Filed 12/18/14 Gillespie v. Western Pacific Housing Management CA4/1 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS 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 

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or ordered published for purposes of rule 8.1115. 

COURT OF APPEAL, FOURTH APPELLATE DISTRICT 

DIVISION ONE 

STATE OF CALIFORNIA 

REBECCA RENEE GILLESPIE, 

 Plaintiff and Respondent, 

 v. 

WESTERN PACIFIC HOUSING 

MANAGEMENT, INC., 

 Defendant and Appellant. 

 D066354 

 (Super. Ct. No. CIVSS710814) 

 APPEAL from a judgment of the Superior Court of San Bernardino, John M. 

Pacheco, Judge. Reversed. 

 Ogletree, Deakins, Nash, Smoak & Stewart, Jack S. Sholkoff, Catherine J. Coble, 

Angel H. Ho and Vanessa C. Krumbein for Defendant and Appellant. 

 Kingsley and Kingsley, Eric B. Kingsley, Darren M. Cohen, Liane Katzenstein Ly 

and Kelsey M. Szamet for Plaintiff and Respondent. 

 In this action for alleged Labor Code violations as to meal and rest periods brought 

by plaintiff Rebecca Renee Gillespie, defendant Western Pacific Housing Management, 
2 

Inc. (Western Pacific) brought a motion to compel arbitration, pursuant to a mutual 

arbitration agreement (MAA). The court denied the motion finding (1) Western Pacific 

waived its right to enforce the agreement by litigating the action for four years before 

seeking to compel arbitration, and (2) the MAA was unconscionable. 

 On appeal Western Pacific asserts the court erred by (1) finding the MAA was 

unconscionable and (2) finding that it waived the right to compel arbitration. We 

conclude that Western Pacific did not waive its right to compel arbitration. We also 

conclude that the MAA is not unconscionable. Further, as we shall discuss, the class 

action waiver is enforceable. However, we also conclude that the class action waiver 

cannot apply to Gillespie's claim under the Private Attorneys General Act of 2004 

(PAGA) (Lab. Code, § 2698 et seq.). Accordingly, we reverse the court's order denying 

the motion to compel arbitration and remand this matter for further proceedings 

consistent with this opinion. 

FACTUAL AND PROCEDURAL BACKGROUND 

 A. The Parties 

 Beginning in March 2006, Gillespie was employed by Western Pacific. Western 

Pacific is a homebuilding company based in Texas that builds homes in California. 

Gillespie worked as a sales representative in Southern California selling homes. 

 B. The MAA 

 Shortly after she was hired, Gillespie signed the MAA. 

 The MAA provided that all employment-related claims, including those related to 

wages, were subject to arbitration: 
3 

"Employee and the Company . . . agree that all disputes and claims 

between them, including those relating to Employee's employment 

with the Company and any separation therefrom . . . shall be 

determined exclusively by final and binding arbitration before a 

single, neutral arbitrator . . . . Claims subject to arbitration under 

this Agreement include without limitation claims for discrimination 

or harassment; wages, benefits of other compensation . . . ." (Italics 

added.) 

 The MAA also provides that the "arbitrator may hear only Employee's individual 

claims and does not have the authority to fashion a proceeding as a class or collective 

action or to award relief to a group or class of employees in one arbitration proceeding." 

 C. The Underlying Litigation 

 In October 2007 Gillespie filed a class action lawsuit on behalf of herself and all 

individuals employed by Western Pacific in the position of salesperson within California 

from four years prior to the filing of the action. The complaint alleged Western Pacific 

improperly classified her and other salespersons as exempt from overtime law and that, as 

a result, she and other salespersons did not receive required meal and rest breaks. The 

complaint asserted causes of action for violation of meal and rest break law, penalties 

pursuant to Labor Code section 203, and violation of Business and Professions Code 

section 17200. In November 2007 Gillespie filed a first amended complaint adding a 

cause of action for violation of Labor Code section 2699. The parties thereafter 

stipulated to transfer venue from Alameda County to San Bernardino County. 

 Western Pacific answered the complaint several weeks after the California 

Supreme Court's decision in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry), in 

which class action waivers in employment agreements were held to be unenforceable, 
4 

and, if parties sought to enforce such waivers, they could be forced into class action 

arbitration. Recognizing that moving to compel arbitration would, in light of Gentry, be 

futile, the parties proceeded to partially litigate Gillespie's claims. The parties agreed (1) 

to send a precertification notice to putative class members and (2) to the production of 

basic contact information about putative class members. Western Pacific deposed 

Gillespie, but Gillespie took no depositions. 

 D. The Stay of Proceedings 

 In December 2009 Western Pacific filed an ex parte application seeking to stay all 

proceedings pending the California Supreme Court's resolution of Brinker v. Superior 

Court (2008) 165 Cal.App.4th 25, review granted October 22, 2008, S166350 (Brinker), 

as that decision would impact resolution of this action. Gillespie opposed Western 

Pacific's ex parte application, asserting Brinker was not dispositive of this action. 

 The trial court denied Western Pacific's ex parte application, but set the matter for 

a noticed hearing on Western Pacific's motion to stay this litigation. On February 10, 

2010, the court granted Western Pacific's motion to stay all proceedings until August 

2010, pending the decision by the Supreme Court in Brinker. Thereafter, the court 

stayed the matter several more times, the last stay having been issued April 11, 2012, the 

day before Brinker was decided. 

 Each time the stay was continued, the trial court and both parties acknowledged 

Brinker's importance to resolution of this action. In its August 9, 2010 order extending 

the stay, the trial court stated, "Counsel stipulate that the Brinker case does apply to the 

case. . . . Counsel agree the stay i[s] appropriate." In January 2011 the parties stipulated 
5 

"[t]he Supreme Court still has not issued a decision in Brinker. Accordingly, the parties 

agree that a further stay of at least 180 days is appropriate, unless the Supreme Court 

issues a decision sooner. [¶] . . . The Parties thus request that the Court extend the stay of 

the action until the next Case Management Conference." In August 2011, when 

continuing the stay, the trial court acknowledged that "[c]ounsel inform[ed] the court they 

are [still] waiting a decision from the California Supreme Court." In February 2012 the 

trial court again extended the stay, noting that "[c]ounsel still waiting on decision from 

the Calif[ornia] Supreme Court." On April 11, 2012, the trial court again continued the 

stay "at [the] request of counsel for all parties." Gillespie opposed the motion, arguing: 

(1) the MAA was both procedurally and substantively unconscionable; (2) Western 

Pacific waived its right to compel arbitration through unreasonable delay and use of the 

judicial process, to the prejudice of Gillespie; (3) the MAA was in violation of the 

National Labor Relations Act (NLRA) and was therefore unenforceable; (4) under the 

holding in Gentry, supra, 42 Cal.4th 443, the MAA would be invalidated; and (5) the 

MAA barred Gillespie from acting as a private attorney general to recover under PAGA 

based on the holding of Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489. 

 F. Court's Ruling 

 At the hearing on Western Pacific's motion to compel arbitration, the trial court 

addressed both the waiver and unconscionability issues raised by Gillespie in her 

opposition to the motion to compel arbitration. On the issue of waiver, the court noted 

that "this has been going on for four years." The court noted that the case had been 

stayed pending the Brinker decision, but stated that "a lot of cost and everything has been 
6 

expended in litigation and everything, and I just think it's better that I stick with my 

tentative." As to the issue of unconscionability, the court addressed concerns about the 

MAA's one-way provision that allowed Western Pacific to terminate the arbitration 

clause, but "plaintiff does not have that right." The court also inquired about the choice 

of law provision. Western Pacific acknowledged "[t]he arbitration agreement, it says that 

either Texas law or the Federal Arbitration Act will apply." However, Western Pacific 

told the court that, despite what the MAA stated, the claims would be resolved under 

California law. 

 Counsel for Gillespie also addressed the clause providing that actions for 

declaratory relief could be brought in state court, but all other claims must be arbitrated. 

Counsel pointed out that although that clause was facially neutral, it favored employers as 

they were the only party likely to seek declaratory relief. The court agreed, stating, 

"[Y]eah, another reason why it would be unconscionable." The court then took the 

matter under submission. 

 Thereafter, the trial court denied Western Pacific's motion finding that 

"[d]efendant waived [its] right to seek arbitration and the MAA is [u]nconscionable." 
7 

DISCUSSION 

I. ANALYSIS

 A. Waiver 

 A trial court may deny a petition to compel arbitration on the ground of waiver. 

(Code Civ. Proc.,1 § 1281.2, subd. (a).) Relevant factors to consider in assessing waiver 

claims include: "'"(1) whether the party's actions are inconsistent with the right to 

arbitrate; (2) whether 'the litigation machinery has been substantially invoked' and the 

parties 'were well into preparation of a lawsuit' before the party notified the opposing 

party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement 

close to the trial date or delayed for a long period before seeking a stay; (4) whether a 

defendant seeking arbitration filed a counterclaim without asking for a stay of the 

proceedings; (5) 'whether important intervening steps [e.g., taking advantage of judicial 

discovery procedures not available in arbitration] had taken place'; and (6) whether the 

delay 'affected, misled, or prejudiced' the opposing party."'" (St. Agnes Medical Center v. 

PacifiCare of California (2003) 31 Cal.4th 1187, 1196.) 

 However, courts cannot lightly infer waiver. (St. Agnes Medical Center v. 

PacificCare of California, supra, 31 Cal.4th at p. 1195.) The party asserting waiver 

bears a heavy burden and "any doubts regarding a waiver allegation should be resolved in 

favor of arbitration." (Ibid.) 

 

1 All further undesignated statutory references are to the Code of Civil Procedure. 
8 

 Here, Gillespie cannot meet this heavy burden. As we have noted, ante, Western 

Pacific filed its motion to compel arbitration shortly after the decision in Brinker was 

issued. As we have also noted, in agreeing to multiple stays of the proceedings in this 

action, the parties acknowledged the importance of Brinker to resolution of this action. 

Thus, we cannot say that Western Pacific's actions evidenced an intent to waive 

arbitration. 

 In finding waiver, the trial court relied on litigation activities and expenses that 

occurred before the action was stayed. In this regard Gillespie submitted two 

declarations in opposition to Western Pacific's motion to compel arbitration: a 

declaration from herself and one from her counsel. Her declaration relates to her 

participation in discovery before the trial court's initial stay order. Her counsel's 

declaration similarly relates to litigation activity occurring before the initial stay order, 

with the exception of a statement that putative class members contacted Gillespie's 

counsel while the stay was pending. However, this ignores the fact that at the time this 

action was filed, Gentry, supra, 42 Cal.4th 443, had held that class action waivers were 

unenforceable. Therefore, it would have been futile to move to compel arbitration based 

upon the law existing at that time. 

 B. Unconscionabilty 

 1. Applicable authority 

 A written contractual provision to submit to arbitration any disputes arising out of 

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

the revocation of any contract." (Code Civ. Proc., § 1281; Kinney v. United HealthCare 
9 

Services, Inc. (1999) 70 Cal.App.4th 1322, 1327.) Unconscionability is one of those 

grounds. (Civ. Code, § 1670.5, subd. (a); Szetela v. Discover Bank (2002) 97 

Cal.App.4th 1094, 1099 (Discover Bank).) 

 "'Unconscionability is ultimately a question of law for the court.' [Citation.] 

However, numerous factual issues may bear on that question. [Citation.] Where the trial 

court's determination of unconscionability is based upon the trial court's resolution of 

conflicts in the evidence, or on the factual inferences which may be drawn therefrom, we 

consider the evidence in the light most favorable to the court's determination and review 

those aspects of the determination for substantial evidence." (Gutierrez v. Autowest, Inc.

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

 "[T]he doctrine [of unconscionability] '"has both a 'procedural' and a 'substantive' 

element."'" (Little v. Auto Steigler, Inc. (2003) 29 Cal.4th 1064, 1071; Armendariz v. 

Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) 

"'The prevailing view is that [procedural and substantive unconscionability] must both be 

present in order for a court to exercise its discretion to refuse to enforce a contract or 

clause under the doctrine of unconscionability.' [Citation.] But they need not be present 

in the same degree. 'Essentially a sliding scale is invoked which disregards the regularity 

of the procedural process of the contract formation, that creates the terms, in proportion 

to the greater harshness or unreasonableness of the substantive terms themselves.' 

[Citations.] In other words, the more substantively oppressive the contract term, the less 

evidence of procedural unconscionability is required to come to the conclusion that the 

term is unenforceable, and vice versa." (Armendariz, supra, 24 Cal.4th at p. 114.) 
10 

2. Analysis

 a. The MAA is not procedurally unconscionable 

 Procedural unconscionability "addresses the circumstances of contract negotiation 

and formation, focusing on oppression or surprise due to unequal bargaining power." 

(Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US) LLC (2012) 55 

Cal.4th 223, 246 (Pinnacle).) Here, there is no evidence of "surprise" with regard to the 

formation of the MAA. This element refers to situations where an arbitration provision is 

hidden in an agreement drafted by the party seeking to enforce it. (Flores v. 

Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846, 853.) 

 Here, the MAA is a separate agreement and the arbitration provision is clear and 

conspicuous. Thus, the MAA's arbitration provision does not contain any element of 

"surprise." 

 Likewise, Gillespie there is no evidence of oppression. Indeed, at her deposition, 

after admitting she signed the MAA, Gillespie conceded that she did not even remember 

being presented with it. Thus, there is no evidence she signed the MAA unwillingly. 

 Thus, because there is little or no evidence that the MAA is procedurally 

unconscionable, Gillespie must demonstrate the MAA's substance was highly 

unconscionable. 

 b. The arbitration provision is not substantively unconscionable 

 Substantive unconscionability relates to "the fairness of an agreement's actual 

terms and to assessments of whether they are overly harsh or one-sided. . . . [T]he term 

must be 'so one-sided as to "shock the conscience.'" (Pinnacle, supra, 55 Cal.4th at p. 
11 

246.) For purposes of unconscionability, an arbitration agreement must lack bilateralism. 

To be enforceable, it must require both parties to submit their claims to arbitration. 

(Armendariz, supra, 24 Cal.App.4th at pp. 117-120. 

 Here, the MAA meets this requirement. It applies to both Western Pacific and 

Gillespie and requires them both to arbitrate their disputes arising from her employment. 

 The trial court's comments at the hearing indicated it was concerned regarding two 

aspects of the MAA: the modification provision and the carve-out for declaratory and 

equitable relief in paragraph 2. However, neither of these issues supports a finding of 

substantive unconscionability. 

 Paragraph 8 of the MAA grants Western Pacific a limited right to modify the 

terms of the MAA. It must provide 30 days' notice of the modification and changes may 

only be prospective. In this regard the MAA provides: "This Agreement may be 

modified or revoked by the Company by providing thirty days written notice to 

employees. Any modification or revocation shall not be effective until after the thirty 

day notice period, shall be prospective only, and shall not apply to any claims already 

initiated by either party." (Italics added.) 

 This provision is not unconscionable. As long as an employer's ability to modify 

is appropriately limited so as to ensure good faith and fair dealing, unilateral modification 

provisions are enforceable: 

"'"[W]here the contract specifies performance the fact that one party 

reserves the power to vary it is not fatal if the exercise of the power 

is subject to prescribed or implied limitations such as the duty to 

exercise it in good faith and in accordance with fair dealings."' 

[Citations.] [The employer's] discretionary power to modify the 
12 

terms of the personnel handbook in writing notice indisputably 

carries with it the duty to exercise that right fairly and in good faith. 

[Citation.] . . . So construed, the modification provision does not 

render the contract illusory." (24 Hour Fitness, Inc. v. Superior 

Court (1998) 66 Cal.App.4th 1199, 1214.) 

 Thus, the MAA's modification provision is not unconscionable. 

 At the hearing on Western Pacific's motion to compel arbitration, the trial court 

indicated it believed the MAA was unconscionable because paragraph 2 excludes from 

arbitration declaratory or injunctive relief claims regarding confidentiality, noncompetition, or similar obligations. This provision does not render the MAA 

unconscionable. 

 This is so because even if the MAA's provision excluding such claims from 

arbitration was improper, the trial court could have severed it, and indeed was required to 

do so. In Little v. Auto Steigler, Inc., supra, 29 Cal.4th 1064, the California Supreme 

Court considered an employment arbitration agreement that included a provision 

providing a right to only the employer to appeal an arbitration award in excess of 

$50,000. (Id. at p. 1071.) Recognizing that the appeal was unilateral, and thus 

unconscionable, the California Supreme Court held that the trial court was required to 

sever the offending provision and enforce the balance of the agreement. (Id. at pp. 1072-

1076.) 

 Similarly, in Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 985 the Court of 

Appeal found that a trial court's refusal to sever from an arbitration agreement a provision 

limiting discovery was an abuse of discretion: 
13 

"Even if we assume the discovery provision to be unconscionable, 

which we do not, the trial court abused its discretion by refusing to 

sever it. Where, as here, only one provision of an agreement is 

found to be unconscionable and that provision can easily be severed 

without affecting the remainder of the agreement, the proper course 

is to do so." (See McManus v. CIBC World Markets Corp. (2003) 

109 Cal.App.4th 76, 101-102 [severing provision in employment 

arbitration agreement requiring employee to pay certain arbitration 

costs].) 

 Thus, if the MAA's provision allowing both parties to seek injunctive or 

declaratory relief in court is unconscionable because it is only likely that Western Pacific 

would bring such a claim, the court was obligated to sever it and enforce the remainder of 

the agreement. 

 C. The MAA's Class Action Waiver Is Enforceable.

 Gillespie asserts that the class action waiver provision in the MAA is 

unenforceable under Gentry, supra, 42 Cal.4th 443. However, that decision has now 

been abrogated by AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [131 S.Ct 

1740] (Concepcion) and Iskanian v. CLS Transportation Los Angeles (2014) 59 Cal.4th 

348 (Iskanian.) 

 In Iskanian, supra, 59 Cal.4th 348, the California Supreme Court held that 

"[u]nder the logic of Concepcion, the FAA [Federal Arbitration Act] preempts Gentry's 

rule against employment class waivers." (Id. at p. 364.) As the court explained: "[T]he 

fact that Gentry 's rule against class waiver is stated more narrowly than Discover Bank 's 

rule does not save it from FAA preemption under Concepcion. The high court in 

Concepcion made clear that even if a state law rule against consumer class waivers were 

limited to 'class proceedings [that] are necessary to prosecute small-dollar claims that 
14 

might otherwise slip through the legal system,' it would still be preempted because states 

cannot require a procedure that interferes with fundamental attributes of arbitration 'even 

if it is desirable for unrelated reasons.' [Citations.] It is thus incorrect to say that the 

infirmity of Discover Bank was that it did not require a case-specific showing that the 

class waiver was exculpatory. Concepcion holds that even if a class waiver is 

exculpatory in a particular case, it is nonetheless preempted by the FAA." (Iskanian,

supra, at p. 364.) 

 The Supreme Court also considered whether the class action waiver was invalid 

under the NLRA and concluded in light of the FAA's "'"liberal federal policy favoring 

arbitration"' (Concepcion, supra, [131 S.Ct. at p. 1745]), that sections 7 and 8 of the 

NLRA do not represent '"a contrary congressional command"' overriding the FAA's 

mandate [citation]." (Iskanian, supra, 59 Cal.4th at p. 373.) The Supreme Court 

observed that its conclusion was "consistent with the judgment of all the federal circuit 

courts and most of the federal district courts that have considered the issue." (Ibid.) 

 As the United States Supreme Court held in Concepcion, if the state laws, rules, or 

"judicial policy judgments" "stand as an obstacle to the accomplishment of the FAA's 

objectives"—to enforce private parties' arbitration agreements—the state law, rule or 

judicial policy judgment fails. (Concepcion, supra, 131 S.Ct. at p. 1748.) States could 

no longer "'rely on the uniqueness of an agreement to arbitrate as a basis for a state-law 

holding that enforcement would be unconscionable . . . .'" (Id. at p. 1747.) Thus, 

Concepcion overruled Gentry, and the class action waiver is enforceable. 
15 

 D. The PAGA Claims 

 Gillespie also asserts that even if the MAA prevents her from maintaining a class 

action against Western Pacific, it does not apply to her PAGA claims under Labor Code 

section 2698 et seq. Gillespie is correct. 

 The court in Iskanian also addressed the question of whether the plaintiff was 

required to arbitrate his PAGA claim on an individual basis. Our high court began by 

summarizing the PAGA provisions: "'Under the legislation, an "aggrieved employee" 

may bring a civil action personally and on behalf of other current or former employees to 

recover civil penalties for Labor Code violations. [Citation.] Of the civil penalties 

recovered, 75 percent goes to the Labor and Workforce Development Agency, leaving 

the remaining 25 percent for the "aggrieved employees." [Citation.] [¶] Before bringing 

a civil action for statutory penalties, an employee must . . . give written notice of the 

alleged Labor Code violation to both the employer and the Labor and Workforce 

Development Agency . . . . If the agency notifies the employee and employer that it does 

not intend to investigate . . . , the employee may commence a civil action.'" (Iskanian, 

supra, 59 Cal.4th at p. 380.) According to the court, these provisions demonstrated that a 

PAGA representative action is "a type of qui tam action" (id. at p. 382) that permits 

"aggrieved employees, acting as private attorneys general, to recover civil penalties for 

Labor Code violations, with the understanding that labor law enforcement agencies were 

to retain primacy over private enforcement efforts." (Id. at p. 379.) 

 The court then addressed whether California law prohibited the waiver of 

representative PAGA claims and, if so, whether such a rule was enforceable under the 
16 

FAA. The Court first concluded that such claims were unwaivable: "[A]n employment 

agreement [that] compels the waiver of representative claims under the PAGA . . . is 

contrary to public policy and unenforceable as a matter of state law." (Iskanian, supra,

59 Cal.4th at p. 384.) In reaching its conclusion, the court rejected defendant's assertion 

that the particular waiver at issue was not against public policy because the plaintiff 

retained his right to arbitrate his PAGA claim on an individual basis: "[W]hether or not 

an individual claim is permissible under the PAGA, a prohibition of representative claims 

frustrates the PAGA's objectives . . . [because] a single-claimant arbitration . . . for 

individual penalties will not result in the penalties contemplated under the PAGA to 

punish and deter employer practices that violate the rights of numerous employees under 

the Labor Code. That plaintiff and other employees might be able to bring individual 

claims for Labor Code violations in separate arbitrations does not serve the purpose of the 

PAGA, even if an individual claim has collateral estoppel effects. [Citation.] Other 

employees would still have to assert their claims in individual proceedings.'" (Ibid., 

italics omitted.) 

 The Court then explained that the FAA did not preempt this rule of California law: 

"Concepcion made clear [that] a state law rule may be preempted when it 'stand[s] as an 

obstacle to the accomplishment of the FAA's objectives.' [Citation.] . . . [T]he rule 

against PAGA waivers does not frustrate the FAA's objectives because . . . the FAA aims 

to ensure an efficient forum for the resolution of private disputes, whereas a PAGA 

action is a dispute between an employer and the state Agency." (Iskanian, supra, 59 

Cal.4th at p. 384, italics omitted.) The Court concluded: "Nothing in the text or 
17 

legislative history of the FAA nor in the Supreme Court's construction of the statute 

suggests that the FAA was intended to limit the ability of states to enhance their public 

enforcement capabilities by enlisting willing employees in qui tam actions." (Id. at p. 

387.) 

DISPOSITION 

 The order denying Western Pacific's petition to compel arbitration is reversed, and 

the court is ordered to grant Western Pacific's motion to compel, with the exception of 

Gillespie's PAGA claim. The parties shall bear their own costs on appeal. 

NARES, J. 

WE CONCUR: 

HUFFMAN, Acting P. J. 

McDONALD, J.