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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or or dered published for purposes of rule 8.1115.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. , Plaintiff s and Respondents ,

v. DAYLIGHT TRANSPORT, LLC , Defendant and Appellant

. A157 104
(Alameda County Super. Ct. No. RG1 8915217 )

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 act i on 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 Californ ia law

. On appeal, appellant challenges the trial court’s findings that (1) respondents are exem pt 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.2 FACTUAL BACKGROUND Evidence submitted in support of and opposition to the motion to

c ompel arbitra tion

— 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.
F or 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 t he freight respondents
handled “ either originated out of state or had final delivery dest ination out of state.” However, appellant’s independent contractor truc k drivers in California , including respondents, “only provide d pic k

- up and delivery
services with in the state of California ” and respondent s “never crossed state lines in moving freigh t for [ appellant’s ] customers.” 1 Respondents Ali and Bland each entered into an “Independent Contractor Service Agreement” (A greement) 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 the reafter instructed him “to change the certification to be for interstate commercial driving because [he] was moving freight that crosses state lines.”3

for appellant , and regularly signed materially identical A greements or
contract extension addenda over the time they drove for appellant

. All of the A greements respondents signed contained an iden tical 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 enforcem ent 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 proceed ings 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 arbitrati on, 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 C ommercial 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 driver s

. Appellant cla ssified and paid both respondents as independent contractor s during the entire time of their work for appellant

. Appellant required them to sig n the A greement s in order to work as driver s

. Ali signed approximately 10 agreements and Bland signed approximately six
A greements and extension addenda over the course of their work for appellant in order to continue driving for the company . E ach of the
A greements contained the identical arbitration provision. Appellant’s terminal service managers presented the A greements to both Ali and Bland , who were not involved in drafting any part of the m

. Nor5

were they given any opportunity to negoti ate th e terms of the A greements , including the arbitration provision, or review the terms with an attorney before signing them

. Ali, for example, would receive the A greement or extension addendum “ the night before he had to sign it” and “could not be dispatched to make pickups o r d eliveries without signing” the A greement “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 da ys 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 arbitr ation rules referred to in the A greement s

.

P ROCEDURAL 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 t he 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 O rder) ; (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; IWC6

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 m otion to compel arbitration and stay the underlying action , arguing chiefly that (1) the FAA applied to the
A greement s between the parties and the FAA’s exemption for transportation
worker s 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

— in cluding, 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 arbitra tion provision in the A greement s was unenforceable . First, the court found that the FAA did not apply to the A greement s 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 unenforce able 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.)7

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
I n 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 be tween 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 , t he 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 demonstrati ng that the FAA did not apply to the Agreements. The court next addressed whether the arbitration provision was never theless enforceable under California law, focusing on the contract defense of unconscionability , and ultimately finding
the provision unen forceable 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 a n 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 fal l 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]

app lies [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 statutory9

interpretation question posed by the transportation

- worker exemption is a necessary first step in order to determine what body of st ate 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’ [cita tion], 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 t heir terms [citation ].” ( Concepcion
, supra, 563 U.S. at p. 339.) S ection 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 rather10

only to ‘transportation workers.’ [Citation.]” ( Muller v. Roy Miller Freight Lines, LLC (2019) 34 Cal.App.5th 1056, 1062 ; see i d. 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 go ods 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 o r that derive their meaning from the fact that an agre ement 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 ) , o ur 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.), ‘ t he Legisla ture has expressed a “ strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. ” ’ [Citation.] As with the11

FAA (9 U.S.C. § 1 et seq .), California law establishes ‘ a presump tion in favor of arbitrabil ity.’ [Citation.] An agreement to submit dispu tes to arbitration

‘ is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.’ ( Code Civ. Proc., § 1281 4 ; 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

an d 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 arbitra tion clauses as for any other contract
clause. [Citation.]” ( O TO
, 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. C onsidering appellant’s abandonment of the issue of FAA preemption (see United Grand Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th 142, 160 [ i n 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.12 II. Unconsc ionability Appellant challe nges 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 esta blished. 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,

t he unconscionabilit y 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.] Su bstantive 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 es tablished, but ‘ they need not be present in the same degree.’ [Citation.] I nstead, they are evaluated on ‘ “a sliding scale. ” ’ [Citation.] ‘ [T]he more substantively oppressive the contract term, the less evidence of procedural u nconscionability is req uired to’ conclude that the term is unenforceable. [Citation.] Conversely, the mor e deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required. [Citations.] A c ontract’s substantive fairness ‘ must be considered i n light of any procedural unconscionabi lity’ 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 cou rt should withhold enforcement.’ [Citation.]13

“ 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 un conscionability in the employee

- employer context are inapplicable here.
In A rmendariz 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 jus tification.” 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 agreeme nt.” ( Ibid

. ) Here, a lthough the Agreements state that responden ts are independent

contractors , r espondents ’ 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 rejec ted a similar argument : “ In R amos [ v. Superior Court (2018) 2814

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.)

“ Divis ion One of this District found ‘ it unnecessary to resolve the question o f whether Ramos was an employee’ for purposes of ‘ deciding whether the parties’ arbitrati on agreement [was] enforceable,’ concluding
that Armendariz should guide its arbitrability determination bec ause, 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
eviden ce in this record that Ramos had an opportunity to negotiate the
arbitrati on 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 m andatory arbitration provision.’ ” ( Subcontracting Concepts
, supra, 34 Cal.App.5th at

p p

. 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 m andatory 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 inappr opriate” 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’ allegation s that they were employee s , “ the
rel ationship 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 relat ionship to conclude the parties’ arbitration agr eement 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 fair ness 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 C al.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 agreemen t 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. 12 7, 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 “wa s 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 Agreem ents 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 Agreement s and extension addenda quickly without any opportunity to negotiate or consult an attorney . They were given the Agreements with short
deadline s

— between one and four day s

— to sign them , initially as a condition of working as a driver for appellant , and subsequently as a repeated precondition to con tinued work

. These circumstances “demon strate 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
tak e the Independent Contractor Agreement to be reviewed by an attorney of
his choo sing. 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 l ong 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 Agreement s before signing them

. Nor did he kn ow whether either respondent ever had the opportunity to negotiate the terms of any of the Agreement s they signed during their time driving for appellant

. Regarding the extension addenda
that current d rivers sometimes were required to sign to extend their

c ontracts 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 cir cumstances18

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 declarat ions, 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 Co mmercial 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 n or attached to the arbitration provision, contain a cost sharing requirement, which respondents have challenged in the present case

. Specifically, r ule 54 of the AAA r ules 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

repre sentatives, 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 p art thereof against any specifi ed party or p arti es .” (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 our19

Supreme Court addressed an employee’s claim that the procedural
unconscionabil i ty 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 unconscionabili ty 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 he r 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 its20

formation , requiring “clos er 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 moder ate degree of

proc edural 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 s imple 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 pu blic interest or public policy ” ’ or attempt to impermissibly alter fundamental legal d uties. [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 in validate 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

p p

. 129

– 130 .)21

Here, the trial court concluded there were three substantively unconscionable terms in the arbitration provision. First, it found that t he Agreement “ has a 120 day statute of limitations. This is substantially shorter than the statutory limits and is unconscionable. [Citation.]” Second, the Agr eement “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 an d 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, w ith respect to the shortened statute of limitations , most of the statutory Labor Code claims in respondents’ complaint have at least a three

year statute of limitations . (See Pinela v. Neiman Marcus Group, Inc

. (2015) 238 Cal.App.4th 227, 254 ( Pin ela ) .) The claims under the Business and Professions Code have a four

- year statute of limitations. (See Bus. & Prof. Code, § 17208.) The arbitration provision shorten s these statutes of limitations, stating : “A written demand for arbitration must be fi led 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 s hall 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 agr eement shortening the statutory limitations period is22

substantively unconscionable. ‘ The Labor Code .

. . affords employees three or four years to assert [wage

- and

- hour claims]. [Citations.] Whe re, 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 limitati ons 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 .) T his 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 , ‘Califo rnia 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.]” ( Q uoting Hambrecht & Quist Venture Par tners v. American Medical International, Inc. (1995) 38 Cal.App.4th 1532, 1548 , italics added .) We have al ready found, however, that in the circumstances of this case the relationship between the parties “was characterized by a power imbalance analogous t o 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 proced ure to which they were required to agree.” ( OTO , supra , 8 Cal.5th at pp. 134

– 135 ; 6 see also Armendariz , sup ra , 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 uncons cionable 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 institut ed 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 C al.5th at p. 128.)24

obtain any provisional remedy including, without limitation, injunctive rel ief, 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 sil ent 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[.] ”
S ection 1281.8, subdivision (b) provides i n 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

con nection 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 c lause 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 impro perly insert a unilateral carve out in the arbitration provision that favors appellant, which demonst rates 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 m ore than restate existing law (see

. . . § 1281.8, subd. (b) . . . ), [and therefore ] does not rende r 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. C lause 6.02(c) does not limit appellant’s ability to seek provisional remedies to arbi tration

- 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 claim s. (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 Arm endariz , 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,
wi thout 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: “ I f 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 cla use, 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 approp riate. 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 unlaw ful 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 augmentin g it with additional terms, ’ which would exceed its power to cure a contract’s illegality. ( Id

. at p p

. 124

– 125 .) ” ( Subcontracting Concepts ,27

supra , 34 Cal.App.5th at pp. 215

– 216 ; accord, Samaniego , supra , 205 Cal.App.4th at p. 1149

. ) “ ‘T he ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in view of all relevant circumstances, that a cou rt 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 forma tion 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 mu ltiple 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 remo ve the unconscionable tain t 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 C al.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 act ed 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 “over arching 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 co nclude 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 concl ude “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 inters tate commerce and t herefore 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 (A15 7104 )