Court Opinion

ID: 4183156
Source: CourtListenerOpinion
Date Created: 2017-07-03 20:01:24.832762+00
Date Added: 2024-06-11T14:39:15.778606
License: Public Domain

NOT FOR PUBLICATION                           FILED
                                                                           JUL 3 2017
                    UNITED STATES COURT OF APPEALS
                                                                       MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS
                            FOR THE NINTH CIRCUIT

 RITAROSE CAPILI,
                                                  No. 15-16657
                Plaintiff - Appellee,
                                                  D.C. No. 3:15-cv-01158-HSG
   v.

 THE FINISH LINE, INC.,                           MEMORANDUM

                Defendant - Appellant,

   and

   CIGNA HEALTH CORPORATION;
   LIFE INSURANCE COMPANY OF
   NORTH AMERICA,

                 Defendants.

                  Appeal from the United States District Court
                     for the Northern District of California
               Haywood S. Gilliam, Junior, District Judge, Presiding

                       Argued and Submitted April 17, 2017
                            San Francisco, California

        
        This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.

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       Before: SCHROEDERR and RAWLINSON, Circuit Judges, and DRAIN,**
District Judge.

      The Finish Line, Inc. (“Finish Line”) appeals the district court’s order

denying its motion to compel arbitration. We have jurisdiction under 9 U.S.C.

§ 16(a)(1)(B). Reviewing de novo, see Poublon v. C.H. Robinson Co., 846 F.3d

1251, 1259 (9th Cir. 2017), we affirm.

      “[A]fter Concepcion, unconscionability remains a valid defense to a petition

to compel arbitration.” Sonic-Calabasas A, Inc. v. Moreno, 311 P.3d 184, 201 (Cal.

2013). This is because California’s “unconscionability standard is, as it must be, the

same for arbitration and nonarbitration agreements.” Sanchez v. Valencia Holding

Co., LLC, 353 P.3d 741, 749 (Cal. 2015). Under California law, both procedural

and substantive unconscionability must be present to find a contract

unconscionable; however, they need not be present in the same degree. Mohamed v.

Uber Techs., Inc., 848 F.3d 1201, 1210 (9th Cir. 2016).

      The district court properly concluded the arbitration agreement was adhesive,

and thus at least minimally procedurally unconscionable. See Chavarria v. Ralphs

Grocery Co., 733 F.3d 916, 922–23 (9th Cir. 2013). Capili’s employment

      **
        The Honorable Gershwin A. Drain, United States District Judge for the
Eastern District of Michigan, sitting by designation.

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application at Finish Line, which included The Finish Line, Inc. Employee Dispute

Resolution Plan (“the Arbitration Agreement”), was adhesive because it was

offered “on essentially a ‘take it or leave it’ basis.” Victoria v. Superior Court, 710

P.2d 833, 837 (Cal. 1985) (en banc). Adhesive contracts are at least minimally

procedurally unconscionable under California law. See Baltazar v. Forever 21, Inc.,

367 P.3d 6, 11 (Cal. 2016) (citing Gentry v. Superior Court, 165 P.3d 556, 573

(Cal. 2007)).

      The district court also correctly determined the unconscionability of the

Arbitration Agreement “at the time it was made.” Cal. Civ. Code, § 1670.5,

Sanchez, 353 P.3d at 755. Finish Line may not retroactively moot the provisions of

Capili’s contract to prevent unconscionability analysis.

       The district court properly determined that the cost-sharing provision was

substantively unconscionable. The provision required Capili, a retail employee

making $15 per hour, to pay up to $10,000 at the outset of arbitration, not

including the fees and costs for legal representation. Much like Chavarria, the

cost-sharing provision here imposes substantial non-recoverable costs on low-level

employees just to get in the door, effectively foreclosing vindication of employees’

rights. 733 F.3d at 926–27.

       The district court was also correct in finding that the clause that allowed

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Finish Line, but not Capili, to seek judicial resolution of specified claims was

substantively unconscionable. While judicial carve-outs are not unconscionable for

claims an employer is more likely to bring, these exemptions must still have a

modicum of bilaterality. See Poublon, 846 F.3d at 1273 (acknowledging the

concession that an employer’s unilateral claim exemptions were substantively

unconscionable); Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1031 (9th Cir. 2016)

(allowing both parties to pursue intellectual property claims in court); Baltazar,

367 P.3d at 13 (allowing both parties to seek injunctive relief in court). Based on

the entire record, the district court did not err in finding that the Arbitration

Agreement was both procedurally and substantively unconscionable.

      At the time the order was issued, the district court was correct in finding the

forum selection clause to be substantively unconscionable; however, subsequent

precedent has refined the standard by which forum selection clauses are judged.

See Tompkins, 840 F.3d at 1029–30. Parties opposing a forum selection clause

must now show that the forum is “unavailable or unable to accomplish substantial

justice” in order to demonstrate substantive unconscionability. Id. at 1029.

Inconvenience and additional expense are not sufficient, unless proceeding in the

selected forum will be “so gravely difficult and inconvenient that [the plaintiffs]

will for all practical purposes be deprived of [their] day in court.” Id. (quoting Aral

                                           4
 v. EarthLink, Inc., 36 Cal. Rptr. 3d 229, 241–42 (Ct. App. 2005)). Capili’s

 pleadings did not provide sufficient details of such a hardship. Given the selected

 forum was not shown to be unavailable or unable to accomplish substantial justice,

 the forum selection provision was not substantively unconscionable.

       The district court did not abuse its discretion by declining to sever the

unconscionable portions of the Arbitration Agreement. See Bridge Fund Capital

Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1005–06 (9th Cir. 2010); Cal.

Civ. Code § 1670.5(a). Although the Federal Arbitration Act articulates a

preference for the enforcement of arbitration agreements, employers may not stack

the deck unconscionably in their favor to discourage claims, then force courts “to

assume the role of contract author rather than interpreter.” Ingle v. Circuit City

Stores, Inc., 328 F.3d 1165, 1180 (9th Cir. 2003). Where unconscionability

permeates the entire agreement, California courts may refuse to sever

unconscionable provisions. See Poublon, 846 F.3d at 1272. Based on the record, the

district court did not abuse its discretion by finding that severance would not serve

the interests of justice.

       For all of the above reasons, the district court properly denied Finish Line’s

motion to compel arbitration.

       AFFIRMED.

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