Court Opinion

ID: 9757977
Source: CourtListenerOpinion
Date Created: 2023-08-28 23:06:37.630856+00
Date Added: 2024-06-11T07:28:46.009072
License: Public Domain

*599Dissenting Opinion by BELL, C.J. which GREENE, J., joins.
I dissent, and emphatically so.
To be sure, and clearly, La’Tia Y. Holloman, the petitioner, submitted an Employment Application with Circuit City seeking a sales associate position. The Employment Application listed “a number of selection tools,” number 2. of which was:
“Dispute Resolution Agreement—This agreement requires you and Circuit City to arbitrate certain legal disputes related to your application for employment or employment with Circuit City. Circuit City will consider your application only if this agreement is signed.”
It also included the “Circuit City Dispute Resolution Agreement,” 1 which the petitioner initialed and signed. By signing the Dispute Resolution Agreement and not withdrawing within three days, the petitioner “recognized” that she would “be required to arbitrate, as explained [earlier in the agreement] employment-related claims which I may have against Circuit City, whether or not I become employed by Circuit City.” A representative of Circuit City, its Senior Vice President for Human Resources, signed the Employment Application, containing the Dispute Resolution Agreement, on its behalf.2 *600Circuit City’s undertaking under the agreement was “to consider this Employment Application and to follow this Dispute Resolution Agreement and the Dispute Resolution Rules and Procedures in connection with the Associate whose signature appears above.”
Substantively, the Dispute Resolution Agreement provided: “Except as set forth below, both Circuit City and I agree to settle any and all previously unasserted claims, disputes or controversies arising out or relating to my application or candidacy for employment, employment and/or cessation of employment with Circuit City, exclusively by final and binding arbitration before a neutral Arbitrator. By way of example only, such claims include claims under federal, state and local statutory or common law, such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including the amendments of the Civil Rights Act of 1991, the Americans with Disabilities Act, the Family Medical Leave Act, the law of contract and law of tort.”
Notwithstanding this provision, the last paragraph of the agreement stated:
“1 understand that neither this Agreement nor the Dispute Resolution Rules and Procedures form a contract of employment between Circuit City and me. I further understand that my signature to this Agreement in no way guarantees that Circuit City will offer me employment. If Circuit City does offer me employment and I become employed at Circuit City, this Agreement in no way alters the ‘at-will’ status of my employment. I understand that my employment, compensation and terms and conditions of employ*601ment can be altered or terminated, with or without cause, and with or without notice at anytime, at the option of either Circuit City or myself. I understand that no store manager or representative of Circuit City, other than an Officer of Circuit City at the level of Vice President or above, has any authority to enter into any agreement for employment for any specific duration, to make any agreement contrary to the foregoing or to alter the Circuit City Dispute Resolution Rules and Procedures.”
Rule 2 of the Circuit City Dispute Resolution Rules and Procedures further amplify and identify the “Claims Subject To Arbitration.” It provided:
“Except as otherwise limited herein, any and all employment-related legal disputes, controversies or claims arising out of, or relating to, an Associate’s application or candidacy for employment, employment or cessation of employment with Circuit City or one of its affiliates shall be settled exclusively by final and binding arbitration before a neutral, third-party Arbitrator selected in accordance with these Dispute Resolution Rules and Procedures. Arbitration shall apply to any and all such disputes, controversies or claims whether asserted against the Company and/or against any employee, officer, alleged agent, director or affiliate company.
“All previously unasserted claims arising under federal, state or local statutory or common law shall be subject to arbitration. Merely by way of example, these claims include, but are not limited to, claims arising under the Age Discrimination in Employment Act (ADEA), Title VII of the Civil Rights Act of 1964, as amended, including the amendments of the Civil Rights Act of 1991, the Americans with Disabilities Act (ADA), the Fair Labor Standards Act (F’LSA), 42 U.S.C. § 1981, as amended, including the amendments of the Civil Rights Act of 1991, the Employee Polygraph Protection Act, the Employee Retirement Income Security Act (ERISA), state discrimination statutes, state statutes and/or common law regulating employment termination, the law of contract or the law of tort; includ*602ing, but not limited to, claims for malicious prosecution, wrongful discharge, wrongful arrest/wrongful imprisonment, and intentional/negligent infliction of emotional distress or defamation. Statutory or common law claims alleging that Circuit City retaliated or discriminated against an Associate shall be subject to arbitration.”
Rule 19, dealing with termination or modification of the dispute resolution agreement or the rules and procedures pursuant thereto, permits Circuit City to “alter or terminate the Agreement and these Dispute Resolution Rules and Regulations on March 1st of any year upon giving 30 days written notice to” the sales associates. It provides further that the agreement and rules and procedures in effect “at the time the Arbitration Request Form and Accompanying filing fee, or Request for Waiver of Filing Fee is received by the Company” will govern that claim.
The agreement at issue in this case, consisting of the Employment Agreement, the Circuit City Dispute Resolution Agreement and the Circuit City Dispute Resolution Rules and Procedures, is, without any doubt, is a contract of adhesion. A contract of adhesion, it is well settled, is one, usually prepared in printed form, “drafted unilaterally by the dominant party and then presented on a ‘take-it-or-leave-it’ basis to the weaker party who has no real opportunity to bargain about its terms.” Restatement (Second) of Conflict of Laws §§ 187, Comment b. See Meyer v. State Farm Fire and Cas. Co., 85 Md.App. 83, 89, 582 A.2d 275, 278 (1990); Armendariz v. Found. Health Psychcare Servs., 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669, 689 (2000), quoting Neal v. State Farm Ins. Companies, 188 Cal.App.2d 690, 694, 10 Cal.Rptr.781 (1961) (contract of adhesion is a “standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it”); Iwen v. U.S. West Direct, 293 Mont. 512, 977 P.2d 989, 995 (1999), quoting Passage v. Prudential-Bache Securities, Inc., 223 Mont. 60, 727 P.2d 1298, 1301 (1986) (“contracts of adhesion ‘arise when a standardized form of agreement, usually drafted *603by the party having the superior bargaining power, is presented to a party, whose choice is either to accept or reject the contract without the opportunity to negotiate its terms’ ”); Lackey v. Green Tree Financial Corp., 330 S.C. 388, 498 S.E.2d 898, 901 (1998).
It is also unconscionable. “[Ujnconscionability has both a ‘procedural’ and a ‘substantive’ element,’ the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.” Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669, 690, quoting A & M Produce Co. v. FMC Corp., 135 Cal.App.3d 473, 486-487, 186 Cal.Rptr. 114, 121-122 (1982). “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.” Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 690, quoting Stirlen v. Supercuts, Inc., 51 Cal.App.4th at 1533, 60 Cal.Rptr.2d 138.
This is a preemployment arbitration contract. In such cases, it has been recognized 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.” Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 690. Thus, although, even in the ordinary case, “when a party who enjoys greater bargaining power than another party presents the weaker party with a contract without a meaningful opportunity to negotiate, ‘oppression and, therefore, procedural unconscionability, are present,’ ” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1172 (9th Cir.2003), quoting Ferguson v. Countrywide Credit Industries, Inc., 298 F.3d 778, 784 (9th Cir.2002); Szetela v. Discover Bank, 97 Cal.App.4th 1094, 1100, 118 Cal.Rptr.2d 862, 867 (2002), that, in other words, contracts of adhesion are procedurally unconscionable. Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 893 (9th Cir.2002) (“The [arbitration agreement] is procedural*604ly unconscionable because it is a contract of adhesion.”); Flores v. Transamerica HomeFirst, Inc., 93 Cal.App.4th 846, 853, 113 Cal.Rptr.2d 376, 382 (2001) (“A finding of a contract of adhesion is essentially a finding of procedural unconscionability”); Acorn v. Household Int’l, Inc., 211 F.Supp.2d 1160, 1168 (N.D.Cal.2002), the unconscionability is more pronounced and, therefore, more acute in such cases.
The agreement also is substantively unconscionable—the terms of the agreement, on which this inquiry must focus, are so one-sided as to shock the conscience of this member of the Court and, I submit, ought to shock the conscience of the entire Court. While ostensibly agreeing to be bound by the Dispute Resolution Agreement, Circuit City quickly extricated itself from that agreement by a subsequent provision that makes clear that the petitioner’s agreement to be bound by the Dispute Resolution Agreement had no effect on it, for the simple reason that, by virtue of that provision, it, in fact, did not agree to be bound to do anything. By the last paragraph of the Circuit City Dispute Resolution Agreement, no contract of employment was formed, it did not agree to offer the applicant employment and, even if it offered the applicant employment and the applicant accepted, the applicant remained an at-will employee, with Circuit City retaining the right to alter or terminate the applicant’s employment, compensation and terms and conditions of employment, “with or without cause, and with or without notice, at any time.”3 That leaves absolutely no issue about which Circuit City has an interest or need to arbitrate. The only effect of this agreement is to require the petitioner to arbitrate. The only meaningful obligation Circuit City has with regard to arbitra*605tion is to appear and defend any arbitration proceeding the petitioner may bring.
That this is so is buttressed both by the agreement itself and the Rules and Procedures implementing it. As we have seen, the Dispute Resolution Agreement refers to “controversies arising out of or relating to my application or candidacy for employment and/or cessation of employment with Circuit City.” More expansively, the Rules and Procedures repeat that the claims covered are “any and all employment-related legal disputes, controversies or claims arising out of, or relating to, an Associate’s application or candidacy for employment, employment or cessation of employment” and make clear that those controversies are “unasserted claims arising under federal, state or local statutory or common law” and give examples of what is meant. It is significant, I think, that all of the examples relate to and involve claims that an employee, not an employer, would have or want to bring. Indeed, even those claims not subject to arbitration, which the agreement mentions, are those that necessarily would be made by “Associates.” 4 That is not surprising, given the rights Circuit City retained.
The court in Ingle, 328 F.3d at 1173-74 (footnotes omitted), considered the identical rule as in this case and found, on that basis, that the arbitration agreement was so one-sided as not to be enforceable. It reasoned:
“Circuit City’s arbitration agreement applies only to ‘any and all employment-related legal disputes, controversies or claims of an Associate,’ thereby limiting its coverage to claims brought by employees. By the terms of this agreement, Circuit City does not agree to submit to arbitration claims it might hypothetically bring against employees.
*606Without a reasonable justification for such a glaring disparity based on ‘business realities,’ ‘it is unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee.’ Armendariz, 24 Cal.4th at 117, 99 Cal.Rptr.2d 745, 6 P.3d at 692; see Cal. Civ.Code §§ 1670.5(b). Therefore, as we held in Adams III,[5] this ‘unjustified onesidedness deprives the [arbitration agreement] of the “modicum of bilaterality” that the California Supreme Court requires for contracts to be enforceable under California law.’ Adams III, 279 F.3d at 894; Armendariz, 24 Cal.4th at 117, 99 Cal.Rptr.2d 745, 6 P.3d at 692.
“This case presents a broad concern with respect to arbitration agreements between employers and employees. Circuit City argues that the arbitration agreement subjects Circuit City to the same terms that apply to its employees. But this argument is ‘exceedingly disingenuous,’ because the agreement is one-sided anyway. Because the possibility that Circuit City would initiate an action against one of its employees is so remote, the lucre of the arbitration agreement flows one way: the employee relinquishes rights while the employer generally reaps the benefits of arbitrating its employment disputes.
“The only claims realistically affected by an arbitration agreement between an employer and an employee are those claims employees bring against their employers. By essentially covering only claims that employees would likely bring against Circuit City, this arbitration agreement’s coverage would be substantively one-sided even without the express limitation to claims brought by employees.”
I am also troubled by the majority’s resolution of the waiver of jury trial issue. There is a dispute concerning whether the petitioner received a copy of the Circuit City Dispute Resolution Rules and Procedures. I do not imagine that anyone *607could think that a failure to provide the petitioner with the Rules and Procedures which will govern her decision to agree to arbitration is not relevant to the issue of whether the petitioner waived her jury trial right. So far as the record reflects, however, that disputed issue was not resolved by taking testimony, rather it was decided on Circuit City’s motion to compel arbitration, without the taking of any evidence. A motion to compel arbitration tests whether there is an agreement to arbitrate. When there is a dispute of fact in that regard, the court must resolve that dispute preliminary to disposing of the motion. When there is a factual dispute, the motion to compel is akin to a motion to dismiss. With respect to such motions, the well pleaded facts in the complaint are taken as true. That, in my opinion should have been done in this case and the movant required to prove the existence of the agreement, including that the petitioner received the rules and procedures as that is, to my mind critical to the finding of a valid and binding agreement to arbitrate.
I share the opinion expressed by the Supreme Court of California:
“Given the lack of choice and the potential disadvantages that even a fair arbitration system can harbor for employees, we must be particularly attuned to claims that employers with superior bargaining power have imposed one-sided, substantively unconscionable terms as part of an arbitration agreement. ‘Private arbitration may resolve disputes faster and cheaper than judicial proceedings. Private arbitration, however, may also become an instrument of injustice imposed on a “take it or leave it” basis. The courts must distinguish the former from the latter, to ensure that private arbitration systems resolve disputes not only with speed and economy but also with fairness.’ ”
Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 690-91, quoting Engalla, v. Permanente Medical Group, Inc., 15 Cal.4th 951, 64 Cal.Rptr.2d 843, 938 P.2d 903 (1997) (Kennard, J., concurring).
Judge GREENE joins in this dissenting opinion.

. The agreement repeated what the selection tool 2. said: "If you wish to be considered for employment you must read and sign the following agreement.” After adding what was necessarily implicit, "[y]ou will be considered as an applicant when you have signed the Agreement, provided:
"Included with this application is the Circuit City Dispute Resolution Rules and Procedures. You should familiarize yourself with these rules and procedures prior to signing the Agreement. If the Rules and Procedures are not included In this booklet you must request a copy from a Circuit City representative prior to signing the Agreement. You will note that If you sign at this time you do have three (3) days to withdraw your consent. You may, of course, take the package with you and return with it signed, if you wish to continue your application process.”

. This is in contrast to what the dissenting judge in Michalski v. Circuit City Stores, Inc., 177 F.3d 634, 637-639 (7th Cir.1999) (Rovner, J., dissenting), determined to be the situation in that case. There Circuit City did not sign the Employment Application, the Dispute Resolution *600Agreement or the Rules and Procedures, relying on its employee handbook to indicate its agreement to arbitrate disputes. In Johnson v. Circuit City Stores, Inc., 148 F.3d 373, 375 (4th Cir.1998), however, as in this case, both the applicant for employment and Circuit City signed a dispute resolution agreement providing that "Circuit City agrees to follow this Dispute Resolution Agreement and the Dispute Resolution Rules and Procedures in connection with the Associate whose signature appears above”.

. To be sure, the phrase, “at the option of either Circuit City or myself,” is inserted at the end of the sentence. It is nonsense to suggest that this provision is mutually for the benefit of the petitioner and Circuit City. While the petitioner may quit her job, an option she has in any event unless she enters into a contract for a term, only Circuit City may alter the terms and conditions of employment or the compensation for that employment.

. "Claims by Associates for state employment insurance (e.g., unemployment compensation, workers' compensation, worker disability compensation) or under the National Labor Relations Act shall not be subject to arbitration. Statutory or common law claims alleging that Circuit City retaliated or discriminated against an Associate for filing a state employment insurance claim, however, shall be subject to arbitration.”

. Circuit City Stores, Inc. v. Adams, 279 F.3d 889 (9th Cir.2002)