Court Opinion

ID: 4690773
Source: CourtListenerOpinion
Date Created: 2021-05-27 19:05:12.861216+00
Date Added: 2024-06-11T08:05:02.625899
License: Public Domain

Filed 5/27/21 Veitenhans v. Hikvision USA CA2/4
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF
                        CALIFORNIA

                          SECOND APPELLATE DISTRICT

                                            DIVISION FOUR

 WAGILISTRIA VEITENHANS,                                                      B302552

             Plaintiff and Respondent,                                        (Los Angeles County
                                                                              Super. Ct. No. 19STCV17310)
             v.

 HIKVISION USA, INC.,

             Defendant and Appellant.

     APPEAL from an order of the Superior Court of
Los Angeles County, Ruth Ann Kwan, Judge. Affirmed.
     Steven B. Stevens; Solomon, Saltsman & Jamieson and
Ryan M. Kroll for Plaintiff and Respondent.
     Gordon Rees Scully Mansukahni, Christopher B. Cato,
Matthew G. Kleiner and Casey Shaw for Defendant and
Appellant.
    _______________________________________________

                     INTRODUCTION
      Appellant Hikvision USA, Inc. appeals from an order
denying its motion to compel arbitration of claims brought
by respondent Wagilistria Veitenhans, a former employee,
alleging Hikvision discriminated against her on the basis of
her gender and disability, in violation of the Fair
Employment and Housing Act (FEHA). Hikvision’s motion
sought to enforce an arbitration provision in an employment
agreement it required Veitenhans to sign when it hired her.
Although the arbitration provision facially applied to all
claims related to Veitenhans’s employment, a
contemporaneously executed confidentiality agreement
established an exception for Hikvision’s claims against
Veitenhans for using or disclosing Hikvision’s confidential
information (the confidentiality carve-out).
      In opposing Hikvision’s motion to compel arbitration,
Veitenhans argued the arbitration provision was both
procedurally and substantively unconscionable, and
therefore unenforceable. She identified the confidentiality
carve-out as the worst of several substantively
unconscionable terms, arguing the carve-out deprived the
arbitration provision of mutuality, the paramount
consideration in assessing the unconscionability of an

                             2
arbitration agreement. Veitenhans further argued that
curing the arbitration provision’s unconscionability by
severing the carve-out (or any other term) was neither
possible nor in the interests of justice. Hikvision did not
argue for severance of the confidentiality carve-out. Indeed,
Hikvision failed even to mention the carve-out in the trial
court.
      The court found the arbitration provision both
substantively and procedurally unconscionable. It found
significant substantive unconscionability because the
confidentiality carve-out (along with another provision)
deprived the arbitration provision of mutuality. It found
substantial procedural unconscionability because: (1) the
employment agreement was adhesive; (2) the arbitration
provision’s language was ambiguous; (3) Hikvision did not
sign the agreement; and (4) Hikvision failed to identify or
attach the rules of the American Arbitration Association
(AAA), which were incorporated into the arbitration
provision by reference. Finding the arbitration provision
unenforceable, the court denied Hikvision’s motion to compel
arbitration.
      On appeal, Hikvision contends: (1) the trial court erred
in finding sufficient degrees of substantive and procedural
unconscionability to render the arbitration provision
unenforceable; and (2) even assuming there was no error in
the court’s unconscionability findings, the court abused its
discretion in refusing to enforce the arbitration provision,

                              3
rather than severing the confidentiality carve-out and
enforcing the remainder of the provision.
      We affirm. Reviewing the trial court’s
unconscionability findings de novo, as there is no material
dispute in the evidence, we find a high degree of substantive
unconscionability and a moderate degree of procedural
unconscionability. A high degree of substantive
unconscionability is established by: (1) the confidentiality
carve-out, which deprived the arbitration provision of the
paramount concern of mutuality; and (2) the provision’s
incorporation of AAA rules that, at the time the provision
was executed, subjected Veitenhans to a risk of bearing costs
forbidden by Armendariz v. Foundation Health Psychcare
                                                   1
Services, Inc. (2000) 24 Cal.4th 83 (Armendariz). A
moderate degree of procedural unconscionability is
established by: (1) the employment agreement’s adhesive
nature; (2) Hikvision’s failure to identify or attach the
substantively unconscionable AAA cost-splitting rules; and
(3) Hikvision’s drafting of the employment and
confidentiality agreements in a manner that obscured the
arbitration provision’s lack of mutuality. In light of these

1
      Under Armendariz, when an employer imposes mandatory
arbitration as a condition of employment, and the arbitration
agreement applies to FEHA claims (or other unwaivable
statutory claims), the agreement “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.” (Armendariz, supra, 24 Cal.4th at 110-111.)

                               4
unconscionability findings, we conclude the trial court did
not err in finding the arbitration provision sufficiently
unconscionable to render it unenforceable. Finally, we
conclude Hikvision forfeited its argument for severance of
the confidentiality carve-out by failing even to mention the
carve-out, let alone argue for its severance, in the trial court.

                 FACTUAL BACKGROUND
      A. The Employment and Confidentiality
         Agreements
      In May 2013, Veitenhans applied for a regional sales
manager position with Hikvision, a multi-national
surveillance camera manufacturer and retailer.
Veitenhans’s written application and resume indicated she
had obtained a bachelor’s degree and a paralegal certificate,
and had worked in sales for more than a decade. Later that
month, Hikvision sent Veitenhans a letter offering her the
position. The offer letter informed Veitenhans that in order
to accept the job, she was required to execute, inter alia, an
employment agreement and a confidentiality agreement.
      On June 1, 2013, Veitenhans signed the employment
agreement and the confidentiality agreement (along with
other employment documents) and began working for
Hikvision. Hikvision did not sign either agreement. The
agreements were drafted on preprinted forms and typically
referred to Veitenhans in generic terms (e.g., “Employee,”
“he or she,” and “his or her”).

                                5
      The employment agreement was three pages long and
included 18 numbered paragraphs. Paragraph 14 of the
employment agreement -- titled, in boldface, “Settlement by
Arbitration” -- provided, “Any claim or controversy that
arises out of or relates to this agreement, or the breach of it,
shall be settled by arbitration in accordance with the rules of
the American Arbitration Association. Judgment upon the
award rendered may be entered in any court with
jurisdiction.” No AAA rules were identified within or
attached to the agreement. The agreement did not explain
that Veitenhans’s agreement to submit claims to arbitration
constituted a waiver of her right to bring those claims in
court. Nor did the employment agreement reference the
separate confidentiality agreement.
      The confidentiality agreement included 10 numbered
paragraphs, without headings. It provided that Veitenhans
had and would come into possession of “confidential
information belonging to the Employer[,] including but not
limited to trade secrets . . . .” Veitenhans promised not to
disclose “such confidential information” to third parties, or to
use it for her own or third parties’ benefit. Paragraph four
provided, “Violation of this agreement by the Employee will
entitle the Employer to an injunction . . . and will entitle the
Employer to other legal remedies, including attorney’s fees
and costs. Employee agrees that in the event of any breach
or threatened breach by Employee, Employer may obtain, in
addition to any other legal remedies which may be available,
such equitable relief as may be necessary to protect

                               6
Employer against any such breach or threatened breach.”
Paragraph five provided, “This Agreement shall be governed
and construed in accordance with the laws of the United
States and the State of California and Employee consents to
the exclusive jurisdiction of the state courts and U.S. federal
courts located there for any dispute arising out of this
Agreement.” As the parties agree on appeal, the second
portion of paragraph five -- investing the courts with
“exclusive” jurisdiction over disputes arising under the
agreement, which protected only Hikvision’s confidential
information -- established the confidentiality carve-out,
exempting Hikvision’s confidentiality claims against
Veitenhans from the employment agreement’s arbitration
provision. (See Civ. Code, § 1642 [“Several contracts relating
to the same matters, between the same parties, and made as
parts of substantially one transaction, are to be taken
together”].) The confidentiality agreement made no
reference to the employment agreement or to arbitration.

      B. Veitenhans’s FEHA Action
      In January 2019, Hikvision terminated Veitenhans’s
employment. In May 2019, Veitenhans sued Hikvision.
Veitenhans alleged there was a “blatant and widespread
culture of misogyny” at Hikvision. A Hikvision executive
overseeing her sales group remarked, in her presence and
that of a colleague and future supervisor, that her gender
was “‘a punishment for being evil in a past life.’” The same
executive hypothesized that Veitenhans might develop

                              7
ovarian cancer as a divine punishment for having engaged in
premarital sex. Coworkers spread rumors that Veitenhans
had sex with clients, and that this was the sole reason for
her success. While training new hires, a Hikvision employee
stated that Veitenhans knew nothing, and did not need to
know anything, because she was a “‘girl.’” Her superiors
treated her less favorably than male coworkers in
performance evaluations, responses to reimbursement
requests, and pay.
      Veitenhans further alleged that Hikvision
discriminated against her on the basis of her July 2018
diagnosis of trochanteric pain disorder, which temporarily
impacted her ability to perform one of her duties, viz.,
driving long distances without a break on visits to customers
and prospective clients. Between August and December
2018, Veitenhans provided Hikvision with a series of
physician letters, each of which identified this temporary
limitation. The last of these physician letters stated
Veitenhans would be able to perform her duties without
limitation on February 8, 2019. Four weeks before that date
(on January 11, 2019), Hikvision terminated her.
Hikvision’s termination letter stated, inter alia, “‘Hikvision
cannot continue to accommodate [your] limitation
indefinitely and accordingly cannot maintain your position
with the Company.’”
      Veitenhans’s complaint included the following FEHA
causes of action: (1) wrongful termination on the basis of
gender, disability, and/or medical condition; (2) sexual

                              8
harassment; (3) gender discrimination; (4) failure to
reasonably accommodate a disability; (5) failure to engage in
an interactive process regarding Veitenhans’s request for
accommodation; and (6) failure to provide medical leave.
The complaint also included non-FEHA causes of action for
breach of the implied covenant of good faith and fair dealing,
intentional infliction of emotional distress, and negligent
infliction of emotional distress. Veitenhans sought, inter
alia, damages in an amount no less than $5 million.

      C. Hikvision’s Motion to Compel Arbitration
            1. Motion
      In July 2019, Hikvision filed a motion to compel
arbitration of Veitenhans’s claims pursuant to the
employment agreement’s arbitration provision. Anticipating
Veitenhans’s unconscionability defense, Hikvision argued
the arbitration provision was neither substantively nor
procedurally unconscionable. Hikvision argued the
arbitration provision was fully mutual because it “state[d]
that ‘any claim or controversy’ is subject to arbitration.”
While arguing generally that any term found unconscionable
should be severed, Hikvision neither identified any provision
that could be severed nor mentioned the confidentiality
carve-out.
      Hikvision submitted a declaration executed by Hui
Yang, the vice president of its human resources and legal
departments. Yang declared Hikvision intended to pay all
costs unique to arbitration (i.e., costs that would not be

                              9
incurred in litigation). Although Yang declared she had
personal knowledge of Veitenhans’s employment documents
and the processes for maintaining them, she did not claim to
have personal knowledge of the documents’ execution, nor
even to have been employed by Hikvision at the time
Veitenhans was hired. She nevertheless declared, “Plaintiff
was afforded ample time and opportunity to review the
Employment Agreement prior to signing it. Had Plaintiff
wanted a third party to review it, or [to] discuss the
arbitration provision therein with [Hikvision], we would
have accommodated her. At no time did [Hikvision] force
Plaintiff to sign the Employment Agreement, and at no time
did we inform Plaintiff that she would not be hired if she did
not agree to the arbitration clause in the Employment
Agreement. Moreover, Plaintiff did not ask us to discuss the
arbitration clause, or any other term in the agreements[,]
before she executed them.” Veitenhans subsequently
objected to Yang’s account of the execution of the
employment agreement on various grounds, including lack of
personal knowledge.

            2. Opposition
      Veitenhans opposed Hikvision’s motion to compel
arbitration. She contended the parties had not executed a
valid arbitration agreement because she had never signed
the employment agreement (her purported signature on the
agreement was not genuine), and because Hikvision’s failure
to identify or attach the applicable AAA rules precluded a

                             10
meeting of the minds. In the alternative, she contended that
the arbitration provision was both procedurally and
substantively unconscionable, and that the court should
therefore refuse to enforce it (rather than merely sever
specific terms).
      In contending that the arbitration provision was
substantively unconscionable, Veitenhans argued that
“[w]orst of all,” the confidentiality carve-out deprived the
arbitration provision of mutuality. She cited several cases
finding arbitration agreements unconscionable in light of
similar confidentiality carve-outs. Veitenhans further
argued that the provision was substantively unconscionable
in incorporating the AAA rules in effect at the time the
provision was executed (the 2010 AAA rules). She argued
the 2010 rules were unconscionable because, inter alia, they
imposed a risk that Veitenhans would bear costs
“impermissible under Armendariz.” Specifically, the 2010
rules provided that if the AAA determined, from a review of
documents provided by the parties, that a dispute submitted
for arbitration arose from an “individually-negotiated
agreement” rather than an “employer-promulgated plan,”
the employee would be required to pay half of many
arbitration costs, including a “proceed fee” required to
proceed beyond the initial opening of the arbitration. For a
claim in the amount of $5 to 10 million (such as Veitenhans’s
claim for at least $5 million), the proceed fee was $9,000. In
response to Yang’s declaration that Hikvision intended to
pay all unique costs of arbitration, Veitenhans argued

                             11
Hikvision was “attempt[ing] to paper-over unconscionable
provisions after the fact” in a manner that courts
consistently had rejected.
      Veitenhans contended the arbitration provision was
also procedurally unconscionable because, inter alia,
Hikvision imposed the provision in a contract of adhesion,
and Hikvision neither identified nor attached the AAA rules
incorporated into the provision by reference. In support of
these arguments, Veitenhans submitted a declaration in
which she described: (1) personal hardships she had
experienced shortly before Hikvision hired her, which had
left her willing to accept any employment terms in order to
obtain additional income; and (2) her execution of
employment documents at Hikvision’s offices on her first day
of work (June 1, 2013). Veitenhans did not recall which
documents she executed, and did not believe she signed the
employment agreement. She did not recall interacting with
Yang (Hikvision’s declarant), and instead recalled
interacting with human resources manager Katherine
Chang. Chang did not indicate that Hikvision was willing to
negotiate the terms of Veitenhans’s employment. Nor did
Chang discuss the AAA rules incorporated by reference into
the employment agreement, provide a copy of the rules, or
inform her where she could review the rules.
      Finally, Veitenhans argued the court should declare
the arbitration provision unenforceable in its entirety, rather
than merely sever specific terms. She argued curing the
provision’s unconscionability through severance was both:

                              12
(1) beyond the court’s power, as the lack of mutuality
established by the confidentiality carve-out could not be
cured without adding new clauses; and (2) not in the
interests of justice, as Hikvision’s insertion of multiple
unconscionable terms (including the confidentiality carve-
out and the incorporation of the AAA’s cost-splitting rules),
along with other factors, indicated Hikvision had made a
“systematic effort” to gain unfair advantages.

            3. Reply
      In its reply brief, Hikvision again failed to mention the
confidentiality carve-out. Hikvision argued the arbitration
provision was fully mutual because its language was mutual
on its face. Hikvision further argued the cost-splitting
provisions of the 2010 AAA rules were irrelevant because:
(1) Hikvision intended to pay all unique costs of arbitration;
and (2) had Veitenhans submitted her claims for arbitration
in 2019 instead of bringing her FEHA action, the AAA rules
would have applied as amended in 2017, and would have
                                              2
required Hikvision to bear most or all costs. Hikvision
asked the court to enforce the arbitration provision, without
asking the court (even in the alternative) to sever any term.

2
      The 2010 rules provided that a dispute would be governed
by the rules in effect when the dispute was submitted for
arbitration. Under the 2017 amendments, the rules provided
that the costs of an employment dispute generally would be paid
by the employer.

                              13
             4. Ruling
       On September 10, 2019, the trial court provided the
parties’ counsel with a tentative ruling denying Hikvision’s
motion to compel arbitration, and held a hearing on the
motion in chambers. The record does not include a reporter’s
transcript or settled statement concerning the hearing. At
the conclusion of the hearing, the court adopted its tentative
ruling. Although the court found that Veitenhans had
signed the employment agreement, it found the arbitration
provision unconscionable and therefore unenforceable.
       The court found a “significant” degree of substantive
unconscionability “due to the non-mutuality of the
arbitration clause.”3 The court found the arbitration
provision lacked mutuality for two reasons. First, through
the confidentiality carve-out, Hikvision “attempted to
circumvent its arbitration obligation” and “preserve the right
to litigate [its confidentiality claims] in courts rather than in
arbitration.” Second, the court found Hikvision’s
entitlement to an injunction against actual or threatened
violations of Veitenhans’s confidentiality obligations allowed
Hikvision to avail itself of judicial remedies unavailable to

3
      The court found no source of substantive unconscionability
other than the lack of mutuality. It found the asserted
unconscionability of the AAA’s cost-splitting rules moot, in light
of Yang’s declaration that Hikvision intended to pay the unique
costs of arbitration.

                                14
Veitenhans, expressing a belief that injunctive relief is
ordinarily unavailable in arbitration.4
      The court found a “substantial” degree of procedural
unconscionability “arising from the ambiguous, and
misleadingly drafted, employment adhesion contract.” The
court found the employment agreement adhesive because it
was presented on a take-it-or-leave-it basis. The court
sustained Veitenhans’s objections to Yang’s contrary account
of the execution of the employment agreement, on the
ground that Yang, who did not claim to have been present
during its execution or even employed by Hikvision at the
time, lacked personal knowledge. The court further found
that the arbitration provision’s language created
uncertainty, reasoning that: (1) the provision’s references to
“settlement” by arbitration misleadingly conflated the trial
and arbitration processes; and (2) the provision’s reference to
disputes arising out of or relating to “‘this agreement’” was
ambiguous, potentially referring to the formation of the
employment agreement or instead to the employment
relationship it created. Finally, relying on Flores v. Nature’s
Best Distribution, LLC (2016) 7 Cal.App.5th 1, the court
found that Hikvision’s failure to identify or attach the AAA
rules incorporated into the provision by reference, along with

4
       In fact, injunctive relief is generally available in
arbitration. (See O’Hare v. Municipal Resource Consultants
(2003) 107 Cal.App.4th 267, 277-278 (O’Hare) [parties to
arbitration may obtain provisional and permanent injunctive
relief “both prior to and at the conclusion of arbitration”].)

                                15
Hikvision’s failure to sign the employment agreement,
                                                             5
contributed to the degree of procedural unconscionability.
      The court concluded the arbitration provision was
unenforceable in light of the significant degree of
substantive unconscionability and substantial degree of
procedural unconscionability it had found. The court
therefore denied Hikvision’s motion to enforce the
arbitration provision.
      Hikvision timely appealed.

                         DISCUSSION
      Hikvision contends: (1) the trial court erred in finding
sufficient degrees of substantive and procedural
unconscionability to render the arbitration provision
unenforceable; and (2) even assuming there was no error in
the court’s unconscionability findings, the court abused its
discretion in refusing to enforce the arbitration provision,
rather than severing the confidentiality carve-out and
enforcing the remainder of the provision.
      “If the court as a matter of law finds [a] contract or any
clause of the contract to have been unconscionable at the
time it was made[,] the court may refuse to enforce the

5
      We note that the Flores court expressly declined to analyze
unconscionability. (Flores v. Nature’s Best Distribution, LLC,
supra, 7 Cal.App.5th at 11.) Veitenhans did not argue below, and
does not argue on appeal, that Hikvision’s failure to sign the
employment agreement established any degree of procedural
unconscionability.

                               16
contract, or it may enforce the remainder of the contract
without the unconscionable clause, or it may so limit the
application of any unconscionable clause as to avoid any
unconscionable result.” (Civ. Code, § 1670.5, subd. (a).)
Both substantive unconscionability (the unfairness of the
contract’s terms) and procedural unconscionability (the
unfair fashion in which the contract was imposed) must be
shown -- but a high showing of one may compensate for a
relatively low showing of the other. (OTO, L.L.C. v. Kho
(2019) 8 Cal.5th 111, 125-126 (OTO).) Where, as here, there
is no meaningful conflict in the evidence, we review de novo
a trial court’s unconscionability findings. (See id. at 126;
Davis v. Kozak (2020) 53 Cal.App.5th 897, 906 (Davis).)

      A. Substantive Unconscionability
      Hikvision contends the trial court erred in finding a
significant degree of substantive unconscionability in the
arbitration provision’s lack of mutuality. We disagree, as
the confidentiality carve-out deprived the provision of the
paramount concern of mutuality. We find additional
substantive unconscionability in the provision’s
incorporation of AAA rules that, at the time the provision
was executed, subjected Veitenhans to a risk of bearing costs
forbidden by Armendariz, supra, 24 Cal.4th 83. We find the
lack of mutuality and the risk of forbidden costs, together,
established a high degree of substantive unconscionability.

                             17
            1. Mutuality
      The trial court properly found a significant degree of
substantive unconscionability in the arbitration provision’s
lack of mutuality. “In assessing substantive
unconscionability [in an arbitration agreement], the
‘paramount consideration’ is mutuality of the obligation to
arbitrate.” (Knight et al., Cal. Practice Guide: Alternative
Dispute Resolution (The Rutter Group 2020) ¶ 5:150.5m;
accord, Davis, supra, 53 Cal.App.5th at 914.) Thus, “an
arbitration agreement is substantively unconscionable where
it compels arbitration of claims employees are most likely to
bring against the employer (e.g., contract, tort or
discrimination claims, etc.), and exempts from arbitration
claims the employer is most likely to bring against its
employees (e.g., injunctive and/or other equitable relief for
intellectual property violations, unfair competition and/or
unauthorized disclosure of trade secrets or confidential
information).” (Knight et al., supra, Cal. Practice Guide:
Alternative Dispute Resolution, ¶ 5:155.2a, italics omitted.)
Indeed, courts consistently have found substantive
unconscionability where an employer drafts an otherwise
mutual arbitration provision subject to a unilateral carve-out
for the employer’s confidentiality claims. (See, e.g., Davis,
supra, 53 Cal.App.5th at 915-917 [arbitration provision was
non-mutual and therefore substantively unconscionable,
where provision’s sole carve-out applied only to disputes
arising from confidentiality agreement that “only
obligate[d] . . . employees to protect the company’s

                             18
confidential and proprietary information, not vice versa”];
Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th
638, 664-666 (Abramson) [same, where arbitration
provision’s sole carve-out applied only to claims that
employee breached covenants protecting employer’s
confidential information]).
       An employer advantaged under a non-mutual
arbitration agreement may defeat a finding of substantive
unconscionability by showing a “reasonable justification” for
its advantage, but “‘the “business realities” that create the
special need for such an advantage [must be] explained in
the contract itself . . . [or] factually established.’”
(Armendariz, supra, 24 Cal.4th at 117-118.) A “reasonable”
justification for an arbitration agreement’s non-mutuality
must be “grounded in something other than the employer’s
desire to maximize its advantage based on the perceived
superiority of the judicial forum.” (Id. at 120.) As we have
recognized, “‘[t]he unilateral right to litigate rather than
arbitrate claims . . . cannot be justified by the need for
provisional remedies,’” as parties to an arbitration
agreement may apply to a court for provisional remedies
(including temporary restraining orders and preliminary
injunctions) under Code of Civil Procedure section 1281.8.
(O’Hare, supra, 107 Cal.App.4th at 277-278.)
       Here, as the trial court found, the arbitration provision
was substantively unconscionable, as the unilateral carve-
out for Hikvision’s confidentiality claims against Veitenhans
deprived the provision of mutuality. (See Davis, supra, 53

                               19
Cal.App.5th at 915-917; Abramson, supra, 115 Cal.App.4th
at 664-666; Farrar v. Direct Commerce, Inc. (2017) 9
Cal.App.5th 1257, 1272-1273 (Farrar).) Hikvision proffered
no justification for the carve-out below. On appeal, although
Hikvision asserts a need to protect its confidential
information, it makes little effort to explain its purported
need to do so by bringing claims in court, merely arguing
that “arbitration cannot offer the immediate relief the court
system offers through a preliminary injunction or temporary
restraining order.” In other words, Hikvision relies on the
“need for provisional remedies” that this court has rejected
as a justification for a “unilateral right to litigate rather
than arbitrate claims,” in light of the availability of
provisional remedies under Code of Civil Procedure section
1281.8. (O’Hare, supra, 107 Cal.App.4th at 277-278.) In any
event, a need for provisional remedies cannot justify
Hikvision’s unilateral right under the confidentiality
agreement to sue in court for additional remedies, including
both permanent injunctive relief and damages. (See id. at
278 [employer’s asserted need for provisional remedies did
not justify its unilateral right under arbitration agreement
to sue in court for injunctive relief and “‘any other equitable
relief that may be appropriate’”].)
       Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237
(Baltazar), the principal authority on which Hikvision relies,
is distinguishable. There, our Supreme Court found no
substantive unconscionability in: (1) an arbitration
agreement’s provision allowing both parties to seek a

                              20
temporary restraining order or preliminary injunction in
court, which “simply . . . confirm[ed] the parties’ ability to
invoke undisputed statutory rights” under Code of Civil
Procedure section 1281.8; and (2) a provision protecting the
employer’s confidential information within arbitration,
which was reasonably justified by the employer’s undisputed
need to protect its confidential information, and which did
not preclude the employee from seeking “comparable
protection” within the arbitration proceedings. (Baltazar at
1246-1250.) Here, as noted, the confidentiality carve-out
went well beyond confirming Hikvision’s statutory right to
seek provisional remedies in court, as it also allowed
Hikvision to seek permanent injunctive relief and damages.
Moreover, the carve-out did not protect Hikvision’s
confidential information within arbitration, but instead
allowed Hikvision to forego arbitration -- while the
employment agreement precluded Veitenhans from doing
the same. The trial court did not err in finding this lack of
mutuality, which Hikvision failed to reasonably justify,
established a significant degree of substantive
unconscionability.

            2. Costs
      We find additional substantive unconscionability in the
arbitration provision’s incorporation of AAA rules that, at
the time the provision was executed, subjected Veitenhans to
a risk of bearing forbidden costs. “[I]n the context of
mandatory employment arbitration agreements that apply to

                              21
unwaivable statutory claims -- such as FEHA claims -- our
Supreme Court has held [in Armendariz, supra, 24 Cal.4th
83] that regardless of an employee’s income, an employer
must pay all costs unique to arbitration, including arbitrator
fees.” (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205,
221 (Penilla).) Thus, as we have recognized, an arbitration
agreement is substantively unconscionable if it incorporates
rules that require FEHA plaintiffs to pay unique costs of
arbitration. (Penilla, supra, at 221 [“respondents asserted
two FEHA claims -- racial discrimination and sexual
harassment in housing. Nevertheless, the instant
arbitration provision does not exempt respondents bringing
those claims from the unique costs of arbitration. This fact
further supports a finding of substantive unconscionability”];
see also Ali v. Daylight Transport, LLC (2020) 59
Cal.App.5th 462, 557-558 (Ali) [employer’s arbitration
agreement was substantively unconscionable in requiring
wage-and-hour plaintiffs to bear half of arbitration costs, in
violation of Armendariz].) Indeed, the risk of imposition of
costs forbidden by Armendariz is sufficient to establish
substantive unconscionability. (Wherry v. Award, Inc. (2011)
192 Cal.App.4th 1242, 1248-1249 (Wherry) [finding
substantive unconscionability in terms “providing the
arbitrator may impose costs, including the arbitration fee, on
the losing party,” exposing FEHA plaintiffs to risk of bearing
costs forbidden by Armendariz].)
      Here, examining the arbitration provision, as we must,
“at the time it was made” in June 2013 (Civil Code, § 1670.5,

                             22
subd. (a)), we find it was substantively unconscionable in
incorporating AAA rules that then subjected Veitenhans to a
risk of bearing costs forbidden by Armendariz. Under the
2010 AAA rules then in effect, had Veitenhans submitted
her FEHA claims for arbitration, the AAA could have
required Veitenhans to pay half of many costs the parties
would not have incurred in court, including a potential
$9,000 fee to proceed beyond the initial opening of
arbitration. Armendariz forbade imposition of such costs.
(See Penilla, supra, 3 Cal.App.5th at 221.) Although the
AAA might not have charged Veitenhans these costs had it
found her dispute with Hikvision arose from an “employer-
promulgated plan,” Hikvision does not argue the AAA would
have made such a finding. In any event, a layperson such as
Veitenhans could not have predicted with confidence
whether the AAA would make such a finding. Thus, the
cost-splitting rules might have discouraged Veitenhans from
asserting her FEHA rights, and were therefore substantively
unconscionable. (See Wherry, supra, 192 Cal.App.4th at
1248-1249; cf. Carlson v. Home Team Pest Defense, Inc.
(2015) 239 Cal.App.4th 619, 636 (Carlson) [employer’s after-
the-fact offer to pay costs did not cure cost-splitting
provisions’ substantive unconscionability, as “the risk that a
claimant may bear substantial costs of arbitration, not just
the actual imposition of those costs, may discourage an
employee from exercising the right to pursue any remedy
against the employer”].)

                             23
      Contrary to Hikvision’s contentions, the substantive
unconscionability established by this risk of forbidden costs
was not negated by: (1) Yang’s declaration that Hikvision
intended to pay the costs; or (2) the 2017 amendments to the
AAA rules, under which Hikvision would have borne most or
all costs. First, Hikvision’s after-the-fact offer to cover
arbitration costs could not retroactively negate the
arbitration provision’s substantive unconscionability at the
time it was executed. (See Carlson, supra, 239 Cal.App.4th
at 636-637; Martinez v. Master Protection Corp. (2004) 118
Cal.App.4th 107, 115-117 [arbitration agreement’s cost-
splitting provision was substantively unconscionable for
violating Armendariz, “notwithstanding [employer’s] belated
willingness to excise that portion of the agreement,” as “the
mere inclusion of the costs provision in the arbitration
agreement produces an unacceptable chilling effect”];
O’Hare, supra, 107 Cal.App.4th at 280 [“[The employer’s]
willingness to bear all costs in the arbitration proceeding
does not change the fact the arbitration provision [imposing
costs forbidden by Armendariz] is substantively
unconscionable”].) Similarly, Hikvision’s reliance on the
2017 amendments is “nothing more than an attempt to make
an end run around the legislative direction to evaluate the
contract based upon its terms at the time of execution.”
(O’Hare, supra, at 281 [addressing employer’s reliance on
AAA discovery rules that went into effect after execution of
arbitration agreement].) The arbitration provision was
executed in 2013, years before the 2017 amendments.

                             24
Although the 2010 rules provided notice that superseding
amendments, if any, would be applied, the parties could not
have known in 2013 that the rules would be amended years
later to allow Veitenhans to submit her FEHA claims for
arbitration without fear of substantial costs. Hikvision
“cites no authority for the proposition it should be relieved of
the effect of an unlawful provision it inserted in the
arbitration provision because of the serendipity that the
AAA rules changed since the employment contract was
executed.” (O’Hare, supra, at 281-282.) We conclude the
arbitration provision was substantively unconscionable at
the time it was made in incorporating the unconscionable
AAA cost-splitting rules then in effect.
      In sum, we find a high degree of substantive
unconscionability, established by: (1) the confidentiality
carve-out, which deprived the arbitration provision of the
paramount concern of mutuality; and (2) the arbitration
provision’s incorporation of AAA rules that, at the time the
provision was executed, subjected Veitenhans to a risk of
bearing costs forbidden by Armendariz. (See Davis, supra,
53 Cal.App.5th at 917 [finding high degree of substantive
unconscionability in non-mutuality established by
employer’s confidentiality carve-out, in combination with
limitations on arbitral discovery]; Swain v. Laser Away
Medical Group, Inc. (2020) 57 Cal.App.5th 59, 73-74 (Swain)
[separately finding high degrees of substantive
unconscionability in skilled nursing facility’s carve-out for
collections and evictions claims, and in its requirement that

                               25
patient pay unaffordable arbitration costs].) We further find
this high degree of substantive unconscionability, combined
with the moderate degree of procedural unconscionability
found below, supports the trial court’s conclusion that the
arbitration provision was unenforceable. (See Davis, supra,
at 917; Swain, supra, at 75.) We therefore need not address
the additional grounds for a finding of substantive
unconscionability identified by the trial court in its ruling
and by Veitenhans on appeal.

      B. Procedural Unconscionability
      The trial court found a substantial degree of procedural
unconscionability, established by the employment
agreement’s adhesive nature, contractual language the court
found ambiguous, Hikvision’s failure to sign the agreement,
and Hikvision’s failure to identify or attach the AAA rules
incorporated into the arbitration provision by reference.
Hikvision contends the court erred in relying on these
factors. We disagree in part, finding the court properly
relied on the employment agreement’s adhesive nature and
on Hikvision’s failure to identify or attach the substantively
unconscionable AAA cost-splitting rules. We find an
additional degree of procedural unconscionability in
Hikvision’s drafting of the employment and confidentiality
agreements in a manner that obscured the arbitration
provision’s lack of mutuality. Considering these factors
together, we find a moderate degree of procedural
unconscionability.

                             26
            1. Adhesion and Oppression
      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. (OTO, supra,
8 Cal.5th at 126.) “Arbitration contracts imposed as a
condition of employment are typically adhesive . . . .” (Ibid.)
A finding of adhesion is “sufficient to establish some degree
of procedural unconscionability.” (Sanchez v. Valencia
Holding Co., LLC (2015) 61 Cal.4th 899, 915.)
      A higher degree of procedural unconscionability may be
established through an additional showing of oppression.
(See OTO, supra, 8 Cal.5th at 126.) “‘The circumstances
relevant to establishing oppression include, but are not
limited to (1) the amount of time the party is given to
consider the proposed contract; (2) the amount and type of
pressure exerted on the party to sign the proposed contract;
(3) the length of the proposed contract and the length and
complexity of the challenged provision; (4) the education and
experience of the party; and (5) whether the party’s review of
the proposed contract was aided by an attorney.’” (Id. at
126-127.) With respect to the pressure-to-sign factor, courts
considering preemployment arbitration agreements must
keep in mind that “‘the economic pressure exerted by
employers on all but the most sought-after employees may
be particularly acute, for the arbitration agreement stands
between the employee and necessary employment, and few
employees are in a position to refuse a job because of an
arbitration requirement.’” (Id. at 127.)

                              27
      Here, the employment agreement satisfied each
element of a contract of adhesion. (See OTO, supra, 8
Cal.5th at 126.) First, the agreement was standardized; it
was drafted on a preprinted form that typically referred to
Veitenhans in generic terms, indicating Hikvision presented
the agreement in identical form to other prospective
employees. Second, the agreement was offered by the party
with superior bargaining power; Hikvision, by its own
admission, was a multi-national company, while Veitenhans
was an individual prospective employee (and no evidence
suggested she was among the “most sought-after”
employees). (OTO, supra, at 127.) Finally, Hikvision offered
the agreement on a take-it-or-leave-it basis; its offer letter
stated that Veitenhans would be required to sign the
employment agreement, and Veitenhans declared that
Hikvision gave no indication through its agent that it was
willing to negotiate the terms of her employment.6 Thus, as
the trial court found, the arbitration provision was imposed
within “a ‘take-it-or-leave-it’ adhesion contract,” establishing
“a degree of procedural unconscionability.”

6
      Contrary to Hikvision’s contention, the trial court acted
within its discretion in sustaining Veitenhans’s objections to Hui
Yang’s contrary account of the execution of the employment
agreement, on the ground of lack of personal knowledge. (See
Evid. Code, § 702, subd. (a).) Yang claimed personal knowledge
only of the documents in Veitenhans’s personnel file and related
document retention processes, not the documents’ execution. As
Hikvision acknowledges, Yang did not even claim to have been
employed by Hikvision when Veitenhans was hired.

                                28
      However, we find no appreciable degree of oppression
beyond that inherent in an adhesive employment agreement.
Veitenhans produced no evidence that she was given only a
short period of time in which to review and sign the
employment agreement (or other employment documents), or
precluded from consulting an attorney. (See OTO, supra, 8
Cal.5th at 126-127.) She declared she had no recollection of
signing the employment agreement, leaving the precise
circumstances of its execution a mystery. Further, neither
the employment agreement nor the arbitration provision was
long or complex.7 (See id. at 127.) There was no evidence
Veitenhans lacked relevant education and experience; her
employment application and resume indicated she had
obtained a bachelor’s degree and a paralegal certificate, and
had worked in sales for more than a decade. (See ibid.)
Finally, although Veitenhans claimed she was desperate for
employment on account of personal hardships, there was no
evidence that her hardships contributed to the degree of

7
       Unlike the trial court, we do not find the language of the
arbitration provision ambiguous. The provision’s references to
“settlement” by arbitration were readily understandable as
referring to resolution by arbitration. Further, by stating that it
applied to disputes arising out of or relating to the employment
agreement or the breach thereof, the provision unambiguously
communicated Hikvision’s intent to require arbitration of
disputes related both to the formation of the agreement and the
employment relationship created by it.

                                29
pressure “exerted on” her by Hikvision, which was
presumably unaware of them.8 (Ibid.)
      In sum, although Hikvision exerted economic pressure
on Veitenhans as her prospective employer, imposing the
arbitration provision within a contract of adhesion, “[t]his
[pressure] alone is a fairly low level of procedural
unconscionability.” (Alvarez v. Altamed Health Services
Corporation (2021) 60 Cal.App.5th 572, 591; accord, Davis,
supra, 53 Cal.App.5th at 907, 910.)

           2. Surprise
     A showing of surprise may establish a higher degree of
procedural unconscionability than that inherent in a

8
       We reject Hikvision’s argument that Veitenhans’s personal
hardships lowered her reasonable expectations concerning her
employment, rendering the arbitration provision enforceable
under Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807.
Hikvision cites Graham for the proposition that “[a]n adhesive
arbitration agreement will be enforced if its terms fall within the
reasonable expectations of the weaker party.” But in Graham,
our Supreme Court articulated and applied a contrary
proposition: “a contract or provision, even if consistent with the
reasonable expectations of the parties, will be denied enforcement
if, considered in its context, it is unduly oppressive or
‘unconscionable.’” (Id. at 820, italics added.) The court held an
arbitration agreement unconscionable and unenforceable despite
finding that the agreement fell within the weaker party’s
reasonable expectations. (Id. at 821, 826-828.) We are unaware
of any authority supporting Hikvision’s implicit position that the
unconscionability doctrine condones an employer’s exploitation of
a job-seeker if the job-seeker is sufficiently desperate.

                                30
contract of adhesion. (See OTO, supra, 8 Cal.5th at 126.)
Surprise may be found where substantively unconscionable
terms were “‘artfully hidden’ by the simple expedient of
incorporating them by reference rather than including them
in or attaching them to the arbitration agreement.”
(Baltazar, supra, 62 Cal.4th at 1246; see also Davis, supra,
53 Cal.App.5th at 909.) Additionally, surprise may be found
where “the agreement appears to have been drafted with an
aim to thwart, rather than promote, understanding,”
undermining the nondrafting party’s informed consent.
(OTO, at 129.) An agreement may thwart understanding by
hiding the challenged provision in a prolix printed form, or
by using language -- for example, complex sentences filled
with legal jargon -- rendering the substance of the
challenged provision opaque. (See id. at 128.)
      Here, we find two sources of surprise. The first is
Hikvision’s incorporation into the arbitration provision of
AAA rules that then subjected Veitenhans to a risk of
bearing costs forbidden by Armendariz, without identifying
these rules or providing Veitenhans a copy. As explained
above, these cost-splitting rules were substantively
unconscionable. Thus, it was procedurally unconscionable
for Hikvision to “artfully hid[e]” the cost-splitting rules “by
the simple expedient of incorporating them by reference
rather than including them in or attaching them to the
arbitration agreement.” (Baltazar, supra, 62 Cal.4th at
1246; see also Ali, supra, 59 Cal.App.5th at 467, 477 [finding
“an element of surprise” in arbitration agreement’s

                              31
incorporation of AAA rules “neither articulated in nor
attached to the arbitration provision,” including
substantively unconscionable rule requiring plaintiff to bear
costs forbidden by Armendariz]; cf. OTO, supra, 8 Cal.5th at
129 [finding surprise in part because employer’s obligation
under Armendariz to pay arbitration-related costs “would
not be evident to anyone without legal knowledge or access
to the relevant authorities,” despite arbitration agreement’s
incorporation of Armendariz by reference to controlling
caselaw].)
       We find a second source of surprise in Hikvision’s
drafting of the employment and confidentiality agreements
in a manner that obscured the arbitration provision’s lack of
mutuality. In light of the seemingly straightforward
language of the arbitration provision, which was mutual on
its face, Veitenhans reasonably could have been surprised to
discover that the provision did not apply to Hikvision’s
confidentiality claims against her. Had Hikvision intended
to ensure that Veitenhans (and other prospective employees
presumably required to sign the same standardized
agreement) understood the scope of the arbitration
provision, Hikvision could have articulated the
confidentiality carve-out within the provision itself, or in an
adjacent provision. Instead, Hikvision inserted the carve-out
into the separate confidentiality agreement. The two
agreements made no reference to each other. Even within
the confidentiality agreement, the carve-out was
inconspicuous, located in a paragraph that began by

                              32
addressing a different topic (choice of law) and lacked a
heading. Finally, the carve-out neither referenced the
arbitration provision nor used the word “arbitration,”
instead referring to the exclusive jurisdiction of the courts.
Hikvision could not reasonably have expected a layperson
such as Veitenhans to recognize that the courts’ exclusive
jurisdiction would preclude arbitration, particularly given
the arbitration provision’s failure to explain that it
constituted a waiver of Veitenhans’s right to bring claims in
court. For these reasons, the employment and
confidentiality agreements “appear[] to have been drafted
with an aim to thwart, rather than promote, understanding”
of the non-mutual scope of the arbitration provision. (OTO,
supra, 8 Cal.5th at 129.)
       In sum, we find a moderate degree of procedural
unconscionability, established by (1) the employment
agreement’s adhesive nature; (2) Hikvision’s failure to
identify or attach the AAA rules that, at the time the
agreement was executed, subjected Veitenhans to a risk of
bearing costs forbidden by Armendariz; and (3) Hikvision’s
drafting of the employment and confidentiality agreements
in a manner that obscured the arbitration provision’s lack of
mutuality. We further find this moderate degree of
procedural unconscionability, combined with the high degree
of substantive unconscionability found above, supports the
trial court’s conclusion that the arbitration provision was
unenforceable. (See Davis, supra, 53 Cal.App.5th at 917
[“minimal” procedural unconscionability established by

                             33
adhesion was sufficient to render arbitration agreement
unenforceable, where high degree of substantive
unconscionability was established by employer’s
confidentiality carve-out and restrictions on arbitral
discovery]; Swain, supra, 57 Cal.App.5th at 68, 71, 75 [same,
where high degree of substantive unconscionability was
established by skilled nursing facility’s carve-out for
collections and evictions claims and requirement that
patient pay unaffordable arbitration costs].)

       C. Severance
       If a court finds a clause within a contract to have been
unconscionable at the time it was made, the court may
refuse to enforce the contract, or instead sever the
unconscionable clause and enforce the remainder of the
contract. (Civ. Code, § 1670.5, subd. (a).) “The decision
[whether] to sever rests in the trial court’s discretion and is
reviewed for abuse of discretion.” (Davis, supra, 53
Cal.App.5th at 917.)
       To the extent Hikvision suggests the trial court abused
its discretion in refusing to enforce the arbitration provision,
rather than merely severing the confidentiality carve-out,
that argument is forfeited. As Hikvision appropriately
concedes in its opening appellate brief, it failed to argue for
severance of the confidentiality carve-out in the trial court.
Although Hikvision attempts to reverse course in its
appellate reply brief, claiming its concession was mistaken,

                               34
                            9
that claim is disingenuous. While Hikvision’s initial motion
brief made a general request for severance of any term the
court might find unconscionable, this request did not
constitute an argument for severance of the confidentiality
carve-out, which Hikvision did not even mention. Moreover,
despite Veitenhans’s identification of the carve-out as the
arbitration agreement’s “[w]orst” substantively
unconscionable term, and her argument that curing the
unconscionability through severance was neither possible
nor in the interests of justice, Hikvision’s reply brief
mentioned neither severance nor the carve-out. Having
failed to ask the court to exercise its discretion by severing
the carve-out, Hikvision has forfeited any argument that the
court abused its discretion by failing to do so. (See
Samaniego v. Empire Today LLC (2012) 205 Cal.App.4th
1138, 1149 [employer forfeited contention that trial court
erred by failing to sever unconscionable terms, including
non-mutual confidentiality carve-out, by failing to ask trial
court to exercise its discretion to do so]; Lopez v. Bartlett
Care Center, LLC (2019) 39 Cal.App.5th 311, 322 [following
Samaniego, where skilled nursing facility failed to ask trial
court to sever non-mutual carve-out for collections and
evictions claims].)
      Hikvision asks us to overlook its failure to raise its
severance argument below, arguing that “under de novo

9
     We deny Veitenhans’s motion to strike the portion of
Hikvision’s appellate reply brief addressing severance.

                                35
review,” we may consider the severance issue in the first
instance as a “question of law applied to undisputed facts.”
But severance is a question for the trial court’s discretion.
(Davis, supra, 53 Cal.App.5th at 917; see also Samaniego v.
Empire Today LLC, supra, 205 Cal.App.4th at 1149
[rejecting appellant’s argument that severance was question
of law and therefore reviewable despite forfeiture].) In any
event, even assuming, arguendo, that Hikvision’s belated
severance request presents an issue of law, we decline to
exercise our discretion to review it. (See Farrar, supra, 9
Cal.App.5th at 1275, fn. 3 [“Merely because an issue is one of
law, does not give a party license to raise it for the first time
on appeal . . . . Whether an appellate court will entertain a
belatedly raised legal issue always rests within the court’s
discretion”].) Hikvision had ample reason and opportunity
to address the confidentiality carve-out in the trial court.
We decline to reach the merits of Hikvision’s belated request
for severance of the provision.

                               36
                        DISPOSITION
      The trial court’s order denying Hikvision’s motion to
compel arbitration is affirmed. Veitenhans is awarded her
costs on appeal.
 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                          MANELLA, P. J.

We concur:

WILLHITE, J.

COLLINS, J.

                             37