Opinion ID: 6107706
Heading Depth: 3
Heading Rank: 3

Heading: Consistency with Federal Law

Text: Our holding rests on generally applicable unconscionability principles and heeds Concepcion 's counsel that arbitration agreements be placed on an equal footing with other contracts. ( Concepcion , supra , 563 U.S. at p. 339, 131 S.Ct. 1740 .) Nevertheless, our dissenting colleague renews several of the preemption arguments he made in Sonic II , insisting once again that this court's approach to unconscionability contradicts the FAA and United States Supreme Court jurisprudence. (See Sonic II , supra , 57 Cal.4th at pp. 1184-1192, 163 Cal.Rptr.3d 269 , 311 P.3d 184 (conc. & dis. opn. of Chin, J.).) We respectfully suggest these complaints are unfounded. The dissent's primary objection is that our analysis evinces hostility to arbitration, discriminates against arbitration, or improperly prefers a nonarbitral forum. (Dis. opn., post , 251 Cal.Rptr.3d at pp. 762-763, 447 P.3d at pp. 720-722.) Yet arbitration is premised on the parties' mutual consent, not coercion (see Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp. , supra , 559 U.S. at p. 681, 130 S.Ct. 1758 ), and the manner of the agreement's imposition here raises serious concerns on that score. Moreover, we have repeatedly stressed that the substantive unconscionability of an arbitration agreement is viewed in the context of the rights and remedies that otherwise would have been available to the parties. ( Sanchez , supra , 61 Cal.4th at p. 922, 190 Cal.Rptr.3d 812 , 353 P.3d 741 , citing Sonic II , supra , 57 Cal.4th at pp. 1146-1148, 163 Cal.Rptr.3d 269 , 311 P.3d 184 .) The dissent supports its claim with repeated quotations to our observations about civil litigation , not the arbitral process under review. The argument is thus premised on a false equivalence between the system of civil litigation and the complex arbitral procedure  adopted in this case, which features few, if any, of the benefits typically associated with arbitration and regarded as fundamental. (See Concepcion , supra , 563 U.S. at pp. 344-345, 131 S.Ct. 1740 .) While the Berman statutes promote the very objectives of 'informality,' 'lower costs,' 'greater efficiency and speed,' and use of 'expert adjudicators' that the high court has deemed 'fundamental attributes of arbitration,'  the arbitration agreement here undermines those objectives by causing an increase in cost, procedural rigor, complexity, or formality. ( Sonic II , supra , 57 Cal.4th at p. 1149, 163 Cal.Rptr.3d 269 , 311 P.3d 184 , quoting Concepcion , supra , 563 U.S. at p. 348, 131 S.Ct. 1740 .) In comparing Berman's administrative process with One Toyota's arbitral procedure, we have simply evaluated the bargain at issue. We have not said no arbitration could provide an appropriate forum for resolution of Kho's wage claim, but only that this particular arbitral process, forced upon Kho  under especially oppressive circumstances and erecting new barriers to the vindication of his rights, is unconscionable. Citing the protracted appellate proceedings here, the dissent also complains that evaluating unconscionability claims will erect the type of preliminary litigating hurdle to arbitration the high court disfavored in  American Express Co. v. Italian Colors Restaurant (2013) 570 U.S. 228 , 239, 133 S.Ct. 2304 , 186 L.Ed.2d 417 . For obvious reasons, the duration of this particular litigation can hardly be considered typical. Few cases progress to appeal, and vanishingly few reach this court. More importantly, the issue here is very different from that in Italian Colors . Unlike the judge-made exception to the FAA the high court found problematic ( Italian Colors , at p. 235, 133 S.Ct. 2304 ), the unconscionability defense has long been recognized as a permissible ground for invalidating arbitration agreements under the FAA's savings clause. ( 9 U.S.C. § 2 ; see, e.g., Concepcion , supra , 563 U.S. at p. 339, 131 S.Ct. 1740 ; Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681 , 687, 116 S.Ct. 1652 , 134 L.Ed.2d 902 .) The FAA thus contemplates that unconscionability claims, like other state law contract defenses, will be resolved before arbitration is enforced. (See Sonic II , supra , 57 Cal.4th at p. 1167, 163 Cal.Rptr.3d 269 , 311 P.3d 184 .) If the defense cannot be addressed before arbitration, then the savings clause has no meaning. The dissent also predicts delay from the case-by-case litigation of accessibility and affordability. (See dis. opn., post , at 251 Cal.Rptr.3d at pp. 766-767, 447 P.3d at p. 724.) But this is an argument with the unconscionability defense itself, which is inherently fact-specific. Once again, the dissent's view would all but eliminate the unconscionability defense to arbitration agreements, rendering the FAA's savings clause meaningless. Under the dissent's sweeping view of FAA preemption, no unconscionability rule may take into account the surrender of statutory protections for certain claimants, whether or not those protections interfere with fundamental attributes of arbitration. ( Sonic II , supra , 57 Cal.4th at p. 1168, 163 Cal.Rptr.3d 269 , 311 P.3d 184 .) We rejected that view in Sonic II and continue to do so. Sonic II 's unconscionability rule does not treat arbitration agreements differently from nonarbitration agreements, does not remotely foreclose the enforceability of agreements to arbitrate wage disputes, and does not require such agreements to adopt any devices or procedures inimical to arbitration's fundamental attributes. ( Id . at p. 1171, 163 Cal.Rptr.3d 269 , 311 P.3d 184 .) Our application  of that rule today fully complies with the FAA and governing law. C. Status of the Labor Commissioner's Award As noted, the trial court granted One Toyota's motion to vacate the Labor Commissioner's award. Because the Court of Appeal concluded the parties  must arbitrate their wage dispute, it did not address the Labor Commissioner's cross-appeal from the order vacating her award. We consider the issue because the status of the Labor Commissioner's award has continuing significance on remand. As One Toyota acknowledges, the issuance of such an award has several consequences even if not reduced to an enforceable judgment. When, as here, a de novo appeal is taken, the employer must post bond in the amount of the award. ( § 98.2, subd. (b).) Employees like Kho who do not contest any aspect of the award can be represented by the Labor Commissioner in the de novo proceedings (§ 98.4) and obtain attorney fees if they recover any amount. ( § 98.2, subd. (c) ; see Lolley , supra , 28 Cal.4th at p. 377, 121 Cal.Rptr.2d 571 , 48 P.3d 1128 .) Kho's access to these benefits on remand depends on the status of the Labor Commissioner's award. 21 A properly vacated award could make these benefits unavailable. However, it appears the order vacating the award was made in error. On the morning of the scheduled Berman hearing, One Toyota faxed the Labor Commissioner a letter. The company explained it had filed a petition to compel arbitration and requested the hearing be taken off calendar until arbitration was complete. The Labor Commissioner refused, proceeded with the hearing in One Toyota's absence, and made an award for Kho. 22 The trial court found  that One Toyota was substantially justified in refusing to participate in the Berman hearing and that enforcing the award would violate One Toyota's right to a fair administrative hearing. The procedural posture here requires reversal of the trial court's order granting relief from the award. The court purportedly relied on Code of Civil Procedure section 1094.5, subdivision (b). That statute authorizes a writ of mandate if an administrative tribunal has proceeded without, or in excess of, jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. ( Code Civ. Proc., § 1094.5, subd. (b).) The difficulty is One Toyota did not petition for a writ of mandate. (See Code Civ. Proc., § 1094.5, subd. (a).) It simply filed a motion to vacate the award. Moreover, administrative mandate applies only to the results of a proceeding in which by law a hearing is required to be given .... ( Ibid ., italics added; see  Keeler v. Superior Court (1956) 46 Cal.2d 596 , 598-599, 297 P.2d 967 .) There is no requirement that a Berman hearing be held on a wage complaint. The Labor Commissioner has discretion to hold a hearing,  prosecute the case in court, or take no further action ... on the complaint. ( Lab. Code, § 98, subd. (a).) Accordingly, Berman hearings are not subject to review under Code of Civil Procedure section 1094.5. ( Corrales v. Bradstreet (2007) 153 Cal.App.4th 33 , 55, 62 Cal.Rptr.3d 440 .) More fundamentally, One Toyota was not entitled to relief on its motion because it failed to exhaust its administrative remedies. The Labor Code outlines two alternatives for challenging a Berman award. (See Gonzalez v. Beck (2007) 158 Cal.App.4th 598 , 605, 69 Cal.Rptr.3d 843 .) First, either party can file an appeal in the superior court. ( § 98.2.) Second, a defendant who has failed to answer or appear in the Berman proceedings can apply to the Labor Commissioner for relief under Code of Civil Procedure section 473. ( Lab. Code, § 98, subd. (f).) Although an application to the Labor Commissioner need not precede a de novo appeal (see Jones v. Basich (1986) 176 Cal.App.3d 513 , 518, 222 Cal.Rptr. 26 ), this administrative recourse must be sought before a motion to vacate the commissioner's decision. Section 98, subdivision (f) states: No right to relief, including the claim that the findings or award of the Labor Commissioner or judgment entered thereon are void upon their face, shall accrue to the defendant in any court unless prior application is made to the Labor Commissioner in accordance with this chapter. (See Gonzalez , at pp. 605-606, 69 Cal.Rptr.3d 843 .) One Toyota tried to pursue both lines of attack. It filed a de novo appeal and made a motion to vacate. Because it failed to seek relief from the Labor Commissioner, however, it was barred from obtaining the latter relief. ( § 98, subd. (f).) If One Toyota wished to halt the Berman proceedings while pursuing arbitration, it could have requested a stay. The filing of a petition to compel arbitration does not automatically stay ongoing proceedings; the party seeking arbitration must request one. ( Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790 , 1796, 13 Cal.Rptr.2d 678 .) Under Code of Civil Procedure section 1281.4, [i]f an application has been made to a court of competent jurisdiction ... for an order to arbitrate a controversy which is an issue involved in an action or proceeding pending before a court of this State and such application is undetermined, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until the application for an order to arbitrate is determined .... (Italics added.) One Toyota's petition to compel did, somewhat vaguely, ask the court to stay this action, but it gave the court no opportunity to rule on its request. The petition was filed with the court on the Friday before a Monday Berman hearing. One Toyota did not ask the court for  an emergency stay in light of its late filing, and no stay order was actually issued before One Toyota's counsel unilaterally left the hearing.  One Toyota argues the terms of Code of Civil Procedure section 1281.4 do not apply because Berman proceedings are not pending before a court of this State. This assertion undermines One Toyota's attempt to excuse its nonparticipation in the hearing and ignores the rule from Brock that a motion to compel does not effect an automatic stay. Moreover, even if the language of section 1281.4 does not explicitly encompass proceedings before the Labor Commissioner, the superior court likely had the power to stay these administrative proceedings under Code of Civil Procedure section 1281.8, subdivision (a), which authorizes a range of provisional remedies in aid of arbitration, including injunctive relief. Failing that, the court  could have issued a stay under its inherent power. [A] court ordinarily has inherent power, in its discretion, to stay proceedings when such a stay will accommodate the ends of justice. ( People v. Bell (1984) 159 Cal.App.3d 323 , 329, 205 Cal.Rptr. 568 .) As the court in Landis v. North American Co. (1936) 299 U.S. 248 , 254, 57 S.Ct. 163 , 81 L.Ed. 153 explained, the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. One Toyota did not obtain a stay, but simply refused to participate in a hearing that had been set months before. Under these circumstances, the Labor Commissioner did not act improperly in proceeding with the hearing after One Toyota and its counsel chose to depart. Vacating that award was error. Nevertheless, One Toyota properly appealed the award under section 98.2, which forestalled the Labor Commissioner's decision, terminated her jurisdiction, and vested jurisdiction in the superior court. ( Murphy v. Kenneth Cole Productions, Inc. , supra , 40 Cal.4th at p. 1116, 56 Cal.Rptr.3d 880 , 155 P.3d 284 .) Although the appeal terminates the commissioner's jurisdiction, Kho will have the benefit of the Labor Code's post-Berman hearing protections on remand. (See §§ 98.2, 98.4.)