Court Opinion

ID: 9397612
Source: CourtListenerOpinion
Date Created: 2023-05-25 18:04:12.827442+00
Date Added: 2024-06-11T17:19:26.173436
License: Public Domain

Filed 5/25/23 Nathaniel v. Greene Motors CA1/1
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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 This opinion has not been certified for publication or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

                                      FIRST APPELLATE DISTRICT

                                                   DIVISION ONE

 VIRGIL NATHANIEL,
           Plaintiff and Respondent,
                                                                        A165056
 v.
 GREENE MOTORS, INC.,                                                   (Solano County
                                                                        Super. Ct. No. FCS056974)
           Defendant and Appellant.

         Appellant Greene Motors, Inc., prevailed before the state Labor
Commissioner on wage claims brought by respondent employee Virgil
Nathaniel. When Nathaniel sought a de novo review of the commissioner’s
order, Greene Motors filed a petition to arbitrate the matter. The trial court
found that the parties’ arbitration agreement was procedurally and
substantively unconscionable and thus unenforceable, and Greene Motors
appealed. We affirm.
                                                    I.
                                          FACTUAL AND PROCEDURAL
                                               BACKGROUND
         The record in this case is sparse and contains little detail about
Nathaniel’s employment relationship with Greene Motors, a car dealership
known as Avery Greene Honda in Vallejo. What we know is that Nathaniel
applied for a job as a “Service–Advisor” with Greene Motors in fall 2015. He

                                                               1
signed an arbitration agreement printed on his form employment application,
as all applicants are required to do. The font size of the agreement and the
low quality of the copy in the appellate record make it difficult to discern each
word of the clause governing alternative dispute resolution.
      Nathaniel was hired and in December 2015 he signed a second
arbitration agreement as part of the “onboarding process,” again because he
was required to do so to work for Greene Motors. We gather from the parties’
briefing in the trial court that this agreement was identical, “or nearly so,” to
the one contained in Nathaniel’s employment application. A copy of the
arbitration agreement Nathaniel signed in December 2015 appears in the
record on a single page titled “AGREEMENTS.” Nathaniel’s signature
appears after a paragraph titled “At Will Employment Agreement” that
stated he agreed his employment and compensation were terminable at will.
The remaining three-quarters of the page is filled with a single paragraph
titled “Binding Arbitration Agreement.” As with the arbitration agreement
Nathaniel signed when he applied for the job, the font size and low quality of
the copy of this agreement in the record make it difficult to discern each word
of the agreement. No evidence was presented in the trial court describing
whether or how the original agreement Nathaniel signed differed from the
copy as it appears in the record.
      In the petition to compel arbitration, however, the text of the
agreement was set forth, and we quote it in its entirety:
      “I also acknowledge that the Company utilizes a system of alternative
      dispute resolution which involves binding arbitration to resolve all
      disputes which may arise out of the employment context. Because of
      the mutual benefits (such as reduced expense and increased efficiency)
      which private binding arbitration can provide both the Company and
      myself, I and the Company both agree that any claim, dispute, and/or
      controversy that either party may have against one another (including,
      but not limited to, any claims of discrimination and harassment,

                                        2
whether they be based on the California Fair Employment and Housing
Act, Title VII of the Civil Rights Act of 1964, as amended, as well as all
other applicable state or federal laws or regulations) which would
otherwise require or allow resort to any court or other governmental
dispute resolution forum between myself and the Company (or its
owners, directors, officers, managers, employees, agents, and parties
affiliated with its employee benefit and health plans) arising from,
related to, or having any relationship or connection whatsoever with
my seeking employment with, employment by, or other association with
the Company, whether based on tort, contract, statutory, or equitable
law, or otherwise, (with the sole exception of claims arising under the
National Labor Relations Act which are brought before the National
Labor Relations Board, claims for medical disability benefits under the
California Workers’ Compensation Act, and Employment Development
Department claims) shall be submitted to and determined exclusively
by binding arbitration. In order to provide for the efficient and timely
adjudication of claims, the arbitrator is prohibited from consolidating
the claims of others into one proceeding. This means that an arbitrator
will hear only my individual claims and does not have the authority to
fashion a proceeding as a class or collective action or to award relief to
a group of employees in one proceeding. Thus, the Company has the
right to defeat any attempt by me to file or join other employees in a
class, collective, representative, or joint action lawsuit or arbitration
(collectively ‘class claims’). I and the Company both agree that any
challenge to the prohibition against consolidating the claims of others
into a single proceeding, whether as a class, a representative action or
otherwise, is a gateway issue and shall be determined by the Superior
Court; and any substantive claims shall not be decided by the
arbitrator until after the gateway determination is made by the Court.
I further understand that I will not be disciplined, discharged, or
otherwise retaliated against for exercising my rights under Section 7 of
the National Labor Relations Act, including but not limited to
challenging the limitation on a class, collective, representative, or joint
action. I understand and agree that nothing in this agreement shall be
construed so as to preclude me from filing any administrative charge
with, or from participating in any investigation of a charge conducted
by, any government agency such as the Department of Fair
Employment and Housing and/or the Equal Employment Opportunity
Commission; however, after I exhaust such administrative
process/investigation, I understand and agree that I must pursue any
such claims through this binding arbitration procedure. I acknowledge

                                 3
      that the Company’s business and the nature of my employment in that
      business affect interstate commerce. I agree that the arbitration and
      this Agreement shall be controlled by the Federal Arbitration Act, in
      conformity with the procedures of the California Arbitration Act (Cal.
      Code Civ. Proc. sec 1280 et seq., including section 1283.05[1] and all of
      the Act’s other mandatory and permissive rights to discovery).
      However, in addition to requirements imposed by law, any arbitrator
      herein shall be a retired California Superior Court Judge and shall be
      subject to disqualification on the same grounds as would apply to a
      judge of such court. To the extent applicable in civil actions in
      California courts, the following shall apply and observed: all rules of
      pleading (including the right of demurrer), all rules of evidence, all
      rights to resolution of the dispute by means of motions for summary
      judgment, judgment on the pleadings, and judgment under Code of
      Civil Procedure section 631.8. Resolution of the dispute shall be based
      solely upon the law governing the claims and defenses pleaded, and the
      arbitrator may not invoke any basis (including, but not limited to,
      notions of ‘just cause’) other than such controlling law. The arbitrator
      shall have the immunity of a judicial officer from civil liability when
      acting in the capacity of an arbitrator, which immunity supplements
      any other existing immunity. Likewise, all communications during or
      in connection with the arbitration proceedings are privileged in
      accordance with Cal. Civil Code section 47(b). As reasonably required
      to allow full use and benefit of this Agreement’s modifications to the
      Act’s[2] procedures, the arbitrator shall extend the times set by the Act
      for the giving of notices and settings of hearings. Awards shall include
      the arbitrator’s written reasoned opinion. If Section 1284.2 of the Code
      of Civil Procedure conflicts with other substantive statutory provisions
      or controlling case law, the allocation of costs and arbitrator fees shall
      be governed by said statutory provisions or controlling case law instead
      of Section 1284.2. Both the Company and I agree that any arbitration

      1 Code of Civil Procedure section 1283.05 provides for obtaining
depositions and other discovery if the parties incorporate the statute’s
provisions into their arbitration agreement (Code Civ. Proc., § 1283.1,
subd. (b)). All undesignated statutory references are to the Code of Civil
Procedure.
      2By this point the agreement had named six legislative acts, but none
of them were specifically defined as “Act.” It appears this was a reference to
the California Arbitration Act.

                                       4
      proceeding must move forward under the Federal Arbitration Act
      (9 U.S.C. §§ 3–4) even though the claims may also involve or relate to
      parties who are not parties to the arbitration agreement and/or claims
      that are not subject to arbitration: thus, the court may not refuse to
      enforce this arbitration agreement and may not stay the arbitration
      proceeding despite the provisions of California Code of Civil
      Procedure 1281.2(c).”

      Below this paragraph are the following two acknowledgements:

      “I UNDERSTAND BY AGREEING TO THIS BINDING
      ARBITRATION PROVISION, BOTH I AND THE COMPANY GIVE UP
      OUR RIGHTS TO TRIAL BY JURY.”

      “Should any term or provision, or portion thereof, be declared void or
      unenforceable it shall be severed and the remainder of this agreement
      shall be enforced. I hereby acknowledge that I have read the above
      statements and understand the same.”

      A copy of the original one-page agreement is attached as Exhibit A to
Greene Motors’s petition to arbitrate, and Nathaniel’s signature appears at
the bottom of the page.
      The human resources administrator for Greene Motors attested that
Nathaniel “was given all the time he needed to review these documents,” and
he “was not rushed in signing these arbitration agreements, was provided an
opportunity to ask questions about the agreement, and was free to seek
outside counsel in connection with signing the arbitration agreement.”
Nathaniel did not ask questions about the agreements or seek additional
advice about signing them.
      At some point Nathaniel raised complaints about overtime wages,
meal-period premium wages, liquidated damages, and waiting-time
penalties. All we know about those complaints is that a Berman hearing was
held before the Labor Commission, which denied relief to Nathaniel in an

                                      5
order dated April 29, 2021. So far as this court can tell, neither party sought
to arbitrate the matter in lieu of the Berman hearing.
      In the order denying relief, Nathaniel was notified that the order would
“become final and enforceable as a judgment in a court of law unless either or
both parties exercise their right to appeal to the appropriate court [which was
identified as the Solano County Superior Court] within ten (10) days.” (Lab.
Code, § 98.2, subd. (a).) Using a state-approved form, Nathaniel filed an
appeal for a de novo review of the order in the Solano County Superior Court.
      Greene Motors then filed a petition to compel arbitration in the trial
court, arguing that Nathaniel’s “filing of his appeal in this Court was
squarely inconsistent with an intent to submit his disputes to binding
arbitration.” Nathaniel opposed the petition, arguing that the arbitration
provisions were procedurally and substantively unconscionable. The trial
court agreed with Nathaniel and denied the petition to compel.
                                      II.
                                 DISCUSSION
      Greene Motors argues that the trial court erred when it denied the
petition to compel arbitration. We are not persuaded.
      A. General Principles and the Standard of Review.
      The Federal Arbitration Act (FAA, 9 U.S.C. § 1 et seq.) provides that a
written agreement to arbitrate “shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation of any
contract.” (9 U.S.C. § 2.) The FAA expresses favor for arbitration
agreements. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development
(US), LLC (2012) 55 Cal.4th 223, 235 (Pinnacle).) “In determining the rights
of parties to enforce an arbitration agreement within the FAA’s scope, courts
apply state contract law while giving due regard to the federal policy favoring
arbitration.” (Id. at p. 236.)

                                       6
      “The party seeking arbitration bears the burden of proving the
existence of an arbitration agreement, and the party opposing arbitration
bears the burden of proving any defense, such as unconscionability.”
(Pinnacle, supra, 55 Cal.4th at p. 236.) Nathaniel does not dispute that he
signed an arbitration agreement with Greene Motors or that if the agreement
were valid it would cover his claims. He argues solely that the agreement
was unconscionable.3
      “The general principles of unconscionability are well established. A
contract is unconscionable if one of the parties lacked a meaningful choice in
deciding whether to agree and the contract contains terms that are
unreasonably favorable to the other party. [Citation.] Under this standard,
the unconscionability doctrine ‘ “has both a procedural and a substantive
element.” ’ [Citation.] ‘The procedural element addresses the circumstances
of contract negotiation and formation, focusing on oppression or surprise due
to unequal bargaining power. [Citations.] Substantive unconscionability
pertains to the fairness of an agreement’s actual terms and to assessments of

      3 In Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I)
our State Supreme Court held that arbitration agreements requiring
employees to waive Berman hearings were categorically unconscionable. But
the Court also held that arbitration agreements could be enforced on appeals
from Berman rulings. (Id. at p. 669.) The judgment in Sonic I was vacated
by the United States Supreme Court, and the matter was remanded for
consideration in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S.
333. On remand, our Supreme Court held that an arbitration agreement is
not categorically unconscionable solely because it entails a waiver of the
Berman procedure, and that an agreement to arbitrate wage disputes can be
enforceable so long as it provides an accessible and affordable process for
resolving those disputes. (Sonic-Calabasas A, Inc. v. Moreno (2013)
57 Cal.4th 1109, 1146.) The parties do not argue, and we therefore do not
decide, whether employers may forfeit their right to compel arbitration of a
Berman appeal when they fail, as Greene Motors failed here, to seek to
compel arbitration of the Berman hearing.

                                       7
whether they are overly harsh or one-sided.’ ” (OTO, L.L.C. v. Kho (2019)
8 Cal.5th 111, 125.) Both procedural and substantive unconscionability must
be shown to establish the defense. (Ibid.)
      The doctrine of unconscionability ensures that contracts, particularly
those of adhesion, do not impose terms that are overly harsh, unduly
oppressive, or are so one-sided as to shock the conscience. (Sanchez v.
Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910 (Sanchez).) It does not,
however, encompass a simple bad bargain. (Id. at p. 911.) “An evaluation of
unconscionability is highly dependent on context.” (Ibid.) “The doctrine often
requires inquiry into the ‘commercial setting, purpose, and effect’ of the
contract or contract provision.” (Ibid.) “[T]he substantive unfairness of the
terms must be considered in light of any procedural unconscionability. The
ultimate issue in every case is whether the terms of the contract are
sufficiently unfair, in view of all relevant circumstances, that a court should
withhold enforcement.” (Id. at p. 912.)
      “Where, as here, the evidence is not in conflict, we review the trial
court’s denial of arbitration de novo.” (Pinnacle, supra, 55 Cal.4th at p. 236.)
We review the trial court’s order denying arbitration and not its reasoning,
affirming it if it is correct on any theory that may be found in the record.
(Ramos v. Westlake Services LLC (2015) 242 Cal.App.4th 674, 686.)
      B. The Trial Court Correctly Found Procedural Unconscionability.
      Greene Motors first argues that Nathaniel “failed to establish a high
degree of procedural unconscionability.” (Formatting omitted.) Even if we
agreed that the level of procedural unconscionability was not extreme, we
conclude that Nathaniel established sufficient procedural unconscionability.
      “A procedural unconscionability analysis ‘begins with an inquiry into
whether the contract is one of adhesion.’ [Citation.] An adhesive contract is

                                        8
standardized, generally on a preprinted form, and offered by the party with
superior bargaining power ‘on a take-it-or-leave-it basis.’ [Citations.]
Arbitration contracts imposed as a condition of employment are typically
adhesive.” (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 126.) The question
then becomes “whether circumstances of the contract’s formation created
such oppression or surprise that closer scrutiny of its overall fairness is
required. (Ibid.) “ ‘ “ ‘Oppression occurs where a contract involves lack of
negotiation and meaningful choice, surprise where the allegedly
unconscionable provision is hidden within a prolix printed form.’ ” ’ ” (Ibid.)
Where a party had no ability to individually negotiate a contract’s terms,
could not opt out of an arbitration provision, and thus had no meaningful
choice but to accept an arbitration provision as drafted by the other party,
this establishes at least a minimal level of procedural unconscionability.
(Bakersfield College v. California Community College Athletic Assn. (2019)
41 Cal.App.5th 753, 762–763.) “[I]n the case of preemployment arbitration
contracts, 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 v. Foundation Health Psychcare Services, Inc.
(2000) 24 Cal.4th 83, 115 (Armendariz).)
      The trial court acknowledged that Nathaniel did not produce evidence
about the circumstances under which he was presented with the arbitration
agreements and asked to sign them. The court concluded, though, that “a
facial review” of the agreements revealed “that both are complex, difficult to
read and contain lengthy run-on sentences that are not separated by topic or
paragraph. Each utilizes a small font. The language itself is replete with

                                        9
significant legal[ese] and numerous references to state and federal statutes.
The language utilized is intended for lawyers, not an unsophisticated
applicant or employee.” The court concluded that “[t]he document speaks for
itself,” and its language and presentation supported a finding of procedural
unconscionability.
      On appeal, Greene Motors does not dispute that the agreements
Nathaniel signed were adhesive. It acknowledges that the agreements
“therefore bear some degree of procedural unconscionability.” Rather than
directly addressing the trial court’s reasons for finding procedural
unconscionability, the company focuses on the arguments Nathaniel made
below when he opposed the petition to compel arbitration.
      It may be true that the long, run-on, legalistic second agreement that
Nathaniel signed is clearly titled “Binding Arbitration Agreement,” as Greene
Motors stresses. And the acknowledgement at the bottom of the document
that Nathaniel gives up his right to jury trial is in bold text and is legible, in
contrast to the substantive terms of the agreement that are in small type.
But these arguments sidestep the actual reasons the trial court articulated in
concluding that the agreement is procedurally unconscionable. We agree
with the trial court that the agreement Nathaniel signed is printed in small
font, the run-on sentences are poorly organized, and the text is written for
lawyers, not layperson job applicants. These facts support a finding of
surprise. (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 128 [agreement was “a
paragon of prolixity,” was “written in an extremely small font,” and the
“single dense paragraph” was “ ‘visually impenetrable’ and ‘challenge[d] the
limits of legibility’ ”].) Because Greene Motors acknowledges some procedural
unconscionability and does not challenge the trial court’s findings that also

                                        10
support finding procedural unconscionability, we proceed to examine whether
the agreement was substantively unconscionable.
          C. The Trial Court Correctly Found Substantive Unconscionability.
          Greene Motors contends that the trial court also erred when it
concluded that the arbitration agreement was substantively unconscionable.
Although this is a closer question, we are guided by OTO, L.L.C. v. Kho,
supra, 8 Cal.5th 111, and agree with the trial court that the agreement is
substantively unconscionable.
          “Substantive unconscionability pertains to the fairness of an
agreement’s actual terms and to assessments of whether they are overly
harsh or one-sided. [Citations.] A contract term is not substantively
unconscionable when it merely gives one side a greater benefit; rather, the
term must be ‘so one-sided as to “shock the conscience.” ’ ” (Pinnacle, supra,
55 Cal.4th at p. 246.) Under Armendariz, arbitration of claims under the
California Fair Employment and Housing Act (FEHA, Gov. Code, § 12900 et
seq.) is subject to certain minimal requirements: (1) the arbitration
agreement may not limit damages otherwise available under the statute,
(2) there must be sufficient discovery to adequately arbitrate the claim,
(3) there must be a written arbitration decision with judicial review sufficient
to ensure that arbitrators comply with statutory requirements, and (4) the
employer must pay all types of costs that are unique to arbitration.
(Armendariz, supra, 24 Cal.4th at pp. 103, 106, 113.) These requirements
apply to wage claims. (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 128 &
fn. 9.)
          The trial court concluded that the arbitration agreement was
substantively unconscionable because it failed to address where to initiate
arbitration, failed to afford discovery, and impermissibly shifted the expense

                                          11
of arbitration to the employee while preserving Greene Motors’s right to file
costly and extensive motions (i.e., demurrer and motion for summary
judgment). Although we agree with Greene Motors that the agreement’s
reference to section 1283.05 (covering depositions and other discovery in
arbitration) and its “mandatory and permissive rights to discovery” provided
sufficient discovery rights,4 we conclude that other reasons cited by the trial
court properly support a determination that the agreement is substantively
unconscionable.
      To begin with, we agree with the trial court that the arbitration
agreement’s failure to specify where or how the employee is to initiate
arbitration supports a determination of substantive unconscionability. The
agreement asserts that Greene Motors “utilizes a system of alternative
dispute resolution which involves binding arbitration,” but it provides no
explanation on how the employee is supposed to access any such system.
Greene Motors maintains there is generally no requirement for such a
specification and that parties may petition the court to select an arbitrator
when they are uncertain how to engage one. (§ 1281.6; see American Home
Assurance Co. v. Benowitz (1991) 234 Cal.App.3d 192, 199.) But this ignores
that the Supreme Court has made clear that circumstances and context are
particularly important in evaluating unconscionability in cases, such as this

      4 Nathaniel contends that section 1283.05 is “limited by” section 1283.1.
Section 1283.1 mandates that section 1283.05 be conclusively incorporated
into any arbitration agreement covering wrongful death of another, whether
or not the statute is specifically mentioned. (§ 1283.1, subd. (b).) But an
agreement can specifically incorporate the terms of section 1283.05, which
was done here. (§ 1283.1, subd. (b).) True, section 1283.05 may not provide
“the full panoply of discovery,” as Nathaniel argues. But even in the
employment context, parties to arbitration are “permitted to agree to
something less than the full panoply of discovery provided in Code of Civil
Procedure section 1283.05.” (Armendariz, supra, 24 Cal.4th at pp. 105–106.)

                                       12
one, involving an employee’s wage claim. (OTO, L.L.C. v. Kho, supra,
8 Cal.5th at p. 136; see Sanchez, supra, 61 Cal.4th at p. 911.)
      OTO, L.L.C. v. Kho, supra, 8 Cal.5th 111, provides significant guidance
on how to evaluate the agreement here because it involved the fairness of an
agreement, strikingly similar to the one at issue here, that was used to try
and compel the arbitration of an employee’s wage claims in lieu of a Berman
hearing. (Id. at pp. 117–118.) OTO concluded that the agreement’s failure to
explain how to initiate arbitration or to specify a commercial arbitration
provider were significant factors causing the agreement to be substantively
unconscionable. (Id. at p. 131.) The court observed that the “agreement does
not mention how to bring a dispute to arbitration, nor does it suggest where
that information might be found. Commercial arbitration providers, for
example, frequently provide standardized forms to start the process.
Employees can also contact the provider for information on claim initiation.
The agreement here, however, identifies no commercial providers. In fact, it
does not mention that such providers exist.” (Ibid, fn. omitted.) In addition,
the court observed that the agreement “mandates that the arbitrator be a
‘retired California Superior Court Judge’ but gives no indication how an
employee might find such a person, let alone one willing to arbitrate a wage
claim.” (Ibid.) The arbitration agreement here has the same omissions and
includes the identical reference to a retired superior court judge. As the court
in OTO pointed out, these omissions and references reflect substantive
unconscionability because they mean that some employees “may be so
confused by the agreement that they are deterred from bringing their wage
claims at all.” (Ibid.)
      The confusing nature of the terms here was exacerbated by other
circumstances in this case. Greene Motors did not seek to compel arbitration

                                       13
in lieu of the Berman hearing itself, leaving the impression that it was not
interested in pursuing arbitration. And, under the order resulting from the
Berman hearing, Nathaniel was correctly told that he was required under
Labor Code section 98.2 to file a notice of appeal within 10 days or the order
issued after the Berman hearing would have become a final and enforceable
judgment.
      Under these circumstances, Nathaniel cannot reasonably have been
expected to discern, much less navigate, the arbitration agreement’s murky
arbitral procedures. Greene Motors itself seems uncertain on precisely what
Nathaniel should have done. In its petition in the trial court, it took the
position that Nathaniel’s filing of the notice of appeal was in “repudiation” of
the arbitration agreement, suggesting that Nathaniel should not have filed
the notice. We flatly reject any such suggestion since Labor Code
section 98.2, subdivision (a) requires the filing of a notice of appeal to
preserve a challenge to an order resulting from a Berman hearing.
      We also agree with the trial court that the arbitration agreement’s cost
provision evinces substantive unconscionability. The provision is convoluted
and drafted in a way to favor Greene Motors. To reiterate, the agreement
provides that “[i]f Section 1284.2 of the Code of Civil Procedure [providing
that parties to arbitration pay their own share of costs] conflicts with other
substantive statutory provisions or controlling case law, the allocation of
costs and arbitrator fees shall be governed by said statutory provisions or
controlling case law instead of Section 1284.2.” Section 1284.2 states,
“Unless the arbitration agreement provides or the parties to the arbitration
otherwise agree, each party to the arbitration shall pay his pro rata share of
the expenses and fees of the neutral arbitrator, together with other expenses
of the arbitration incurred or approved by the neutral arbitrator, not

                                        14
including counsel fees or witness fees or other expenses incurred by a party
for his own benefit.” But under Armendariz, section 1284.2’s cost-sharing
terms do not apply in employment cases, such as this one. (Armendariz,
supra, 24 Cal.4th at p. 113.)
         Thus, the agreement’s passage creates both procedural and substantive
unconscionability concerns. In discussing the procedural unconscionability of
an identical term, OTO explained that “[i]t is difficult to envision that [the
employee] would have had any idea what the cited code section says or that a
13-year-old case creates a relevant exception to it. . . . It would have been
nearly impossible to understand the contract’s meaning without legal
training and access to the many statutes it references.”5 (OTO, L.L.C. v. Kho,
8 Cal.5th at p. 129.) In addition to procedural unconscionability, the
provision evinces substantive unconscionability. The convoluted passage’s
references to section 1284.2 and the mandatory use of a retired superior court
judge deter employees from filing arbitration claims because they incorrectly
suggest that the employees might be required to pay a portion of arbitration
costs.
         We recognize that a Berman hearing took place in this case and
rendered a decision in favor of Greene Motors. We accept the company’s
point that the procedural posture of this case is thus different from the
procedural posture in OTO, L.L.C. v. Kho, supra, 8 Cal.5th 111, which makes
this case perhaps a closer call. Greene Motors contends the distinction

        This may be what the trial court was getting at when it found that the
         5

agreement “inappropriately shifts the expense of an arbitration to the
employee.” In other words, one possible interpretation of the agreement is
that the employee must bear his or her costs. We agree with Greene Motors
that, taking into account the caselaw not mentioned in the agreement, the
clause cannot be fairly read to shift expenses to Nathaniel.

                                       15
means it did not use the arbitration agreements “to effectuate a waiver of
Berman rights or the replacement of simplified administrative claims with
the complexities of civil litigation.” But the procedures in a de novo review
have some apparent advantages for the employee that do not appear
available in Greene Motors’s opaque “system of alternative dispute
resolution.” (See, e.g., OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 123
[procedures permit “the [Labor C]ommissioner to represent claimants on
appeal and facilitate award collection”].) We reject the notion that the
arbitration agreement, which under OTO clearly would have been
unenforceable at the Berman hearing stage of the proceedings, has somehow
become enforceable at the de novo stage of the proceedings.6
         Finally, it does not appear that Greene Motors requested in the trial
court that any part of the arbitration agreement be severed in the event that
the court found unconscionability. And since the company likewise has not
advanced any severance argument in this court, we need not consider the
issue.
                                        III.
                                    DISPOSITION
         The trial court’s order denying the petition to arbitrate is affirmed.
Nathaniel shall recover his costs on appeal.

        After briefing was complete in this case, Division Eight of the Second
         6

Appellate District filed two cases enforcing arbitration agreements between
car dealerships and their employees because the agreements lacked
substantive unconscionability. (Basith v. Lithia Motors, Inc. (2023)
90 Cal.App.5th 951, 953; Fuentes v. Empire Nissan, Inc. (2023)
90 Cal.App.5th 919, 923.) These cases are distinguishable because they did
not involve wage claims or implicate the Berman process. (Basith at p. 953
[plaintiff sued dealership “for firing him”]; Fuentes at p. 926 [plaintiff sued
“for discrimination and wrongful termination”].)

                                          16
                                          _________________________
                                          Humes, P.J.

WE CONCUR:

_________________________
Banke, J.

_________________________
Swope, J.*

     *Judge of the Superior Court of the County of San Mateo, assigned by
the Chief Justice pursuant to article VI, section 6 of the California
Constitution.

Nathaniel v. Green Motors, Inc. A165056

                                    17