Court Opinion

ID: 9894206
Source: CourtListenerOpinion
Date Created: 2023-10-31 20:04:06.866243+00
Date Added: 2024-06-11T09:09:00.315935
License: Public Domain

Filed 10/31/23 Hutcheson v. UBS Financial Services CA1/2
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or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 TWO

 ANDREW HUTCHESON,
           Plaintiff and Respondent,
                                                                        A166376
 v.
 UBS FINANCIAL SERVICES, INC.,                                          (Alameda County
                                                                        Super. Ct. No. RG18894787)
           Defendant and Appellant.

         Defendant UBS Financial Services, Inc. (UBS) appeals from an order
denying its motion to compel arbitration of claims brought by plaintiff
Andrew Hutcheson under the Labor Code Private Attorneys General Act of
2004 (Lab. Code,1 § 2698 et seq. (PAGA)).
         UBS moved to compel arbitration several years into the case, but less
than two weeks after the United States Supreme Court issued its opinion in
Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. __ [142 S.Ct. 1906]
(Viking River). The trial court concluded that UBS had waived its right to
compel arbitration, and did not reach other arguments that Hutcheson raised
in opposition to the motion. Although we conclude that as a matter of law
UBS did not waive its right to arbitration, we will affirm on the alternative
ground that Hutcheson has shown that the arbitration agreement is

         1 Statutory references are to the Labor Code unless otherwise stated.

                                                               1
unenforceable as unconscionable because of the limitations it imposes on
discovery as to his PAGA claim.
            FACTUAL AND PROCEDURAL BACKGROUND
A.    Terms of the Arbitration Agreements
      Andrew Hutcheson and Larry Van Steenhuyse were employed by UBS
as financial advisors, and during the course of their employment they
executed contracts with UBS that contained substantively identical
arbitration agreements.
      The arbitration agreements state that they were to be “governed by and
interpreted in accordance with the Federal Arbitration Act (‘FAA’ [9 U.S.C.
§ 1 et seq.]).” The agreements provide that “Covered Claims,” defined as “any
and all claims or disputes” between the employee and UBS, including claims
and disputes arising from or related to “employment, compensation, benefits
and terms and conditions of employment,” would be resolved by arbitration
under the rules established by the Financial Industry Regulatory Authority
(FINRA).2 The agreements also include a section entitled “Waivers,” which
provides that, “To the maximum extent permitted by applicable law, [the
parties] agree that no Covered Claims may be initiated, maintained, heard,
or determined on a class action basis, collective action basis, or
representative action basis either in court or in arbitration.”
      The agreements also include a paragraph stating that if any contract
provisions were “determined to be legally unenforceable or void,” those
provisions “may be severed from the remaining provisions as appropriate, to

      2 Certain claims are excluded from the scope of the arbitration

agreement, and the agreements permit employees to elect to arbitrate
“discrimination claims . . . (including claims of harassment and
retaliation . . . )” before JAMS under the JAMS arbitration rules; those
provisions do not apply to the claims at issue here.

                                        2
the extent permitted by law,” except that if the waiver of class, collective
action and representative claims was “determined to be invalid,
unenforceable or void with respect to any Covered Claim, that Covered Claim
. . . shall proceed in court.” The paragraph concludes, “Insofar as any
Covered Claim is permitted to proceed on a class, collective or representative
action basis, it may do so only in a court of competent jurisdiction and not in
arbitration.”
B.    Proceedings through April 2022
      This case began in February 2018, when Van Steenhuyse filed a
complaint alleging a single cause of action for civil penalties under PAGA,
which authorizes an “aggrieved employee” to file a civil action against a
former employer “on behalf of himself or herself and other current or former
employees” to recover civil penalties ordinarily “assessed and collected by the
Labor and Workforce Development Agency . . .” for violations of the Labor
Code. (§ 2699, subd. (a).) Van Steenhuyse alleged that UBS violated section
2802 by failing to indemnify financial advisors for business expenses, and
violated section 204 with respect to the timely payment of commissions. In
its answer, filed in April 2018, UBS asserted as an affirmative defense that
Van Steenhuyse and other allegedly aggrieved individuals were “barred from
litigating their claims, in whole or in part, in this court to the extent their
claims are governed by the terms of applicable and binding arbitration
agreements containing representative action waivers.”
      In February 2019, Andrew Hutcheson, who worked as a financial
advisor at UBS until December 2017, filed his own complaint seeking
penalties under PAGA for alleged violations of section 2802 and 204, and in
March 2019 he filed a motion to intervene in Van Steenhuyse’s lawsuit and
replace Van Steenhuyse as the named plaintiff.

                                         3
      In August 2019, Van Steenhuyse, Hutcheson, and UBS stipulated to
the filing of an amended complaint that added Hutcheson as the named
plaintiff and removed Van Steenhuyse. The parties agreed that by
stipulating to the filing of the amended complaint, UBS had not waived its
right to move to compel arbitration. The parties disagreed, however, as to
whether the limitations period for the PAGA claim in the amended complaint
related back to the date of Van Steenhuyse’s original PAGA notice, and they
stipulated that if UBS did not move to compel arbitration, the issue of the
limitations period was to be submitted for resolution to the trial court in a
motion for summary adjudication based on stipulated facts, which would be
filed by UBS.
      UBS filed a motion for summary adjudication, pursuant to the
stipulation, and eventually, this court ruled that the relation back doctrine
applied. (Hutcheson v. Superior Court (2022) 74 Cal.App.5th 932, 938, 945.)
The remittitur was filed by the clerk of the superior court on April 13, 2022.
C.    The Developing Law on Arbitration of PAGA Claims
      Shortly after the remittitur was filed, the United States Supreme Court
issued its opinion in Viking River, which changed the law governing the
arbitration of PAGA claims. Until Viking River was decided, the applicable
law derived from Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59
Cal.4th 348 (Iskanian). Under Iskanian and its progeny, PAGA claims were
generally not subject to arbitration, but Viking River abrogated Iskanian in
part. (Viking River, supra, 596 U.S. at p. __ [142 S.Ct at p. 1924].) In Adolph
v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 (Adolph), the California
Supreme Court summarized the effect of Viking River:
      “In Iskanian we held that a predispute categorical waiver of the right to
bring a PAGA action is unenforceable (Iskanian, supra, 59 Cal.4th at pp. 382-

                                       4
383) – a rule that Viking River left undisturbed. (See Viking River, supra,
596 U.S. at pp. __-__, __-__ [142 S.Ct. at pp. 1922-1923, 1924-1925] [the FAA
does not preempt this rule].) We explained that such waivers violate
California public policy and Civil Code sections 1668 and 3513. [Citations.]
      “In addition, Iskanian held unenforceable an agreement that, while
providing for arbitration of alleged Labor Code violations sustained by the
plaintiff employee (what Viking River called individual claims), compels
waiver of claims on behalf of other employees (i.e., non-individual claims).
(Iskanian, supra, 59 Cal.4th at p. 384; see Viking River, supra, 596 U.S. at p.
__ [142 S.Ct. at p. 1916].) We explained that ‘whether or not an individual
claim is permissible under the PAGA, a prohibition of representative [i.e.,
non-individual] claims frustrates the PAGA’s objectives.’ (Iskanian, at p. 384;
see ibid. [‘[W]here . . . an employment agreement compels the waiver of
representative claims under the PAGA, it is contrary to public policy and
unenforceable as a matter of state law.’].) Viking River also left this rule
intact. [Citations.]
      “Following our decision in Iskanian, various courts held that employers
may not require employees to ‘split’ PAGA actions in a manner that puts
individual and non-individual components of a PAGA claim into bifurcated
proceedings. [Citations.] Viking River held that ‘the FAA preempts the rule
of Iskanian insofar as it precludes division of PAGA actions into individual
and non-individual claims through an agreement to arbitrate.’ (Viking River,
supra, 596 U.S. at p. __ [142 S.Ct. at p. 1924].) . . . Requiring parties to
adjudicate a PAGA action entirely in one proceeding, the high court said,
‘compels parties to either go along with an arbitration in which the range of
issues under consideration is determined by coercion rather than consent, or
else forgo arbitration altogether. Either way, the parties are coerced into

                                         5
giving up a right they enjoy under the FAA.’ (Viking River, at p. __ [142 S.Ct.
at p. 1924].) Thus, Viking River requires enforcement of agreements to
arbitrate a PAGA plaintiff’s individual claims if the agreement is covered by
the FAA.” (Adolph, supra, 14 Cal.5th at pp. 1117-1119.)
D.    UBS Moves to Compel Arbitration
      On June 27, 2022, just 12 days after the United States Supreme Court’s
opinion in Viking River was issued, UBS filed a motion to compel arbitration
of Hutcheson’s PAGA claims seeking to recover civil penalties for Labor Code
violations committed against him (individual claims) and to dismiss his
claims seeking penalties for violations committed against others (non-
individual claims).
      UBS argued that in the wake of Viking River, Hutcheson’s individual
PAGA claims could be compelled to arbitration, and once that happened, his
non-individual claims should be dismissed because he would lack statutory
standing to maintain those claims in court. Anticipating that Hutcheson
would contend that UBS had waived its right to compel arbitration, UBS
argued it would have been futile to move to compel until after Viking River
was decided, because until then such a motion would have been denied under
Iskanian, which was abrogated in part by Viking River. (Viking River, supra,
596 U.S. at p. __ [142 S.Ct. at p. 1924].)
      Hutcheson opposed the motion to compel arbitration on three
alternative grounds: UBS waived any right to compel arbitration; under the
plain language of his agreement with UBS, his PAGA claims were exempt
from arbitration; and the arbitration agreement was unconscionable. He also
argued that even if the trial court ordered arbitration of his individual
claims, his non-individual claims should not be dismissed.

                                        6
      The trial court found that Hutcheson demonstrated that UBS waived
its right to compel arbitration, and that UBS had not demonstrated that it
was excused from filing such a motion because the motion would have been
futile. Based on those findings, and without reaching Hutcheson’s
alternative arguments, the trial court denied UBS’s motion. UBS timely
appealed.3
                                 DISCUSSION
A.    Compelling Arbitration
      In Barrera v. Apple American Group LLC (2023) 95 Cal.App.5th 63
(Barrera), we summarized the legal principles that govern attempts to compel
arbitration:
      “The governing law is both federal and state in character. We begin
with federal law.” (Barrera, supra, 95 Cal.App.5th at p. 75.)
      Because “arbitration is a matter of contract, the FAA . . . applies if it is
so stated in the agreement.” (Barrera, supra, 95 Cal.App.5th at p. 76.) The
agreement here provides that the FAA controls. “Under the FAA, there is a
strong policy favoring arbitration. [Citations.] ‘The overarching purpose of
the FAA is to ensure the enforcement of arbitration agreements according to
their terms . . . .’ [Citation.] Therefore, ‘[a]rbitration is a matter of consent
. . . .’ [Citations.] [¶] ‘ “Although the FAA preempts any state law that
stands as an obstacle to its objective of enforcing arbitration agreements

      3 With his respondent’s brief on appeal, Hutcheson submitted an

unopposed request that we take judicial notice of documents related to the
Viking River case, which Hutcheson argues “demonstrate arguments that . . .
[UBS] could have made in support of a time[ly]-filed motion to compel
arbitration, which arguments would have been successful (at least in part) as
evidenced by the Viking River decision.” We took the request under
submission for decision with the merits, and now deny it on the grounds that
the material is not relevant to our resolution of the appeal.

                                         7
according to their terms, . . . we apply general California contract law to
determine whether the parties formed a valid agreement to arbitrate their
dispute.” ’ [Citations.]” (Ibid.)
      “ ‘ “General contract law principles include that ‘[t]he basic goal of
contract interpretation is to give effect to the parties’ mutual intent at the
time of contracting. [Citations.] . . . “The words of a contract are to be
understood in their ordinary and popular sense.” ’ [Citation.] Furthermore,
‘ “[t]he whole of a contract is to be taken together, so as to give effect to every
part, if reasonably practicable, each clause helping to interpret the other.”
[Citation.]’ ” [Citation.]’ [Citation.] Also, ambiguities or doubts about the
scope of an arbitration agreement must be resolved in favor of arbitration.
[Citations.]” (Barrera, supra, 95 Cal.App.5th at p. 76.)
      “The party seeking arbitration bears the burden of proving the
existence of an arbitration agreement, and the party opposing arbitration any
defense, such as unconscionability and waiver.” (Barrera, supra, 95
Cal.App.5th at p. 77.)
B.    Waiver
      1.    Applicable Law and Standard of Review
      Because the FAA applies to the arbitration agreement here, the
question whether UBS has waived the right to arbitration is a matter of
federal law, rather than state law. (Davis v. Shiekh Shoes, LLC (2022) 84
Cal.App.5th 956, 963.)
      “Because waiver of the right to arbitration is disfavored, ‘any party
arguing waiver of arbitration bears a heavy burden of proof.’ ” (Martin v.
Yasuda (9th Cir. 2016) 829 F.3d 1118, 1124 (Martin).) To satisfy this burden,
Hutcheson “ ‘must demonstrate (1) knowledge of an existing right to compel
arbitration; [and] (2) acts inconsistent with that existing right.’ ” (Ibid.; see

                                         8
Morgan v. Sundance, Inc. (2022) 596 U.S. 411, 419 [“prejudice is not a
condition of finding that a party, by litigating too long, waived its right to . . .
compel arbitration under the FAA”].)
      Ordinarily, the determination of waiver is a question of fact, and we
affirm the trial court’s finding if it is supported by substantial evidence. (St.
Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187,
1196.) But where “ ‘the facts are undisputed and only one inference may
reasonably be drawn, the issue is one of law and the reviewing court is not
bound by the trial court’s ruling.’ ” (Ibid.)
      2.     Analysis
      The parties disagree as to the standard of review that applies to trial
court’s waiver ruling, with UBS arguing for de novo review, and Hutcheson
arguing that we should review for substantial evidence. We conclude that
this is a case where the evidence is not in conflict, and the record establishes
lack of waiver as a matter of law.
      Hutcheson argues there is substantial evidence that UBS knew of its
right to compel arbitration by April 2018, as shown by its assertion of the
arbitration agreement as an affirmative defense. Hutcheson further argues
that there is evidence that UBS acted inconsistently with its alleged right to
arbitrate: UBS delayed for years before moving to compel arbitration, and
litigated the case extensively in court, as reflected in its removing Van
Steenhuyse’s case to federal court and opposing remand, serving discovery on
Van Steenhuyse and responding to discovery propounded by Van Steenhuyse,
and, after Hutcheson was substituted as plaintiff, moving for summary
adjudication and challenging the resulting order.
      UBS argues that as a matter of law, it cannot have had knowledge of
an existing right to compel arbitration until Viking River was decided,

                                         9
because, before that decision was issued, a motion to compel arbitration
would have been rejected under Iskanian, which was then the governing law.
      UBS has the stronger argument. Piplack v. In-N-Out Burgers (2023) 88
Cal.App.5th 1281 (Piplack) is on point and we agree with its analysis, as we
did in Barrera. (Barrera, supra, 95 Cal.App.5th at p. 77.) In Piplack the
plaintiff sued the defendant under PAGA in 2019. (Piplack, supra, 88
Cal.App.5th at p. 1286.) “Initially, the case proceeded in relatively ordinary
fashion, with the filing of answers, demurrers, amended complaints, and a
discovery motion. However, in February 2022, defendant filed a motion to
compel arbitration.” (Ibid.) Defendant explained its delay in filing the
motion by referring to the then-pending Viking River case, which defendant
expected would “overturn or materially alter” the California Supreme Court’s
decision in Iskanian. (Piplack at p. 1286.) The trial court summarily denied
the motion under Iskanian, and plaintiff appealed. (Ibid.) On appeal,
plaintiff argued that defendant had waived its right to arbitrate by, among
other things, delaying seeking arbitration and participating in litigation in
the trial court. (Id. at p. 1289.)
      The Court of Appeal resolved Piplack in favor of defendant as a matter
of law, concluding that the case was analogous to Iskanian, which, among
other things, considered whether the defendant had waived its right to
compel arbitration and prevent certification of a class action by failing to
pursue its arbitration rights until the United States Supreme Court issued
its decision in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333.
(Piplack, supra, 88 Cal.App.5th at p. 1289, citing Iskanian, supra, 59 Cal.4th
at pp. 374-378.) Piplack explains that “[t]he defendant in Iskanian initially
filed a petition to compel arbitration at the outset of the case, then withdrew
it after the California Supreme Court issued Gentry [v. Superior Court (2007)

                                       10
42 Cal.4th 443 (Gentry)4]. (Iskanian, at p. 376.) But when the United States
Supreme Court issued Concepcion and effectively invalidated Gentry, the
defendant renewed its motion for arbitration, citing the change in the law.
(Iskanian, at p. 376.) The California Supreme Court held this delay, and the
cost of related intervening proceedings in the trial court, could not constitute
waiver because the failure to file a ‘futile’ motion to compel arbitration was
not an unreasonable delay. (Id. at pp. 376-377.)” (Piplack, supra, 88
Cal.App.5th at p. 1289.)
      The court in Piplack continued, “Similarly, in the present case,
defendant raised its right to arbitrate as soon as it had any chance of
success.” (Piplack, supra, 88 Cal.App.5th at p. 1289.) “If anything, defendant
moved too quickly by seeking to compel arbitration before the United States
Supreme Court could decide Viking. In the absence of Viking, the trial court
had no choice but to deny defendant’s motion, as Iskanian remained good law
and prohibited arbitration of any PAGA claim.” (Id. at p. 1289, fn. 5.)
      Here, as in Piplack, UBS litigated the case in court before moving to
compel arbitration. The defendant in Piplack moved to compel arbitration
after the United States Supreme Court granted certiorari in Viking River,
while UBS moved to compel arbitration almost immediately after the decision
in Viking River was issued, which is “as soon as it had any chance of success.”
(Piplack, supra, 88 Cal.App.5th at p. 1289.) If UBS had made the motion
earlier, it would have been denied under the then-existing law, so filing the
motion would have been futile. In those circumstances, UBS could not have

      4 In Gentry, the California Supreme Court held that in certain

circumstances, class arbitration waivers in employment contracts were
unenforceable as contrary to California public policy. (Gentry, supra, 42
Cal.4th at p. 457.)

                                       11
had “knowledge of an existing right to compel arbitration.” (Martin, supra,
829 F.3d at p. 1124.)
      We are not persuaded by Hutcheson’s attempts to distinguish Piplack.
Hutcheson contends that Piplack is inapposite because here, unlike in
Piplack, the trial court made a finding of waiver, and that finding is
supported by evidence in the record. But the trial court’s findings of fact are
irrelevant here because as a matter of law there is no waiver where it was
futile to file a motion to compel arbitration before Viking River was decided,
because the motion would have had to be denied under governing law.
(Piplack, supra, 88 Cal.App.5th at p. 1289.) Hutcheson also contends that
Piplack is distinguishable because the defendant there “engaged in
significantly less litigation activity than UBS.” But, as Piplack explained,
“[t]he fact that defendant vigorously defended itself in the trial court makes
no difference” to the waiver analysis. (Ibid.) The relevant question is
whether there was any unreasonable delay, and as a matter of law, the
failure by a defendant to file a futile motion to compel arbitration is not
unreasonable delay and cannot constitute waiver. (Ibid.)
      We conclude that UBS did not waive its right to compel arbitration.
C.    Hutcheson’s Other Grounds for Opposing the Motion to Compel
      Arbitration
      In opposing UBS’s motion to compel arbitration in the trial court,
Hutcheson argued not only that UBS had waived its right to compel
arbitration, but also argued that even after Viking River his PAGA claim was
exempt from arbitration under the terms of the arbitration agreement and
that the arbitration provisions in his agreement with UBS are
unconscionable. The trial court did not decide the latter two issues, and
Hutcheson argues that we should affirm the trial court’s ruling on those
grounds even if we conclude that there was no waiver.

                                       12
      1.    PAGA Claims as Exempt from Arbitration
      The agreement between Hutcheson and UBS does not mention PAGA,
but because PAGA claims are made under a state law that governs
compensation they are “Covered Claims” for purposes of the agreement (as
defined in paragraph 6.b), and as such are subject to resolution by binding
arbitration under paragraph 6.a of the agreement absent some contractual
exception or overriding legal rule.
      Section 6.d of the agreement provides that, “to the maximum extent
permitted by applicable law,” Covered Claims may not be brought on a “class
action basis, collective action basis, or representative action basis” in court or
in arbitration. In 2016, when Hutcheson signed his agreement, the
applicable law was set forth in Iskanian: a PAGA suit was a “representative
action” in which the plaintiff sues “ ‘as the proxy or agent of the state’s labor
law enforcement agencies’ ” and “ ‘represents the same legal right and
interest as state labor law enforcement agencies.’ ” (Iskanian, supra, 59
Cal.4th at p. 380.) And under Iskanian PAGA claims could not be waived (id.
at p. 383) and individual PAGA claims could not be bifurcated from non-
individual PAGA claims. (Adolph, supra, 14 Cal.5th at p. 1118; see Viking
River, supra, 596 U.S. at p. __ [142 S.Ct. at p. 1916] [recognizing that all
“PAGA actions are ‘representative’ in that they are brought by employees
acting as representatives—that is, as agents or proxies—of the State,” and
distinguishing “ ‘individual’ PAGA claims, which are premised on Labor Code
violations actually sustained by the plaintiff, from ‘representative’ (or
perhaps quasi-representative) PAGA claims arising out of events involving
other employees”].)
      Thus, under applicable law at the time Hutcheson signed the
agreement, the representative action waiver in paragraph 6.d was invalid

                                        13
with respect to Hutcheson’s PAGA claim. The agreement provided that “in
the event any of the Waivers set forth in Paragraph 6.d are determined to be
invalid, unenforceable or void with respect to any Covered Claim, that
Covered Claim and only that Covered Claim shall proceed in court,” and
further provided that “[i]nsofar as any Covered Claim is permitted to proceed
on a class, collective, or representative action basis, it may do so only in a
court of competent jurisdiction and not in arbitration.” The result was that,
at least until Viking River, the agreement between UBS and Hutcheson
required Hutcheson’s PAGA claim to proceed in court.5
      After Viking River, however, “a PAGA claim can be divided into an
‘ “individual” ’ portion involving ‘claims based on code violations suffered by
the plaintiff’ and a ‘ “representative” ’ portion ‘arising out of events involving
other employees[.]’ ” (Vaughn v. Tesla, Inc. (2023) 87 Cal.App.5th 208, 236.)
An individual claim is arbitrable (Piplack, supra, 88 Cal.App.5th at p. 1288),
and because we resolve any doubts about the scope of an arbitration
agreement in favor of arbitration (Barrera, supra, 95 Cal.App.5th at p. 76.),
under paragraphs 6.a and 6.b of the agreement between Hutcheson and UBS,

      5 UBS argues that the provision that a Covered Claim proceed in court

“in the event any of the Waivers set forth in Paragraph 6.d are determined to
be invalid” is irrelevant, arguing that because paragraph 6.d prohibited
representative actions only “to the maximum extent permitted by applicable
law,” there was never any invalid waiver of any Covered Claim. Under that
interpretation of paragraph 6.d, however, no waiver could ever be invalid and
the contractual language providing that Covered Claims for which waivers
are invalid must proceed in court would be superfluous, as would the
language in paragraph 6.d, which recognizes that there may be disputes as to
the “validity” of the waivers, which must be decided by a court. (See
Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1507 [we “avoid
interpretations that render any portion [of a contract] superfluous, void or
inexplicable”].)

                                        14
the individual PAGA claim is a Covered Claim to be resolved by arbitration.
We must read Hutcheson’s waiver of Covered Claims brought on a
“representative action” basis as applying only to his non-individual PAGA
claim, which still cannot be waived. (Viking River, supra, 596 U.S. at p. __
[142 S.Ct. at p. 1925].) Because the waiver is invalid as to the non-individual
PAGA claim, the agreement requires that the non-individual claim “shall
proceed in court,” even though the individual claim is subject to arbitration.
The differential treatment of the individual and non-individual (or
“representative”) PAGA claims is further supported by language in the
agreement providing that “[i]nsofar as any Covered Claim is permitted to
proceed on a . . . representative action basis, it may do so only in a court of
competent jurisdiction and not in arbitration.” (Italics added.)
      In sum, we are not persuaded by Hutcheson’s argument that his PAGA
claims are exempt from arbitration under his agreement with UBS, at least
insofar as his individual PAGA claim is concerned, and therefore we will not
affirm the trial court’s ruling on this alternative ground.
      2.    Unconscionability
      We turn now to the issue of unconscionability, another argument raised
by Hutcheson in opposing the motion to compel arbitration.
            a.     Applicable Law and Standard of Review
      The relevant legal principles have been summarized by the California
Supreme Court in OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111 (OTO):
      “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

                                        15
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
whether they are overly harsh or one-sided.’ [Citation.]
      “Both procedural and substantive unconscionability must be shown for
the defense to be established, but ‘they need not be present in the same
degree.’ [Citation.] Instead, they are evaluated on ‘ “a sliding scale.” ’
[Citation.] ‘[T]he more substantively oppressive the contract term, the less
evidence of procedural unconscionability is required to’ conclude that the
term is unenforceable. [Citation.] Conversely, the more deceptive or coercive
the bargaining tactics employed, the less substantive unfairness is required.
[Citations.] A contract’s substantive fairness ‘must be considered in light of
any procedural unconscionability’ in its making. [Citation.] ‘The ultimate
issue in every case is whether the terms of the contract are sufficiently
unfair, in view of all the relevant circumstances, that a court should withhold
enforcement.’ [Citation.]
      “The burden of proving unconscionability rests upon the party
asserting it.” (OTO, supra, 8 Cal.5th at pp. 125-126.)
      Unconscionability is ultimately a question of law. (Civ. Code, § 1670.5,
subd. (a); Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846,
851.) We may decide the issue of unconscionability in the first instance,
because it comes before us on uncontested facts. (Barrera, supra, 95
Cal.App.5th at p. 86; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238,
1251.)

                                        16
            b.    Analysis
      We begin by disposing of two preliminary issues. First, even though
the trial court did not address Hutcheson’s unconscionability arguments,
Hutcheson argues that under the doctrine of implied findings we must
assume that the trial court made findings in his favor on the issue. The
argument is meritless. The doctrine of implied findings instructs us to infer
that the trial court “made every factual finding necessary to support its
decision.” (Fladeboe v. American Isuzu Motors, Inc. (2007) 150 Cal.App.4th
42, 48.) The trial court here made no decision as to unconscionability, and
therefore no factual findings pertaining to unconscionability are necessary to
its decision, so none are implied.
      Second, citing Buckeye Check Cashing, Inc. v. Cardegna (2006) 546 U.S.
440, 445-446, UBS argues that the issue of unconscionability must be decided
by an arbitrator because Hutcheson challenges the contract as a whole rather
than the validity of the agreement to arbitrate. We are not persuaded.6 The
contract at issue between UBS and Hutcheson is entitled, “Deferred Cash
Award Agreement,” and it incorporates several paragraphs under the
heading “Arbitration Agreement.” UBS quotes a passage from Hutcheson’s
opposition brief in the trial court in which Hutcheson claimed that “the
agreement contains multiple unconscionable provisions,” and asks us to
conclude that from this statement Hutcheson was challenging the Deferred
Cash Award Agreement as a whole. But it is clear that in his brief
Hutcheson was referring to the provisions in the “Arbitration Agreement,”

      6 UBS contends that Hutcheson fails to address the argument that

unconscionability must be addressed by the arbitrator in the first instance.
UBS is incorrect: although Hutcheson’s discussion of the issue appears in a
footnote, Hutcheson opposes UBS’s argument with citations to the record and
legal authority.

                                      17
rather than the contract as a whole. For example, the first sentence in the
section of his trial court brief addressing unconscionability is: “UBS’s motion
should also be denied for the independent reason that its arbitration
agreement is unconscionable and therefore unenforceable.” (Italics added.)
And each of the provisions that Hutcheson challenged in the trial court is
related to arbitration—which is not surprising, since the copies of his
contract that were submitted to the trial court were redacted, and the
provisions that pertained to issues other than arbitration were blocked out.7
      We turn now to the merits of Hutcheson’s claim of unconscionability,
starting with procedural unconscionability. An analysis of procedural
unconscionability “ ‘begins with an inquiry into whether the contract is one of
adhesion,’ ” that is, a standardized contract, “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.4th at p. 126.) The next inquiry is
“whether circumstances of the contract’s formation created such oppression
or surprise that closer scrutiny of its overall fairness is required. [Citations.]
‘ “ ‘Oppression occurs where a contract involves a lack of negotiation and
meaningful choice, surprise where the allegedly unconscionable provision is
hiding within a prolix printed form.’ ” ’ ” (Ibid.) Courts have recognized that
“[a]rbitration contracts imposed as a condition of employment are typically
adhesive” (ibid.) and that is the case here. Hutcheson submitted a

      7 At oral argument, UBS argued for the first time that a delegation

clause in the section of the arbitration agreement pertaining to waivers of
class claims requires that unconscionability be decided by the arbitrator
rather than the court. This argument, which was not raised in the trial court
or in UBS’s appellate briefs, has been forfeited, and we do not address it.
(See Haight Ashbury Free Clinics, Inc. v. Happening House Ventures (2010)
184 Cal.App.4th 1539, 1554, fn. 9 [“We do not consider arguments raised for
the first time at oral argument”].)

                                        18
declaration stating that over the course of his employment with UBS, from
2011 until 2017, he signed a series of agreements containing similar
arbitration provisions, and that all the agreements were presented to him by
UBS on a take-it-or-leave-it-basis. Hutcheson further declared that the most
recent agreement, which had been submitted to the trial court, was given to
him on a standardized, pre-printed form; that he had no input into the
content or wording of the agreement; and that he had no choice but to sign it
if he wanted to receive amounts that constituted a significant portion of his
promised compensation. Surprise is not an issue here, but Hutcheson’s
declaration shows a lack of negotiation and meaningful choice, and therefore
we conclude that Hutcheson has demonstrated some degree of procedural
unconscionability.8 (See id. at p. 127 [recognizing economic pressure on
employees to sign arbitration contracts as a condition of employment and as a
condition of keeping employment].)
      In analyzing substantive unconscionability we consider whether the
contract at issue contains “ ‘terms that are “unreasonably favorable to the
more powerful party,” ’ ” including terms that “ ‘ “contravene the public
interest or public policy.” ’ ” (OTO, supra, 8 Cal.5th at p. 130 [purpose of
analysis is to ensure that contracts of adhesion do not impose “ ‘unfairly one-
sided’ ” terms].) Hutcheson argues that five terms in the arbitration

      8 Contrary to assertions made by UBS at oral argument, this is not a

case like Barrera, where we concluded that plaintiffs failed to demonstrate
unconscionability. (Barrera, supra, 95 Cal.App.5th at p. 88.) In Barrera, the
plaintiffs presented no evidence as to procedural unconscionability. (Id. at
pp. 87-88.) Here, we have a declaration from Hutcheson; in contrast, in
Barrera, plaintiffs’ arguments on procedural unconscionability relied entirely
on a declaration from the defendant’s “human resources business partner.”
(Ibid.)

                                       19
agreement are substantively unconscionable, and we consider them in turn,
beginning with the most significant, which concerns limitations on discovery.
      The arbitration agreement between Hutcheson and UBS requires that
any arbitration be conducted according to FINRA’s arbitration rules, which
Hutcheson argues imposes an unconscionable limitation on discovery. In
opposing the motion to compel arbitration, Hutcheson submitted a
declaration from his attorney who stated that, based on more than 30 years of
experience representing plaintiffs in wage-and-hour litigation, which
included about 15 cases involving the compensation of securities broker-
dealers, the FINRA rules do not allow Hutcheson to obtain sufficient
discovery to prove his PAGA claim.9 Hutcheson argues that FINRA’s
arbitration rules “generally do not permit interrogatories and allow
depositions only under ‘extraordinary circumstances.’ ” And Hutcheson
argues that because the penalties at issue in his individual PAGA claim
would be less than $50,000, it is “likely that FINRA’s ‘Simplified Arbitration’
rules would apply,” which “do not permit depositions or interrogatories under
any circumstances,” and under which “the only discovery a party may request
is production of documents, and only during the 30 days following the

      9 The attorney estimated that to prove the Labor Code violations at

issue in Hutcheson’s claim he would need to take at least five depositions,
including depositions of persons most knowledgeable about UBS’s “Business
Builder” program (which allegedly violates section 2802 by causing a
Financial Advisor to pay business expenses that should be borne by UBS),
and the steps involved in calculating a Financial Advisor’s commission wages,
the timing of which are an issue in Hutcheson’s section 204 claim.
Hutcheson’s attorney further stated that in addition, he would need to serve
up to 30 interrogatories and multiple rounds of requests for production of
documents.

                                      20
defendant’s answer.” 10 According to the attorney, the requirement that any
requests for production of documents be served within 30 days of UBS’s
answer would effectively allow Hutcheson only one round of requests. The
attorney stated that even if FINRA’s general arbitration rules applied,
interrogatories would not be permitted, and depositions would be permitted
only under the “very limited circumstances,” including to preserve the
testimony of a dying witness, to accommodate witnesses who cannot travel to
the hearing, and in “extraordinary circumstances.”
      Relying on Baxter v. Genworth North America Corp. (2017) 16
Cal.App.5th 713 (Baxter) and De Leon v. Pinnacle Property Management
Services, LLC (2021) 72 Cal.App.5th 476 (De Leon), Hutcheson argues that
the discovery limitations that would apply to his claim are unconscionable
because they deprive him of sufficient discovery to vindicate his statutory
claims for PAGA penalties. Courts recognize that parties to an arbitration
agreement may agree to limits on the discovery that would be available
under the Code of Civil Procedure, but “an arbitration agreement must
nonetheless ‘ “ensure minimum standards of fairness” so employees can
vindicate their public rights.’ ” (Baxter, supra, 15 Cal.App.5th at p. 727.) In
Baxter the arbitration agreement limited the parties to 10 interrogatories,
with each subpart counting as a separate interrogatory, five written requests
for documents, and depositions of two individuals for a total of no more than

      10 According to the declaration from Hutcheson’s attorney, the amount

of penalties at stake does not affect the amount of discovery necessary to
prove the alleged violations. The attorney stated that proof of Hutcheson’s
claims requires learning the steps involved in calculating a financial advisor’s
commission wages and how UBS’s “Business Builder” program works; that
information does not differ from employee to employee; and therefore the
same basic discovery is required regardless of the number of employees or
total amount of penalties.

                                       21
eight hours, and authorized the arbitrator to increase those limits “ ‘for good
and sufficient cause shown’ in order ‘to ensure that a party has a fair
opportunity to present a case.’ ” (Id. at p. 727.) In De Leon, the arbitration
agreement limited the parties to 20 interrogatories and three depositions per
side, with no provision for any additional discovery except that the arbitrator
could order more discovery “ ‘upon . . . a showing of substantial need’ ‘but only
if the Arbitrator finds that such additional discovery is not overly
burdensome and will not unduly delay conclusion of the arbitration.’ ” (De
Leon, supra, 72 Cal.App.5th at p. 487.) The plaintiffs in Baxter and De Leon,
like Hutcheson here, set forth facts tending to show that they would not be
able to vindicate their statutory rights under the discovery limitations
provided under the arbitration agreement, and in both cases, the discovery
provisions were found to be substantively unconscionable. (Baxter, supra, 16
Cal.App.5th at pp. 729, 739; De Leon, supra, 72 Cal.App.5th at pp. 489-490.)
      Notably, UBS did not file a declaration rebutting Hutcheson’s
attorney’s opinions as to the scope of discovery necessary for Hutcheson to
prove his PAGA claim, and how the FINRA rules would constrain it. UBS’s
sole response to Hutcheson’s argument is to cite cases that stand for the
general proposition, untethered to the facts of this case, that “California
Courts have long found that FINRA (as the successor to NASD and NYSE)
rules for arbitrating disputes between brokerage firms and their customers
are not unconscionable.” (Johannsen v. Morgan Stanley Credit Corp.
(E.D.Cal. 2012) 2012 WL 90408 at p. *4; see also Brown v. Wells Fargo Bank,
N.A. (2008) 168 Cal.App.4th 938, 945, 947 [discussing NASD limitations on
arbitrations].) UBS does not explain why PAGA claims such as Hutcheson’s
should be considered similar to claims between brokerage firms and their
customers, and does not attempt to distinguish Hutcheson’s argument from

                                       22
the successful arguments in Baxter and De Leon. In these circumstances,
Hutcheson has demonstrated that the discovery limitations imposed on him
by the FINRA arbitration rules are substantively unconscionable.11 We
cannot sever this unconscionable term: we cannot replace the agreement’s
provision that arbitration will proceed under FINRA’s arbitration rules, or
insert new discovery procedures into the agreement to replace the
unconscionable FINRA discovery rules. (See Armendariz v. Foundation
Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 124-125 (Armendariz)
[courts lack authority to reform contracts by adding terms].)
      Hutcheson argues that four other provisions of the arbitration
agreement are also substantively unconscionable, and we address them
briefly.
      Hutcheson argues that the representative action waiver is
unconscionable because it violates the prohibition against waiving
representative PAGA claims, which has been affirmed in Viking River.
Hutcheson’s argument on this point is unpersuasive, because he disregards
the provisions in the agreement that authorize representative claims to be
brought in court to the extent any waiver is invalid.
      More persuasive is Hutcheson’s argument that for certain Covered
Claims, the agreement includes a one-way attorney-fee shifting provision in
favor of UBS.12 This provision is unconscionable and unenforceable (Ajamian

      11 We do not suggest that as a general matter the adoption of FINRA’s

rules for arbitration will constitute substantive unconscionability. We hold
only that in the circumstances here, where Hutcheson has come forward with
unrefuted evidence tending to show that he cannot prove his PAGA claim if
he is subject to the applicable FINRA discovery limitations, Hutcheson has
demonstrated substantive unconscionability.
      12 “Covered Claims,” which are subject to arbitration, include all

disputes between the employee (i.e., Hutcheson) and UBS, and therefore

                                      23
v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 779-800), but it is severable
and if it were the only unconscionable provision, would not render the
contract as a whole unenforceable. (Armendariz, supra, 24 Cal.4th at p. 127.)
       Another provision that Hutcheson challenges as unconscionable states
that the employee “consents to the issuance of a temporary restraining order
or a preliminary injunction by any court or arbitration panel with jurisdiction
over Employee to prohibit the breach of any provision of this Agreement . . .
and, further, that the issue of temporary and preliminary injunctive relief
may be decided by a court and not by an arbitration panel should [UBS] in its
discretion elect to seek such relief.” This provision reflects a lack of
mutuality: the employee, but not UBS, consents to the issuance of a
temporary restraining order or preliminary injunction to prohibit breach of
the agreement, and UBS, but not the employee, has the right to seek
temporary relief in court rather than in arbitration. UBS does not attempt to
justify this one-sidedness, and we conclude that it constitutes
unconscionability. (See Armendariz, supra, 24 Cal.4th at p. 117 [“it is
unfairly one-sided for an employer with superior bargaining power to impose
arbitration on the employee as a plaintiff but not to accept such limitations
when it seeks to prosecute a claim against the employee, without at least
some reasonable justification for such one-sidedness based on ‘business
realities’ ”].)
       Finally, Hutcheson challenges a provision stating that “[n]o arbitration
award or decision will have any preclusive effect as to any issues or claims in

include disputes concerning the non-solicitation and confidentiality-of-client-
information provisions of Hutcheson’s agreement with UBS. The agreement
provides that if the employee breaches those provisions, the employee is
liable to UBS for attorney fees it incurs to enforce the provisions.

                                        24
any other arbitration or court proceeding unless each of the parties in such
proceeding was also a named party in the arbitration.” UBS argues that the
provision incorporates the well-accepted principle that “a private arbitration
award cannot have nonmutual collateral estoppel effect unless the arbitral
parties so agree.” (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 836-
837.) Hutcheson argues that this provision is improper in the context of a
PAGA action, but he does not explain how the case on which he relies, Arias
v. Superior Court (2009) 46 Cal.4th 969, which concerned the preclusive effect
of a trial court judgment in a PAGA case that included both individual and
non-individual claims (id. at pp. 976, 981, 986), would apply in the context of
the arbitration of an individual PAGA claim, such as this one. Hutcheson
has not met his burden to demonstrate that this provision is unconscionable.
      Nevertheless, Hutcheson has persuaded us that the arbitration
agreement contains multiple unconscionable provisions. Even if some of
them might be severed from the remaining provisions, as authorized by the
arbitration agreement, we cannot rewrite the agreement to eliminate the
unconscionable provision that would require Hutcheson’s individual PAGA
claim to proceed under the FINRA discovery rules. Further, the arbitration
agreement includes more than one unconscionable provision, which would
weigh against severing the provision even if it were possible. The existence
of multiple unconscionable provisions supports the conclusion that the
arbitration agreement here reflects “a systematic effort to impose arbitration
on an employee not simply as an alternative to litigation, but as an inferior
forum that works to the employer’s advantage.” (Armendariz, supra, 24
Cal.4th at p. 124.)
      We conclude that Hutcheson has demonstrated some degree of
procedural unconscionability and sufficient substantive unconscionability,

                                      25
including an unconscionable limitation on discovery, to render his arbitration
agreement unenforceable with respect to his PAGA claim. On that basis, we
affirm the trial court’s order.13
                                    DISPOSITION
      The challenged order denying the motion to compel arbitration is
affirmed. Hutcheson shall recover his costs on appeal.

      13 UBS argues that once Hutcheson’s individual claim is compelled to

arbitration, his non-individual claims should be dismissed for lack of
standing. Because we affirm the trial court order denying the motion to
compel we do not reach this issue. We note, however, that the California
Supreme Court rejected an argument identical to UBS’s in Adolph, supra, 14
Cal.5th 1104, holding that “where a plaintiff has filed a PAGA action
comprised of individual and non-individual claims, an order compelling
arbitration of individual claims does not strip the plaintiff of standing to
litigate non-individual claims in court.” (Id. at p. 1123.)

                                        26
                                         _________________________
                                         Miller, J.

WE CONCUR:

_________________________
Stewart, P.J.

_________________________
Richman, J.

A166376, Hutcheson v. UBS Financial Services, Inc.

                                    27