Ardon v. Shaver Automotive Group, Inc. CA2/6

Filed 11/12/26 Ardon v. Shaver Automotive Group, Inc. CA2/6 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX LUIS ARDON, 2d Civ. No. B349900 (Super. Ct. No. Plaintiff and Respondent, 2025CUOE042961) (Ventura County) v. SHAVER AUTOMOTIVE GROUP, INC., Defendant and Appellant. Appellant Shaver Automotive Group, Inc. (Shaver) appeals from the trial court’s order denying its motion to compel arbitration. We affirm. FACTS AND PROCEDURAL HISTORY Shaver, which operates an automobile dealership, employed respondent Luis Ardon as a salesperson from January 2024 through August 2024. When he was hired, Ardon was provided several onboarding documents including three arbitration agreements. On January 4, Ardon signed an “APPLICANT STATEMENT AGREEMENT” (ASA) as a part of his employment application. The ASA contained an agreement to arbitrate “all disputes which may arise out of the employment context.” On January 15, Ardon signed the “SALESPERSON PAY PLAN” (Pay Plan), an eight-page compensation document containing a “BINDING ARBITRATION AGREEMENT.” On May 24, Ardon signed the “HANDBOOK ACKNOWLEDGMENT AT WILL AND BINDING ARBITRATION AGREEMENT” (Handbook Agreement). The Handbook Agreement superseded the ASA and Pay Plan and required Ardon to arbitrate “all claims” he brought against Shaver and any of its third party beneficiaries. It also required Shaver to submit its claims against Ardon to arbitration. In April 2025, Ardon filed a class and representative action in superior court. The complaint alleged various wage and hour violations. Shaver petitioned to compel arbitration. The trial court denied the petition. It found the operative arbitration agreement, the Handbook Agreement, was unenforceable because it contained “multiple unconscionable provisions.” The court also found severance was “not justified” because the agreement was “permeated with unconscionability.” DISCUSSION While Ardon signed three separate arbitration agreements, the parties agree that the Handbook Agreement is the operative one. We agree. It is governed by the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) and states, “This is the entire agreement between the Company and me regarding dispute resolution and this agreement supersedes any and all prior agreements regarding this issue to the extent that they differ from the foregoing.” (Italics added.) “Federal and California law treat valid arbitration agreements like any other contract and favor their enforcement.” 2 (Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478, 492 (Ramirez).) “A written agreement to submit a controversy to arbitration is valid, enforceable, and irrevocable, ‘save upon such grounds as exist for the revocation of any contract.’ (Code Civ. Proc., § 1281.) Unconscionability provides such grounds.” (Ibid.) A contract is unconscionable if “ ‘one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party.’ ” (Ibid.) Unconscionability encompasses procedural and substantive elements. “Procedural unconscionability ‘addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power.’ [Citation.] This element is generally established by showing the agreement is a contract of adhesion, i.e., 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.’ ” (Ramirez, supra, 16 Cal.5th at p. 492.) “[A]lthough adhesion alone generally indicates only a low degree of procedural unconscionability, the potential for overreaching in the employment context warrants close scrutiny of the contract’s terms.” (Id. at p. 494.) “Substantive unconscionability looks beyond the circumstances of contract formation and considers ‘the fairness of an agreement’s actual terms.’ ” (Ramirez, supra, 16 Cal.5th at p. 493.) This analysis “ ‘ “ensures that contracts . . . do not impose terms that have been variously described as ‘ “ ‘overly harsh’ ” ’ [citation], ‘ “unduly oppressive” ’ [citation], ‘ “so one-sided as to ‘shock the conscience’ ” ’ [citation], or ‘unfairly one-sided’ [citation]. All of these formulations point to the central idea that the unconscionability doctrine is concerned not with ‘a 3 simple old-fashioned bad bargain’ [citation], but with terms that are ‘unreasonably favorable to the more powerful party’ [citation].” ’ ” (Id. at p. 494.) “Substantive unconscionability ‘typically is found in the employment context when the arbitration agreement is “one-sided” in favor of the employer without sufficient justification.’ ” (Cook v. University of Southern California (2024) 102 Cal.App.5th 312, 320 (Cook).) “Both procedural and substantive elements must be present to conclude a term is unconscionable, but these required elements need not be present to the same degree. [Citation.] Courts apply a sliding scale analysis under which ‘the more substantively oppressive [a] term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’ ” (Ramirez, supra, 16 Cal.5th at p. 493.) Because the evidence here regarding unconscionability is undisputed, we review the Handbook Agreement’s validity de novo. (Ibid.) Procedural unconscionability The Handbook Agreement states, “By signing my name below and/or by accepting and/or continuing employment with the Company, I agree to pursue any claims I might have against the Company that currently exist or that may arise in the future exclusively through binding arbitration; similarly, the Company agrees to pursue any claims it might have against me that currently exist or that may arise in the future exclusively through binding arbitration.” It is a contract of adhesion because it requires an employee to acquiesce to its terms by merely accepting and/or continuing employment. Adhesion alone establishes a low degree of procedural unconscionability. (Ramirez, supra, 16 Cal.5th at p. 494.) 4  Substantive unconscionability Citing to Cook, supra, 102 Cal.App.5th 312, the trial court found the Handbook Agreement substantively unconscionable because of its broad scope, indefinite duration, and “ ‘one-sided’ ” third party beneficiary clause. We agree. 1. Scope The Handbook Agreement states, “I understand that this agreement requires me to pursue all claims I bring against the Company (and any third-party beneficiaries) through binding arbitration and requires that the Company submit any claims it has against me to binding arbitration (except for those claims specifically excluded by this agreement). Our agreement to arbitrate includes any and all claims which arise out of the employment context or any other interaction/relationship we had, have or may have in the future. Those claims include, but are not limited to, any claim, dispute, and/or controversy that either party brings against the other (including, but not limited to, any claims of discrimination and harassment, . . . claims pursuant to the California Private Attorneys General Act (‘PAGA’) unless prohibited by controlling law, as well as all other applicable state or federal laws or regulations) which would otherwise require or allow resort to any court or other governmental dispute resolution forum between myself and the Company, as well as any third-party beneficiaries of the Company.” (Italics added.) We employ ordinary rules of contract interpretation to interpret the Handbook Agreement with the goal of giving effect to the mutual intention of the parties at the time of contract formation. (Duran v. EmployBridge Holding Co. (2023) 92 Cal.App.5th 59, 65.) Thus, we first examine the contract’s plain language, giving words their usual and ordinary meaning. (Ibid.) And we interpret the contract as a whole to give effect to every 5 part, if reasonably practicable, with each clause helping to interpret the other. (Civ. Code, § 1641.) “When interpreting the provisions in an arbitration agreement covered by the FAA, due regard must be given to the federal policy favoring arbitration and, as a result, ambiguities as to the scope of the arbitration clause should be resolved in favor of arbitration.” (Ford v. The Silver F, Inc. (2025) 110 Cal.App.5th 553, 566.) But “ ‘[w]e do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated.’ ” (Ibid.) In Cook, our colleagues in Division Four concluded the employment arbitration agreement was substantively unconscionable because of its broad scope, indefinite duration, and lack of mutuality. (Cook, supra, 102 Cal.App.5th at p. 321.) The agreement there required the employee to arbitrate “ ‘all claims, whether or not arising out of Employee’s University employment, remuneration or termination, that Employee may have against the University or any of its related entities.’ ” (Ibid., italics added.) Based on the agreement’s plain language, Cook observed that the employer required the employee “to arbitrate claims that are unrelated to her employment with USC.” (Ibid.) Similarly, in Stoker v. Blue Origin, LLC (2026) 120 Cal.App.5th 91, 107–108, our colleagues in Division Three concluded an arbitration agreement was unconscionable because it encompassed “ ‘any and all claims, disputes, or controversies’ ” between the employer, a space exploration company, and the employee, “not limited to claims arising out of the employment relationship” “ ‘including, without limitation[,]’ ” tort and breach of contract claims. (Some italics omitted; second italics added.) 6 Stoker observed “the arbitration agreement would apply if Stoker [the employee] were to be injured in an automobile accident with another Blue Origin employee years after his employment ended, or if his house were damaged by debris from a Blue Origin rocket. The arbitration provision’s broad scope, thus, renders it substantively unconscionable.” (Id. at p. 108.) Like Cook and Stoker, the Handbook Agreement’s scope is equally broad because it is not limited to claims “aris[ing] out of the employment context.” The Handbook Agreement expressly encompasses claims that arise out of “any other interaction/relationship we had, have or may have in the future.” Its reach is expansive because it includes claims “not limited to, any claim, dispute, and/or controversy that either party brings against the other (including, but not limited to, any claims of discrimination and harassment, . . . [and] claims pursuant to [PAGA] . . . .” Thus, Ardon is required to give up his right to sue Shaver for claims that may be wholly unrelated to his employment. If, for instance, Ardon is a customer of Shaver, he would, as a condition of his employment, be barred from suing Shaver in court for claims that may arise from a buyer-seller relationship. Shaver does not provide justification for such a broad scope. Ayala-Ventura v. Superior Court (2026) 119 Cal.App.5th 241 (Ayala-Ventura), upon which Shaver relies, is distinguishable. Ayala-Ventura involved an arbitration agreement requiring the parties to arbitrate claims “ ‘whether or not arising out of Employee’s employment or the termination of employment.’ ” (Id. at p. 247.) Because the employer was a commercial janitorial service company, Ayala-Ventura concluded it was implausible that any claims unrelated to employment could realistically arise between the employer and its hourly 7 janitorial employees. (Id. at p. 257 [distinguishing Cook, “we are hard pressed to discern how a similarly vast range of claims completely unrelated to [the employee’s] employment could arise” given that the employer “solely provides commercial janitorial services”].) As our Fifth District colleagues in Ayala-Ventura emphasized, “we reiterate the importance of context in determining unconscionability.” (Ayala-Ventura, supra, 119 Cal.App.5th at p. 257.) And the circumstances here support the trial court’s unconscionability finding. Shaver is a car dealership and its employees could currently or foreseeably become customers. Claims can therefore arise from that buyer-seller relationship, wholly unrelated to the employment relationship. We conclude the Handbook Agreement’s broad scope without justification is unconscionable. Additionally, while this appeal was pending, our colleagues in the Third District decided a similar provision was unconscionable in Phan v. Knight Sacramento Su Inc. (2026) 121 Cal.App.5th 641. Like this case, Phan involved arbitration agreements between an employee and a company operating car dealerships. (Id. at p. 645.) The agreements required arbitration of “ ‘any and all claims which arise out of the employment context or any other interaction/relationship we had, have or may have in the future’ against Knight, and third-party beneficiaries” and “ ‘any claims arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company or third-party beneficiaries, whether based on tort, contract, statute, equity or otherwise.’ ” (Id. at pp. 645–646, 654.) Phan held there was “no material difference between the agreement in Cook and the Agreements here” because “the plain language is so 8 broad that they . . . also encompass all of Phan’s claims against Knight and its related third parties, whether related to her employment or not.” (Id. at p. 654.) We agree and adopt the reasoning in Phan. 2. Duration Cook also held the arbitration agreement there was unconscionable because of its indefinite duration. The agreement stated that it “ ‘shall survive the termination of Employee’s employment, and may only be revoked or modified in a written document that expressly refers to the “Agreement to Arbitrate Claims” and is signed by the President of the University.’ ” (Cook, supra, 102 Cal.App.5th at p. 325.) Because the agreement expressly stated it would survive termination, Cook concluded such an “express term of duration” showed the parties “did not contemplate that the arbitration agreement would be terminable at will” after a reasonable time. (Id. at p. 326.) Here, the Handbook Agreement states that Ardon is required to pursue any claims “that currently exist or that may arise in the future” and “all claims which arise out of . . . any other interaction/relationship we had, have or may have in the future.” (Italics added.) The agreement also provides it “may not be changed, altered, revised or modified without a writing signed by the President of the Company” and “any agreement contrary to the foregoing must be entered into, in writing, by both the Owner(s) and/or President of the Company and me. Oral promises shall not serve to modify and/or cancel this agreement.” Shaver concedes the Handbook Agreement “survives termination of employment.” And because its scope is broad, the agreement necessarily covers claims unrelated to Ardon’s employment. Nor can it be modified or canceled by oral promises without a writing signed by the President of the Company and 9 the employee. Thus, like the arbitration agreement in Cook, the Handbook Agreement is similarly infinite in duration. Because covered claims include those arising after termination of the employment relationship, the express written requirement for modification or cancellation indicates the agreement is not terminable at will after a reasonable time. (Cook, supra, 102 Cal.App.5th at p. 326; contrast with Ayala-Ventura, supra, 119 Cal.App.5th at pp. 257–258.) We conclude the indefinite duration of the Handbook Agreement is substantively unconscionable. (Phan, supra, 121 Cal.App.5th at p. 654.) 3. Third party beneficiary The Handbook Agreement also requires Ardon to pursue all claims “against the Company (and any third-party beneficiaries) through binding arbitration.”1 (Italics added.) Cook held that a similar clause was unconscionable because it required the employee to arbitrate claims against USC’s “ ‘related entities’ ” but did not require the related entities to arbitrate their claims against the employee. (Cook, supra, 102 Cal.App.5th at pp. 326–327.) Cook illustrated the contract’s one-sided nature by explaining that “nonsignatories may enforce 1 “Third-party beneficiaries include the Company’s owners, directors, officers, managers, employees, agents, partners, attorneys, sister-companies, subsidiaries, parent companies, joint-venturers, affiliated persons/entities, independent contractors, and parties affiliated with its employee benefit and health plans. These claims also include any claims arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Company or third-party beneficiaries, whether based on tort, contract, statute, equity or otherwise.” 10 an arbitration agreement against a party to the agreement simply by showing they are intended third party beneficiaries of the arbitration agreement.” (Id. at p. 328.) But for the employee “to enforce the arbitration agreement against USC’s agents or employees as third party beneficiaries, she would have to show they actually accepted a benefit under the agreement. [Citations.] It is difficult to imagine how Cook could carry this burden to compel USC’s employees and agents to arbitration unless those specific agents or employees first moved to compel arbitration under the agreement.” (Ibid.) The “plain language of the arbitration agreement thus provides a significant benefit to USC’s related entities without any reciprocal benefit to Cook.” (Ibid.) Like Cook, we conclude the third party beneficiary clause here lacks mutuality. Third party beneficiaries can enforce the arbitration agreement against Ardon, but Ardon cannot readily compel arbitration against third party beneficiaries who are nonsignatories to the Handbook Agreement. Because Shaver has not provided a valid justification for the one-sided nature of this clause, the trial court did not err in finding it was unconscionable. (Cook, supra, 102 Cal.App.5th at p. 320; Phan, supra, 121 Cal.App.5th at p. 657.) Shaver’s attempts to distinguish Cook, on the ground that the agreement there did not invoke the FAA, is meritless. “The FAA seeks to treat interpretation and enforcement of arbitration agreements equally with other contracts. Such treatment continues to recognize the severance of unconscionable claims as an option for the court’s consideration. . . . [I]t was not Congress’s intent to make arbitration agreements more enforceable than other contracts.” (Ramirez, 16 Cal.5th at p. 518.) The trial 11 court’s ruling regarding unconscionability does not contravene the FAA. Severability Shaver contends the trial court erred when it found the Handbook Agreement was “permeated” with unconscionability and could not be cured by severing the unconscionable provisions. We again disagree. If a court finds a contract or any clause in the contract unconscionable, it “ ‘may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.’ ” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 121–122, citing to Civ. Code, § 1670.5, subd. (a).) The court has the discretion to refuse to enforce the contract as a whole if it is “ ‘permeated by . . . unconscionability.’ ” (Armendariz, at p. 122.) To determine whether severance is appropriate, a court should consider the contract’s purposes. “If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. If 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.” (Armendariz, supra, 24 Cal.4th at p. 124.) We review the trial court’s severance decision for abuse of discretion. (Ramirez, supra, 16 Cal.5th at p. 513.) We conclude the trial court did not abuse its discretion in declining severance. Because of its “broad scope,” “undefined duration,” and “lack of mutuality,” the court reasonably concluded the Handbook Agreement was “permeated with unconscionability.” (Cook, supra, 102 Cal.App.5th at p. 329; 12 Phan, supra, 121 Cal.App.5th at p. 658.) Nor was severance required given the need to rewrite the Handbook Agreement in order to excise the unconscionable provisions. Courts do not have such power to reform contracts. If a court is unable to cure through severance, it must void the entire agreement. (Armendariz, supra, 24 Cal.4th at p. 125.) Because we conclude the trial court did not err in denying the motion to compel arbitration, we need not discuss the parties’ remaining contentions. DISPOSITION The order denying the motion to compel arbitration is affirmed. Respondent shall recover costs on appeal. NOT TO BE PUBLISHED. BALTODANO, J. We concur: CODY, P. J. YEGAN, J. 13  Charmaine H. Buehner, Judge Superior Court County of Ventura ______________________________ Fine, Boggs & Perkins, John P. Boggs, David J. Reese, William D. Wheelock and Alexander J. Curry for Defendant and Appellant. Otkupman Law Firm, Roman Otkupman and Nidah Farishta for Plaintiff and Respondent.