Carmax Auto Superstores California LLC v. Hernandez
Carmax Auto Superstores California LLC v. Hernandez
Opinion of the Court
ORDER DENYING DEFENDANT’S MOTION TO DISMISS AND GRANTING PLAINTIFF’S MOTION TO COMPEL ARBITRATION
On November 12, 2014, CarMax Auto Superstores California LLC (“CarMax”) filed a petition for an order compelling arbitration under § 4 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 4; it also sought a stay of state court proceedings arising out of its dispute with Rosella Michelle Hernandez.
I. FACTUAL BACKGROUND
A. Facts Alleged in the Petition
CarMax alleges that, beginning in 2002, it employed Hernandez as a Management Assistant.
“[B]oth CarMax 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 CarMax, exclusively by final and binding arbitration before a neutral Arbitrator.”8
The DRA requires the applicant to “file a claim for arbitration within one (1)' year of the day on which [she] know[s] or, through reasonable diligence, should have known of the facts giving rise to [the] claim.” It requires that the arbitration be conducted in accordance with CarMax’s Dispute Resolution Rules and Procedures (“DRRP”).
Hernandez was purportedly given a copy of the DRRP before signing the DRA.
On September 25, 2014, Hernandez sued CarMax and Alan Hanna, one of her supervisors, in Orange Superior Court.
CarMax alleges that, prior to filing the state court complaint, Hernandez’s attorneys told her in writing of the DRA and her obligation to submit the claims in the complaint to binding arbitration.
B. Plaintiff’s Request for Judicial Notice
CarMax requests that the court take judicial notice of a docket entry in Hernandez’s state court action in considering its opposition to Hernandez’s motion to dismiss the petition.
A court can consider evidence in deciding a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, including documents that can be judicially noticed. See, e.g., Villegas v. United States, 963 F.Supp.2d 1145, 1158 (E.D.Wash. 2013) (“A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction permits a court to consider ‘affidavits or any other evidence properly before the court,’ even material extrinsic to the pleadings,” quoting Association of Am. Medical Colleges v. United States, 217 F.3d 770, 778 (9th Cir. 2000)); Ellis v. J.P. Morgan Chase & Co., 950 F.Supp.2d 1062, 1072-73 (N.D.Cal. 2013) (taking judicial notice of various documents in deciding defendant’s Rule 12(b)(1) motion to dismiss); Smith v. Kim, No. C 05-01439 JK, 2006 WL 1320483, *2-3 (N.D.Cal. May 15, 2006) (same). Thus, in deciding Hernandez’s motion to dismiss, the court can consider material that can be judicially noticed under Rule 201 of the Federal Rules of Evidence. Fed. R. Evid. 201. Under Rule 201, the court can take judicial notice of “[ojfficial acts of legislative, executive, and judicial departments of the United States,” and “[f]acts and propositions that are not
As noted, CarMax requests that the court take notice of an order issued in the parallel state court proceeding.
II. DISCUSSION
A. Defendant’s Motion to Dismiss the Petition
1. Defendant’s Alleged Failure to Meet and Confer
CarMax argues that Hernandez’s motion should be denied because she failed to comply with Local Rule 7-3.
“In all cases ..., counsel contemplating the filing of any motion shall first contact opposing counsel to discuss thoroughly, preferably in person, the substance of the contemplated motion and any potential resolution. The conference shall take place at least seven (7) days prior to the filing of the motion. If the parties are unable to reach a resolution which eliminates the necessity for a hearing, counsel for the moving party shall include in the notice of motion a statement to the following effect: ‘This motion is made following the conference of counsel pursuant to L.R. 7-3 which took place on (date).’ ” CA CD L.R. 7-3.
When a party fails to comply with Local Rule 7-3, the court can, in its discretion, refuse to consider the motion. See, e.g., Singer v. Live Nation Worldwide, Inc., No. SACV 11-0427 DOC (MLGx), 2012 WL 123146, *2 (C.D.Cal. Jan. 13, 2012) (denying a motion for summary judgment because the moving party failed to comply with Local Rule 7-3); Alcatel-Lucent USA, Inc. v. Dugdale Communications, Inc., No. CV 09-2140 PSG (JCx), 2009 WL 3346784, *4 (C.D.Cal. Oct. 13, 2009) (“The meet and confer requirements of Local Rule 7-3 are in place for a reason, and counsel is warned that nothing short of strict compliance with the local rules will be expected in this Court. Thus, the
In her reply, Hernandez concedes that she did not meet and confer with CarMax prior to filing the motion to dismiss. She asserts, however, that “the parties subsequently met and conferred, and [she] filed an amended notice [of motion] following” that meeting.
In its discretion, therefore, the court could deny Hernandez’s motion. Failure to comply with the Local Rules does not automatically require the denial of a party’s motion, however, particularly where the non-moving party has suffered no apparent prejudice as a result of the failure to comply. See ECASH Techs., Inc. v. Guagliardo, 35 Fed.Appx. 498, 500 (9th Cir. May 13, 2002) (Unpub.Disp.) (“The Central District of California’s local rules do not require dismissal of appellee’s motions for failure to satisfy the meet-and-confer requirements” (citations omitted)); Brodie v. Board of Trustees of California State University, No. CV 12-07690 DDP (AGRx), 2013 WL 4536242; *1 (C.D.Cal. Aug. 27, 2013) (considering the merits of a motion despite counsel’s failure to comply with Local Rule 7-3); Williams-Ilunga v. Gonzalez, No. CV 12-08592 DDP (AJWx), 2013 WL 571795, *4 (C.D.Cal. Feb. 13, 2013) (same); Reed v. Sandstone Properties, L.P., No. CV 12005021 MMM (VBKx), 2013 WL 1344912, *6 (C.D.Cal. Apr. 2, 2013) (same). The court therefore elects to consider the merits of Hernandez’s motion.
2. Legal Standard Governing Motions to Dismiss Under Rule 12(b)(1)
Federal courts are courts of limited jurisdiction, and may adjudicate only those cases authorized by the Constitution and by Congress. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Attorneys Trust v. Videotape Computer Products, Inc., 93 F.3d 593, 594-95 (9th Cir. 1996). “The presumption is that a federal court lacks jurisdiction in a particular case until it has been demonstrated that jurisdiction over the subject matter exists.” 13 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, FedeRAL PRACTICE & PROCEDURE: JURISDICTION 2ü § 3522 n. 3 (1984). Plaintiffs bear the burden of proving that the court has subject matter jurisdiction to hear the action. See, e.g., Sopcak v. Northern Mountain Helicopter Serv., 52 F.3d 817, 818 (9th Cir. 1995); Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989).
A defendant mounting a Rule 12(b)(1) challenge to the court’s jurisdiction may do so either on the face of the pleadings or by presenting extrinsic evidence for the court’s consideration. See Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004) (“A Rule 12(b)(1) jurisdictional attack may be facial or factual. White v. Lee, 227 F.3d 1214, 1242 (9th
3. Whether the Court Has Diversity Jurisdiction to Hear Plaintiffs Petition
CarMax’s petition seeks to compel arbitration under the Federal Arbitration Act.
a. Legal Standard Governing Diversity Jurisdiction
Under 28 U.S.C. § 1332(a), “[t]he district courts ... have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000.00, exclusive of interest and costs, and is between ... citizens of different states.” -28 U.S.C. § 1332(a); see also Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003) (“[JJurisdiction founded on [diversity] requires that the parties be in complete diversity and the amount in controversy exceed $75,000”). In any case where subject
b. Whether the Amount in Controversy Requirement is Satisfied
Although neither party disputes that the amount in controversy requirement is satisfied, the court nonetheless evaluates the allegations of the petition to determine whether more than $75,000 is at issue in this case. Generally, the amount in controversy claimed by a plaintiff in good faith will be determinative of the jurisdictional amount, unless it appears to a legal certainty that the claim is for less than $75,000. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938). “When a petition to compel arbitration is involved, ‘the amount at stake in the underlying litigation ... is the amount in controversy for purposes of diversity jurisdiction.’ ” L.A. Fitness, 2009 WL 3676272, at *3 (quoting Theis Research, Inc. v. Brown & Bain, 400 F.3d 659, 662 (9th Cir. 2005)). In the petition, CarMax alleges that the amount in controversy exceeds $75,000, citing the prayer for damages in Hernandez’s state court complaint; Hernandez seeks no less than $5,000,000 in damages for Car-Max’s alleged violations of state law.
c. Whether the Complete Diversity Requirement is Satisfied
The court next evaluates whether there is complete diversity of citizenship between the parties, i.e., whether Hernandez has citizenship different than all defendants. See Strawbridge, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435; see also Caterpillar, Inc., 519 U.S. at 68 n. 3, 117 S.Ct. 467. Hernandez does not dispute that her citizenship is diverse from CarMax’s.
“Najd claims that the district court lacked diversity jurisdiction.... Circuit City and Najd, the only parties in this action, are diverse. However, Najd argues that we must consider the citizenship of Khorsand, who is a defendant in the state court action. If Khorsand’s citizenship is considered, complete diversity is lacking because Najd and Khor-sand are both California residents. However, the citizenship of someone not before the court is irrelevant to the jurisdictional inquiry. The district court properly exercised diversity jurisdiction over Circuit City’s petition.”
Id. (citing We Care Hair Development, Inc. v. Engen, 180 F.3d 838, 842 (7th Cir. 1999); MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 945 (11th Cir. 1999); Doctor’s Associates, Inc. v. Distajo, 66 F.3d 438, 445-46 (2d Cir. 1995) (emphasis added)).
As in Najd, it is undisputed that the citizenship of the parties before the court, i.e., the parties to CarMax’s arbitration petition, is diverse. It is of no consequence that Hannah, who is not a party to the petition, is a California citizen; under Najd, “the citizenship of someone not before the court[, i.e., Hannah,] is irrelevant to the jurisdictional inquiry.”
Hernandez asserts that Najd is no longer good law in light of the Supreme Court’s decision in Vaden v. Discover Bank, 556 U.S. 49, 129 S.Ct. 1262, 173 L.Ed.2d 206 (2009).
Hernandez relies on the Supreme Court’s statement in Vaden that the district court should “look through a § 4 petition” to consider the “substantive conflict between the parties” as support for her argument that the court must consider the citizenship of all parties named in a parallel state court action to determine if it can exercise diversity jurisdiction over CarMax’s 4 petition. The court is not persuaded.
Most fundamentally, Hernandez’s argument ignores the limited scope of the Supreme Court’s holding in Vaden. The Eighth Circuit’s decision in Northport Health Services of Arkansas, LLC v. Rutherford, 605 F.3d 483 (8th Cir. 2010), is particularly instructive on this point. There, the court addressed the argument Hernandez makes here — that the Vaden “look through” directive applies when the court is determining whether it has diversity jurisdiction to entertain a § 4 petition. Rutherford, 605 F.3d at 488-91. After extensive analysis of Vaden and relevant authorities, the court concluded that the “look through” approach mandated by the Supreme Court in federal question cases does not “appl[y] in deciding diversity of citizenship ... § 4 disputes.” Id. at 489. In reaching this conclusion, the Rutherford court made several important observations.
First, it addressed “[t]he fundamental flaw in the [ ] contention that Vaden implicitly overruled prior circuit court diversity jurisdiction decisions” concluding that a court can consider only the citizenship of the parties to the § 4 petition. The court stated “that [the argument] ignore[d] the underlying facts and the Supreme Court’s decision in Moses H. Cone [Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ]. In Moses H. Cone, the Supreme Court observed that the court had diversity jurisdiction over a § 4 petition and affirmed an order compelling arbitration, notwithstanding the fact that a “non-diverse party [] made the parallel state court action [underlying the petition] non-removable.” See Rutherford, 605 F.3d at 490 (citing Moses H. Cone, 460 U.S. at 7 & n. 4, 103 S.Ct. 927). The Eighth Circuit
Second, the Eighth Circuit noted that, although the Supreme Court described at length “the ‘curious practical consequences’ of the no-look-through approach to federal question issues,” it made no mention of similar concerns associated with employing such an approach where diversity jurisdiction was invoked. Id. It found this significant, as the Vaden Court “adopted the look-through approach to expand the universe of § 4 cases in which there will be an independent basis of federal question jurisdiction [so that it would] be more compatible with diversity jurisdiction cases (i.e., Moses H. Cone).” Adopting the “look-through approach” for diversity jurisdiction, the Rutherford court observed, would run counter to the Supreme Court’s focus on expanding § 4 jurisdiction because it would “severely contradi ] pre-existing § 4 diversity jurisdiction” under Moses H. Cone. Id. at 490-91.
The court agrees with the Eighth Circuit’s reasoned analysis, and concludes that the Supreme Court’s holding in Vaden is not so expansive as to mandate that a district court adopt the “look-through approach” to determine whether it has diversity jurisdiction to hear a § 4 petition. In reaching this conclusion, the court finds particularly significant the expressly limited nature of the Vaden Court’s approval of the “look-through approach” to assess the existence of federal question jurisdiction. See Vaden, 556 U.S. at 62, 129 S.Ct. 1262 (“Attending to the language of the FAA and the above-described jurisdictional tenets, we approve the “look through” approach to this extent: A federal court may “look through” a § f petition to determine whether it is predicated on an action that ‘arises under’ federal law ” (emphasis added)). The court is also cognizant of the well-established principle that the Supreme Court “does not normally overturn, or [ ] dramatically limit, earlier authority[, i.e., Moses H. Cone ] sub silentio.” Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 18, 120 S.Ct. 1084, 146 L.Ed.2d 1 (2000).
The authority Hernandez cites, moreover, does not support her argument to the contrary. Each case cites Vaden only for the general proposition that “a federal court has jurisdiction over a petition to compel arbitration if the federal court would have jurisdiction over the underlying substantive dispute.” See Countrywide Home Loans, Inc. v. Mortgage Guar. Ins. Corp., 642 F.3d 849, 855 (9th Cir. 2011); Geographic Expeditions, Inc., 599 F.3d at 1106; In re Wade, No. 14-CV-03453-LHK, 2014 WL 5088258, *4 (N.D.Cal. Oct. 9, 2014). None of these decisions provides any substantive support for Hernandez’s argument, however. In Countrywide Home Loans and Geographic Expeditions, Inc., the Ninth Circuit concluded that there was diversity jurisdiction to hear § 4 petitions because there was complete diversity of citizenship among the parties; in neither decision did the court indicate that the parties to the federal action were different than the parties to the underlying state action. Nor did either address whether, assuming this was the case, complete diversity should be assessed by looking to the citizenship of the parties to the underlying state action. See Countrywide Home Loans, 642 F.3d at 855 n.2 (it is undisputed that the “parties are completely diverse”); Geographic Ex
In re Wade is similarly of little help; the court notes in summary fashion that “[it was] simply not the case [t]here” that “the matter involve[d] a question of federal law, or [that] it involve[d] diverse parties.” In re Wade, 2014 WL 5088258, at *4. Finally, Anaya v. Lowe’s Home Centers, LLC, No. 14cvl260 L(BGS), 2014 WL 2199878, *1 (S.D.Cal. May 27, 2014), is clearly distinguishable, as it addressed removal jurisdiction rather than a petition to compel arbitration under the FAA; the decision makes no reference whatsoever to Vaden.
In sum, for the reasons stated, the court declines to extend the limited approval of the “look-through” approach announced in Vaden to the question of diversity jurisdiction in this case.
B. Plaintiffs Motion to Compel Arbitration and Stay State Court Proceedings
1. Legal Standard Governing Motions to Compel Arbitration
The Federal Arbitration Act (“FAA”) provides that written arbitration agreements “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. Section 4 of the FAA, which governs petitions to compel arbitration, provides that
“[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction.... The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement....” 9 U.S.C. § 4.43
In enacting the FAA, Congress “declared a national policy favoring arbitration” that was intended to reverse centuries of judicial hostility to arbitration agreements. Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984); see Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 475 n. 8 (9th Cir. 1991) (“The Federal Arbitration Act of 1925 ... reflects the strong Congressional policy favoring arbitration by making such clauses ‘valid, irrevocable, and enforceable,’ ” quoting 9 U.S.C. § 2); Arreguin v. Global Equity Lending, Inc., No. C 07-06026 MHP, 2008 WL 4104340, *4 (N.D.Cal. Sept. 2, 2008) (stating that the FAA “is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary,’ ” quoting Moses H. Cone, 460 U.S. at 24, 103 S.Ct. 927). As a result, the FAA requires that courts “rigorously enforce agreements to arbitrate.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985); id. at 218, 105 S.Ct. 1238 (“By its terms, the [FAA] leaves no place for the exercise of discretion by a district court, but instead mandates that, district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed,” citing 9 U.S.C. §§ 3, 4 (emphasis original)); see also Moses H. Cone, 460 U.S. at 22-23, 103 S.Ct. 927.
Despite this strong policy favoring arbitration, “ ‘arbitration is a matter of contract and a party cannot be re
A district court’s “role under the [FAA] is ... limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue. If the response is affirmative on both counts, then the Act requires the court to enforce the arbitration agreement in accordance with its terms.” Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (citations omitted).
When evaluating whether a party is bound by an arbitration agreement, “the liberal federal policy regarding the scope .of arbitrable issues is inappo-site.” Comer v. Micor, Inc., 436 F.3d 1098, 1104 n. 11 (9th Cir. 2006); Chastain v. Union Security Life Insurance Co., 502 F.Supp.2d 1072, 1075 (C.D.Cal. 2007) (where the issue is whether parties are bound by an arbitration agreement, “the Court is not bound by [the] ... policy encouraging arbitration in reviewing plaintiffs’ motion”). The issue instead is determined according to ordinary principles of contract law. Waffle House, 534 U.S. at 293, 122 S.Ct. 754 (in deciding whether a valid agreement to arbitrate exists, federal courts must “place arbitration agreements on equal footing with other contracts”); Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003) (“[T]o evaluate the validity of an arbitration agreement, federal courts ‘should apply ordinary state-law principles that govern the formation of contracts,’ ” quoting First Options of Chicago, 514 U.S. at 944, 115 S.Ct. 1920)); see also Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002) (“[The] federal policy favoring arbitration does not apply to the determination of whether there is a valid agreement to arbitrate between the parties; instead ‘Mrdi-nary contract principles determine who is bound,’” quoting Daisy Manufacturing Co. v. NCR Corp., 29 F.3d 389, 392 (8th Cir. 1994)); Flores v. Jewels Marketing and Agribusiness, No. CIV-F 07-334 AWI WMW, 2007 WL 2022042, *6 (E.D.Cal. July 9, 2007) (same). Accordingly, arbitration agreements “are subject to all defenses to enforcement that apply to contracts generally.” Ingle, 328 F.3d at 1170.
“[A]n arbitration agreement may - not function so as to require employees to
Thus, to be enforceable, an agreement to arbitrate claims based on statutory rights must meet minimum requirements first articulated in Cole v. Burns International Sec. Services, 105 F.3d 1465 (D.C.Cir. 1997). Specifically, they must' “(1) provide[] for neutral arbitrators, (2) provide[] for more than minimal discovery, (3) require[ ] a written award, (4) provide[] for all types of relief that would otherwise be available in court, and (5)[ ] not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum.” See id. at 1482 (applying Gilmer, 500 U.S. at 28, 111 S.Ct. 1647); see also Arreguin, 2008 WL 4104340, at *4 (listing the Cole factors, and noting that “[b]oth the Ninth Circuit and the California Supreme Court have cited ... this portion of Cole with approval,” citing Ting, 319 F.3d at 1151, and Armendariz, 24 Cal.4th at 102, 99 Cal.Rptr.2d 745, 6 P.3d 669).
In addition, “generally applicable defenses, such as ... unconscionability, may be applied to invalidate arbitration agreements” between employers and employees. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). Because Hernandez was employed in California, the court must apply California law to determine whether the arbitration agreement is unconscionable. See Ingle, 328 F.3d at 1170 (“Ingle was employed in California; we therefore evaluate Circuit City’s arbitration agreement under the contract law of that state”).
2. Whether the Court Should Grant Plaintiffs Motion to Compel
a. Whether the FAA Applies to the Parties’ Agreement
As an initial matter, Hernandez contends that CarMax’s motion must be denied because the FAA does not apply to her arbitration agreement with CarMax.
“The FAA applies to any contract affecting interstate commerce.” Yahoo! Inc. v. Iversen, 836 F.Supp.2d 1007, 1009 (N.D.Cal. 2011) (citing Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001)); see Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1126
“A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, 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 Supreme Court has held that the FAA applies to employment contracts if the employment affects interstate commerce. See, e.g., Herrera v. CarMax Auto Superstores California, LLC, No. CV-14-776-MWF (VBKx), 2014 WL 3398363, *3 (C.D.Cal. July 2, 2014) (“The FAA applies to written arbitration agreements in ‘eon-tract[s] evidencing a transaction involving commerce.’ An employment contract including an agreement to arbitrate can be subject to the FAA, if it is not expressly exempted by the FAA and if the employment affects interstate commerce,” citing Circuit City Stores, 532 U.S. at 113, 119, 121 S.Ct. 1302 (rejecting an argument that an employment agreement is not a “contract evidencing a transaction involving interstate commerce,” and holding that 9 U.S.C. § 1 does not exempt all employment contracts from the FAA)); Plows v. Rockwell Collins, Inc., 812 F.Supp.2d 1063, 1066 (C.D.Cal. 2011) (“The FAA, which provides that ‘a written provision in any ... contract ... to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,’ applies to transactions involving interstate commerce, including employment agreements where the employment relationship involves interstate commerce,” citing Circuit City Stores); Slaughter v. Stewart Enterprises, Inc., No. C 07-01157 MHP, 2007 WL 2255221, *5 (N.D.Cal. Aug. 3, 2007) (“[T]he FAA undis-putably reaches some employment contracts,” citing Circuit City Stores).
The term “involving commerce” “signals an intent to exercise Congress’ commerce power to the full.” Circuit City Stores, 532 U.S. at 115, 121 S.Ct. 1302 (citing Alliedr-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 277, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)). Given that the statute “provides for ‘the enforcement of arbitration agreements within the full reach of the Commerce Clause,’ ” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 156 L.Ed.2d 46 (citing Perry v. Thomas, 482 U.S. 483, 490, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987)), the Court has held that “the FAA encompasses a wider range of transactions than those actually ‘in commerce’ — that is ‘within the flow of interstate commerce.’ ” Id. at 56, 123 S.Ct. 2037 (citing Allied-Bruce, 513 U.S. at 277, 115 S.Ct. 834).
Hernandez argues that CarMax has “fail[ed] to establish that [her] specific
CarMax proffers the declaration of Kimberly Ross, its vice president of human resources.
The evidence proffered by CarMax suffices to demonstrate that Hernandez’s employment contract with CarMax “in-volv[ed] [interstate] commerce.” It is undisputed that Hernandez was employed by a national corporation that did business in thirty-six states and engaged in interstate transactions on a regular basis. CarMax has also adduced evidence that Hernandez’s job directly involved interstate commerce in that management assistants (1) hire employees who engage in interstate activity; (2) correspond with CarMax’s corporate offices in Virginia; and (3) make out-of-state travel arrangements. Courts have concluded that similar employment relationships have a sufficient connection in interstate commerce that they are subject to the FAA. See, e.g., Herrera, 2014 WL 3398363, at *2-3 (concluding that an employment contract between CarMax and three former employees — a painter, service mechanic, and automotive service technician — involved interstate commerce); Montes v. San Joaquin Community Hospital, No. 1:13-cv-01722-AWI-JLT, 2014 WL 334912, *5 (E.D.Cal. Jan. 29, 2014) (concluding that an employment contract between plaintiff and a hospital was governed by the FAA because the hospital’s activities were involved interstate commerce); Abdullah v. Duke University Health System, Inc., No. 5:09-CV-8-FL, 2009 WL 1971622, *3 (E.D.N.C. July 8, 2009) (concluding that an employment contract between a hospital and the plaintiff “involve[d] interstate commerce because DUHS treats patients
b. Whether the Parties’ Arbitration Agreement is Valid
(1) Legal Standard Governing Unconscionability
Hernandez argues that the arbitration agreement is unconscionable and
The California Supreme Court’s decision in Armendariz “provides the definitive pronouncement of California law on uncon-scionability to be applied to mandatory arbitration agreements.” See Ferguson v. Countrywide Credit Industries, Inc., 298 F.3d 778, 782-83 (9th Cir. 2002). Prior to Armendariz, California courts applied two distinct analytical frameworks in assessing whether a contract was unconscionable. See Morris v. Redwood Empire Bancorp, 128 Cal.App.4th 1305, 1317, 27 Cal.Rptr.3d 797 (2005) (“In California, two separate approaches have developed for determining whether a contract or provisions thereof [are] unconscionable”); see also Flores v. Transamerica HomeFirst, Inc., 93 Cal.App.4th 846, 852-53 & n. 6, 113 Cal.Rptr.2d 376 (2001) (explaining the two frameworks); Patterson v. ITT Consumer Financial Corp., 14 Cal.App.4th 1659, 1663-64, 18 Cal.Rptr.2d 563 (1993) (“Two alternative analyses exist under California law for determining whether a contractual provision will be enforceable because it is unconscionable”). In Armendariz, the Supreme Court cited both tests with approval but did not treat them as separate. See Armendariz, 24 Cal.4th at 113-14, 99 Cal.Rptr.2d 745, 6 P.3d 669.
Under the first test, which derives from Graham v. Scissor-Tail, Inc., 28 Cal.3d 807, 817-20, 171 Cal.Rptr. 604, 623 P.2d 165 (1981), courts look first to whether the agreement at issue is a contract of adhesion. See Armendariz, 24 Cal.4th at 113, 99 Cal.Rptr.2d 745, 6 P.3d 669 (“Uncon-scionability analysis begins with an inquiry into’ whether the contract is one of adhesion,” citing Graham, 28 Cal.3d at 817-19, 171 CahRptr. 604, 623 P.2d 165). A 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.” Id. (quoting Neal v. State Farm Ins. Cos., 188 Cal.App.2d 690, 694, 10 Cal.Rptr. 781 (1961)). If an agreement is a contract of adhesion, the court must consider both whether the terms are contrary to the expectations of the weaker party, and whether they are otherwise unduly oppressive. See id. (“Generally speaking, there are two judicially imposed limitations on the enforcement of adhesion contracts or provisions thereof. The first is that such a contract or provision which does not fall within the reasonable expectations of the weaker or ‘adhering’ party will not be enforced against him. The second — a principle of equity applicable to all contracts generally — is that a contract or provision, even if consistent with the reasonable expectations of the parties, will be denied enforcement if, considered in its context, it is unduly oppressive or ‘unconscionable’” (citations and internal quotation marks omitted)).
The different phrasing of the two tests has produced some confusion. In particular, Armendariz’s statement that “[u]n-conscionability analysis begins with an inquiry into whether the contract is one of adhesion,” id. at 113, 99 Cal.Rptr.2d 745, 6 P.3d 669, has led some courts to conclude that a contract must be adhesive to be unconscionable. See Morris, 128 Cal.App.4th at 1317, 27 Cal.Rptr.3d 797 (“Each of the two approaches has generated some confusion in its application. For example, the Graham approach commences with a determination of whether the contract is one of adhesion, thus fostering the impression that a nonadhesion contract may never be unconscionable”). While Armendar-iz ’s statement that adhesiveness is the starting point for unconscionability analysis may have generated confusion, the Court also made clear that any contract or contract term may be unconscionable if it is “unduly oppressive.” See Armendariz, 24 Cal.4th at 113, 99 Cal.Rptr.2d 745, 6 P.3d 669 (“The second [judicially imposed limitation on enforcement of adhesion contracts] — a principle of equity applicable to all contracts generally — is that a contract or provision, even if consistent with the reasonable expectations of the parties, will be denied enforcement if, considered in its context, it is unduly oppressive or ‘unconscionable’ ” (emphasis added and internal quotation marks omitted)).
The Graham test is thus best understood as a specific application of the “sliding scale” adopted in A & M Produce. Because “[a] finding of a contract of adhesion is essentially a finding of procedural unconscionability,” Flores, 93 Cal.App.4th at 853; 113 Cal.Rptr.2d 376, the Graham test simply describes the degree of substantive unconscionability that must be present before it is appropriate to refuse to enforce an adhesive contract or term on grounds of unconscionability. The California Supreme Court has observed, in fact, that the Graham and A & M Produce frameworks produce identical results. See Perdue v. Crocker National Bank, 38 Cal.3d 913, 925 n. 9, 216 CaLRptr. 345, 702 P.2d 503 (1985).
(2) Whether the 2001 or 2011 DRRP is Applicable
Before considering whether Hernandez and CarMax entered into a valid, enforceable arbitration agreement, the court must first determine whether the 2001 or 2011 DRRP reflects that agreement. Hernandez asserts that unconscion-ability must be measured “at the time the agreement is entered into, not when it is
Rule 19 of the 2001 DRRP included a modification clause stating:
“CarMax may alter or terminate the Agreement and these Dispute Resolution Rules and Procedures on December 31st of any year upon giving 30 calendar days written notice to Associates, provided that all claims arising before alteration or termination shall be subject to the Agreement and corresponding Dispute Resolution Rules and Procedures in efect at the time the Arbitration Request Form and accompanying filing fee, or Request for Waiver of Filing Fee is received by the Company. Notice may be given by posting a written notice by December 1 of each year at all CarMax locations (including locations of affiliated companies). A copy of the text of any modification to the Agreement or Rules and Procedures will be published in the Applicant Packet, which will be available at such locations after December 31 of each year.”59
Hernandez does not dispute that CarMax provided the notice required by Rule 19 or that it validly modified the DRRP. Rather, she appears to contend that the modified DRRP does not apply because it was not in effect at the time she entered into the DRA, and thus cannot govern any of her claims. While it is true that “[t]he court determines unconsciona-bility with reference to the time the contract is entered into,” Lanigan v. City of Los Angeles, 199 Cal.App.4th 1020, 1035, 132 Cal.Rptr.3d 156 (2011), Hernandez fails to appreciate that “a subsequent written contract alters the terms of a previous contract,” Thiele v. Merrill Lynch, Pierce, Fenner & Smith, 59 F.Supp.2d 1060, 1064 (S.D.Cal. 1999).
It is for this reason that courts considering modifications to arbitration clauses have found that, when a term has been altered through a valid modification, un-conscionability is judged with reference to the modified provision, rather than the original, superceded provision. See, e.g., Herrera, 2014 WL 3398363, at *4-5 (applying the 2011 DRRP, which was different than that in effect on the date the employees signed the agreement, and rejecting plaintiffs argument that the agreement was illusory because it could be modified unilaterally by CarMax, as CarMax had followed the prescribed notice procedures and that procedure and the covenant of good faith and fair dealing limited Car-Max’s ability to make unilateral modifications and save the agreement from being illusory); Casas, 224 Cal.App.4th at 1236-37, 169 Cal.Rptr.3d 96 (concluding that the 2011 DRRP applied to plaintiffs claims, rather than the DRRP in effect when he was first hired, and holding that “ ‘[t]he implied covenant of good faith and fair dealing limits the employer’s authority to unilaterally modify the arbitration agreement and saves that agreement from being illusory and thus unconscionable,’ ” quoting Serpa v. California Surety Investigations, Inc., 215 Cal.App.4th 695, 708, 155 Cal.Rptr.3d 506 (2013)). Compare Ferguson, 298 F.3d 778, 786 (9th Cir. 2002) (in assessing the unconscionability of an arbitration agreement, the court declined to consider a fee provision included in a subsequent arbitration agreement, holding “the pur
Countrywide did not follow its company modification procedure,” citing Mercuro v. Superior Court, 96 Cal.App.4th 167, 181— 82, 116 Cal.Rptr.2d 671 (2002)). Because Hernandez does not dispute that CarMax validly modified the DRRP in accordance with Rule 19, the court concludes that the 201-1 DRRP is the effective arbitration agreement for purposes of Car-Max’s petition.
(3) Whether the Arbitration Agreement Satisfies the Cole Factors
It is undisputed that the agreement mandates the arbitration of claims based on statutory rights.
(a) Whether the DRRP Provides for Neutral Arbitrators
Rule 5 of the 2011 DRRP governs the selection of a neutral arbitrator.
(b) Whether the DRRP Provides for More than Minimal Discovery
The second Cole factor examines whether the DRRP provides for “more than minimal discovery.” Rule 8 requires the parties to make initial disclosures within fourteen days of the appointment of an arbitrator, exchanging copies of “all documents (except for privileged documents that are protected from disclosure because they involve attorney-client, doctor-patient, or other legally privileged or protected communications or materials) upon which they rely in support of their claims or defenses”; it imposes a continuing obligation to supplement the initial disclosures.
Hernandez asserts, in summary fashion, and without substantive argument, that the discovery authorized by the 2001 Rules
Numerous courts have found that similar — and in some cases, identical — discovery provisions provide sufficient discovery and have held that the DRRP does not unfairly or unconscionably limit a party’s ability to conduct discovery in order to prove its case. See, e.g., Herrera, 2014 WL 3398363, at *8-9 (“The DRRP’s Rule 8 provides for initial disclosure of relevant documents, production of the ... plaintiffs ‘personnel records file,’ up to twenty interrogatories which may be submitted with a request for supporting documents, and additional discovery on a showing of ‘substantial need.’ The court in Sanchez [v. Carmax Auto Superstores California, LLC, 224 Cal.App.4th 398, 168 Cal.Rptr.3d 473 (2014),] reviewed the DRRP’s Rule 8 and found that it was not unconscionable. ... Plaintiffs have not shown that the discovery allowable under the DRRP would be unconscionable in wage-and-hour cases. Because the DRRP allows for a significant amount of discovery, because California courts have found it sufficient, and because discovery in arbitration need not be as robust as provided for in a court’s rules of procedure, the DRRP’s Rule 8 is not unconscionable”); Jones-Mixon v. Bloomingdale’s, Inc., No. 14-cv-01103-JCS, 2014 WL 2736020, *9 (N.D.Cal. June 11, 2014) (“The discovery provisions of the agreement in this case require Defendants to provide Plaintiff with ‘copies of all documents upon which they rely in support of their claims or defenses,’ and Plaintiff is ‘entitled to a copy of all documents’ in her personnel file. The parties are both limited to one set of twenty interrogatories and three depositions, and all discovery must be completed within ninety days. In addition, the arbitrator [may] permit additional discovery upon ‘a showing of appropriate justification,’ so long as the request for discovery is not ‘overly burdensome, and will not unduly delay the conclusion of arbitration.’ Plaintiff has cited no case in support of her argument that the foregoing discovery restrictions render an agreement to arbitrate substantively unconscionable. The great weight of authority supports at least one California Court of Appeal in holding that ‘[t]he fact that an arbitration may limit a party’s discovery rights is not substantive unconscionability.’ In any event, several courts have held that discovery limitations similar to those here do not render an agreement substantively unconscionable” (citations omitted)); Luchini v. CarMax, Inc., No. CV F 12-0417 LJO DLB, 2012 WL 2995483, *10 (E.D.Cal. July 23, 2012) (“CarMax notes that Rule 8 requires the parties’ exchange of nonprivileged documents to support claims and defenses and to supplement disclosures and permits up to 20 interrogatories and three depositions along with additional discovery as allowed by the arbitrator. There is no dispute that the arbitration agreement and arbitration rule provide for adequate discovery”); Abeyrama v. J.P. Morgan Chase Bank, No. CV 12-00445 DMG (MRWx), 2012 WL 2393063, *4 (C.D.Cal. June 22, 2012) (“Plaintiff also argues that the arbitration agreement does not provide for the minimal discovery that Armendariz requires because the parties can only conduct a limited amount of discovery and two depositions prior to the arbitration hearing. Plaintiffs argument fails because ‘the fact that an arbitration may limit a party’s discovery rights is not substantive uncon-scionability.’ While the arbitration agreement normally allows only two depositions,
(c) Whether the DRRP Requires a Written Award
Hernandez argues that the agreement does not require a “written reasoned award”; the provision she references, however, is from the 2001 DRRP.
(d) Whether the DRRP Provides for All Types of Relief That Would Be Available in a Court Proceeding
Rule 14 of the DRRP states that “[i]f the Arbitrator finds for the Associate, the Arbitrator, in his discretion, may aivard appropriate relief in accordance with applicable law.”
(e) Whether the DRRP Does Not Condition Access to the Arbitral Forum on Payment of Unreasonable Costs
Hernandez argues that the DRRP conditions access to the arbitral forum on payment of unreasonable costs by the employee because it “require[s] the employee to pay certain of the arbitration forum fees (including room rental), and also permits these fees to be shifted and awarded to CarMax if CarMax[] prevails.”
(O Conclusion Re: Cole Factors
For the reasons stated, the court finds that the 2011 DRRP between CarMax and Hernandez satisfies each of the Cole factors. Accordingly, the court proceeds to consider whether it is unconscionable generally.
(4) Whether the Arbitration Agreement is Procedurally Unconscionable
“Procedural unconscionability concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. It focuses on factors of oppression and surprise. The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party.” Parada v. Superior Court, 176 Cal.App.4th 1554, 1570, 98 Cal.Rptr.3d 743 (2009) (citations omitted).
In Armendariz, the California Supreme Court concluded that an arbitration agreement was procedurally unconscionable because “[i]t was imposed on employees as a condition of employment and there was no opportunity to negotiate.... ” Armendariz, 24 Cal.4th at 114, 99 Cal.Rptr.2d 745, 6 P.3d 669. The Court noted that “in 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.” Id. Because the agreement lacked mutuality, it concluded that the arbitration agreement was substantively as well as procedurally unconscionable. Specifically, the employee was required to arbitrate claims against the employer, but the employer was not bound to arbitrate any dispute it had with the employee. Id. at 114, 119, 99 Cal.Rptr.2d 745, 6 P.3d 669. The Court noted that, in the employment context, arbitration agreements must contain a “modicum of bilaterality.” Id. at 117, 99 Cal.Rptr.2d 745, 6 P.3d 669. It explained:
“Given the disadvantages that may exist for plaintiffs arbitrating disputes, 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, without at least some reasonable justification for such one-sidedness based on ‘business realities.’ As has been recognized ‘unconscionability turns not only on a “one-sided” result, but also on an absence of “justification” for it.’ ... If the arbitration system established by the employer is indeed fair, then the employer as well as the employee should be willing to submit claims to arbitration. Without reasonable justification for this lack of mutuality, arbitration appears less as a forum for neutral dispute resolution and more as a means of maximizing employer advantage. Arbitration was not intended for this purpose.” Id. at 117-18, 99 Cal.Rptr.2d 745, 6 P.3d 669 (citations omitted).
Like the arbitration agreement at issue in Armendariz, CarMax’s arbitration agreement is procedurally unconscionable. Although it is not hidden, or buried in a lengthy document, see Nat’l Bank of California, NA v. Gay, No. CV 11-2521-RSWL (JCGx), 2011 WL 2672359, *3 (C.D.Cal. June 29, 2011) (“[T]he element of surprise was not present at the time of contracting. The arbitration agreement is not hidden or difficult to read, as it was contained in a stand-alone, three-page document regarding remedies, is listed in bold, capital letters and clearly sets forth the terms contained therein”), it is a preemployment contract of adhesion that the potential employee must sign if he or she wishes to be considered for employment. Indeed, the document speaks for itself in this regard; its first sentence states that the employer “will not consider
Hernandez contends that, beyond the adhesive nature of the agreement, the fact that CarMax did not give her a copy of the DRRP before she signed the DRA adds an additional layer of procedural un-conseionability. She notes that courts have concluded that “[t]he failure to attach the applicable rules referred to in the agreement, or provide them to employee at the time the agreement is entered into establishes further procedural unconscion-ability.”
Evidence in the record, however, belies Hernandez’s assertion that she was not given the DRRP at the time she entered into the agreement, and that she was not given sufficient notice and access to the 2011 DRRP when modifications were made. Although Hernandez asserts that the employment application she completed did not include the DRRP,
“If you wish to be considered for employment you must read and sign the following agreement. You will be considered as an applicant when you have signed the Agreement. Included with this application is the CarMax 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 CarMax representative prior to siyniny 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.”82
Hernandez does not dispute that she signed the employment application and subsequent agreements acknowledging, immediately below bolded text, that she had “received” a copy of the DRRP prior to signing the agreement.
As for subsequent DRRPs, including the 2011 DRRP, the agreement, as noted, requires that CarMax give employees notice of the modified DRRP. CarMax has submitted Ross’ declaration, which states that CarMax employees, including Hernandez, were given access to copies of all DRRPs through the company’s intranet system.
Poublon is distinguishable, and in fact supports CarMax’s contention that the modification provision is not unconscionable. That provision is, in all relevant respects, identical to the one at issue in Casas. Judge Snyder implicitly recognized that the Casas provision was not procedurally unconscionable. Hernandez does not dispute that the agreement required that CarMax give all employees notice of any intention to amend the DRRP at least thirty days before the modification took effect. She has adduced no evidence that the notice was not given.
(5) Whether the Arbitration Agreement is Substantively Unconscionable
The foregoing analysis indicates that the arbitration agreement was somewhat unconscionable procedurally. Cf. Nagrampa, 469 F.3d at 1284 (holding that there was only “minimal” procedural un-conscionability despite defendant’s “overwhelming bargaining power,” its concession that the contract was non-negotiable, and its drafting of the contract). Consequently, the court can find that it is unenforceable only on a showing of significant substantive unconscionability. See, e.g., id. at 1281 (“Because California courts employ a sliding scale in analyzing whether the entire arbitration provision is unconscionable, even if the evidence of procedural unconscionability is slight, strong evidence of substantive unconscionability will tip the scale and render the arbitration provision unconscionable,” citing Armen-dariz).
An arbitration provision is substantively unconscionable if it is “ ‘overly harsh’ ” or generates “ ‘one-sided’ results.” Armendariz, 24 Cal.4th at 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 (quoting A & M Produce, 135 Cal.App.3d at 486-87, 186 Cal.Rptr. 114); see Herrera, 2014 WL 3398363 at *6 (“ ‘Substantive unconsciona-bility relates to the effect of the contract
(a) Statute of Limitations
Hernandez first argues that the DRRP is substantively unconscionable because it shortens the limitations period on statutory claims against CarMax and because the limitations provision is unilateral, i.e., it applies only to her claims against CarMax and does not apply to claims asserted by CarMax.
Although Rule 4(b) of the 2001 DRRP required that an employee submit an arbitration claim “not later than one year after the date on which [he or she] knew, or through reasonable diligence, should have known, of the facts giving rise to the ... claim(s)”,
(b) Written Arbitration Decision
Hernandez next argues that the DRRP is substantively unconscionable because it does not require a written arbitration award.
(c) Costs Provision
Hernandez’s next argument — that the agreement is substantively unconscionable because it does not require CarMax to bear all of the costs of arbitration — is unpersuasive for the same reason, i.e., that it is premised on the language of the 2001, rather than the 2011, DRRP.
(d) Confidentiality Provision
Rule 9(g) of the 2011 DRRP states:
“All aspects of an arbitration pursuant to these Dispute Resolution Rules and Procedures, including the hearing and record of the proceeding, shall be confidential and shall not be open to the public, except (I) to the extent both Parties agree otherwise in writing; (ii) as may be appropriate in any subsequent proceeding between the Parties; or (iii) as may otherwise be appropriate in response to a governmental agency or legal process. All settlement negotiations, mediations, and the results thereof shall be confidential.”97
Hernandez argues that “the requirement of confidentiality of the arbitration proceedings is unconscionable because, although it is facially mutual, in reality it may greatly favor the employer because [it is a] ‘repeat player[ ].’ ”
First, as CarMax notes, both the Sanchez and Herrera courts concluded that the confidentiality provision in the 2011 DRRP was not substantively unconscionable. Those courts considered the nature of the provision and concluded that it was not enough, standing alone, to warrant a finding of substantive unconscionability. See Herrera, 2014 WL 3398363 at *9 (“The DRRP’s Rule 9.g provides that all aspects of the arbitration ‘shall be confidential and shall not be open to the public.’ Plaintiffs contend that this provision is substantively unconscionable because ‘it prevents Plaintiffs from discussing their claims with other potential plaintiffs and from discovering relevant precedent to support their claims.’ The court in Sanchez found there was ‘nothing unreasonable or prejudicial’ about Rule 9.g or with respect to its ‘fairness or desirability.’ It therefore found that Rule 9.g was not unconscionable”); Sanchez, 224 Cal.App.4th at 408, 168 Cal.Rptr.3d 473 (“The second provision requiring confidentiality is not unconscionable. In regard to ‘the fairness or desirability of a secrecy provision with respect to the parties themselves, ... we see nothing unreasonable or prejudicial about it,’ and it is not substantively unconscionable,” citing Woodside Homes of Cal., Inc. v. Superior Court, 107 Cal.App.4th 723, 732, 132 Cal.Rptr.2d 35 (2003)).
Second, and more fundamentally, the Ninth Circuit has noted that “the enforceability of the confidentiality clause is a matter distinct from the enforceability of the arbitration clause in general.” Kilgore v. KeyBank Nat’l Ass’n, 718 F.3d 1052, 1059 n. 9 (9th Cir. 2013) (“In any event, the enforceability of the confidentiality clause is a matter distinct from the enforceability of the arbitration clause in general. Plaintiffs are free to argue during arbitration that the confidentiality clause is not enforceable”). Hernandez argues that the confidentiality provision is unduly restrictive and provides a “repeat player [like CarMax an] advantage” because it allows it to use prior arbitral rulings concerning other employees, while depriving the employee of the ability to do so, even if he or she is represented by a lawyer involved in the prior proceeding. Even if this were so, under Kilgore, the fact that a confidentiality clause is overly restrictive and not enforceable does not compel a conclusion that the arbitration agreement itself is unenforceable; indeed, the Kilgore court suggested that this argument is best left to the arbitrator to decide. See, e.g., Melez v. Kaiser Foundation Hospitals, Inc., No. 2:14-cv-08772-CAS (VBKx), 2015 WL 898455, *11 (C.D.Cal. Mar. 2, 2015) (“The DROP confidentiality provision is less restrictive than those held unconscionable in the cases cited above.... Moreover, even assuming the provision is unduly restrictive, the Ninth Circuit has cautioned against invalidating arbitration ■ agreements on the basis of confidentiality provisions, noting that ‘[plaintiffs are free to argue during arbitration that the confiden
Because confidentiality provisions are generally unobjectionable and, in any event, “the enforceability of the confidentiality clause is a matter distinct from the confidentiality of the arbitration clause in general” — the question now before the court — the court concludes that Rule 9(g) of the 2011 DRRP does not render the DRRP substantively unconscionable and thus unenforceable. Hernandez is “free to argue during arbitration that the confidentiality clause is unenforceable.” Kilgore, 718 F.3d at 1059 n. 9.
(e) Settlement Restrictions
In passing, Hernandez asserts that the “Rules prohibit the parties from settling their case after the arbitration hearing has been closed without the approval of the arbitrator.” She contends this “acts as an obstacle to parties’ resolving their dispute among themselves, in violation of public policy.”
“The Parties may settle their dispute at any time. Prior to the closure of the arbitration hearing, the Parties may settle the case without involvement of the Arbitrator. Once the hearing has closed, settlement may take place only with the approval of the Arbitrator. At any point prior to the Arbitrator’s issuance of an award, the Parties may, by agreement, refer their dispute to mediation before a mediator provided by the Arbitration Service.”100
Although Hernandez does not clearly argue so, it appears she believes that the provision conditioning settlement on approval of the arbitrator after the arbitration hearing has concluded is unconscionable because the arbitrator, who is being paid to conduct the arbitration, may have an incentive to disapprove a settlement on which the parties mutually agree. Such a limitation on the parties’ ability to resolve the dispute voluntarily could run contrary to the “strong public policy of this state ... encouraging] voluntary settlement of. litigation.” Osumi v. Sutton, 151 Cal.App.4th 1355, 1359, 60 Cal.Rptr.3d 693 (2007). Given the fact that California “courts will refuse to enforce arbitration provisions that are ... contrary to public policy” on grounds that they are unconscionable, Abramson v. Juniper Networks, Inc., 115 Cal.App.4th 638, 651, 9 Cal.Rptr.3d 422 (2004) (citing Armendariz, 24 Cal.4th at 99, 99 Cal.Rptr.2d 745, 6 P.3d 669), the court concludes that the settlement provision exhibits some degree of substantive unconscionability.
The DRRP, however, gives the parties free rein to settle the case without the arbitrator’s approval at all times after the filing of the arbitration demand through conclusion of the hearing. Given this freedom, and the narrow set of circumstances under which the arbitrator’s approval must be obtained, the settlement provision is, at most, minimally unconscionable.
(f) Discovery Limitations
Hernandez next contends that the limitations on discovery set forth in the DRRP are substantively unconscionable.
(g) Burden of Proof
Finally, Hernandez argues that the DRRP is substantively unconscionable because it “expressly placets] the burden of proving a claim or claims by [a] preponderance of the evidence [on the employee],” and makes no “exception for those claims for which the employee does not bear the burden of proof.” For this reason, she contends, the agreement “improperly shifts th[e] burden [of proof] to the employee” on all claims.
“For the Associate to prevail, the Associate must prove that the Company’s conduct with respect to the Associate was a violation of applicable law. For the Company to prevail on any claims asserted against an Associate, the company must prove that the Associate’s conduct was [a] violation of applicable law.”103
Thus, far from “improperly shifting] th[e] burden” to Hernandez, the DRRP explicitly requires that she satisfy the same burden of proof she would be required to satisfy if proceeding in court. Hernandez cites no reason why the court should conclude that a bilateral requirement that both Hernandez and CarMax satisfy their respective burdens of proof under applicable law is unconscionable, and the court can discern none. Because the DRRP provides that Hernandez and CarMax have the burden of proving their respective claims just as they would in court, the 2011 DRRP does not unconscionably shift the burden of proof on all claims to Hernandez. See, e.g., Sanchez,
(6) Severability of the Settlement Provision
The arbitration agreement at issue has indicia of both procedural and substantive unconscionability: it is a contract of adhesion that the prospective employee must accept as a condition of employment and it might have the effect of preventing the parties from voluntarily resolving the case after the close of the arbitral hearing. Under Civil Code § 1670.5(a), a court may either refuse to enforce an agreement that is “permeated” by unconscionability, Armendariz, 24 Cal.4th at 122, 99 Cal.Rptr.2d 745, 6 P.3d 669, or, alternatively, “[i]f the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.” Id. at 124, 99 Cal.Rptr.2d 745, 6 P.3d 669.
In Armendariz, the court discussed the severance of contractual provisions:
“Two reasons for severing or restricting illegal terms rather than voiding the entire contract appear implicit in case law. The first is to prevent parties from gaining undeserved benefit or suffering undeserved detriment as a result of voiding the entire agreement — particularly when there has been full or partial performance of the contract. Second, more generally, the doctrine of severance attempts to conserve a contractual relationship if to do so would not be condoning an illegal scheme. The overarching inquiry is whether the interests of justice ... would be furthered by severance. Moreover, courts must have the capacity to cure the unlawful contract through severance or restriction of the offending clause.... ” Armendariz, 24 Cal.4th at 124, 99 Cal.Rptr.2d 745, 6 P.3d 669 (citations and internal quotation marks omitted).
Factors weighing against severance include (1) the existence of more than one unlawful provision in the arbitration agreement, and (2) the inability of the court to “remove the unconscionable taint from the agreement” by simply striking or limiting a provision. Id. at 124-25, 99 Cal.Rptr.2d 745, 6 P.3d 669. “The overarching inquiry is whether the interests of justice ... would be furthered by severance.” Id.
Here, unlike in Armendariz, severance of the unconscionable provision is appropriate. Compare id. at 124, 99 Cal.Rptr.2d 745, 6 P.3d 669 (“In this case, two factors weigh against severance of the unlawful provisions. First, the arbitration agreement contains more than one unlawful provision; it has both an unlawful damages provision and an unconscionably unilateral arbitration clause. Such multiple defects indicate 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. In other words, given the multiple unlawful provisions, the trial court did not abuse its discretion in concluding that the arbitration agreement is permeated by an unlawful purpose”); Dunham v. Environmental Chemmical Corp., No. C 06-03389 JSW, 2006 WL 2374703, *12-13 (N.D.Cal. Aug. 16, 2006) (“Having determined that the provision requiring only Dunham, but not ECC, to arbitrate, and the provision
By contrast, CarMax’s arbitration agreement contains a single portion of one provision that could arguably be said to be unconscionable. Unlike the provisions at issue in Armendariz and the cases cited above, the settlement provision is mutual and affects both parties’ ability to settle the case equally. The restriction on their right to settle without the arbitrator’s approval does not “permeate” the arbitration agreement as a whole, or even the provision in which it is found, and can be easily severed.
Consequently, the court concludes that severing the unconscionable portion of the settlement provision — i.e., the portion that requires the parties to obtain the arbitrator’s approval of any settlement reached after the arbitral hearing has concluded— is appropriate. See Martin v. Ricoh Americas Corp., No. C-08-4853 EMC, 2009 WL 1578716, *6 (N.D.Cal. June 4, 2009) (“In the instant case ... there is only one substantively unconscionable provision; the arbitration agreement otherwise comports with the requirements of Armendariz ( e.g., providing for a neutral arbitrator, more than minimal discovery, and all of the types of relief that would otherwise be available in court and not requiring an employee to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum).... Because there is only one substantively unconscionable provision easily capable of severance, and because there is no other indication that there has been ‘a systematic effort [on the part of Ricoh] 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,’ the Court shall sever ¶ 8 and compel arbitration” (citation omitted)); Siglain v. Trader Publishing Co., No. C 08-2108 JL, 2008 WL 3286974, *11 (N.D.Cal. Aug. 6,
III. CONCLUSION
For the reasons stated, the court denies Hernandez’s motion to dismiss and grants CarMax’s motion to compel arbitration. The court severs the arbitration agreement’s provision requiring the parties to obtain the arbitrator’s approval of a settlement reached after the close of the arbitration hearing. The court stays the state court action currently pending in Superior Court pending resolution of the arbitration in this matter. See, e.g., Brown v. Pacific Life Ins. Co., 462 F.3d 384, 399 (5th Cir. 2006) (affirming a district court’s order compelling arbitration and staying a parallel state court proceedings); Circuit City Stores, Inc. v. Najd, 294 F.3d 1104, 1109 (9th Cir. 2002) (affirming the district court’s order compelling arbitration and staying state court proceedings); Insurance Newsnet.com, Inc. v. Pardine, No. 1:11-CV-00286, 2011 WL 3423081, *4 (M.D.Pa. Aug. 4, 2011) (“Plaintiffs also seek a stay of the New Jersey state court proceedings pending arbitration. In keeping with principles of federalism and respect for the sovereignty of the several states and their judicial system, the courts of the United States are generally prohibited by the Anti-Injunction Act from issuing injunctions to stay proceedings in state courts. However, the Anti-Injunction Act does empower the courts of the United States to enjoin actions in a state court where (1) an injunction is expressly authorized by Congress; (2) an injunction is necessary in aid of its jurisdiction; or (3) an injunction is necessary to protect or effectuate its judgments. The FAA does not expressly authorize federal courts to enjoin state court proceedings. However, such injunctions fall within the second exception to the Anti-Injunction Act because they are necessary in aid of federal juris
. Petition for Order Compelling Arbitration and Stay of State Court Proceedings Pursuant to Federal Arbitration Act ("Petition”), Docket No. 1 (Nov. 12, 2014).
. Notice of Motion and Motion to Dismiss Petition to Compel Arbitration ("MTD”), Docket No. 8 (Dec. 3, 20 Í4). See also Reply in Support of Motion to Dismiss Petition to Compel Arbitration ("MTD Reply”), Docket No. 16 (Mar. 16, 2015).
. Notice of Motion and Motion to Compel Arbitration ("MTC”), Docket No. 10 (Dec. 30, 2014). See also Reply in Support of Motion to Compel Arbitration ("MTC Reply”), Docket No. 17 (Mar. 9, 2015).
. See Opposition to Motion to Dismiss Petition to Compel Arbitration (“MTD Opposition”), Docket No. 11 (Feb. 23, 2015); Memorandum in Opposition to Motion to Compel Arbitration ("MTC Opposition”), Docket No. 15 (Mar. 9, 2015).
. Petition, ¶ 4.
. Id.
. See id., Exh. A (“DRA”)
. Id., ¶ 4; Exh. A.
. Id.
. Id., ¶ 4.
. Id.
. Id., Exhs. B ("2001 DRRP”); C ("2011 DRRP”).
. Id., Exh. D ("Complaint”).
. Id.,n 32-42.
. Id., ¶¶ 43-53.
. Id.,n 54-65.
. Id., ¶¶ 66-71.
. Id.,n 72-79.
. Id., ¶¶ 80-87.
. Id.,m 88-95..
. Id., ¶¶ 96-104.
. Id., ¶¶ 105-115.
. Id., ¶¶ 116-126.
. Id., ¶¶ 127-136.
. Id., ¶¶ 137-143.
. Id., ¶¶ 144-153.
. Id., ¶¶ 154-170.
. Id., «171-177.
. Petition, ¶ 7.
. Id.
. Request for Judicial Notice in Support of Petitioner CarMax’s Opposition to Motion to Dismiss ("RJN”), Docket No. 14 (Feb. 25, 2015).
. RJN at 1.
. MTD Opposition at 7-8.
. MTD Reply at 4.
. Petition at 1.
. Petition, ¶ 3.
. Petition, ¶ 3; see also Complaint at 29.
. The petition adequately alleges Hernandez's and CarMax's respective citizenship. An individual like Hernandez is a citizen of the state in which he or she is domiciled. See Gilbert v. David, 235 U.S. 561, 569, 35 S.Ct. 164, 59 L.Ed. 360 (1915) (holding that a person is a citizen of the state in which she has her domicile, i.e., a permanent home where she intends to remain or to which she intends to return); Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001) ("A person's domicile is her permanent home, where she resides with the intention to remain or to which she intends to return”). A party's residence alone does not determine his or her citizenship for purposes of diversity jurisdiction. Kanter, 265 F.3d at 857 ("[T]he diversity jurisdiction statute, 28 U.S.C. § 1332, speaks of citizenship, not of residency. To be a citizen of a state, a natural person must first be a citizen of the United States. The natural person's state citizenship is then determined by her state of domicile, not her state of residence.... A person residing in a given state is not necessarily domiciled there, and thus is not necessarily a citizen of that state”). Here, in addition to relying on Hernandez’s allegation that she is a California resident, CarMax alleges that, for nearly thirteen years, she has worked in California. Allegations that a party has an extensive and continuous period of residence and employment in a state are sufficient to establish that the party is a citizen of the state; this is particularly here as Hernandez does not dispute the point. See Lew v. Moss, 797 F.2d 747, 750 (9th Cir. 1986) (“[Djetermination of an individual's domicile involves a number of factors (no single factor controlling), including: current residence, voting registration and voting practices, location of brokerage and bank accounts, location of spouse and family, membership in unions and other organizations, place of employment or business, driver’s license and automobile registration, and payment of taxes”).
The Ninth Circuit treats limited liability companies such as CarMax like partnerships for purposes of diversity jurisdiction. See Johnson v. Columbia Props. Anchorage LP, 437 F.3d 894, 899 (9th Cir. 2006) (applying the standard used by sister circuits and treating LLCs like partnerships). Thus, "an LLC is a citizen of every state of which its owners/members are citizens.” Id.; see also Handelsman v. Bedford Village Assocs., Ltd. Partnership, 213 F.3d 48, 51-52 (2d Cir. 2000) (recognizing that "a limited liability company has the citizenship of its membership”). Car-Max alleges that it is a wholly-owned subsidiary of CarMax Auto Superstores West Coast, Inc., which is a Virginia corporation with its principal place of business in Virginia. (See Petition, ¶ 1.) CarMax is thus a citizen of Virginia. As a result, there is complete diversity of citizenship between Hernandez and CarMax.
. MTD at 1 ("The Petition alleges that the Court has diversity jurisdiction over this matter, arguing only that Respondent's state court action seeks a judgment in excess of $5,000,000, thus satisfying the $75,000 threshold. As the petition also admits, the state court action names an additional defendant, Alan Hannah, who is alleged to be a resident of the state of California. Respondent cannot rely upon the state court action to assert diversity jurisdiction for purposes of the amount in controversy, and yet disclaim reliance upon the state court action to the extent it facially destroys diversity jurisdiction. The Petition should be dismissed”).
. MTD Opposition at 3-6.
. MTD Reply at 2-4.
. In reaching this conclusion, the court joins all federal courts throughout the country that have been addressed a similar question following the Supreme Court’s decision in Vaden. See, e.g., Rutherford, 605 F.3d at 491 ("For all these reasons, we decline to conclude that Moses H. Cone was implicitly overruled sub silentio in Vaden. Therefore, Moses H. Cone continues to be precedent that resolves these appeals. As the Supreme Court has frequently instructed, '[i]f a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.’ Likewise, Va-den did not implicitly overrule ... the pre-Vaden § 4 diversity jurisdiction decisions from other circuits. Therefore, we conclude that diversity of citizenship is determined in these cases by the citizenship of the parties named in the proceedings before the district court” (citations omitted)); Golden Gate National Senior Care, LLC v. Addison, Misc. No. 14-mc-0421, 2014 WL 4792386, *6 (M.D.Pa. Sept. 24, 2014) ("Notwithstanding Respondents’ logical arguments highlighting the potential problems with following Rutherford's position of the limited application of Vaden to only federal question cases, the court finds more persuasive the Supreme Court’s purposeful omission of diversity cases from its holding in Vaden. This does not result in, as Respondents suggest, this court 'willfully disregard[ing]' its obligation to determine 'whether it has jurisdiction over an underlying dispute when presented with a [Section] 4 petition to compel arbitration.’ Indeed, based on the parties of this action, the court clearly has jurisdiction based on diversity of citizenship. However, the court does not find Respondents’ 'diversity look through’ argument compelling and declines to look through the present federal action to determine whether it would have diversity jurisdiction over the state court action”); Brookdale Sr. Living Inc. v. Stacy, 27 F.Supp.3d 776, 782 (E.D.Ky. 2014) ("At least one district court within this circuit has similarly noted that Vaden is limited to cases involving federal question jurisdiction. And in an opinion this Court finds persuasive, the Eighth Circuit Court of Appeals reached the same conclusion. Accordingly, the Court will not look through the present action for arbitration to determine whether it would have diversity over the state-law suit,” citing Credit Acceptance Corp. v. Davisson, 644 F.Supp.2d 948, 953 (N.D.Ohio 2009) (noting that "the Vaden Court explicitly limited its holding to cases where the controversy underlying the § 4 petition involves federal-question jurisdiction”)); Sun Healthcare Group, Inc. v. Dowdy, No. 5:13-CV-00169-TBR, 2014 WL 790916, *4 (W.D.Ky. Feb. 26, 2014) (“While not binding, the Court is persuaded by the well-reasoned analysis in [Rutherford ]. As the Eighth Circuit recognized, Defendant’s argument for applying the 'look through' analysis in this case distorts the Supreme Court’s decision in Va-den. It ignores that Vaden involved a federal-question, explicitly stated it was only applicable to federal-question cases, and that the circuit conflict it sought to resolve involved only federal-question cases. Vaden did not mandate a new analysis for § 4 diversity jurisdiction disputes. Furthermore, Moses H. Cone is persuasive because the Supreme Court found the independent basis of federal
. The statute further provides: "If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default ... the court shall hear and determine such issue.” 9 U.S.C. § 4.
. MTC Opposition at 4-6.
. Id. at 5 (“Respondent was a management assistant performing administrative tasks at the Buena Park location in California, and her job duties had nothing to do with interstate commerce. CarMax’s motion fails to establish that Respondent’s specific job and job duties bears upon interstate commerce in any substantial way as required”).
. MTC Opposition at 5.
. MTC Reply at 2-6.
. Declaration of Kimberly Ross in Support of CarMax Auto Superstores California, LLC, A Virginia Limited Liability Company’s Motion to Compel Arbitration and Stay State Court Action ("Ross Decl.”), Docket No. 10-1 (Dec. 30, 2014).
.Ross Decl., ¶ 8.
. Id.
. Id.
. Id.
. Id., ¶ 9.
. Id.
. The single case cited by Hernandez as support for her contention that the FAA does not apply — The California Court of Appeal's decision in Hoover v. American Income Life Ins. Co., 206 Cal.App.4th 1193, 142 Cal.Rptr.3d 312 (2012) — is distinguishable. There, the court concluded that defendant had not met its burden of showing that the FAA applied because it had adduced no evidence "establishing the relationship between Hoover and AIL.” Hoover, 206 Cal.App.4th at 1207, 142 Cal.Rptr.3d 312. The court noted that defendant had established only that "Hoover was a California resident who sold life insurance policies,” and that "AIL [was] based in Texas.” Id. Given the dearth of evidence, the court concluded that AIL had not shown that the employment relationship "had a specific effect or 'bear[ing] on interstate commerce in a substantial way.” Id.
Here, in contrast to Hoover, CarMax has adduced evidence concerning the extent of its interstate activities. (See Ross Decl., ¶ 8.) It has also shown that Hernandez's job affected interstate commerce in that management assistants hired employees who sold and transported vehicles across state lines, served as liaisons to CarMax’s out-of-state corporate offices, and arranged interstate travel for Car-Max employees. (Ross Decl., ¶ 9.) No evidence of this type was proffered in Hoover. As the authorities cited indicate, such evidence is sufficient to show that an employment relationship involves interstate commerce under the FAA.
. Even if the FAA did not apply, Hernandez fails to identify the effect on the arbitrability analysis if the California Arbitration Act ("CAA”), rather than the FAA applied. As one California district court has observed:
"The CAA, like the FAA, favors arbitration. Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 98, 99 Cal. Rptr.2d 745, 6 P.3d 669 (2000). The California Supreme Court has observed, 'Two years after the FAA was enacted, this state adopted its first modem arbitration statute (Stats.1927, ch. 225), declaring arbitration agreements to be irrevocable and enforceable in terms identical to those used in section 2 of the federal act, and since that time California courts and its Legislature have 'consistently reflected a friendly policy toward the arbitration process.’ That policy was expanded and clarified in the current arbitration statute which was adopted in 1961 (Stats.1961, ch. 461, §2 et seq.), and it continues to be the policy of this state.” Keating v. Superior Court, 31 Cal.3d 584, 601-02, 183 Cal.Rptr. 360, 645 P.2d 1192 (1982). The Court has noted further, '[U]nder California law, as under federal law, an arbitration agreement may only be invalidated for the same reasons as other contracts.’ Armendariz, 24 Cal.4th at 98, 99 Cal.Rptr.2d 745, 6 P.3d 669.” Montes, 2014 WL 334912, at *5 n. 1.
. "Although the court is not bound by unpublished decisions of intermediate state courts, unpublished opinions that are supported by reasoned analysis may be treated as persuasive authority." Scottsdale Ins. Co. v. OU Interests, Inc., No. C 05-313 VRW, 2005 WL 2893865, *3 (N.D.Cal. Nov. 2, 2005) (citing Employers Ins. of Wausau v. Granite State Ins. Co., 330 F.3d 1214, 1220 n. 8 (9th Cir. 2003) ("[W]e may consider unpublished state decisions, even though such opinions have no precedential value”)).
. MTC Opposition at 6-8.
. Ross Dec!., Exh. B (“2001 DRRP”) at 20.
. At the hearing, Hernandez reiterated her the argument that unconscionability must be judged by looking to the DRRP that was in effect at the time she entered into an employment contract with CarMax and signed the DRA. She cited Fitz v. NCR Corp., 118 Cal.App.4th 702, 13 Cal.Rptr.3d 88 (2004), and Harper v. Ultimo, 113 Cal.App.4th 1402, 7 Cal.Rptr.3d 418 (2003), as support for this proposition. Fitz and Harper are distinguishable, and do not require that the court consider the unconscionability of the 2001 DRRP rather than the 2011 modified DRRP.
In Fitz, plaintiff began to work for NCR Corp. in 1981. Beginning in 1996, the company implemented a mandatory, binding arbitration policy. Fitz, 118 Cal.App.4th at 708-09, 13 Cal.Rptr.3d 88. In 2000, NCR amended the terms of the policy to comply with the requirements, set forth in Armendariz by excising certain provisions of the 1996 policy. Id. at 709, 13 Cal.Rptr.3d 88. The policy was amended in accordance with authority granted NCR in the 1996 policy. Id.
Prior to considering the merits of the trial court's decision regarding unconscionability, the appellate court addressed Fitz's contention that the 1996 policy should be considered in its entirety when determining whether the policy was unconscionable or not. Id. at 715, 13 Cal.Rptr.3d 88. Fitz argued, much as Hernandez does here, that the court should not judge unconscionability by examining the 2000 amended policy, which removed certain purportedly unconscionable provisions from the 1996 policy, but should instead evaluate unconscionability by looking to the 1996 policy; she asserted this was the proper approach because "a judicial determination of uncon-scionability focuses on whether the contract or any of its provisions was ‘unconscionable at the time it was made.' " Id. After noting that "Fitz [had] fail[ed] to provide any authority to support her argument that the 2000 modifications were invalid,” such that uncon-scionability should not be judged with reference to the 2000 amended policy, the court explicitly declined to determine which policy was relevant because “two provisions ... that were not modified,” i.e., that were present in both the 1996 and 2000 policies, were sufficiently unconscionable to make either policy unenforceable. Id. ("Fitz, however, fails to provide any authority to support her argument that the 2000 modifications were invalid. At any rate, since we find two provisions of the ACT policy that were not modified to be contra to both standards of unconscionability and the minimum requirements of Armendar-iz, we need not decide whether the 2000 amendments were improper”).
Harper also does not stand for the proposition that the court must judge unconscionability with reference to the 2001, rather than 2011, DRRP. The Court of Appeal there did not address whether a court can consider validly modifications to a written arbitration agreement when determining unconscionability. Instead, it noted that the agreement was procedurally unconscionable because Ultimo had failed to attach the relevant arbitration rules to the agreement at the time it was presented to the employee to sign. Harper, 113 Cal.App.4th at 1406, 7 Cal.Rptr.3d 418 ("Here is the oppression: The inability to receive full relief is artfully hidden by merely referencing the Better Business Bureau arbitration rules, and not attaching those rules to the contract for the customer to review. The customer is forced to go to another source to find out the full import of what he or she is about to sign — and must go to that effort prior to signing”). As discussed infra, this aspect of Harper is distinguishable, as CarMax has adduced evidence that Hernandez was given the DRRP at the time she signed the DRA and when subsequent modifications were made.
Although the Harper court referenced the modification provision as additional evidence of procedural unconscionability, id. at 1407, 7 Cal.Rptr.3d 418 ("But the oppression is even more onerous than that: As written, the clause pegs both the scope and procedure of the arbitration to rules which might change”), the procedurally unconscionable aspect of the
For these reasons, the court finds Fitz and Harper distinguishable. The authority cited above for the proposition that unconscionability should be judged by looking to the most recent, validly modified agreement is directly on point and not in conflict with Fitz and Harper. Thus, the court applies it to the facts of this case.
. Although CarMax addresses the Cole factors in its motion (see MTC at 10-11), Hernandez does not make reference to the factors in her opposition. Instead, she addresses un-conscionability more generally.
. Of Hernandez's fifteen causes of action, ten (the first through ninth and twelfth causes of action) expressly invoke statutory rights.
. See Ross Deck, Exh. D ("2011 DRRP”) at 9.
. Id.
. Id.
. Id.
. 2011 DRRP at 9.
. Id. at 9-10.
. Id. at 10.
., The discovery provisions in the 2001 DRRP are identical to those in the 2011 DRRP. (Compare 2001 DRRP at 14-15 with 2011 DRRP at 9-10.)
. MTC Opposition at 14.
.See also Mercuro v. Superior Court, 96 Cal. App.4th 167, 183-84, 116 Cal.Rptr.2d 671 (2002) (concluding that an arbitration agreement provided for more than "minimal discovery” where it permitted thirty written discovery requests and three depositions, and noting that " ‘adequate’ discovery does not mean unfettered discovery and Armendariz itself recognizes an arbitration agreement may require 'something less than the full panoply of discoveiy provided in [the California Code of Civil Procedure”).
. MTC Opposition at 12.
. See 2011 DRRP at 12.
. 2011 DRRP at 13 (emphasis added).
. MTC Opposition at 12.
.2011 DRRP at 12-13.
. MTC Opposition at 8-11.
. Greene Decl., Exh. 1.
. MTC Opposition at 8-9 (citing Harper v. Ultimo, 113 Cal.App.4th 1402, 1402, 7 Cal. Rptr.3d 418 (2003)).
. See Declaration of Rosella Michelle Hernandez in Support of Opposition to Motion to Compel Arbitration ("Hernandez Dec!.”), Docket No. 15-1 (Mar. 9, 2015), ¶ 5.
. Ross Decl., Exh. A at 7 (italics added).
. Id., Exh. A at 8 ("The Dispute Resolution Agreement and the Dispute Resolution Rules and Procedures affect your legal rights. By signing this Agreement, you acknowledge receipt of the Dispute Resolution Rules and Procedures. You may wish to seek legal advice before signing this Dispute Resolution Agreement,” (italics added)).
. Hernandez Deck, ¶ 5 (“The 2001 Rules were not provide[d] to me at the time I completed my application, nor were they offered to me, nor were they provided to me at any
. Ross Dec!., ¶ 4. Thus, although Hernandez argues that "there is no evidence submitted that the 2001 Rules (or any of CarMax's arbitration rules) are available on the internet,” CarMax has submitted evidence demonstrating that CarMax employees, including Hernandez, had ready access to the DRRPs.
. Id., ¶ 4; id., Exh. G.
. Hernandez notes, in passing, that “Car-Max did not ... provide the[] [2001 Rules] to her before she was hired.” (MTC Opposition at 10.) She also states, in her declaration, that she had been hired by CarMax prior to being required to complete an employment application and to sign the DRA. (Hernandez Decl., ¶ 3.) Although she does not explicitly make the argument in her memorandum, it appears that she contends that this timeline of events added an additional degree of procedural unconscionability because she would have been required to "quit” her job with CarMax if she refused to sign the DRA given the fact that the agreement was mandatory and she was not asked to sign it until after she had purportedly been hired.
The court is not persuaded that this demonstrates procedural unconscionability. First, CarMax has presented evidence from its Human Resources department indicating that Hernandez had not been hired until July 8, 2002, some twelve days after she was presented with and signed the DRA. (See Declaration of Kristy P. Jordan In Support of Petitioner
More fundamentally, even if Hernandez had not been presented with the DRA until after she was officially hired by CarMax— which the evidence indicates is not the case— courts have found that "the exact date that [an employee] began to work for CarMax is not alone determinative of whether [she] showed oppression or surprise,” particularly in cases where, as here, "[t]he stand-alone arbitration agreement was not hidden, but prominently featured as part of the employment application.” Sanchez, 224 Cal.App.4th at 402-03, 168 Cal.Rptr.3d 473 ("Sanchez makes much of the timing of his signature, arguing that he was not advised that he would have to sign an arbitration agreement until after he was already working for CarMax. He submitted a declaration in the trial court stating that he began work for CarMax on October 16, 2006 without being told that he would have to sign an arbitration agreement, and was presented with the agreement for signature over a week later on October 26. His declaration also states, however, that he received his offer of employment from Car-Max on October 31, 2006, and he acknowledged receipt of the Associate Handbook on November 9, 2006. The October 31, 2006 letter offering him employment states that he was to start October 16 (which CarMax calls a typographical error); his signature on the letter accepting and agreeing to the offer of employment is dated November 9, 2006. He acknowledged receipt of the CarMax Associate Handbook on November 9 and November 21, 2006. Further, Sanchez signed his employment application on October 26. The trial court did not resolve the factual question whether Sanchez signed the agreement before or after he began employment with CarMax. In any event, the exact date that Sanchez began to work for CarMax is not alone determinative of whether he showed oppression or surprise. The trial court did not find oppression or surprise, and we agree. The standalone arbitration agreement was not hidden, but prominently featured as part of the employment application, and there are no 'other indicia of procedural unconscionability' ” (citation omitted)); see also Luchini v. Carmax, Inc., No. CV F 12-0417 LJO DLB, 2012 WL 2995483, *9 (E.D.Cal. July 23, 2012) (finding no oppression or surprise when employee signed arbitration agreement after beginning employment with CarMax).
. MTC Opposition at 10-11 ("Further, the fact that CarMax alone may modify or even terminate the Agreement adds to the procedural unconscionability and unfair surprise”).
. See Ross Decl., ¶¶ 3-4; id., Exh. G.
. The court's conclusion that the modification clause is not procedurally unconscionable is consistent with the decisions of at least two other courts that have considered the same provision. See, e.g., Herrera, 2014 WL 3398363 at *4 ("Plaintiffs argue that th[e] [modification] term renders the agreement illusory because it permits CarMax to unilaterally modify its terms. The California Court of Appeal held in Casas v. Carmax Auto Superstores California LLC that ‘the modification clause in the CarMax DRRP does not invalidate the arbitration agreement.' The court found that the DRRP’s Rule 19 did not render the agreement illusory because modifications could only be made with advance notice, implying a covenant of good faith and fair dealing. The implied covenant limit[ed] the employer’s authority to unilaterally modify the arbitration agreement and save[d] that agreement from being illusory and thus unconscionable.’ ... The modification term in the 1999 DRRP is identical in all relevant respects to the term discussed in Casas above. Therefore, the Agreements are not illusory” (citations omitted)); id. at *7 ("Plaintiffs contend that the Agreements are [ ] unconscionable 'because they provide lor the unilateral after the fact modifications only by the Plaintiffs’ employer.’ But as discussed above, Car-Max’s freedom under the Agreements to unilaterally modify the contract] terms is limited by an implied covenant of good faith and fair dealing. That implied covenant 'saves the agreement from being illusory and thus unconscionable’ ” (citations omitted)); Casas, 224 Cal.App.4th at 1236-37, 169 Cal.Rptr.3d 96 ("Unlike the arbitration clause in Sparks, the arbitration agreement in this case was not hidden in a handbook which the employee simply acknowledged receiving. More to the point, the agreement signed by Casas provided a specific date for any amendment of the agreement or the DRRP (December 31 of every year), 30 days’ notice, and posting at CarMax locations, while the clause in the handbook in Sparks allowed change or elimination without notice, and at any time. While the trial court did not find the modification provision unconscionable, it declared it unilateral, allowing CarMax to 'change [its] mind’ about the arbitration agreement but not allowing Casas to change his mind. Under California law, however, even a modification clause not providing for advance notice does not render an agreement illusory, because the agreement also contains an implied covenant of good faith and fair dealing. 'Where the contract specifies performance the fact that one party reserves the power to vary it is not fatal if the exercise of the power is subject to prescribed or implied limitations such as the duty to exercise it in good faith and in accordance with fair dealings.’ '[T]he implied covenant of good faith and fair dealing limits the employer’s authority to unilaterally modify the arbitration agreement and saves that agreement from being illusory and thus unconscionable,’ ” citing Serpa v. California Surety Investigations, Inc., 215 Cal.App.4th 695, 708, 155 Cal.Rptr.3d 506 (2013)); id. at 1237, 169 Cal.Rptr.3d 96 ("Casas points out that rule 19 of the DRRP also provides; ‘[A]ll claims arising before alteration or termination shall be subject to the [agreement] in effect at the time the Arbitration Request Form is received by the Company.' To the extent that this express statement would subject a claim to a modified agreement where the claim arose before a modification, but was not submitted to arbitration until after incorporation of that modification into the arbitration agreement, the covenant of good faith and fair dealing cannot vary the plain language, and the contract is illusory. In this case, however, rule 18 of the DRRP states that if any of the arbitration rules 'is held to be in conflict with a mandatory provision of applicable law, the conflicting Rule or Procedure shall be modified automatically to comply with the mandatory provision’ until the rules can be formally modified to comply with the law. That express statement in rule 18 means that should an employee assert a claim that arose before modification of the agreement, CarMax could not apply the modifications to that claim. The modification clause in the CarMax DRRP does not invalidate the arbitration agreement” (citations omitted)). See also 24 Hour Fitness, Inc. v. Superior
. MTC Opposition at 11-12.
. See 2001 DRRP at 13.
. See 2011 DRRP at 8.
. MTC Opposition at 12 ("Armendariz requires a written arbitration award with adequate judicial review. To ensure adequate judicial review, ‘an arbitrator in a FEHA case must issue a written arbitration decision that will reveal, however briefly, the essential findings and conclusions on which the award is based”).
.See 2011 DRRP at 12.
. MTC Opposition at 12.
. 2011 DRRP at 11.
. MTC Opposition at 13.
. MTC Opposition at 13-14.
. 2011 DRRP at 13.
. MTC Opposition at 14.
. MTC Opposition at 14.
. 2011 DRRP at 11 (emphasis original).
Reference
- Full Case Name
- CARMAX AUTO SUPERSTORES CALIFORNIA LLC, a Virginia limited liability company v. Rosella Michelle HERNANDEZ, an individual
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