1

Filed 8/17/15

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

JULIE A. CARLSON,

Plaintiff and Respondent,

v.

HOME TEAM PEST DEFENSE, INC. 

et al.,

Defendants and Appellants.

 A142219

 (Contra Costa County

 Super. Ct. No. C1400155)

I.

INTRODUCTION

Respondent Julie A. Carlson (Carlson) filed this wrongful termination action 

against her former employer Home Team Pest Defense, Inc. and related parties 

(collectively Home). The trial court denied Home’s motion to compel arbitration of 

Carlson’s claims, finding that an arbitration agreement Carlson signed when Home first 

hired her was procedurally and substantively unconscionable. We agree with the trial

court’s conclusions and also reject Home’s contentions that (1) state law 

unconscionability principles are preempted by the Federal Arbitration Act (FAA) (9 

U.S.C. § 1 et seq.); and (2) the trial court abused its discretion by refusing to sever 

unconscionable provisions from the agreement in this case. Accordingly, we affirm the 

order denying Home’s motion to compel arbitration.
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II.

PROCEDURAL AND FACTUAL BACKGROUND

A. The Complaint

In January 2014, Carlson filed a complaint against Home in which she alleged that 

she was employed as the office manager at Home’s Antioch office from February 4, 

2013, until her wrongful termination on July 1, 2013. Carlson sought damages and 

attorney fees for wrongful termination, harassment, breach of her employment 

agreement, a wage claim for unpaid overtime (Lab. Code, §§ 510, 515), a claim of 

retaliation, in violation of Labor Code section 1102.5, and intentional infliction of 

emotional distress.

B. Home’s Motion to Compel

In March 2014, Home filed a motion to compel arbitration and to stay the superior 

court proceedings, contending that all of Carlson’s claims were subject to binding 

arbitration pursuant to an arbitration agreement between the parties that was “valid and 

enforceable as a matter of law.” Home supported its motion with a declaration from the 

general manager of its Antioch office, appellant Mohammed Nadeem (Nadeem).

Nadeem stated that on Carlson’s first day of work, he provided her with access to 

Home’s electronic “onboarding system,” which contained company policies, including 

Home’s “Agreement to Arbitrate” (the Agreement). Later that day, Carlson objected to 

the Agreement in an email which stated: “This agreement is far to [sic] broad and does 

not include several very important terms/clause [sic] relating to the arbitration. I would 

like to negotiate the terms of this agreement so that the agreement is equally fair to both 

parties.” The following day, Nadeem arranged a conference call between himself,

Carlson and Home’s human resources manager (HR Manager) to discuss Carlson’s 

concerns. The HR Manager told Carlson she could review the terms of the Agreement 

with Home’s attorney. In response, Carlson asked who would pay for any arbitration and 

what firm would perform it. The HR Manager began to explain how costs were handled 

and that she did not know what firm would be used, but Carlson “cut [her] off,” saying 

that was all the information she needed and she would sign the Agreement. Carlson also 
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said that her attorney had reviewed the Agreement, and told her that it “lacked details that 

would prove important.”

Home also submitted a declaration from its in-house counsel, Jefferson Blandford,

who confirmed Carlson’s prior employment with Home, and who produced a copy of the 

Agreement that Carlson “signed electronically,” which was kept in her personnel file.1 

Blandford also produced a copy of Home’s 13-page “Dispute Resolution Policy” (the 

Policy or the Dispute Resolution Policy), which was incorporated by reference into the 

Agreement.

C. The Agreement

The Agreement stated as follows:

“AGREEMENT TO ARBITRATE

“This Agreement is made and entered into by and between Rollins, Inc. and all 

their related companies including any parent, subsidiary or affiliate, or any other person 

or entity acting as its agent, (herein ‘Company’) and the Employee.

“I desire, as does the Company, to resolve any disputes regarding or arising from 

my employment in an expeditious and economical fashion. I recognize and agree, as 

does the Company, that arbitration of such disputes through binding arbitration is in the 

best interest of both parties. Therefore, in consideration of employment and the mutual 

promises, covenants, and conditions set forth in this Agreement, I agree, as does the 

Company, to abide by the Company’s Dispute Resolution Policy (‘DRP’) and to arbitrate 

any dispute, claim, or controversy regarding or arising out of my employment (as defined 

by the Company’s DRP, a copy of which I may request at any time) that may arise 

between me and the Company, its parent, subsidiaries, affiliates or any other persons or 

entities acting as its agent. The parties agree that the Company’s operations directly 

 

1

 What Carlson actually signed was an electronic acknowledgement form which 

stated that the employee had reviewed and agreed to comply with the terms of the 

following Home “policies”: Agreement to Arbitrate Policy, Equal Employment 

Opportunity Diversity & Respect Policy, Code of Business Conduct, Distracted Driving 

Policy, GPS Policy, HomeTeam Vehicle Policy, Personal Protective Equipment Policy, 

and the Employee Responsibility & Deductions Agreement.
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affect interstate commerce to the extent that all procedures hereunder contemplated shall 

be subject to, and governed by, the Federal Arbitration Act (FAA). Unless the parties 

agree otherwise, the arbitration shall be administered under the applicable rules of the 

American Arbitration Association (‘AAA’). The parties agree that the arbitrator shall 

follow the substantive law, including the terms and conditions of this Agreement.

“I retain the right to file a claim for workers compensation or unemployment 

insurance benefits, and certain other claims enumerated in the Company’s DRP. The 

Company retains the right to file a lawsuit for purposes of preventing or stopping any 

unfair or unlawful competition or solicitation of its customers and employees, and/or 

misappropriation of its trade secrets.

“I specifically understand that by agreeing to arbitrate, I waive any right to trial by 

judge or jury in favor of having such disputes resolved by binding arbitration. I 

understand that any disputes presented to an arbitrator shall be resolved only in 

accordance with the applicable federal, state, or local law governing such dispute. The 

award rendered by the arbitrator shall he final and binding, and judgment may be entered 

on the award in any court having jurisdiction thereof. I agree that any arbitration 

proceeding under this Agreement will not be consolidated or joined with any action or 

legal proceeding under any other agreement or involving any other employees, and will 

not proceed as a class action, collective action, private attorney general action or similar 

representative action.

“If any provision, or portion thereof, of this Agreement is found to be invalid or 

unenforceable, it shall not affect the validity or enforceability of any other part of this 

Agreement. Provided, however, that if the sentence in the foregoing paragraph 

precluding the arbitrator from conducting an arbitration proceeding as a class, collective, 

representative or private attorney general action is found to be invalid or unenforceable, 

then the entirety of this Agreement shall be deemed unenforceable.

“I acknowledge that this agreement to arbitrate is not a contract of employment 

and does not alter my status as an employee at-will (to the extent applicable under state 

law), and is a free-standing independent contract.
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“By electronically signing, the New Hire Policy Acknowledgement Form, I 

agree to all the terms and conditions contained in this form.” (Original bolding and 

underscoring.)

The Dispute Resolution Policy referenced in the Agreement sets forth the 

procedures to resolve any disputes that might arise between Home and its employee. It 

defines a “dispute” as including legal claims the employee may have against Home under 

federal, state, statutory or common law relating to his or her employment with Home, 

including termination. Excluded from the definition are those claims the employee may 

have under the exclusive jurisdiction of a federal or state agency, such as workers 

compensation, unemployment benefits, claims which must be filed with the National 

Labor Relations Board (NLRB), employee benefit plan claims, Employee Retirement 

Income Security Act (ERISA), and criminal complaints. Also excluded are claims Home 

may have to prevent unfair or unlawful competition by the employee, including 

solicitation of Home’s customers or the misappropriation of Home’s trade secrets. The 

Policy also confirms that the Agreement is a mandatory document that must be signed by 

the employee at the commencement of employment.

Section IV of the Policy sets forth pre-arbitration procedures to be followed by an 

employee who wishes to demand arbitration, which includes a requirement that the 

employee first must make a “Request for Dispute Resolution.” Any claims by the 

employee that are not included in the initial Request for Dispute Resolution are waived 

and barred from arbitration. During the resolution process, the employee is prohibited 

from having any representation, including legal counsel. If informal resolution is not 

successful, then under section IV.A. of the Policy, the employee is required to file a 

separate “Demand for Arbitration” within 90 days after filing of the initial Request for 

Dispute Resolution. The Policy does not require that Home follow the Request for 

Dispute Resolution procedure.

Once a Demand for Arbitration has been timely made, section VII of the Policy 

gives Home’s legal department the right to select in the first instance a “reputable 

arbitration service” which will provide a list of seven potential arbitrators. If the 
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employee objects to the selected arbitration service, the parties will use the AAA. 

Section XII of the Policy provides that the employee must pay a $120 filing fee within 90 

days after the employee makes an initial Request for Dispute Resolution. Except for 

“statutory civil rights claims,” the parties agree to split the costs, fees, and expense of the 

arbitration.

The Policy also contains a severability clause providing that if any portion or 

provision of the Policy is deemed unenforceable, it will not affect the enforceability of 

the remaining provisions. That clause specifically states that if a prohibition on class 

actions or private attorney general actions contained in section XII.D. of the Policy is 

found to be unenforceable, then the entirety of section XII.D. will be deemed deleted 

from the Policy.

D. Carlson’s Opposition to the Arbitration Motion

Carlson opposed Home’s motion to compel arbitration arguing, among other 

things, that the Agreement was unconscionable and unenforceable. In her own 

declaration, Carlson disputed inferences and misleading statements she believes were in

Nadeem’s declaration. For example, Carlson explained that although Nadeem gave her

access to Home’s electronic “onboarding system” on her first day of work, she was 

required to perform the onboarding tasks from her own home computer after work. 

Furthermore, the reason she refused to sign the Agreement online that evening was 

because, contrary to Nadeem’s representation, she was not given access to the Dispute 

Resolution Policy. Rather, the Agreement she was allowed to review required her to 

agree to the Policy she was not able to access from the electronic system. For that reason

she sent an email via the website indicating that she wanted to discuss the terms and 

conditions of her employment agreement, specifically parts relating to arbitration. The 

next morning, Nadeem called her into his office, where he already had the HR Manager 

on the speakerphone.

According to her declaration, Carlson told Nadeem and the HR Manager that she

had been unable to access the Dispute Resolution Policy, and asked that it be provided to 

her so she could review it and discuss or negotiate any terms with which she was “not 
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comfortable.” But Nadeem and the HR Manager claimed they did not have a copy of the 

Policy. When Carlson questioned why she was being asked to agree to a policy that she 

was not allowed to review, the HR Manager offered to try to find a telephone number 

Carlson could call “in a couple of weeks” to see if someone had a copy of the Policy. 

The HR Manager made assurances that issues pertaining to the Policy rarely arose, but 

also advised Carlson that, in any case, Home would not negotiate its terms. Carlson was 

also told that she could not wait and review the Policy when it became available, but

would have to sign her employment agreement that day, or it would be viewed as a 

refusal of the job offer.

At that point in the conversation, Carlson felt she had no choice but to sign the 

Agreement. Now that she had been offered a job, Carlson realized that if she refused to 

sign the Agreement before reading the Dispute Resolution Policy, she would lose the job 

opportunity and no longer be eligible for unemployment benefits. Therefore, if she did 

not comply and sign the acknowledgement that day, essentially she would be losing her 

only other source of income, “i.e. my unemployment benefits.” Carlson admitted that she 

probably did cut off further discourse with the HR Manager by telling her “that’s fine,”

because she realized at that point that nothing else really mattered. She had to “blindly 

sign this agreement” or she would lose the job offer and her unemployment benefits.

Carlson concluded her declaration by stating that, during the remainder of her 

employment, she was never provided with a copy of the Policy or with a copy of the 

American Arbitration Association (AAA) rules referenced in the Agreement. Home’s 

attorneys sent the Policy to her after she filed her lawsuit.

The employment agreement that Carlson signed was attached to her declaration. 

That agreement contained detailed anticompetitive covenants and confidentiality 

provisions applicable to the employee. Those provisions also specifically entitled Home 

to seek judicial intervention, including “temporary, preliminary, final injunctions, 

temporary restraining orders, and temporary protective orders” in the event the employee 

violated the anticompetitive or confidentiality provisions. The agreement also entitled
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Home to recover its attorney fees and costs “through trial and any subsequent appeal”

incurred in the successful enforcement of the agreement.

E. The Trial Court’s Ruling

In an order filed on June 13, 2014, the trial court denied Home’s motion to compel 

arbitration, concluding that the Agreement was both procedurally and substantively 

unconscionable. The court found that the circumstances under which Home, the stronger 

party, presented the Agreement to Carlson, the weaker party, constituted procedural 

unconscionability. Among other things, the court specifically found that the Agreement 

was presented on a “take-it-or-leave-it” basis, and that there was “oppression” in the 

manner in which it was presented because Carlson had no choice but to sign it or lose 

both her job offer and her unemployment benefits.

The finding that the Agreement was also substantively unconscionable was based 

primarily on the fact that the claims that were exempted from arbitration were those most 

likely to be brought by Home against Carlson, while those claims Carlson would likely 

bring were required to be arbitrated, except for those which were legally exempt from 

arbitration. The court also pointed out that the employment agreement between the 

parties granted only Home the right to recover its attorney fees and costs associated with 

such claims. Ultimately, the court concluded the Agreement was one-sided, objectively 

unreasonable, and lacked mutuality.

Finally, the trial court found that severing all unconscionable provisions from the 

Agreement would require the court to “rewrite the arbitration agreement,” a task the court 

“cannot do,” citing Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 

Cal.4th 83, 124-125 (Armendariz), and Flores v. Transamerica HomeFirst, Inc. (2001) 

93 Cal.App.4th 846, 857. Therefore, the court concluded that the entire Agreement was 

unenforceable.
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III.

DISCUSSION

A. Standard of Review

“There is no uniform standard of review for evaluating an order denying a motion 

to compel arbitration. [Citation.] If the court’s order is based on a decision of fact, then 

we adopt a substantial evidence standard. [Citations.] Alternatively, if the court’s denial 

rests solely on a decision of law, then a de novo standard of review is employed.

[Citations.]” (Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 

1425.)

In this case the trial court made factual findings based on at least some material 

disputed evidence. From those findings, the trial court concluded that Home’s 

Agreement was both procedurally and substantively unconscionable and should not be 

enforced. Accordingly, “[t]o the extent there are material facts in dispute, we accept the 

trial court’s resolution of disputed facts when supported by substantial evidence; we 

presume the court found every fact and drew every permissible inference necessary to 

support its judgment. (Engineers & Architects [Assn. v. Community Development Dept.

(1994)] 30 Cal.App.4th [644,] 653.)” (Brown v. Wells Fargo Bank, N.A. (2008) 168 

Cal.App.4th 938, 953.)

“ ‘[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 
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unenforceable, and vice versa.” (Armendariz, supra, 24 Cal.4th at p. 114, italics omitted;

see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC

(2012) 55 Cal.4th 223, 246) (Pinnacle Museum).)

If a court finds that an agreement to arbitrate or any clause of such an agreement is 

unconscionable, the court may “refuse to enforce the contract, or it may enforce the 

remainder of the contract without the unconscionable clause, or it may so limit the 

application of any unconscionable clause as to avoid any unconscionable result.” (Civ. 

Code, § 1670.5, subd. (a).) Any challenge to the failure by the trial court to sever an 

unconscionable provision and enforce the balance of the agreement is reviewed for abuse

of discretion. (See Armendariz, supra, 24 Cal.4th at p. 124.)

B. The Agreement Was Procedurally Unconscionable

“Procedural unconscionability exists when the stronger party drafts the contract 

and presents it to the weaker party on a ‘take-it-or-leave-it basis.’ [Citation.]” (Serafin v. 

Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 179 (Serafin).) “However, the 

fact that the arbitration agreement is an adhesion contract does not render it automatically 

unenforceable as unconscionable.” (Id. at p. 179.) Instead, to determine whether an 

arbitration agreement satisfies the “procedural element of unconscionability,” courts 

focus on “two factors: oppression and surprise. [Citation.]” (Tiri v. Lucky Chances, Inc.

(2014) 226 Cal.App.4th 231, 246 (Tiri). “ ‘ “ ‘Oppression’ arises from an inequality of 

bargaining power which results in no real negotiation and ‘an absence of meaningful 

choice.’ [Citations.] ‘Surprise’ involves the extent to which the supposedly agreed-upon 

terms of the bargain are hidden in the prolix printed form drafted by the party seeking to 

enforce the disputed terms.” ’ [Citation.]” (Zullo v. Superior Court (2011) 197 

Cal.App.4th 477, 484 (Zullo).)

Thus, for example, in Serafin, supra, 235 Cal.App.4th 165, this court reviewed an 

arbitration agreement which was “indisputably . . . a form contract of adhesion, which 

was presented to Serafin on a ‘take-it-or-leave-it basis[,]’ ” and yet we concluded that 

other circumstances pertaining to the presentation and execution of that agreement 

significantly limited the “degree of procedural unconscionability arising from the 
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adhesive nature of the agreement.” (Id. at pp. 179-180.) Specifically, the evidence 

showed that the agreement and rules referenced in the agreement were made available to

the employee for review, and when she was asked to sign the agreement, a human 

resources representative was present “specifically to explain the document and answer 

any questions Serafin might have [had] about it.” (Id. at p. 180, italics omitted.)

Last year this division decided Tiri, supra, 226 Cal.App.4th 231, which found that 

an arbitration agreement presented to an existing employee was procedurally 

unconscionable. (Id. at p. 245.) The evidence showed that the employee signed a take-itor-leave-it arbitration agreement because she was afraid she would lose her job if she 

refused. (Ibid.) Highlighting the significance of this fact, we cited a passage from 

Armendariz that echoed and reinforced our concern: “In the employment context, ‘the 

economic pressure exerted by employers on all but the most sought-after employees may 

be particularly acute, for the arbitration agreement stands between the employee and 

necessary employment, and few employees are in a position to refuse a job because of an 

arbitration requirement.’. . .” (Ibid., quoting Armendariz, supra, 24 Cal.4th at p. 115.) In 

our Tiri decision, we also found that the same factors which established that the 

arbitration agreement was a contract of adhesion supported the trial court’s implied 

finding that the agreement was procedurally unconscionable. (Tiri, at pp. 245-246.)

In Zullo, supra, 197 Cal.App.4th 477, an appellate court found that there was 

“really no question” that an arbitration agreement was procedurally unconscionable when 

the facts showed that the agreement was a contract of adhesion presented on a take-it or 

leave-it basis; AAA rules incorporated into the agreement were not provided to the 

employee; and it was “oppressive” to require the employee to make an independent

inquiry to find the rules just so she could understand the agreement she was about to sign. 

(Id. at pp. 485-486.)

In Trevedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 393

(Trivedi), this division found that the failure to provide an employee with a copy of AAA 

arbitration rules that were incorporated by reference into an arbitration agreement 
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supported a finding that the arbitration agreement as a whole was procedurally 

unconscionable.

2

The manner in which the Agreement here was presented to Carlson resulted in 

more than a baseline adhesion contract. The Agreement referenced the Dispute 

Resolution Policy, but it was not available to Carlson either online or at the meeting she 

attended with Nadeem and the HR Manager, who were asked specifically by Carlson 

about its content. Instead, Carlson was told she might be given a telephone number that 

she could call “in a couple of weeks” to see if someone could provide her with a copy of 

the Policy, but that she needed to sign the employment contract, including the 

Agreement, that day or her job offer would be withdrawn. In fact, Carlson was never 

provided with a copy of the Policy while she was employed by Home; instead, she first 

saw it when Home’s attorneys sent it to her after she filed the underlying action. Nor was 

Carlson provided with a copy of the AAA rules made applicable to any dispute, as stated 

in the Agreement. Perhaps most important to the procedural unconscionability analysis, 

Carlson declared, and the trial court found, that the Agreement was nonnegotiable and 

she had no choice but to sign it at her meeting with Nadeem and the HR Manager, or she 

would lose both her job offer and her ongoing unemployment benefits based on that

refusal to sign.

On this record, we conclude that the degree of procedural unconscionability 

cloaking Carlson’s signing of the Agreement was high, relative to other cases where 

courts have found that arbitration agreements were procedurally unconscionable. (See,

e.g., Tiri, supra, 226 Cal.App.4th 231; Zullo, supra, 197 Cal.App.4th 477; Trevedi, 

 

2

 We recognize that since we decided Trivedi, courts of appeal have come to 

differing conclusions as to whether the failure to provide the employee with a copy of the 

applicable arbitration rules and procedures alone renders the arbitration agreement 

procedurally unconscionable. (Tiri, supra, 226 Cal.App.4th at p. 246, fn. 9.) However, 

because of the abundance of facts supporting a finding of procedural unconscionability in 

this case we need not, and do not, ground our finding solely on this point.
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supra, 189 Cal.App.4th 387.) Without question it was oppressive, and the failure to 

disclose the terms of arbitration and the applicable rules also constitute surprise.

3

In reaching this conclusion we note that our facts are materially more egregious 

than those extant in Division One’s decision in Peng v. First Republic Bank (2013) 219 

Cal.App.4th 1462 (Peng), a case heavily relied on by Home. There, the employee was 

given 25 days to consider a job offer and the arbitration agreement, the employee never 

objected to the agreement, nor did she “express any reluctance to sign the [a]greement 

[or] concerns about [its] terms at any time during her employment [with the defendant].” 

(Id. at p. 1466.)4 Given these facts, it is not surprising that the court enforced the 

employment arbitration agreement. But here, by contrast, Carlson was required to sign 

the Agreement without time for reflection, and despite her objections to signing it after 

being told that a copy of the Dispute Resolution Policy was not available to her for 

review.

Under these facts, we agree with the trial court that a high degree of procedural 

unconscionability accompanied the signing of the Agreement in this case.

C. The Agreement Was Substantively Unconscionable

“Substantive unconscionability focuses on the actual terms of the agreement and 

evaluates whether they create ‘ “ ‘overly harsh’ ” ’ or ‘ “ ‘one-sided’ ” ’ results. 

[Citations.]” (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469.) “An 

arbitration agreement lacks ‘basic fairness and mutuality if it requires one contracting 

 

3

 We emphasize that in reviewing the court’s determinations as to 

unconscionability we consider the evidence in the light most favorable to the court’s 

determination and review those findings for substantial evidence. (Gutierrez v. Autowest, 

Inc. (2003) 114 Cal.App.4th 77, 89.)

4

 Peng has joined the juridical camp opining that the mere failure to provide a 

copy of the arbitration rules applicable to the agreement does not itself establish 

procedural unconscionability absent evidence that the rules contain unexpected 

provisions that limit the employee’s claims or available relief. (Peng, supra, 219 

Cal.App.4th at pp. 1471-1472.) Review has been granted by the Supreme Court in 

another Division One case following Peng upon which Home mistakenly relies here, 

Galen v. Redfin Corp. (2014) 227 Cal.App.4th 1525, review granted Nov. 12, 2014, 

S220936.
14

party, but not the other, to arbitrate all claims arising out of the same transaction or 

occurrences . . . . [Citation.]” (Serafin, supra, 235 Cal.App.4th at p. 181, fn. omitted.)5

“Courts have found one-sided employer-imposed arbitration provisions 

unconscionable where they provide that employee claims will be arbitrated, but the 

employer retains the right to file a lawsuit in court for claims it initiates, or where the 

types of claims likely to be brought by employees (wrongful termination, discrimination 

etc.) are the only ones made subject to arbitration. [Citations.]” (Serafin, supra, 235 

Cal.App.4th at p. 181.)

In Trivedi, supra, 189 Cal.App.4th 387, this court affirmed a finding of 

substantive unconscionability based in part on a trial court’s assumption that a provision 

exempting claims for injunctive relief favored the employer. (Id. at p. 397.) As we 

explained, the trial court’s conclusion was “not a novel or unsupportable proposition.”

(Ibid., citing Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 725 & Mercuro v. Superior 

Court (2002) 96 Cal.App.4th 167, 176.)

Unlike Trivedi, here we need not infer the value and importance to Home of

reserving for litigation its competition and intellectual property claims, because the Home 

employment agreement Carlson was required to sign along with the Agreement is 

evidence of this fact. The employment agreement spells out in detail anticompetitive 

covenants and confidentiality provisions applicable to Carlson’s work at Home. It also 

specifically entitles Home to seek judicial intervention, including “temporary, 

preliminary, final injunctions, temporary restraining orders, and temporary protective 

orders” in the event the employee violates the anticompetitive or confidentiality 

proceedings, and entitles Home to recover its attorney fees and costs “through trial and 

any subsequent appeal” incurred in the successful enforcement of the employment 

 

5

 Our Supreme Court has granted review of numerous cases involving the 

enforceability of arbitration agreements, including claims of unconscionability based on 

lack of mutuality. (Tiri, supra, 226 Cal.App.4th at p. 243, fn. 6; see, e.g., Baltazar v. 

Forever 21, Inc., review granted Mar. 20, 2013, S208345; Leos v. Darden Restaurants, 

Inc., review granted Sept. 11, 2013, S212511 [briefing deferred pending disposition of 

Baltazar].)
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agreement. The importance that Home retain access to the courts for these types of 

claims was mirrored in the Agreement language stating that “The Company retains the 

right to file a lawsuit for purposes of preventing or stopping any unfair or unlawful 

competition or solicitation of its customers and employees, and/or misappropriation of its 

trade secrets.”

Thus, we conclude that the trial court’s findings that the Agreement was onesided, objectively unreasonable, and lacked mutuality was supported by substantial 

evidence. In light of the high degree of procedural unconscionability associated with the 

presentation and execution of the Agreement, the fact that Home was exempt from 

having to arbitrate its most likely claims against Carlson while Carlson was required to 

relinquish her access to the courts for all of her nonstatutory claims alone warrants a 

conclusion that the Agreement was unenforceable under the sliding-scale test set forth by 

our Supreme Court. (Armendariz, supra, 24 Cal.4th at p. 114; Pinnacle Museum, supra,

55 Cal.4th at p. 246.) But, there are other one-sided provisions that aggravate the 

substantive unconscionability of the Agreement.

For example, the Dispute Resolution Policy requires an employee to make a 

Request for Dispute Resolution before demanding arbitration and, any claims by the 

employee not included in this initial request, are waived and barred from any subsequent

arbitration. However, the Policy does not impose any requirement that Home itself 

follow the Request for Dispute Resolution procedure before commencing arbitration.

The Policy also states that after an employee has submitted a Request for Dispute 

Resolution, he or she is required to submit to an unspecified form of alternative dispute 

resolution before demanding arbitration. During that process, the employee is forbidden 

from being represented by legal counsel. Again, this requirement for pre-arbitration 

unrepresented participation in alternative dispute resolution applies only to employee 

claims. The potential perniciousness of this type of mandatory pre-arbitration settlement 

efforts affecting the employee’s claims was discussed in Nyulassy v. Lockheed Martin 

Corp. (2004) 120 Cal.App.4th 1267 (Nyulassy).
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Nyulassy, supra, 120 Cal.App.4th 1267 involved an arbitration agreement that was 

substantively unconscionable in three respects: it required only the employee to arbitrate

all of his disputes with the defendant employer; it placed time limitations on the 

employee’s assertion of claims against the employer; and it required the employee “to 

submit to discussions with his supervisors in advance of, and as a condition precedent to, 

having his dispute resolved through binding arbitration.” (Id. at pp. 1281-1282.) With 

regard to this last aspect, the court stated: “While on its face, this provision may present 

a laudable mechanism for resolving employment disputes informally, it connotes a less 

benign goal. Given the unilateral nature of the arbitration agreement, requiring plaintiff 

to submit to an employer-controlled dispute resolution mechanism (i.e., one without a 

neutral mediator) suggests that defendant would receive a ‘free peek’ at plaintiff’s case, 

thereby obtaining an advantage if and when plaintiff were to later demand arbitration.”

(Id. at pp. 1282-1283.)

Here, the alternative dispute mechanism built into the Agreement would give 

Home an even more significant advantage than the informal dispute resolution 

mechanism criticized in Nyulassy, supra, 120 Cal.App.4th at page 1283, because Carlson 

was explicitly forbidden legal representation. Furthermore, like Nyulassy, the Agreement 

in this case requires only the employee to arbitrate his or her most likely claims and also 

places a time limitation on the employee’s assertion of those claims that does not apply to 

the employer. In this regard, the Agreement provides that if informal resolution is not 

successful, the employee must file a separate Demand for Arbitration within 90 days after 

filing her initial Request for Dispute Resolution. The practical effect of this last 

provision is that, while Carlson may present her claims to Home well within the 

otherwise applicable legal statutes of limitations, the addition of a 90-day time limitation 

to demand arbitration acts to limit the time that would be available otherwise for filing a 

complaint in superior court. Because there is no requirement that Home make a prearbitration Request for Dispute Resolution, there is no time limit applicable to Home’s 

Demand for Arbitration.
17

Finally, the Agreement requires the employee to pay a $120 filing fee within 90 

days after making an initial Request for Dispute Resolution, after which all fees and 

expenses incurred in connection with the arbitration are to be split between the parties. 

Our Supreme Court has expressly held that a provision of this nature which imposes an 

obligation to pay fees and expenses of arbitration that would not be required to bring a 

matter to court is substantively unconscionable. (Little v. Auto Stiegler, Inc. (2003) 29 

Cal.4th 1064, 1082-1085; see also Martinez v. Master Protection Corp. (2004) 118 

Cal.App.4th 107, 115-116 (Martinez).)

Apparently recognizing that its fee and cost provisions may render the Agreement

substantively unconscionable, Home agreed below to forego any attempt to enforce these 

fee and cost provisions. But, similar after-the-fact attempts to avoid the effect of an 

unconscionable provision have been rejected. (Martinez, supra, 118 Cal.App.4th at 

pp. 116-117 [willingness to change a provision of an arbitration agreement so it conforms 

to law does not change the fact that the arbitration agreement as written is unconscionable 

and contrary to public policy.]; O’Hare v. Municipal Resource Consultants (2003) 107 

Cal.App.4th 267, 280 [same].) Indeed, the risk that a claimant may bear substantial costs 

of arbitration, not just the actual imposition of those costs, may discourage an employee 

from exercising the right to pursue any remedy against the employer. (Armendariz, 

supra, 24 Cal.4th at p. 110.)
18

For all these reasons, we conclude that the Agreement was both procedurally and 

substantively unconscionable, and unenforceable.6

D. The Substantive Unconscionability Analysis Is Not Preempted by the FAA

Home contends that, even if the Agreement is substantively unconscionable, it 

must be enforced because it is a valid agreement under the FAA as interpreted by both 

the United States and the California Supreme Courts. Under section 2 of the FAA (9 

U.S.C. § 2), an agreement to arbitrate is “valid, irrevocable, and enforceable, save upon 

such grounds as exist at law or in equity for the revocation of any contract.” This section 

reflects a liberal federal policy favoring arbitration. Furthermore, while the savings 

clause permits agreements to arbitrate to be invalidated by “ ‘generally applicable 

contract defenses, such as fraud, duress, or unconscionability,’ ” the savings clause does 

not apply to defenses that are unique to arbitration, or that “derive their meaning from the 

fact that an agreement to arbitrate is at issue. [Citations.]” (AT&T Mobility LLC v. 

Concepcion (2011) 563 U.S. ___, 131 S.Ct. 1740, 1746 (Concepcion).)

The question as to what degree, if at all, arbitration agreements can be found to be 

unenforceable because they contain provisions that are substantively unconscionable was 

addressed by our Supreme Court in Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 

1109 (Sonic II). This opinion followed the issuance of the first opinion in that case, 

which was granted certiorari by the United States Supreme Court, vacated, and remanded 

 

6

 As demonstrated by our analysis above, the substantive unconscionability 

inquiry focuses on whether the contract terms are unfairly one sided. (Gentry v. Superior 

Court (2007) 42 Cal.4th 443, 468-469, abrogated on another ground as stated in Iskanian 

v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360.) Some courts 

alternatively have framed the test as whether the disputed provisions “ ‘ “ ‘ “shock the 

conscience” ’ ”’ ’ ” (Bigler v. Harker School (2013) 213 Cal.App.4th 727, 736), are 

“ ‘ “overly harsh,” ’ ” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532), or 

“ ‘ “unduly oppressive” ’ ” (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 

925). The issue of what is the proper test was recently clarified by our Supreme Court in 

Sanchez v. Valencia Holding Co., LLC (Aug. 3, 2015) 2015 Cal. LEXIS 5292, which 

stated that all of these formulations essentially embrace a central idea requiring a degree 

of unfairness, beyond “a simple old-fashioned bad bargain.” (Id. at pp. *14-*15.) The 

Agreement here certainly meets this standard of unconscionability. 
19

for our state high court to reconsider in light of Concepcion, supra, 131 S.Ct. 1740.

(Sonic II, at p. 1124.) The holding in Sonic II is that post-Concepcion, California courts 

may continue to enforce unconscionable rules that do not “ ‘interfere[] with the 

fundamental attributes of arbitration.’ [Citation.]” (Ibid.)

In its decision, the Sonic II court described the concept of contractual 

unconscionability as follows: “[T]he core concern of the unconscionability doctrine is the 

‘ “ ‘absence of meaningful choice on the part of one of the parties together with contract 

terms which are unreasonably favorable to the other party.’ ” ’ [Citations.] The 

unconscionability doctrine ensures that contracts, particularly contracts of adhesion, do 

not impose terms that have been variously described as ‘ “ ‘overly harsh’ ” ’ [citation], 

‘ “unduly oppressive” ’ [citation], ‘ “so one-sided as to ‘shock the conscience” ’

[citation], or ‘unfairly one-sided’ [citation].” (Sonic II, supra, 57 Cal.4th at p. 1145.)

Here, our conclusion that the Agreement is unconscionable and unenforceable 

against Carlson does not mandate any procedural rules that are inconsistent with the 

fundamental attributes of arbitration. In fact, our principal concern with the Agreement 

rests on its failure to hold Home to the same obligation to arbitrate that it holds Carlson. 

Furthermore, our subordinate objections to the provisions in the Agreement requiring 

Carlson to engage in an unrepresented dispute resolution process for which she must pay

a fee to Home, and after which she cannot arbitrate claims not submitted to dispute 

resolution, are not the least bit antithetical to arbitration as a form of adjudication.

Home contends that the common law doctrine of contractual unconscionability 

was created to apply only to arbitration agreements, and thus “specifically inhibit[s] the 

enforcement of arbitration agreements.” We disagree. It is clear from a reading of the 

majority’s thorough opinion in Sonic II that the doctrine is applicable to all contracts 

enforceable in California. (Sonic II, supra, 57 Cal.4th at p. 1145 [citing among other 

authorities 8 Williston on Contracts (4th ed. 2010) § 18.10, p. 91]; see also Perdue v. 

Crocker National Bank, supra, 38 Cal.3d at p. 925.)

This issue, too, was addressed again by our Supreme Court in Sanchez, supra, 

2015 Cal. LEXIS 5292, where the court reiterated that the same unconscionability 
20

standard applies to both arbitration and nonarbitration contracts. “But the application of 

unconscionability doctrine to an arbitration clause must proceed from general principles 

that apply to any contract clause. In particular, the standard for substantive 

unconscionability—the requisite degree of unfairness beyond merely a bad bargain—

must be as rigorous and demanding for arbitration clauses as for any contract clause.”

(Id. at p. *17.)7

E. The Trial Court Did Not Abuse Its Discretion

Home’s final contention on appeal is that the trial court abused its discretion by 

refusing to sever the cost-sharing provision from the Agreement rather than by

invalidating the entire Agreement. As it did in the trial court, Home takes the position 

that the cost-sharing provision in the Policy is the only arguably unconscionable term in 

the Agreement. Therefore, it contends that the trial court abused its discretion by denying 

Home’s request to sever this one allegedly unconscionable term and enforce the 

remainder of the Agreement.

“A trial court has discretion under Civil Code section 1670.5, subdivision (a) to 

refuse to enforce an entire agreement if the agreement is ‘permeated’ by 

unconscionability. [Citations.] An arbitration agreement can be considered permeated 

by unconscionability if it ‘contains more than one unlawful provision . . . . Such multiple 

defects indicate a systematic effort to impose arbitration . . . not simply as an alternative 

to litigation, but as an inferior forum that works to the [stronger party’s] advantage.

[Citations.] ‘The overarching inquiry is whether “ ‘the interests of justice . . . would be 

furthered’ ” by severance. [Citation.]’ [Citation.]” (Trivedi, supra, 189 Cal.App.4th at 

p. 398.)

Here, the trial court’s order denying the motion to compel arbitration noted that 

Home’s request to sever the unconscionable part of the Agreement was expressly limited 

 

7

 Home also argues that we should follow a relatively recent Ninth Circuit 

decision in Mortensen v. Bresnan Communications, LLC (9th Cir. 2013) 722 F.3d 1151. 

However, until the United States Supreme Court holds otherwise, we are bound to follow 

California Supreme Court authority on this issue. (Montano v. Wet Seal Retail, Inc. 

(2015) 232 Cal.App.4th 1214, 1224, fn. 5.)
21

to the cost-sharing provision. But it ultimately found that even if Home had consented to 

severance of other parts of the Agreement, the court would not have been able to “fix this 

arbitration agreement” because “severing its one-sided nature” would require the court 

“to rewrite the arbitration agreement, which it cannot do.”

We conclude that the trial court did not abuse its discretion by refusing to sever 

objectionable clauses from the Agreement because substantive unconscionability 

permeated the entire Agreement. As noted in detail above, like the trial court, we have 

found particularly offensive the provision that required Carlson to arbitrate all of her 

nonexempt claims while Home enjoyed unfettered access to the court for its most 

important and likely claims against Carlson. Moreover, only Carlson was required to 

demand dispute resolution of her claims against Home, and any subsequent arbitration 

would be limited to those of her claims for which an attempt to settle had been made. 

During that pre-arbitration period, Carlson would not be allowed representation, 

including legal counsel. None of these limitations were imposed on Home.

Furthermore, we cannot ignore the fundamental shortcoming inherent in a request 

to sever substantively unconscionable terms from the Agreement and the 13-page Dispute 

Resolution Policy incorporated in it when the record establishes such a high level of 

procedural unconscionability. Severance would result in the modification and 

enforcement of the Agreement that Carlson was required to sign without the opportunity 

to review either the Policy or the AAA arbitration rules despite her specific request for 

them. Indeed, she was threatened with withdrawal of the job offer and faced with the 

potential of an impecunious future if she insisted on reviewing the very documents Home 

now seeks to enforce. To rewrite this Agreement in such a way as to eliminate its 

unconscionable provisions under these circumstances would not further the interests of 

justice. (Trevedi, supra, 189 Cal.App.4th at p. 398.)

IV.

DISPOSITION

The order denying Home’s motion to compel arbitration is affirmed. Costs on 

appeal are awarded to Carlson.
22

_________________________

RUVOLO, P. J.

We concur:

_________________________

REARDON, J.

_________________________

STREETER, J.

A142219, Carlson v. Home Team Pest Defense, Inc.
23

Trial Court: Contra Costa County Superior Court

Trial Judge: Hon. Steven K. Austin

Counsel for Appellant: JACKSON LEWIS, Tyler A. Brown,

Conor J. Dale

Counsel for Respondent: LAW OFFICES OF DOUGLAS A.

PRUTTON and Douglas A. Prutton
24

A142219, Carlson v. Home Team Pest Defense, Inc.