

Accordingly, while we may “more closely scrutinize the

substantive unconscionability” of terms appearing only in the

American Arbitration Association’s rules or C.H. Robinson’s

Arbitration Procedure, Baltazar, 62 Cal. 4th at 1246, the

incorporation of these documents by reference does not

support Poublon’s claim that the dispute resolution provision

was oppressive.

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14 POUBLON V. C.H. ROBINSON

Second, Poublon states that the dispute resolution

provision was oppressive because she believed signing the

agreement was necessary not only to receive bonuses, but

also to remain employed. This argument fails, because there

is no evidence in the record that C.H. Robinson ever stated or

suggested that Poublon would be fired for failing to sign the

agreement. To the contrary, the record shows that in response

to Poublon’s question regarding what would happen if she did

not sign the agreement, Nelson responded only that she would

not receive her bonus. Poublon points to a statement in the

Incentive Bonus Agreement that provides: “In consideration

for Your continued employment, Your eligibility for a bonus

incentive, and the mutual promises set forth in this

Agreement, You and the Company hereby agree as follows.” 

But this boilerplate merely establishes there is consideration

for the agreement; it does not state that failure to sign the

agreement will result in termination from employment. By

contrast, when the Incentive Bonus Agreement expressly

addresses termination, it states only that “[e]mployment with

the Company is ‘at-will’” and the employee or the Company

can terminate the employment at any time. Poublon’s

unsupported belief that she might be terminated if she failed

to sign the agreement does not provide a basis for her claim

that the dispute resolution provision was oppressive. Cf.

Ayoob v. Ayoob, 74 Cal. App. 2d 236, 250 (1946) (holding

that a “self-serving declaration” was “without sufficient

probative value . . . to establish the intent of the appellant or

the truth of a fact declared”). Moreover, this argument would

fail even if Poublon presented evidence that signing the

Incentive Bonus Agreement were a condition of her

employment. Poublon has not established any other element

of oppression or surprise associated with the employment

agreement, and therefore under California law, “the degree of

procedural unconscionabilityof [such] an adhesion agreement

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POUBLON V. C.H. ROBINSON 15

is low, and the agreement will be enforceable unless the

degree of substantive unconscionability is high.” Serpa,

215 Cal. App. 4th at 704 (internal quotation marks omitted);

see also Baltazar, 62 Cal. 4th at 1245; Ajamian, 203 Cal.

App. 4th at 796.

B

We now turn to Poublon’s argument that eight provisions

in the Incentive Bonus Agreement are substantively

unconscionable. We first consider the language in the dispute

resolution provision itself, and then turn to the language in

the Arbitration Procedure, which is incorporated in the

dispute resolution provision by reference.

1

The Judicial Carve-Out Provision. The dispute resolution

provision requires employees to submit all claims against

C.H. Robinson to arbitration, but preserves C.H. Robinson’s

right to seek judicial resolution of “any claims by the

Company that include a request for injunctive or equitable

relief, including,” certain restrictive covenants and

intellectual property rights. The district court held that the

judicial resolution carve-out was substantively

unconscionable. On appeal, C.H. Robinson does not contest

the district court’s holding that the carve-out for equitable or

injunctive relief was substantively unconscionable. 

Accordingly, any argument that the judicial carve-out was not

substantively unconscionable has been waived. MartinezSerrano v. INS, 94 F.3d 1256, 1259–60 (9th Cir. 1996).

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16 POUBLON V. C.H. ROBINSON

2

Waiver of Representative Claims. The dispute resolution

provision states that “except as mutually agreed at the time

between You and the Company, neither You nor the

Company may bring any Claim combined with or on behalf

of any other person or entity, whether on a collective,

representative, or class action basis or any other basis.” The

parties do not dispute that this provision denies Poublon the

right to bring her representative PAGA claim, and we agree. 

In Iskanian v. CLS Transportation Los Angeles, LLC, the

California Supreme Court held that where “an employment

agreement compels the waiver of representative claims,”

whether or not the agreement specifically references PAGA,

it “frustrates the PAGA’s objectives” and “is contrary to

public policy and unenforceable as a matter of state law.” 

59 Cal. 4th 348, 384 (2014). This holding is not preempted

by the FAA and is the controlling rule of California contract

law. Sakkab, 803 F.3d at 439.

Poublon argues that because the waiver of a

representative PAGA claim is unenforceable, it is also

substantively unconscionable. This is incorrect. Under

California law, “[c]ontracts can be contrary to public policy

but not unconscionable and vice versa.” Sonic-Calabasas A,

Inc. v. Moreno, 51 Cal. 4th 659, 686–87, cert. granted,

judgment vacated on other grounds, 132 S. Ct. 496 (2011)

(Sonic I) (internal citations omitted); see also Securitas Sec.

Servs. USA, Inc. v. Superior Court, 234 Cal. App. 4th 1109,

1123 (2015) (holding that the determination “whether an

agreement has been validly formed, and whether its terms are

adhesive or unconscionable . . . are different from the

determination of whether [the employee] entered into a

knowing and intelligent waiver of her right to bring a PAGA

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POUBLON V. C.H. ROBINSON 17

claim . . . or whether Iskanian compels a conclusion that such

a waiver is unenforceable as against public policy”). We are

not aware of a California case holding that a PAGA waiver is

substantively unconscionable. Nor has Poublon directed us

to a case holding that the waiver of a representative claim,

other than a PAGA claim, is substantively unconscionable.

By contrast, the Supreme Court has suggested that

arbitration agreements can generally waive collective, classwide, and representative claims. In Concepcion, an

arbitration agreement “required that claims be brought in the

parties’ ‘individual capacity, and not as a plaintiff or class

member in any purported class or representative

proceeding.’” 563 U.S. at 336. Because the California

Supreme Court had developed a rule that such provisions

were unconscionable, we denied a company’s motion to

compel arbitration. Id. at 338. The Supreme Court reversed,

holding that this state court rule was preempted by the FAA,

because “[t]he overarching purpose of the FAA . . . is to

ensure the enforcement of arbitration agreements according

to their terms so as to facilitate streamlined proceedings,” and

“[r]equiring the availabilityof classwide arbitration interferes

with fundamental attributes of arbitration and thus creates a

scheme inconsistent with the FAA.” Id. at 344. Accordingly,

even if the parties cannot lawfully agree to waive a PAGA

representative action, Concepcion weighs sharply against

holding that the waiver of other representative, collective or

class action claims, as provided in the dispute resolution

provision, is unconscionable. Therefore, the unenforceability

of the waiver of a PAGA representative action does not make

this provision substantively unconscionable.

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18 POUBLON V. C.H. ROBINSON

3

The Venue Provision. Section II(f) of the Arbitration

Procedure, “Venue and Place of Hearing,” provides:

The venue of any Dispute shall be Hennepin

County, MN. Unless the Parties otherwise

agree or the Arbitrator otherwise directs for

good reason, any hearing shall be conducted

and deemed held in that county of venue, at a

place convenient to the Parties as so

designated by the Arbitrator.

Relying on cases decided prior to Sanchez, Poublon

claims that this venue provision is substantively

unconscionable because it requires her to litigate her

California claims in Minnesota, a thousand miles away from

her home in California. We have previously rejected this

argument. See Tompkins, 840 F.3d at 1027. As we

explained, the California Supreme Court has stated that

California courts must enforce a forum selection clause

unless the clause is unreasonable because “the forum selected

would be unavailable or unable to accomplish substantial

justice”; inconvenience and expense of the forum alone is not

sufficient. Id. (quoting Smith, Valentino & Smith, Inc. v.

Superior Court, 17 Cal. 3d 491, 494 (1976) (in bank)).

As in Tompkins, Poublon has not met the burden of

proving that the forum selection clause in the Arbitration

Procedure is unreasonable. For one, even if the venue

provision required arbitration to take place in Hennepin

County, Minnesota, the forum is not “unavailable or unable

to accomplish substantial justice.” See id. Moreover,

Poublon’s interpretation of this venue provision is wrong: on

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POUBLON V. C.H. ROBINSON 19

its face, the provision does not require a Minnesota venue, but

allows the parties to agree on a different venue, and allows

the arbitrator to select a different venue “for good reason.” 

An arbitrator would have good reason to change the venue if

Poublon could demonstrate that Minnesota would be “so

gravely difficult and inconvenient that [the plaintiffs] will for

all practical purposes be deprived of [their] day in court.” 

Aral v. EarthLink, Inc., 134 Cal. App. 4th 544, 561 (2005)

(quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 18

(1972)). When determining the validity of an arbitration

procedure, “[w]e assume that the arbitrator will operate in a

reasonable manner in conformity with the law.” Dotson v.

Amgen, Inc., 181 Cal. App. 4th 975, 984 (2010). 

Accordingly, we conclude that this venue provision in the

Arbitration Procedure is not substantively unconscionable.

4

The Confidentiality Provision. Section II(h) of the

Arbitration Procedure, “Confidentiality,” provides:

All aspects of the arbitration, including

without limitation, the record of the

proceeding, are confidential and shall not be

open to the public, except (a) to the extent

both Parties agree otherwise in writing, (b) as

may be appropriate in any subsequent

proceedings between the Parties, or (c) as may

otherwise be appropriate in response to a

governmental agency or legal process,

provided that the Party upon whom such

process is served shall give immediate notice

of such process to the other Party and afford

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20 POUBLON V. C.H. ROBINSON

the other Party an appropriate opportunity to

object to such process.

Poublon claims that this provision is substantively

unconscionable because keeping the arbitration proceedings

secret under threat of a sanction order by the arbitrator

unfairly favors employers. In making this argument, Poublon

relies on our decision in Pokorny v. Quixtar, Inc., which held

that a confidentialityrequirement in the arbitration agreement

is substantivelyunconscionable when it (1) allows defendants

to learn as “repeat player[s]” in the arbitration process, while

preventing employees from learning from similar prior cases,

or (2) prevents plaintiffs from investigating or engaging in

discovery by limiting contact with other employees. 601 F.3d

987, 1001–03 (9th Cir. 2010).3

This argument fails. Several years after Pokorny was

decided, the California Court of Appeal considered a trial

court’s denial of an employer’s motion to compel arbitration. 

Sanchez v. CarMax Auto Superstores Cal. LLC, 224 Cal.

3The confidentialityprovision inPokornyprevented distributors from

disclosing “to any other person not directly involved in the conciliation or

arbitration process (a) the substance of, or basis for, the claim; (b) the

content of any testimony or other evidence presented at an arbitration

hearing or obtained through discovery; or (c) the terms [or] amount of any

arbitration award.” 601 F.3d at 1001. This provision took effect as soon

as the distributor became “aware of a potential Rule violation or of a claim

against” another distributor or against Quixtar, the defendant company. 

Id. We interpreted this provision as barring distributors from disclosing

their claim and “the evidence supporting it.” Id. Quixtar, on the other

hand, could “mak[e] such disclosures up until the time [a distributor]

formally demands arbitration,” and could “avoid the confidentiality

requirement altogether when it bringsits own claims against [a distributor]

because it is not required to first assert those claims using the Quixtar

ADR process.” Id.

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POUBLON V. C.H. ROBINSON 21

App. 4th 398 (2014), review denied (June 11, 2014). The

employee opposed the motion, on the ground that the

arbitration agreement was unconscionable. Id. at 401. 

Among the allegedly unconscionable provisions was a

confidentiality provision requiring “that the arbitration

(including the hearing and record of the proceeding) be

confidential and not open to the public unless the parties

agree otherwise, or as appropriate in any subsequent

proceeding between the parties, or as otherwise may be

appropriate in response to governmental or legal process.” 

Id. at 408. The trial court held that this provision, along with

others in the agreement, unreasonably favored the employer

because “they inhibit employees from discovering evidence

from each other” while “[n]o such restrictions are applied in

a court action.” Id. The California Court of Appeal rejected

this reasoning, holding that there is nothing unreasonable or

prejudicial about “a secrecy provision with respect to the

parties themselves,” and the provision requiring

confidentiality was not unconscionable. Id. (quoting

Woodside Homes of Cal., Inc. v. Superior Court, 107 Cal.

App. 4th 723, 732 (2003)).

This holding is directly on point. The confidentiality

provisions in both the Arbitration Procedure at issue here and

in CarMax are substantially identical: they both require that

the arbitration, including the record of the proceeding, be

confidential, and they both include the same enumerated

exceptions. See id. Moreover, the California Court of

Appeal rejected the same policy argument that Poublon

makes here, namely that such confidentiality provisions

“inhibit employees from discovering evidence from each

other.” See id.

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22 POUBLON V. C.H. ROBINSON

In the absence of any decision on this issue from the

California Supreme Court, we are bound by CarMax, as the

ruling of the highest state court issued to date. While the

state’s Supreme Court is “the final arbiter of what is state

law,” there are “many rules of decision commonly accepted

and acted upon by the bar and inferior courts which are

nevertheless laws of the state although the highest court of the

state has never passed upon them.” West v. Am Tel. & Tel.

Co., 311 U.S. 223, 236 (1940). “A state appellate court’s

announcement of a rule of law is a datum for ascertaining

state law which is not to be disregarded by a federal court

unless it is convinced by other persuasive data that the highest

court of the state would decide otherwise.” Miller v. Cty. of

Santa Cruz, 39 F.3d 1030, 1036 n.5 (9th Cir. 1994), as

amended (Dec. 27, 1994) (quoting Hicks v. Feiock, 485 U.S.

624, 630 (1988)) (internal quotation marks omitted). Federal

courts are required to “ascertain from all the available data

what the state law is and apply it rather than to prescribe a

different rule, however superior it may appear from the

viewpoint of ‘general law’ and however much the state rule

may have departed from prior decisions of the federal courts.”

Am Tel. & Tel. Co., 311 U.S. at 237. This approach is

consistent with the longstanding principle that state law

should be applied consistently in federal and state courts, a

goal that “would be thwarted if the federal courts were free to

choose their own rules of decision whenever the highest court

of the state has not spoken.” Id. at 236.

Here, there is no “persuasive data,” Miller, 39 F.3d at

1036 n.5, that the California Supreme Court would reach a

different conclusion than CarMax, and the fact that the

California Supreme Court declined to review CarMax

supports this conclusion. See Tenneco W., Inc. v. Marathon

Oil Co., 756 F.2d 769, 771 (9th Cir. 1985) (noting the

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POUBLON V. C.H. ROBINSON 23

importance of relying on a state appellate court’s ruling is

heightened when “the highest court has refused to review the

lower court’s decision” (quoting Am Tel &Tel. Co., 311 U.S.

at 236)). Poublon does not cite any California case reaching

a different conclusion than CarMax.

Moreover, our prior decisions on this issue did not rely on

any California law. Rather, in holding that a confidentiality

provision was substantively unconscionable, Pokorny relied

only on our decisions in Davis v. O’Melveny & Myers,

485 F.3d 1066 (9th Cir. 2007), and Ting v. AT&T, 319 F.3d

1126 (9th Cir. 2003). Davis, in turn, relied on Ting and a

decision of the Washington Supreme Court, see Davis,

485 F.3d at 1078–79 (citing Zuver v. Airtouch Commc’ns,

Inc., 153 Wash. 2d 293, 313 (2004) (en banc)), while Ting,

relied solely on a D.C. Circuit decision, 319 F.3d at 1151–52

(citing Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465 (D.C.

Cir. 1997)). Now that we have available data establishing

“what the state law is” regarding a closely similar

confidentiality provision, we are bound to apply it, even

though “the state rule may have departed from prior decisions

of the federal courts.” Am Tel & Tel. Co., 311 U.S. at 237.4

Accordingly, the confidentiality provision in the Arbitration

Procedure is not substantively unconscionable.

4 Even if Pokorny and related cases remained relevant to our analysis

of California law, the policy concerns that drove these decisions are not

applicable in this case. First, where the number of putative class members

is smaller than the thousands in Davis and the millions in Ting, the “repeat

player” concerns are mitigated. See Kilgore v. KeyBank Nat’l Ass’n,

718 F.3d 1052, 1059 n.9 (9th Cir. 2013) (en banc). Poublon’s suit

involves around 250 class members. Second, the scope of the

confidentiality provision in the dispute resolution provision is narrower

than in our prior cases, which mitigates Pokorny’s concern that plaintiffs

will be limited in their ability to share information.

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24 POUBLON V. C.H. ROBINSON

5

Sanctions Provision. Section II(p) of the Arbitration

Procedure, “Sanctions,” states:

The Arbitrator may award either Party its

reasonable attorneys’ fees and costs, including

reasonable expenses associated with

production of witnesses or proof, upon a

finding that the claim or counterclaim was

frivolous or brought to harass the Employee,

the Company or the Company’s personnel.

The Arbitrator may award either Party its

reasonable attorneys’ fees and costs, including

reasonable expenses associated with

production of witnesses or proof, upon a

finding that the other Party (a) engaged in

unreasonable delay, (b) failed to cooperate in

discovery, or (c) failed to comply with

requirements of confidentiality.

Under California law, “[i]n the context of mandatory

employment arbitration of unwaivable statutory rights, . . .

arbitration agreements ‘cannot generally require the

employee to bear any type of expense that the employee

would not be required to bear if he or she were free to bring

the action in court.’” Sanchez, 61 Cal. 4th at 918 (quoting

Armendariz, 24 Cal. 4th at 110–11).

Poublon argues that the sanctions provision violates this

rule and is substantively unconscionable for two reasons. 

First, she argues that the provision permits an award of

attorneys’ fees in favor of the employer even though under

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POUBLON V. C.H. ROBINSON 25

section 1194 of the California Labor Code, only the employee

is entitled to attorneys’ fees when prevailing on a

misclassification claim.5 Second, she argues that the

provision violates California law because it gives the

arbitrator the option to award attorneys’ fees to the prevailing

employee, while section 1194 gives the prevailing employee

an absolute right to recover attorneys’ fees.

We disagree with both arguments. First, Poublon

misconstrues the sanctions provision as authorizing the

arbitrator to award attorneys’ fees to the prevailing party in

the arbitration. On its face, it does not give the arbitrator

such power. Rather, the provision authorizes the arbitrator to

award attorneys’ fees against a party that brought a frivolous

or harassing claim, or in the course of the proceeding,

engaged in unreasonable delay, failed to cooperate in

discovery, or violated confidentiality requirements. In other

words, the clause provides for the imposition of attorneys’

fees as a sanction for bad behavior. As such, it is consistent

with sections 128.7 and 2023.030(a) of the California Code

of Civil Procedure, which authorize courts to impose similar

sanctions in judicial proceedings. Indeed, Poublon has not

identified a circumstance in which the sanctions available

5

 California Labor Code section 1194(a) provides:

(a) Notwithstanding any agreement to work for a lesser

wage, any employee receiving less than the legal

minimum wage or the legal overtime compensation

applicable to the employee is entitled to recover in a

civil action the unpaid balance of the full amount of this

minimum wage or overtime compensation, including

interest thereon, reasonable attorney’s fees, and costs of

suit.

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26 POUBLON V. C.H. ROBINSON

under the Arbitration Procedure would not be available in a

judicial proceeding.

6

Second, because the sanctions provision is silent on

whether an arbitrator can award attorneys’ fees to a prevailing

employee, it is not inconsistent with section 1194 of the

California Labor Code. Rather, the Arbitration Procedure

requires the arbitrator to comply with applicable California

law, which would include section 1194 to the extent

applicable. See Section II(j), “Applicable Law and Burden of

Persuasion,” (“The principles of applicable substantive

common, decisional and statutory law shall control the

disposition of each Dispute.”). Accordingly, the sanctions

provision is not substantively unconscionable.

6

Unilateral Modification. Poublon argues that the dispute

resolution provision is substantively unconscionable because

it unfairly permits C.H. Robinson to change the arbitration

rules unilaterally and terms merely by changing its rules on

its corporate intranet. Poublon apparently relies on the

language in the agreement that “any mediation or arbitration

shall be governed by the Company’s Employment Dispute

Mediation/Arbitration Procedure, which is available on the

Company intranet.”

6

In connection with this point, Poublon argues that in prior litigation,

C.H. Robinson conceded that the arbitration agreement potentially offered

it attorneys’ fees for which it might not otherwise be eligible under

California law. The record does not establish such a concession; rather,

C.H. Robinson declined to contest this issue.

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POUBLON V. C.H. ROBINSON 27

This claim is meritless. Under California law, a contract

and a document incorporated by reference into the contract

are read together as a single document, see Standard Iron

Works v. Globe Jewelry & Loan, Inc., 164 Cal. App. 2d 108,

117 (1958), and “what is being incorporated must actually

exist at the time of the incorporation, so the parties can know

exactly what they are incorporating,” Gilbert St. Developers,

LLC v. La Quinta Homes, LLC, 174 Cal. App. 4th 1185, 1194

(2009) (emphasis omitted). “Put another way, to have a valid

incorporation by reference, the terms of the document being

incorporated must be known or easily available to the

contracting parties.” Id. (internal quotation marks omitted). 

If a provision or term of an incorporated document “does not

exist at the time of incorporation by reference,” then it “fails

the elementary test of being known or easily available at the

time of incorporation.” Id. Accordingly, at the time Poublon

executed the Incentive Bonus Agreement, it incorporated the

then-existing Arbitration Procedure, regardless whether this

document was attached to the contract or was posted on the

company intranet. See DVD Copy Control Ass’n, Inc. v.

Kaleidescape, Inc., 176 Cal. App. 4th 697, 714 (2009) (“The

clear and unequivocal reference to the extrinsic document and

the contemporaneous availability of its terms shows that, at

the time of contracting, the parties consented to those terms.”

(emphasis added)); see also Shaw v. Regents of Univ. of Cal.,

58 Cal. App. 4th 44, 55–56 (1997) (holding that a patent

agreement between a teacher and university incorporated the

terms of a patent policy in effect at the time the teacher

signed the agreement). While the parties may agree to

incorporate a document as it is updated or amended, see

Tompkins, 840 F.3d at 1032 n.9 (construing a contract that

expressly permitted the defendant to “make changes to the

[contract] from time to time”), the parties did not do so here;

nothing in the dispute resolution provision gives C.H.

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28 POUBLON V. C.H. ROBINSON

Robinson the authority to modify any part of the agreement

unilaterally, including any incorporated document. 

Moreover, even had C.H. Robinson included a unilateral

modification clause, “California courts have held that the

implied covenant of good faith and fair dealing prevents a

party from exercising its rights under a unilateral

modification clause in a way that would make it

unconscionable.” Id. at 1033. Accordingly, the incorporation

provision is not substantively unconscionable.

7

Discovery Limitations. Both the dispute resolution

provision and the Arbitration Procedure address the scope of

discovery. The dispute resolution provision includes the

following:

[E]xcept on a substantial showing of good

cause, discovery will be limited to the

exchange of relevant documents and three

depositions per side . . . In the case of any

conflict between the rules and procedures for

either mediation or arbitration, the priority

and order of precedence shall be as follows:

(1) the rules and procedures stated herein;

(2) the Company’s Employment Dispute

Mediation/Arbitration Procedure; (3) the

Employment Arbitration Rules and Mediation

Procedures of the American Arbitration

Association.

Section II(g) of the Arbitration Procedure, “Pre-Hearing

Discovery,” provides four paragraphs of guidance on the

conduct of discovery. As relevant here, the section provides:

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POUBLON V. C.H. ROBINSON 29

Upon request, either Party shall be entitled to

receive, prior to the hearing, information and

copies of documents that meet the criteria for

discovery. Upon request, the Employee shall

also be entitled to a true copy of his or her

personnel records kept in the ordinary course

of business (including without limitation any

and all performance valuations), other than

records relating to pre-employment

procedures and any reference checks, subject

to any condition or limitation imposed by the

Arbitrator upon a showing of good cause.

Upon request, the Employee shall be entitled,

at least thirty (30) days in advance of the

commencement of the hearing, to take at least

one deposition of a Company representative

designated by the Employee. . . . Any dispute

relative to discovery shall be presented to the

Arbitrator for final and binding resolution. 

The Arbitrator may grant, upon good cause

shown, either Party’s request for discovery in

addition to or limiting that for which this

paragraph expressly provides.

Poublon argues that these limitations on discovery are

substantively unconscionable, because they allow less

discovery than the federal rules and are insufficient to allow

her to arbitrate her claims.

Again, we reject this argument. The California Supreme

Court has made clear that “limitation on discovery is one

important component of the ‘simplicity, informality, and

expedition of arbitration.’” Armendariz, 24 Cal. 4th 83 at 106

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30 POUBLON V. C.H. ROBINSON

n.11 (quoting Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20, 31 (1991)); see also Dotson, 181 Cal. App. 4th

at 983 (holding that “discovery limitations are an integral and

permissible part of the arbitration process”). Because

“arbitration is meant to be a streamlined procedure,” parties

may agree to limit the number of depositions and impose

other restrictions. Dotson, 181 Cal. App. 4th at 983. But

while limitations on discovery are permissible in an

arbitration agreement, California has made clear that a court

must balance the “desirable simplicity” of limiting discovery

with employees’ need for discovery “sufficient to adequately

arbitrate their statutory claim, including access to essential

documents and witnesses, as determined by the arbitrator(s)

and subject to limited judicial review.” Armendariz, 24 Cal.

4th at 106.

In finding this balance, California courts look to the

amount of discovery permitted, the standard for obtaining

additional discovery, and the evidence presented by plaintiffs

that the discovery limitations will prevent them from

adequately arbitrating their statutory claims. Fitz v. NCR

Corp., 118 Cal. App. 4th 702, 715–18 (2004); CarMax,

224 Cal. App. 4th at 404–06. In Fitz, the court considered an

agreement that limited the plaintiff to two depositions and no

written discovery, with additional discovery permitted only

if the requesting party could demonstrate a compelling need,

meaning that a fair hearing would be impossible without

additional discovery. 118 Cal. App. 4th at 717–18. The

employee estimated that she would have to depose eight to

ten witnesses in order to vindicate her claim against the

employer. Id. at 717. The court concluded that the only way

the employee could gain access to “necessary information to

prove the claim is to get permission from the arbitrator for

additional discovery” under the burdensome impossibility

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POUBLON V. C.H. ROBINSON 31

standard. Id. Because the employee should not “be forced to

demonstrate this impossibility to an arbitrator before being

granted access to the type of discovery that is necessary for

a fair opportunity to vindicate her claim,” the California

Court of Appeal held that the discovery limitations were

substantively unconscionable. Id. at 719.

In CarMax, by contrast, the dispute resolution provision

provided for “disclosure of relevant documents and

production of the personnel file upon request, with each party

under a continuing obligation to supplement its initial

disclosure” and limited “each party to 20 interrogatories and

three depositions.” 224 Cal. App. 4th at 404. The dispute

resolution provision also stated “that on request of any party

and a showing of ‘substantial need,’ the arbitrator may allow

additional discovery if it ‘is not unduly burdensome and will

not unduly delay the conclusion of the arbitration.’” Id.

Further, the employee did not show “how the limitation on

discovery would prevent him from vindicating his rights in

his particular case.” Id. Rather, the employee argued that the

substantial need standard was per se too stringent. Id. The

California Court of Appeal rejected this argument, noting that

in the dispute resolution provision at issue in its case, the

discovery provisions were “considerably more liberal” than

they were in Fitz, and the employee could get additional

discovery merely by showing substantial need, rather than

compelling need as in Fitz. Id. at 405. CarMax also noted

that the employee did not “make any showing that he could

not maintain his claim without more discovery than that

provided by the agreement.” Id. Accordingly, CarMax

concluded that the discovery provisions were not

substantively unconscionable. Id. at 405–06.

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32 POUBLON V. C.H. ROBINSON

Here,the discoverylimitations and evidence presented are

more similar to those in CarMax than those in Fitz. Reading

the dispute resolution provision and the Arbitration Procedure

together, Poublon can obtain all “relevant documents,”

request her personnel records, and take three depositions. 

Poublon can obtain additional discovery merely by showing

good cause, which would include a demonstrated need for

discovery “sufficient to adequately arbitrate” her claim. See

Armendariz, 24 Cal. 4th at 106. Finally, Poublon fails to

make any showing that she would be unable to vindicate her

rights under the standard provided in the agreement. See

CarMax, 224 Cal. App. 4th at 405–06. Accordingly, the

discovery limitations provision is not substantively

unconscionable.

8

Reaffirmation Clause. The final provision in the

Incentive Bonus Agreement states: “I reaffirm and agree

anew to abide by all of my prior agreements with Company

as a necessary condition of receiving the benefits under this

Agreement.” Poublon contends that this reaffirmation

provision means that she is reaffirming an illegal

noncompetition agreement with C.H. Robinson. We decline

to consider this argument. This provision is not part of the

dispute resolution provision, either directlyor as incorporated

by reference. Our “authority to review portions of the

contract outside the arbitration provision is limited.” 

Tompkins, 840 F.3d at 1032. Rent-A-Center, West, Inc. v.

Jackson stated that “[i]t may be that” where a plaintiff

challenges “the validity under § 2 of the precise agreement to

arbitrate at issue” on the ground that certain general contract

provisions “as applied” to the agreement to arbitrate render

it unconscionable, such a “challenge should [be] considered

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POUBLON V. C.H. ROBINSON 33

by the court.” 561 U.S. 63, 71, 74 (2010) (emphasis in

original). Here, Poublon fails to explain how the provision

reaffirming prior agreements applies to the agreement to

arbitrate so as to render it unconscionable. Therefore, it is up

to the arbitrator to evaluate whether the provision reaffirming

previous agreements is unenforceable.

C

If a California court concludes that a contract contains

one or more unconscionable clause, it may: (1) refuse to

enforce a contract that was “unconscionable at the time it was

made”; (2) “enforce the remainder of the contract without the

unconscionable clause”; or (3) “limit the application of any

unconscionable clause asto avoid anyunconscionable result.” 

Cal. Civ. Code § 1670.5(a). A court may “refuse to enforce

the entire agreement” only when it is “‘permeated’ by

unconscionability.” Armendariz, 24 Cal. 4th at 122 (citing

Cal. Civ. Code § 1670.5, Legis. Comm. Comments, n.2); see

also Ajamian, 203 Cal. App. 4th at 802 (“[T]he strong

preference is to sever unless the agreement is ‘permeated’ by

unconscionability.” (emphasis omitted)).

“Where a contract has several distinct objects, of which

one at least is lawful, and one at least is unlawful, in whole or

in part, the contract is void as to the latter and valid as to the

rest.” Cal. Civ. Code § 1599; see also Fair v. Bakhtiari,

195 Cal. App. 4th 1135, 1157 (2011) (“Civil Code section

1599 codifies the common law doctrine of severability of

contracts.”). By contrast, a contract is permeated with

unlawfulness (and severance is inappropriate) where “[t]he

good cannot be separated from the bad, or rather the bad

enters into and permeates the whole contract, so that none of

it can be said to be good.” Keene v. Harling, 61 Cal. 2d 318,

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34 POUBLON V. C.H. ROBINSON

322 (1964) (quoting Santa Clara Val. M. & L. Co. v. Hayes,

76 Cal. 387, 393 (1888)). In other words,“[i]f the central

purpose of the contract is tainted with illegality, then the

contract as a whole cannot be enforced.” Marathon Entm’t,

Inc. v. Blasi, 42 Cal. 4th 974, 996 (2008) (internal quotation

marks and citations omitted). On the other hand, “[i]f the

illegality is collateral to the main purpose of the contract, and

the illegal provision can be extirpated from the contract by

means of severance or restriction, then such severance and

restriction are appropriate.” Id.

In Armendariz, the California Supreme Court considered

whether a trial court had abused its discretion in refusing to

enforce a contract due to the presence of two unlawful

provisions in an arbitration agreement. 24 Cal. 4th at 122–27. 

The court first reiterated the general rule that a court should

not enforce a contract if its central purpose is “tainted with

illegality,” but should enforce the contract if “the illegality is

collateral to the main purpose of the contract” and the illegal

provisions “can be extirpated from the contract by means of

severance or restriction.” Id. at 124. Applying this rule,

Armendariz concluded that the trial court had not abused its

discretion because two factors weighed against severing the

unlawful provisions. First, the court noted that the arbitration

agreement contained “more than one unlawful provision; it

has both an unlawful damages provision and an

unconscionably unilateral arbitration clause.” Id. According

to the court, “[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.” Id. Second, Armendariz stated

that the contract as a whole lacked mutuality, and therefore

“there is no single provision a court can strike or restrict in

order to remove the unconscionable taint from the

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POUBLON V. C.H. ROBINSON 35

agreement.” Id. at 124–25. Armendariz concluded that

“severance or restriction” would not cure the

unconscionability, and therefore “it must void the entire

agreement.” Id. at 125.

Poublon argues that an agreement is necessarily

permeated by unconscionability if more than one clause in the

agreement is unconscionable or illegal. We disagree;

California courts have not adopted such a per se rule. 

Following Armendariz, California courts have held that a

factor weighing against severance exists when “the agreement

contains more than one objectionable term” which “may

indicate a systematic effort to impose arbitration on an

employee.” Ontiveros v. DHL Exp. (USA), Inc., 164 Cal.

App. 4th 494, 515 (2008) (internal quotation marks omitted). 

But this is only one of the relevant factors; California courts

also consider whether “the central purpose of the contract is

tainted with illegality,” and whether “there is no single

provision a court can strike or restrict in order to remove the

unconscionable taint from the agreement.” Id.; see also Little

v. Auto Stiegler, Inc., 29 Cal. 4th 1064, 1074 (2003); Mercuro

v. Superior Court, 96 Cal. App. 4th 167, 184–85 (2002).7In

7 Poublon argues that Magno v. Coll. Network, Inc., supports her

contention that California has adopted a per se “two-strikes” rule, because

it states that “[a]n agreement to arbitrate is considered ‘permeated’ by

unconscionability where it contains more than one unconscionable

provision.” 1 Cal. App. 5th 277, 292 (2016). We disagree. Magno

followed this statement by reciting the rule that an arbitration agreement

is deemed “permeated” by unconscionability if “there is no single

provision a court can strike or restrict in order to remove the

unconscionable taint from the agreement,” and then proceeded to affirm

the trial court’s decision to void the entire arbitration agreement only

because the unconscionability could not be cured by severance. Id. at

292–93. Reading the sentence excerpted byPoublon in context, therefore,

Magno is consistent with the California Supreme Court’s decision in

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36 POUBLON V. C.H. ROBINSON

each case, the dispositive question is whether “the central

purpose of the contract” is so tainted with illegality that there

is no lawful object of the contract to enforce. Marathon

Entm’t, 42 Cal. 4th at 996.

In this case, severance is appropriate. Per C.H.

Robinson’s concession, there is one unconscionable clause in

the dispute resolution provision, the portion of the dispute

resolution provision that permits C.H. Robinson, but not

Poublon, to seek judicial resolution of specified claims. This

provision can be extirpated without affecting the remainder

of the paragraph and is “collateral to the main purpose of the

contract,” which is to require arbitration of disputes. Id. 

Second, the waiver of representative claims is unenforceable

to the extent it prevents an employee from bringing a PAGA

action. This clause can be limited without affecting the

remainder of the agreement. Iskanian, 59 Cal. 4th at 391

(holding that an employer “cannot compel the waiver of [the

employee’s] representative PAGA claim but that the

agreement is otherwise enforceable according to its terms”);

see also Sakkab, 803 F.3d at 440 (limiting the PAGA waiver

and holding that non-PAGA claims must be arbitrated). 

Finally, the fourth paragraph of the dispute resolution

provision allowing modifications “to the extent necessary,

consistent with [the agreement’s] fundamental purpose and

intent, in order to make it enforceable” makes clear that the

parties intended for any invalid portion of the agreement to be

restricted.

Armendariz, 24 Cal. 4th at 122–27, and Sanchez, 61 Cal. 4th at 912, as

well as with California’s “very liberal view of severability,” Adair v.

Stockton Unified Sch. Dist., 162 Cal. App. 4th 1436, 1450 (2008).

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POUBLON V. C.H. ROBINSON 37

Accordingly, we conclude that the dispute resolution

provision is valid and enforceable once the judicial carve-out

clause is extirpated and the waiver of representative claims is

limited to non-PAGA claims, and the district court erred in

holding otherwise.

REVERSED AND REMANDED.

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