1

Filed 12/4/20 Ali v. Daylight Transport, LLC CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or 

ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

SABID ALI et al.,

Plaintiffs and Respondents,

v.

DAYLIGHT TRANSPORT, LLC,

Defendant and Appellant.

 A157104

 (Alameda County Super. Ct.

 No. RG18915217)

Daylight Transport, LLC (appellant) appeals from the trial court’s 

order denying its motion to compel arbitration and stay the underlying action

in this matter arising from the proposed class action lawsuit filed by Sabid 

Ali and Eric Bland (collectively respondents), alleging they were misclassified 

as independent contractors and, therefore, denied certain wage and hour 

protections under California law. On appeal, appellant challenges the trial 

court’s findings that (1) respondents are exempt from the Federal Arbitration 

Act (FAA) (9 U.S.C. § 1, et seq.) because they are transportation workers 

engaged in interstate commerce, and (2) the agreement to arbitrate between 

appellant and each respondent was unconscionable and unenforceable. We 

shall affirm the trial court’s order. 
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FACTUAL BACKGROUND

Evidence submitted in support of and opposition to the motion to 

compel arbitration—which includes, inter alia, documentary evidence; the 

declaration and deposition of Jim McCarthy, appellant’s vice president of 

finance and chief financial officer; and the declarations of both respondents—

is as follows. 

Appellant is “an established expedited less-than-truck load (‘LTL’) 

carrier” that is “in the business of managing, coordinating, and scheduling 

expedited LTL shipments across the country.” Appellant has locations 

throughout California and the United States. The “vast majority” of 

appellant’s work involves interstate transport. 

For pick-up and delivery services, appellant contracts with independent 

truck drivers. Although the freight transported by these truck drivers “is 

predominantly interstate freight, [it] also includes intrastate freight.” 

Documents McCarthy had reviewed showed that the freight respondents

handled “either originated out of state or had final delivery destination out of 

state.” However, appellant’s independent contractor truck drivers in 

California, including respondents, “only provided pick-up and delivery 

services within the state of California” and respondents “never crossed state 

lines in moving freight for [appellant’s] customers.”1 

Respondents Ali and Bland each entered into an “Independent 

Contractor Service Agreement” (Agreement) before beginning to drive freight 

1

In April 2016, when Bland renewed his commercial driver’s license, he 

initially indicated on a Department of Motor Vehicles form that he would be 

driving intrastate only. However, appellant’s employees thereafter instructed 

him “to change the certification to be for interstate commercial driving because 

[he] was moving freight that crosses state lines.” 
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for appellant, and regularly signed materially identical Agreements or 

contract extension addenda over the time they drove for appellant.

All of the Agreements respondents signed contained an identical 

arbitration provision, which stated: 

“6.02 Arbitration. Any claim, dispute or controversy including, but not 

limited to the interpretation of any federal, statutory or regulatory provisions 

purported to be encompassed by this Agreement (i.e., the Leasing 

Regulations), any alleged breach of this Agreement, or the enforcement of any 

statutory rights emanating or relating to this Agreement shall be resolved on 

an individual basis (and not as part of a class action) exclusively between 

Contractor and Company by final and binding arbitration to be held in the 

County and State of Contractor’s domicile before the American Arbitration 

Association (‘AAA’). The arbitration proceeding shall be governed by the 

following rules: 

“(a) A written demand for arbitration must be filed with the AAA and a 

copy of the filing provided to the other party within one hundred twenty (120) 

days of the occurrence of the claimed breach or other event giving rise to the 

controversy or claim. Failure to make such timely demand for arbitration 

shall constitute an absolute bar to the institution of any proceedings and a 

waiver of the claim. 

“(b) The demand for arbitration shall identify the provision(s) of this 

Agreement alleged to have been breached and shall state the issue proposed 

to be submitted to arbitration and the remedy sought. The copy of the 

demand shall be filed with the American Arbitration Association at 1750 Two 

Galleria Tower, 13455 Noel Road, Dallas, Texas 75240-6636 with a request 

that the demand be forwarded to the appropriate AAA Regional Office. 
4

“(c) As to any dispute or controversy which under the terms of this 

Agreement is a proper subject of arbitration, no suit at law or in equity based 

on such dispute or controversy shall be instituted by either party other than a 

suit to conform, enforce, vacate, modify or correct the award of the 

arbitrator(s) as provided by law; provided, however, that this clause shall not 

limit Company’s right to obtain any provisional remedy including, without 

limitation, injunctive relief, writ for recovery of possession or similar relief 

from any court of competent jurisdiction, as may be necessary in Company’s 

sole subjective judgment to protect its property rights . . . .

“(d) General pleadings and discovery processes related to the 

arbitration proceeding shall comply with the Federal Rules of Civil 

Procedure. 

“The Arbitration proceeding shall be governed by the AAA’s 

Commercial Arbitration Rules to the extent that such Rules are not 

inconsistent with the immediately preceding subparts (a) through (d).”

(Agreement, § VI., cl. 6.02.) 

Ali worked for appellant from 2007 to September 2016, and Bland 

worked for appellant from August 2014 to January 2018, as pickup and 

delivery drivers. Appellant classified and paid both respondents as 

independent contractors during the entire time of their work for appellant. 

Appellant required them to sign the Agreements in order to work as drivers. 

Ali signed approximately 10 agreements and Bland signed approximately six 

Agreements and extension addenda over the course of their work for 

appellant in order to continue driving for the company. Each of the 

Agreements contained the identical arbitration provision. 

Appellant’s terminal service managers presented the Agreements to 

both Ali and Bland, who were not involved in drafting any part of them. Nor 
5

were they given any opportunity to negotiate the terms of the Agreements, 

including the arbitration provision, or review the terms with an attorney

before signing them. Ali, for example, would receive the Agreement or 

extension addendum “the night before he had to sign it” and “could not be 

dispatched to make pickups or deliveries without signing” the Agreement “as 

presented to [him].” If he failed to do so, he would lose his job with appellant. 

In another example, in late 2017, Bland received notice of an extension 

addendum two to three days before the New Year’s holiday, which he was 

directed to sign by New Years’ Eve, in order to continue working. In addition, 

appellant did not provide either respondent with a copy of the AAA 

commercial arbitration rules referred to in the Agreements. 

PROCEDURAL BACKGROUND

On August 2, 2018, respondents filed a complaint against appellant on 

behalf of themselves and a putative class of California delivery drivers, 

requesting relief from appellant’s “unlawful misclassification of former and 

current Daylight delivery drivers as ‘Independent Contractors,’ ” and alleging 

that, as a result of the misclassification, appellant had violated a number of 

Labor Code and wage order provisions, as well as the law against unfair 

competition. The causes of action included (1) failure to pay minimum wage 

(Lab. Code, §§ 226.2, 1182.11, 1182.12, 1194, 1104.2, 1197 et seq.; Industrial 

Welfare Commission (IWC) Wage Order No. 9; Minimum Wage Order); (2) 

failure to reimburse employment expenses (Lab. Code, §§ 2802, 2804; IWC 

Wage Order No. 9); (3) unlawful deductions from wages (Lab. Code, §§ 221, 

223; IWC Wage Order No. 9); (4) failure to provide off-duty meal periods 

(Lab. Code, §§ 226.7, 512; IWC Wage Order 9); (5) failure to provide off-duty 

paid rest periods (Lab. Code, §§ 226.2, 512; IWC Wage Order No. 9); (6) 

failure to furnish accurate wage statements (Lab. Code, §§ 226, 226.3; IWC 
6

Wage Order No. 9); (7) waiting time penalties (Lab. Code, §§ 201–203); and 

(8) violations of California’s Unfair Competition Law (Bus. & Prof. Code, 

§ 17200 et seq.). 

On October 19, 2018, appellant filed a motion to compel arbitration and 

stay the underlying action, arguing chiefly that (1) the FAA applied to the 

Agreements between the parties and the FAA’s exemption for transportation 

workers engaged in interstate commerce was inapplicable to respondents, 

and (2) under the FAA, the arbitration provision applied to the claims 

asserted in respondents’ lawsuit, respondents had agreed to arbitrate those 

claims, and no grounds—including, in particular, unconscionability—existed 

for revocation of the arbitration provision. 

On November 26, 2018, respondents filed a first amended complaint, 

adding a cause of action under the Private Attorneys General Act (Lab. Code, 

§ 2698 et seq.), based on appellant’s alleged Labor Code violations. 

On March 1, 2019, the trial court denied appellant’s motion to compel 

arbitration and stay the action, after finding that the arbitration provision in 

the Agreements was unenforceable. First, the court found that the FAA did 

not apply to the Agreements between the parties because respondents fell 

within the FAA’s exemption for transportation workers engaged in interstate 

commerce. (9 U.S.C. § 1.)2 Second, the court found that the arbitration 

provision was both procedurally and substantively unconscionable and 

unenforceable under applicable state law. 

2 Section 1 provides an exemption from FAA coverage to “contracts of 

employment of seamen, railroad employees, or any other class of workers 

engaged in foreign or interstate commerce.” (9 U.S.C. § 1.) 
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On March 26, 2019, appellant filed a notice of appeal.3

DISCUSSION

I. FAA Preemption and Appellant’s Abandonment of that Issue

A. Trial Court Background

In its motion to compel arbitration, appellant first argued that

respondents were required to arbitrate the claims asserted in their complaint 

because the FAA applied to the Agreements between the parties and the 

section 1 transportation worker exemption to arbitration was inapplicable to 

respondents because they did not personally cross state lines while driving 

for appellant. In its order denying the motion to compel, the trial court first

found that appellant had “met its burden of demonstrating that the 

Independent Contractor Agreements are contracts evidencing a transaction 

involving commerce,” and were therefore covered by the FAA. The court 

further found, however, that the transportation worker exemption applied 

because appellant’s “evidence demonstrates that the class of drivers that 

includes [respondents] delivered interstate freight” and that appellant 

instructed Bland to get an interstate driver’s license. The court therefore 

concluded respondents had satisfied their burden of demonstrating that the 

FAA did not apply to the Agreements. The court next addressed whether the 

arbitration provision was nevertheless enforceable under California law, 

focusing on the contract defense of unconscionability, and ultimately finding 

the provision unenforceable due to its procedural and substantive 

unconscionability. 

In its opening brief on appeal, appellant argued that the trial court 

erred when it found the FAA inapplicable to respondents’ claims, before 

3 On July 13, 2020, we granted the unopposed application of Public 

Justice for leave to file an amicus curiae brief in support of respondents’ 

position on the question of whether they are exempt from the FAA. 
8

turning to the issue of unconscionability and enforceability of the arbitration 

provision under state law. In its reply brief, however, appellant asserted that 

this court need not reach the question of whether the FAA applies to the 

parties’ Agreements or whether respondents fall under the FAA’s 

transportation worker exemption because those questions have “no bearing 

on this appeal. The trial court’s sole basis for declining to enforce the 

Agreement was that it was unconscionable under California law, and 

[respondents] offer no other basis for declining to enforce it. [Appellant] does 

not contend that California’s unconscionability doctrine conflicts with or is 

preempted by the FAA. Hence that doctrine applies regardless of whether 

the Agreement is covered by the FAA, and this court need not resolve 

whether it is.”

Appellant further claimed in its reply brief that it “has not changed its 

position as to relevance of the FAA to this appeal. [Appellant] has always 

maintained that the Agreement fully complies with California law. 

[Citation.] However, as [respondents] can defend the order on any grounds, 

and are not limited to those stated in the order, [appellant] was forced to 

raise the application of the FAA, in case [respondents] raised grounds for 

nonenforcement which are preempted by the FAA. As [respondents] have not 

done so either below or on appeal, the issue is now moot.”

In its amicus brief, amicus curiae Public Justice responded that, 

“[a]fter spending thirteen pages of its opening brief arguing that the [FAA] 

applies [citation], [appellant] changes course in its reply brief . . . . But where 

it applies, the [FAA] limits what state law can do, for the [FAA] preempts 

state law with which it conflicts. If the [FAA] does not apply, state law that 

would otherwise be preempted is applicable. Thus, before this court can 

resolve this appeal as a matter of state law, answering the statutory 
9

interpretation question posed by the transportation-worker exemption is a 

necessary first step in order to determine what body of state law it may 

permissibly apply.”

B. Legal Analysis

In AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333 (Concepcion), 

the United States Supreme Court discussed the history and import of the 

FAA, which “was enacted in 1925 in response to widespread judicial hostility 

to arbitration agreements. [Citation.] Section 2, the ‘primary substantive 

provision of the Act’ [citation], provides in relevant part, as follows: 

“ ‘A written provision of 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 . . . shall be 

valid, irrevocable, and enforceable, save upon such grounds as exist at law or 

in equity for the revocation of any contract.’ (9 U.S.C. § 2.) 

“We have described this provision as reflecting both a ‘liberal federal 

policy favoring arbitration’ [citation], and the ‘fundamental principle that 

arbitration is a matter of contract’ [citation]. In line with these principles, 

courts must place arbitration agreements on an equal footing with other 

contracts [citation], and enforce them according to their terms [citation].” 

(Concepcion, supra, 563 U.S. at p. 339.) 

Section 1 of the FAA, however, “provides a limited exemption from FAA 

coverage to ‘contracts of employment of seamen, railroad employees, or any 

other class of workers engaged in foreign or interstate commerce.’ (9 U.S.C. 

§ 1.) In Circuit City [Stores, Inc. v. Adams (2001) 532 U.S. 105, 119], the 

United States Supreme Court concluded section 1’s catchall phrase ‘ “any 

other class of workers engaged in foreign or interstate commerce” ’ does not 

refer to all workers involved in foreign or interstate commerce, but rather 
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only to ‘transportation workers.’ [Citation.]” (Muller v. Roy Miller Freight

Lines, LLC (2019) 34 Cal.App.5th 1056, 1062; see id. at p. 1069 [truck driver

who drove intrastate portion of interstate trips for transportation company

was engaged in interstate commerce and therefore exempt from FAA under 

section 1 because company’s goods originated primarily outside of California]; 

Nieto v. Fresno Beverage Co., Inc. (2019) 33 Cal.App.5th 274, 284 [intrastate 

delivery driver was exempt under section 1 of FAA because he “was engaged 

in interstate commerce through his participation in the continuation of the 

movement of interstate goods to their destinations”].) 

In Concepcion, the high court addressed whether certain claims, such 

as the alleged unconscionability of an arbitration agreement, may be raised 

as a defense to the agreement’s enforceability, notwithstanding the FAA’s 

preemption of state law. The court explained that the final phrase of section 

2 of the FAA “permits arbitration agreements to be declared unenforceable 

‘upon such grounds as exist at law or in equity for the revocation of any 

contract.’ This saving 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. [Citations.]” (Concepcion, supra, 563 U.S. at p. 339.) 

Recently, in OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111 (OTO), our 

Supreme Court discussed how California law interacts with the FAA as to the 

enforceability of arbitration agreements: “California law strongly favors 

arbitration. Through the comprehensive provisions of the California 

Arbitration Act (Code Civ. Proc., § 1280 et seq.), ‘the Legislature has 

expressed a “strong public policy in favor of arbitration as a speedy and 

relatively inexpensive means of dispute resolution.” ’ [Citation.] As with the 
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FAA (9 U.S.C. § 1 et seq.), California law establishes ‘a presumption in favor 

of arbitrability.’ [Citation.] An agreement to submit disputes to arbitration 

‘is valid, enforceable and irrevocable, save upon such grounds as exist for the 

revocation of any contract.’ (Code Civ. Proc., § 12814; see 9 U.S.C. § 2.)

“ ‘ “[G]enerally applicable contract defenses, such as . . . 

unconscionability, may be applied to invalidate arbitration agreements 

without contravening” the FAA’ or California law. [Citations.] 

Unconscionability can take different forms depending on the circumstances 

and terms at issue. However, the doctrine’s application to arbitration 

agreements must rely on the same principles that govern all contracts. 

[Citation.] The degree of unfairness required for unconscionability must be 

as rigorous and demanding for arbitration clauses as for any other contract 

clause. [Citation.]” (OTO, supra, 8 Cal.5th at p. 125.) 

In the present case, appellant acknowledged in its reply brief that

respondents have not raised any defenses to the arbitration provision that 

conflict with, and would therefore be preempted by, the FAA. Considering

appellant’s abandonment of the issue of FAA preemption (see United Grand 

Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th 142, 160 [in light of 

appellant’s repudiation of an argument raised in its opening brief, appellate 

court would “treat the claim as abandoned”]), and its acknowledgement that 

respondents’ unconscionability claims under California law could potentially 

apply regardless of the FAA’s arguable applicability (see OTO, supra,

8 Cal.5th at p. 126), we will go directly to the question of whether the 

arbitration provision is unconscionable and unenforceable under California 

law. 

4 All further statutory references are to the Code of Civil Procedure 

unless otherwise indicated. 
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II. Unconscionability

Appellant challenges the trial court’s findings that, under California

law, the arbitration provision in the Agreement between it and respondents 

is procedurally and substantively unconscionable, and so permeated with 

unconscionability that severance of the unconscionable terms is not possible. 

“The general principles of unconscionability are well established. A 

contract is unconscionable if one of the parties lacked a meaningful choice in 

deciding whether to agree and the contract contains terms that are 

unreasonably favorable to the other party. [Citation.] Under this standard, 

the unconscionability doctrine ‘ “has both a procedural and a substantive 

element.” ’ [Citation.] ‘The procedural element addresses the circumstances 

of contract negotiation and formation, focusing on oppression or surprise due 

to unequal bargaining power. [Citations.] Substantive unconscionability 

pertains to the fairness of an agreement’s actual terms and to assessments of 

whether they are overly harsh or one-sided.’ [Citation.] 

“Both procedural and substantive unconscionability must be shown for 

the defense to be established, but ‘they need not be present in the same 

degree.’ [Citation.] Instead, they are evaluated on ‘ “a sliding scale.” ’

[Citation.] ‘[T]he more substantively oppressive the contract term, the less 

evidence of procedural unconscionability is required to’ conclude that the 

term is unenforceable. [Citation.] Conversely, the more deceptive or coercive 

the bargaining tactics employed, the less substantive unfairness is required. 

[Citations.] A contract’s substantive fairness ‘must be considered in light of 

any procedural unconscionability’ in its making. [Citation.] ‘The ultimate 

issue in every case is whether the terms of the contract are sufficiently 

unfair, in view of all relevant circumstances, that a court should withhold 

enforcement.’ [Citation.] 
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“The burden of proving unconscionability rests upon the party 

asserting it. [Citations.] ‘Where, as here, the evidence is not in conflict, we 

review the trial court’s denial of arbitration de novo.’ [Citation.]” (OTO, 

supra, 8 Cal.5th at pp. 125–126.) 

A. Applicability of California Law Applying the Unconscionability

 Doctrine to Arbitration Agreements in the Employment Context

As a preliminary matter, appellant argues that because the 

Agreements between the parties make clear that respondents are 

independent contractors, California cases addressing unconscionability in the 

employee-employer context are inapplicable here. 

In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 

Cal.4th 83, 115 (Armendariz), our high court observed that “[a]rbitration is 

favored in this state as a voluntary means of resolving disputes, and this 

voluntariness has been its bedrock justification.” Nevertheless, “[g]iven the 

lack of choice and the potential disadvantages that even a fair arbitration 

system can harbor for employees, we must be particularly attuned to claims 

that employers with superior bargaining power have imposed one-sided, 

substantively unconscionable terms as part of an arbitration agreement.” 

(Ibid.) 

Here, although the Agreements state that respondents are independent 

contractors, respondents’ complaint is based primarily on the contention that 

they were misclassified as independent contractors, and were instead 

employees, entitled to certain protections under the Labor Code. Recently, in

Subcontracting Concepts (CT), LLC v. De Melo (2019) 34 Cal.App.5th 201 

(Subcontracting Concepts), a panel of this Division addressed a similar 

contention by a purported employer based on facts that were nearly identical 

to those in this case. We first discussed two appellate opinions that had 

rejected a similar argument: “In Ramos [v. Superior Court (2018) 28 
14

Cal.App.5th 1042, 1046 (Ramos)], the trial court granted a law firm’s motion 

to compel arbitration after Ramos, an ‘ “Income Partner” ’ at the firm, 

brought a California Fair Employment and Housing Act (Gov. Code, § 12900 

et seq.; FEHA) claim. On appeal, the parties disputed whether Armendariz

applied to the arbitration clause in the parties’ partnership agreement, with 

the law firm contending it did not because Ramos was not an employee.”

(Ramos, at pp. 1055–1056.) 

“Division One of this District found ‘it unnecessary to resolve the 

question of whether Ramos was an employee’ for purposes of ‘deciding 

whether the parties’ arbitration agreement [was] enforceable,’ concluding 

that Armendariz should guide its arbitrability determination because, inter 

alia, the law firm ‘was in a superior bargaining position vis-à-vis [the 

partner] akin to that of an employer-employee relationship, and there is no 

evidence in this record that Ramos had an opportunity to negotiate the 

arbitration provision.’ (Ramos, supra, 28 Cal.App.5th at p. 1056.)

“Likewise, in Wherry [v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1249 

(Wherry)], the appellate court applied Armendariz’s requirements in finding 

unconscionable an arbitration agreement between the parties even though 

the plaintiffs were independent contractors. In its analysis of substantive 

unconscionability, the court stated: ‘That plaintiffs are independent 

contractors and not employees makes no difference in this context. The 

contract by which they were to work for defendants contained a mandatory 

arbitration provision.’ ” (Subcontracting Concepts, supra, 34 Cal.App.5th at 

pp. 208–209.) 

In Subcontracting Concepts, we ultimately concluded that because 

“there plainly was a power imbalance between the parties, respondent was 

required to sign an agreement containing a mandatory arbitration provision, 
15

and the underlying claims involve whether respondent was an employee or 

an independent contractor,” it was “both unnecessary and inappropriate to 

resolve the question of whether respondent was an employee for purposes of 

our unconscionability determination under California law. [Citations.]” 

(Subcontracting Concepts, supra, 34 Cal.App.5th at pp. 209–210.) 

Likewise, in the case before us, we find that it is “both unnecessary and 

inappropriate” to determine whether respondents were employees for 

purposes of our unconscionability determination. (Subcontracting Concepts, 

supra, 34 Cal.App.5th at p. 210.) Whether or not a finder of fact ultimately 

agrees with respondents’ allegations that they were employees, “the 

relationship between [appellant and respondents] was characterized by a 

power imbalance analogous to that of an employer-employee relationship”

and was “sufficiently similar to that of an employee-employer relationship to 

conclude the parties’ arbitration agreement is subject to Armendariz

requirements.” (Ramos, supra, 28 Cal.App.5th at pp. 1057–1058.)

B. Procedural Unconscionability

“A procedural unconscionability analysis ‘begins with an inquiry into 

whether the contract is one of adhesion.’ [Citation.] An adhesive contract is 

standardized, generally on a preprinted form, and offered by the party with 

superior bargaining power ‘on a take-it-or-leave-it basis.’ [Citations.] 

Arbitration contracts imposed as a condition of employment are typically 

adhesive [citations]. The pertinent question, then, is whether circumstances 

of the contract’s formation created such oppression or surprise that closer 

scrutiny of its overall fairness is required. [Citations.] ‘ “ ‘Oppression occurs 

where a contract involves lack of negotiation and meaningful choice, surprise

where the allegedly unconscionable provision is hidden within a prolix 

printed form.’ ” ’ [Citations.]” (OTO, supra, 8 Cal.5th at p. 126.) 
16

“With respect to preemployment arbitration contracts, [our Supreme 

Court has] observed that ‘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.’ [Citation.] This economic pressure can also be 

substantial when employees are required to accept an arbitration agreement 

in order to keep their job.” (OTO, supra, 8 Cal.5th at p. 127, quoting 

Armendariz, supra, 24 Cal.4th at p. 115.) 

In the present case, the trial court found that the Agreements were 

procedurally unconscionable because appellant “was in a superior bargaining 

position and presented the contracts on a take it or leave it basis.” We agree 

that the undisputed evidence shows that the Agreements were contracts of 

adhesion. (See OTO, supra, 8 Cal.5th at p. 126.) Each Agreement consisted 

of a standardized, preprinted form in small font, with the arbitration 

provision appearing near the end of a 15-page contract containing multiple 

provisions. Specifically, the arbitration provision is the 27th of 39 clauses 

contained within the Agreement and is the second of three clauses set forth 

under a heading entitled, “Administrative and Related Matters.”

Both respondents stated that they were under pressure to sign the 

Agreements and extension addenda quickly without any opportunity to 

negotiate or consult an attorney. They were given the Agreements with short 

deadlines—between one and four days—to sign them, initially as a condition 

of working as a driver for appellant, and subsequently as a repeated 

precondition to continued work. These circumstances “demonstrate 

significant oppression.” (OTO, supra, 8 Cal.5th at p. 127.) 
17

Appellant points out that in his declaration, Jim McCarthy, appellant’s 

chief financial officer, provided conflicting evidence on this issue, stating, “As 

is [appellant’s] general practice, [each respondent] was afforded an 

opportunity to review the Independent Contractor Agreement and was free to 

take the Independent Contractor Agreement to be reviewed by an attorney of 

his choosing. If [either respondent] so desired, he also could have engaged 

[appellant] in discussions over the terms of the Independent Contractor 

Agreement. In other words, [each respondent] could have asked questions, 

raised concerns, or offered to negotiate any terms of the Independent 

Contractor Agreement.” 

In his subsequent deposition, however, when asked about the specific 

circumstances surrounding respondents’ signing of the initial and subsequent 

Agreements and extension addenda, McCarthy acknowledged that he was not 

present when the Agreements were presented to or signed by either 

respondent and did not know who gave them the Agreements to sign or how 

they received them. He did not know when respondents’ received the 

Agreements for signature or how long they had to review them before 

signing. McCarthy acknowledged that he did not even know whether either 

respondent was ever given an opportunity to review the Agreements before 

signing them. Nor did he know whether either respondent ever had the 

opportunity to negotiate the terms of any of the Agreements they signed 

during their time driving for appellant. Regarding the extension addenda

that current drivers sometimes were required to sign to extend their 

contracts in lieu of a new Agreement, if a driver did not sign the addendum, 

the driver’s relationship with appellant would terminate. 

In light of McCarthy’s detailed deposition testimony in which he 

admitted that he did not know any of the particular circumstances 
18

surrounding respondents’ signing of their Agreements with appellant, we find 

that the evidence is not in conflict on this point. Instead, the sole and 

uncontroverted evidence regarding those circumstances, provided in Ali’s and 

Bland’s declarations, is that Ali and Bland were under pressure to sign the 

initial and subsequent Agreements and extension addenda quickly and that

neither respondent was given the opportunity to consult an attorney or 

negotiate the terms of the Agreements before signing them as a condition of 

driving for appellant. This evidence shows significant oppression. (See OTO, 

supra, 8 Cal.5th at p. 127.) 

In addition, the arbitration provision stated that “[t]he Arbitration 

proceeding shall be governed by the AAA’s Commercial Arbitration Rules,” 

but the provision failed to state what those rules were and appellant did not 

provide either respondent with a copy of them. (See Subcontracting Concepts, 

supra, 34 Cal.App.5th at p. 211; Carbajal v. CWPSC, Inc. (2016) 245 

Cal.App.4th 227, 245 (Carbajal).) The AAA rules, which were neither

articulated in nor attached to the arbitration provision, contain a cost sharing 

requirement, which respondents have challenged in the present case. 

Specifically, rule 54 of the AAA rules states that, except for the expenses of 

witnesses called by either party, “[a]ll other expenses of the arbitration, 

including required travel and other expenses of the arbitrator, AAA 

representatives, and any witness and the cost of any proof produced at the 

direct request of the arbitrator, shall be borne equally by the parties, unless 

they agree otherwise or unless the arbitrator in the award assesses such 

expenses or any part thereof against any specified party or parties.” (Italics 

added.) 

This case is thus distinguishable from Baltazar v. Forever 21, Inc.

(2016) 62 Cal.4th 1237, 1246 (Baltazar), cited by appellant, in which our 
19

Supreme Court addressed an employee’s claim that the procedural 

unconscionability of the arbitration agreement she was required to sign was 

increased by the fact that the employer did not provide her “with a copy of the 

AAA’s rules for arbitration of employment disputes, which, by the terms of 

the arbitration agreement, govern[ed] any arbitration between the parties.” 

The court rejected the employee’s reliance on several Court of Appeal cases, 

explaining that those cases “stand for the proposition that 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. [Citation.] [The employee’s] argument accordingly might have 

more force if her unconscionability challenge concerned some element of the 

AAA rules of which she had been unaware when she signed the agreement. 

But her challenge to the enforcement of the agreement has nothing to do with 

the AAA rules; her challenge concerns only matters that were clearly 

delineated in the agreement she signed.” (Ibid.) 

Here, unlike the employee in Baltazar, respondents’ unconscionability 

challenge does “concern[] some element of the AAA rules of which [they] had 

been unaware when [they] signed the agreement.” (Baltazar, supra,

62 Cal.4th at p. 1246.) One of their claims of substantive unconscionability 

relates to the requirement that they bear half the costs of arbitration, which 

was not included anywhere in the arbitration provision. (See pt. II.C., post.) 

Rather it was “ ‘artfully hidden’ ” by appellant’s incorporation by reference of 

the AAA rules, which were neither delineated in the Agreements respondents

signed nor otherwise provided to them. (Baltazar, at p. 1246.) This fact 

exacerbated the procedural unconscionability of the arbitration provision by 

adding an element of surprise to the already oppressive circumstances of its 
20

formation, requiring “closer scrutiny of its overall fairness.” (OTO, supra,

8 Cal.5th at p. 126.) 

In sum, because neither the arbitration provision nor the manner of its 

presentation to Ali and Bland “promote[d] voluntary or informed agreement 

to its terms,” the evidence indicates, at the very least, a moderate degree of

procedural unconscionability. (OTO, supra, 8 Cal.5th at p. 129.) 

C. Substantive Unconscionability

“Substantive unconscionability examines the fairness of a contract’s 

terms. This analysis ‘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].) 

All of these formulations point to the central idea that the unconscionability 

doctrine is concerned not with “a simple old-fashioned bad bargain” [citation], 

but with terms that are “unreasonably favorable to the more powerful 

party.” ’ [Citation.] Unconscionable terms ‘ “impair the integrity of the 

bargaining process or otherwise contravene the public interest or public 

policy” ’ or attempt to impermissibly alter fundamental legal duties. 

[Citation.] . . .

“Substantive terms that, in the abstract, might not support an 

unconscionability finding take on greater weight when imposed by a 

procedure that is demonstrably oppressive. Although procedural 

unconscionability alone does not invalidate a contract, its existence requires 

courts to closely scrutinize the substantive terms ‘to ensure they are not 

manifestly unfair or one-sided.’ [Citation.]” (OTO, supra, 8 Cal.5th at 

pp. 129–130.) 
21

Here, the trial court concluded there were three substantively 

unconscionable terms in the arbitration provision. First, it found that the 

Agreement “has a 120 day statute of limitations. This is substantially 

shorter than the statutory limits and is unconscionable. [Citation.]” Second, 

the Agreement “permits [appellant] to seek a provisional remedy from the 

court but precludes plaintiffs from equivalent access. This is one sided and 

supports a finding of unconscionability. [Citation.]” Third, the Agreement

“also requires that [respondents and appellant] split the cost of arbitration. 

This is unconscionable because a cost greater than the filing fees associated 

with litigation deters claims.”

We agree with the trial court that these three terms are substantively 

unconscionable. 

First, with respect to the shortened statute of limitations, most of the 

statutory Labor Code claims in respondents’ complaint have at least a threeyear statute of limitations. (See Pinela v. Neiman Marcus Group, Inc. (2015) 

238 Cal.App.4th 227, 254 (Pinela).) The claims under the Business and 

Professions Code have a four-year statute of limitations. (See Bus. & Prof. 

Code, § 17208.) The arbitration provision shortens these statutes of 

limitations, stating: “A written demand for arbitration must be filed with the 

AAA and a copy of the filing provided to the other party within one hundred 

twenty (120) days of the occurrence of the claimed breach or other event 

giving rise to the controversy or claim. Failure to make such timely demand 

for arbitration shall constitute an absolute bar to the institution of any 

proceedings and a waiver of the claim.” (Agreement, § VI., cl. 6.02(a).) 

“California courts have held that, in the context of statutory claims

such as the wage-and-hour claims brought by [respondents], a provision in an 

arbitration agreement shortening the statutory limitations period is 
22

substantively unconscionable. ‘The Labor Code . . . affords employees three 

or four years to assert [wage-and-hour claims]. [Citations.] Where, as in this 

case, arbitration provisions undermine statutory protections, courts have 

readily found unconscionability.’ [Citations.]” (Pinela, supra, 238 

Cal.App.4th at p. 254; accord, Samaniego v. Empire Today LLC (2012) 205 

Cal.App.4th 1138, 1147 (Samaniego); Nyulassy v. Lockheed Martin Corp. 

(2004) 120 Cal.App.4th 1267, 1283.)5 

Considering the applicable law and the circumstances of this case, we 

conclude the language in the arbitration provision significantly shortening 

the statute of limitations is substantively unconscionable. (See Pinela, supra,

238 Cal.App.4th at p. 254.) 

Second, with respect to the requirement that respondents bear half the 

costs of arbitration, as noted earlier, this AAA rule was not included in the 

arbitration provision or attached to the Agreement even though the provision 

required that any arbitration proceedings be governed by AAA rules, which 

we have found is procedurally unconscionable. (See pt. II.B., ante; see also

Agreement, § VI., cl. 6.02; AAA Rules, rule 54.) This rule is also substantively

unconscionable under applicable California law because “[a]n arbitration 

procedure may not impose such costs or risks on wage claimants that it 

5 Appellant asserts that the shortened limitations period in this case 

was not substantively unconscionable because, “outside the employment 

context, ‘California courts have permitted contracting parties to modify the 

length of the otherwise applicable California statute of limitations, whether 

the contract has extended or shortened the limitations period.’ [Citation.]” 

(Quoting Hambrecht & Quist Venture Partners v. American Medical 

International, Inc. (1995) 38 Cal.App.4th 1532, 1548, italics added.) We have 

already found, however, that in the circumstances of this case the 

relationship between the parties “was characterized by a power imbalance 

analogous to that of an employer-employee relationship” and the arbitration 

provision, therefore, is subject to the Armendariz requirements. (Ramos, 

supra, 28 Cal.App.5th at pp. 1057–1058; see pt. II.A., ante.) 
23

‘ “effectively blocks every forum for the redress of disputes, including 

arbitration itself.” ’ [Citation.] [¶] . . . . [Armendariz] requires that 

employers bear most arbitration costs, which, because they include the 

arbitrator’s compensation, can be substantial. The Armendariz rule 

mitigates the unfairness of expecting that employees bear costs of a 

procedure to which they were required to agree.” (OTO, supra, 8 Cal.5th at 

pp. 134–135;

6 see also Armendariz, supra, 24 Cal.4th at pp. 110–111

[“consistent with the majority of jurisdictions to consider this issue, we 

conclude that when an employer imposes mandatory arbitration as a 

condition of employment, the arbitration agreement or arbitration process 

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”]; Subcontracting Concepts, supra, 34 Cal.App.5th at p. 212, 

[finding substantively unconscionable an arbitration provision’s requirement 

that plaintiff claiming misclassification as an independent contractor bear his 

own arbitration costs].) 

Third, the clause in the arbitration provision purporting to allow only 

appellant to request a provisional remedy in court provides: “As to any 

dispute or controversy which under the terms of this Agreement is a proper 

subject of arbitration, no suit at law or in equity based on such dispute or 

controversy shall be instituted by either party other than a suit to conform, 

enforce, vacate, modify or correct the award of the arbitrator(s) as provided 

by law; provided, however, that this clause shall not limit Company’s right to 

6 The OTO court noted that section 1284.2 “states a default rule that, 

unless the agreement specifies otherwise, parties to an arbitration will bear 

their own expenses. However, Armendariz created an exception to this 

general rule for arbitrations of employment-related disputes.” (OTO, supra, 

8 Cal.5th at p. 128.) 
24

obtain any provisional remedy including, without limitation, injunctive relief, 

writ for recovery of possession or similar relief from any court of competent 

jurisdiction as may be necessary in Company’s sole subjective judgment to 

protect its property rights.” (Agreement, § VI., cl. 6.02(c), italics added.) 

Appellant maintains that the trial court “misread” this clause because, 

“[w]hile [the challenged] language does permit [appellant] to seek a 

provisional remedy in court, nothing about it precludes [respondents] from 

doing the same; the clause is simply silent on that issue. In fact, 

[respondents] are permitted to seek a provisional remedy in court, 

notwithstanding the agreement to arbitrate, because . . . section 1281.8(b) 

guarantees both parties that right[.]” 

Section 1281.8, subdivision (b) provides in relevant part: “A party to an 

arbitration agreement may file in the court in the county in which an 

arbitration proceeding is pending, or if an arbitration proceeding has not 

commenced, in any proper court, an application for a provisional remedy in 

connection with an arbitrable controversy, but only upon the ground that the 

award to which the applicant may be entitled may be rendered ineffectual 

without provisional relief.” 

We find that clause 6.02(c) is misleading in that it states that the 

exception to arbitrability for provisional remedies applies only to appellant. 

This reflects an attempt to improperly insert a unilateral carve out in the 

arbitration provision that favors appellant, which demonstrates substantive 

unconscionability. (See Armendariz, supra, 24 Cal.4th at p. 117; compare 

Baltazar, supra, 62 Cal.4th at p. 1241 [clause in arbitration agreement that 

authorized both parties to seek preliminary injunctive relief in trial court 

“does no more than restate existing law (see . . . § 1281.8, subd. (b) . . . ), [and

therefore] does not render the agreement unconscionable”].) 
25

In addition, appellant is incorrect that “[t]he language of [clause] 

6.02(c) merely reiterates what . . . section 1281.8(b) already provides,” and is 

therefore not unconscionable. Clause 6.02(c) does not limit appellant’s ability 

to seek provisional remedies to arbitration-related issues, which is the sole 

context to which section 1281.8 applies. (See § 1281.8, subd. (b) [parties to an 

arbitration agreement may file in trial court “an application for a provisional 

remedy in connection with an arbitrable controversy, but only upon the 

ground that the award to which the applicant may be entitled may be 

rendered ineffectual without provisional relief”].) Instead, the clause gives 

appellant the right to obtain in court any provisional remedy, “without 

limitation,” whenever it believes in its “sole subjective judgment” that such

action is necessary “to protect its property rights,” despite the arbitration 

provision’s requirement that the parties otherwise arbitrate all claims. 

(Agreement, § VI., cl. 6.02(c).) 

Thus, because the clause purports to permit appellant alone to seek 

redress in court, because the rights given to appellant in clause 6.02(c) of the 

arbitration provision go beyond the bilateral rights provided by section 

1281.8 to parties involved in the arbitration process, and because appellant 

has provided no reasonable justification for such a one-sided carve out, this 

clause is substantively unconscionable. (See Armendariz, supra, 24 Cal.4th 

at p. 117 [“it is unfairly one-sided for an employer with superior bargaining 

power to impose arbitration on the employee as plaintiff but not to accept 

such limitations when it seeks to prosecute a claim against the employee, 

without at least some reasonable justification for such one-sidedness based 

on ‘business realities’ ”]; accord, Carbajal, supra, 245 Cal.App.4th at p. 248;

Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 

86.) 
26

D. Severability

Appellant contends that even assuming the arbitration provision 

contained unconscionable terms, the trial court improperly refused to sever 

those provisions and enforce the contract. 

Civil Code section 1670.5, subdivision (a) provides: “If the court as a 

matter of law finds the contract or any clause of the contract to have been 

unconscionable at the time it was made 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.”

We review the trial court’s refusal to sever the unconscionable terms 

for abuse of discretion. (Armendariz, supra, 24 Cal.4th at p. 122.) “The 

overarching inquiry is whether ‘ “the interests of justice . . . would be 

furthered” ’ by severance. [Citation.]” (Id. at p. 124.) 

“In Armendariz, the court identified three factors relevant to whether 

severance is appropriate. First, ‘[i]f the central purpose of the contract is 

tainted with illegality, then the contract as a whole cannot be enforced.’ 

(Armendariz, supra, 24 Cal.4th at p. 124.) Second, the fact that an 

‘arbitration agreement contains more than one unlawful provision’ may 

‘indicate a systematic effort to impose arbitration on an employee . . . as an 

inferior forum that works to the employer’s advantage’ and may justify a 

conclusion ‘that the arbitration agreement is permeated by an unlawful 

purpose.’ (Ibid.) Third, if ‘there is no single provision a court can strike or 

restrict in order to remove the unconscionable taint from the agreement,’ the 

court would have to ‘reform the contract, not through severance or restriction, 

but by augmenting it with additional terms,’ which would exceed its power to 

cure a contract’s illegality. (Id. at pp. 124–125.)” (Subcontracting Concepts, 
27

supra, 34 Cal.App.5th at pp. 215–216; accord, Samaniego, supra, 205 

Cal.App.4th at p. 1149.) 

“ ‘The ultimate issue in every case is whether the terms of the contract 

are sufficiently unfair, in view of all relevant circumstances, that a court 

should withhold enforcement.’ [Citation.]” (OTO, supra, 8 Cal.5th at p. 126.) 

Here, we have found at least a moderate level of procedural 

unconscionability, with circumstances surrounding the formation of this

contract of adhesion demonstrating both oppression and surprise, and three 

substantively unconscionable terms that unfairly favor appellant in various 

ways. These circumstances plainly justify a finding that “ ‘the central 

purpose of the contract is tainted with illegality,’ ” that the multiple unlawful 

provisions “ ‘indicate a systematic effort to impose arbitration [on 

respondents] as an inferior forum that works to [appellant’s] advantage,’ ”

and that, “ ‘there is no single provision [the court could] strike or restrict in 

order to remove the unconscionable taint from the agreement.’ ”

(Subcontracting Concepts, supra, 34 Cal.App.5th at p. 215, quoting 

Armendariz, supra, 24 Cal.4th at pp. 124, 125.)7

For these reasons, we conclude the trial court did not abuse its 

discretion when it determined that the terms of the arbitration provision

were “sufficiently unfair” that enforcement should be withheld. (OTO, supra,

8 Cal.5th at p. 126; see also Davis v. Kozak (2020) 53 Cal.App.5th 897, 918 

7 Moreover, even assuming it would be possible, as appellant argues, to 

strike the substantively unconscionable terms, without having to rewrite or 

augment the terms of the arbitration provision, we would still find the trial 

court acted within its discretion when it refused to enforce the contract. That 

is because, as discussed in detail, ante, the totality of the circumstances 

support the determination that the interests of justice would not be served by 

severance, which is the “overarching inquiry” in deciding whether to enforce 

an unconscionable contract. (Armendariz, supra, 24 Cal.4th at p. 124.) 
28

[where two substantively unconscionable provisions worked to employer’s 

“distinct advantage,” and indicated employer’s “self-interested effort to 

impose an inferior forum on its employees, the trial court was within its 

discretion to conclude the agreement was permeated by unconscionability 

and should not be enforced”]; Carbajal, supra, 245 Cal.App.4th at p. 254 

[where arbitration agreement contained three substantively unconscionable 

terms, trial court did not abuse its discretion when it refused to enforce 

agreement because it was “permeated with unconscionability”]; Samaniego, 

supra, 205 Cal.App.4th at pp. 1147–1148, 1149 [where arbitration agreement 

contained three substantively unconscionable terms, trial court could 

reasonably conclude “that severance would not serve the interests of 

justice”].) 

In light of our conclusion that the trial court did not abuse its discretion 

when it found the arbitration provision unenforceable based on one of the 

“generally applicable contract defenses,” i.e., unconscionability (Concepcion, 

supra, 563 U.S. at p. 339; see 9 U.S.C. § 2), we need not resolve the question 

of whether respondents are transportation workers engaged in interstate 

commerce and therefore exempt from the FAA. (See OTO, supra, 8 Cal.5th at 

p. 125; 9 U.S.C. § 1.) 

DISPOSITION

The trial court’s order denying appellant’s motion to compel arbitration 

and stay the underlying action is affirmed. Costs on appeal are awarded to 

respondents Sabid Ali and Eric Bland. 
29

_________________________

Kline, P.J.

We concur:

_________________________

Richman, J.

_________________________

Miller, J.

Ali et al. v. Daylight Transport, LLC (A157104)