Key Points

  • The Court of Appeal reversed an order denying CN Motor Company LLC's motion to compel arbitration and directed the trial court to compel arbitration of Luis Antonio Salazar's individual wage-and-hour claims.
  • Substantial evidence did not support the trial court's findings of oppression or surprise; the agreement carried only a low degree of procedural unconscionability because it was adhesive.
  • The agreement's 'of any nature,' 'any other relationship/interaction' and 'Affiliates' language and its one-sided procedure for starting arbitration were highly substantively unconscionable, but the 'not revocable' clause did not make the agreement infinite in duration.
  • Because the offending terms could be struck without rewriting the contract, the trial court erred in refusing to sever them; the remainder applies only to claims arising from Salazar's employment.
  • On remand the trial court must address Salazar's challenge to the class action waiver, which it had not decided.

A California appeals court has directed a trial court to compel a former car dealership employee to arbitrate his individual wage-and-hour claims, holding that the trial judge should have cut the unfair language out of the arbitration agreement the worker signed when he was hired instead of refusing to enforce it at all.

The Second District Court of Appeal, Division Eight, reversed a Los Angeles Superior Court order that had denied CN Motor Company LLC's motion to compel arbitration of the suit brought by Luis Antonio Salazar. Presiding Justice Stratton wrote the opinion, joined by Justice Viramontes. Justice Wiley concurred only in the result, writing in full, "I join in the result." The opinion was filed Oct. 19 and certified for publication Nov. 12.

The panel agreed with the trial court that parts of the agreement were unconscionable. But it held that the trial court erred by refusing to enforce the agreement at all when the offending words could be struck without rewriting the contract. The ruling sends Salazar's own claims to arbitration and leaves his challenge to the agreement's class action waiver for the trial court.

CN Motor, which does business as Santa Monica Lincoln, sells vehicles. According to the opinion, Salazar filled out a job application on June 6, 2022, listing a start date of June 20, and signed the two-page "APPLICANT STATEMENT AND AGREEMENT" on June 8. He worked as an hourly employee until March 2024. In June 2024 he filed a class action asserting 10 claims, including failure to pay overtime and minimum wages, failure to provide meal and rest periods, and unfair competition.

Judge Lawrence P. Riff denied CN Motor's motion on Dec. 16, 2024. He found "moderate-to-high" procedural unconscionability, citing time pressure, the dealership's use of English-language documents although Spanish is Salazar's preferred language, and small, dense print. He also found the agreement's reach so broad that it might cover a malpractice claim against a hospital affiliated with the dealership's health plans. Riff concluded that the problems "go to the core of the Agreement" and that "the Court would need to rewrite the Agreement to narrow the scope and add symmetry to the parties bound."

On appeal, CN Motor argued that Salazar's declaration, which he dictated in Spanish and which was translated into English, should not have been considered at all. The panel held the dealership had forfeited that objection. It had objected below only on relevance and prejudice grounds, and it had itself relied on a declaration Salazar signed in an unrelated case that suffered from the same defect. "CN Motors cannot have it both ways," Stratton wrote.

Even so, the panel held that substantial evidence did not support the findings of oppression or surprise. The pressure Salazar described to sign other documents came after he signed the arbitration agreement, which he executed two weeks before starting work. By his own account, he first told the dealership he had trouble reading English after he had signed. Capital-letter warnings at the start of the agreement and just before the signature block undercut any surprise, the court said, and "the 11-point font was readable; the format was neither jumbled nor dense." The court found only a low degree of procedural unconscionability, arising from the agreement's take-it-or-leave-it nature.

The substantive terms fared worse. The agreement required arbitration of "all disputes of any nature" arising from Salazar's employment "or any other relationship/interaction with the Company and its Affiliates," a term defined to include owners, attorneys, sister companies, independent contractors and parties affiliated with the dealership's benefit and health plans. CN Motor argued that its language mirrored the agreement in Little v. Auto Stiegler, Inc., a 2003 decision. The panel disagreed, noting that the Little agreement was expressly limited to employment claims and this one was not.

The court also found a provision on starting arbitration one-sided. It required the employee to deliver a dated demand letter personally to two managers before the statute of limitations ran, while saying only that the company "may similarly commence claims" by letter. The panel called that language "confusing at best." On the substantive terms, it disagreed with Riff on one point, holding that a clause calling the agreement "not revocable" did not make it infinite in duration.

Taken together, the terms indicated that the employer sought "to protect itself and its affiliates from any type of damages claims, whether or not they arise from Salazar's employment, when it had the leverage to do so by way of an adhesion contract," Stratton wrote. "We find the Agreement sufficiently unconscionable that it cannot be enforced in its present form."

The panel parted ways with Riff on the remedy. Applying the 2024 decision in Ramirez v. Charter Communications, Inc., which bars courts from curing unconscionability by rewriting a contract, it concluded that the defective provisions "appear entirely severable from the remainder of the agreement." The agreement itself contained a clause calling for void terms to be severed.

The court struck the phrases "of any nature," "or any other relationship/interaction with" and "Affiliates," removed the list of example claims, and deleted the arbitration-initiation paragraph entirely. It enforced the rest only for claims arising from Salazar's employment. "Any other claims between these parties or between Salazar and third parties are now excluded from arbitration under this contract," the opinion said.

Lawyers for CN Motor included Tyler T. Rasmussen of Fisher & Phillips LLP. Salazar was represented by David D. Bibiyan of Bibiyan Law Group.

The case returns to the trial court with directions to grant the motion as to Salazar's individual claims under the agreement as severed. Because the trial court never ruled on Salazar's challenge to the class action waiver, the panel directed it to address that issue on remand. The agreement provides that its bar on class arbitration cannot be severed. No costs were awarded.