Green v. Tuff Shed, Inc.

Existence of an Agreement to Arbitrate

Tuff Shed argues that the present action is subject to an arbitration dispute. Green began working for Tuff Shed on April 11, 2023. As part of the onboarding process with Tuff Shed, Green received the Arbitration Agreement at onboarding, was able to review and signed indicating she had done so, and returned the Arbitration Agreement via DocuSign. (Holli Hoglund Decl., ¶¶ 6, 9, 11-13.) There was no time limit placed on Green to review and sign the Arbitration Agreement. Green could sign onto Dayforce at any time and take all the time she needed to review the Arbitration Agreement. (Hoglund Decl., ¶ 8.) The Arbitration Agreement was not a condition of employment, and Green had the option to opt-out. (Hoglund Decl., ¶¶ 9-12.) Green electronically signed the arbitration agreement. (Hoglund Decl., ¶13, Ex. A.) That agreement (“Arbitration Agreement”) is the subject of this petition.

Because Tuff Shed has adequately established the existence of an Arbitration Agreement that is governed by the FAA, the burden now shifts to Green to establish any defenses to the enforcement of this provision. In opposition, Green argues that arbitration should be denied because the Arbitration Agreement is both procedurally and substantively unconscionable.

Unconscionability

“[P]rocedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.) Courts invoke a sliding scale which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves, i.e., the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa. (Id., at pg. 114.) Plaintiff bears the burden of proving that the provision at issue is both procedurally and substantively unconscionable.

Procedural Unconscionability

Green argues that the agreement is procedurally unconscionable because it is a contract of adhesion, and Tuff Shed did not provide Green with a copy of the arbitration rules. 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.” (Armendariz, supra, 24 Cal.4th at 113.)

Green cites Haydon v. Elegance at Dublin (2023) 97 Cal.App.5th 1280 (“Haydon”), where it the court held as procedurally unconscionable that a skilled nursing facility buried the arbitration provision “as the last of over 20 unrelated “miscellaneous” provisions spanning several pages at the end of the agreement,” and did not explain the opt-out provision or procedure to the resident when the agreement was being signed. (Id. at p. 1288.) Green argues that her case is similar to Haydon where she was required to click on boxes on a computer as a condition of starting her employment, she was placed in front of a computer to sign the documents and “reasonably believed that failure to sign-even to request clarification would result in not being hired.” (Green Decl., ¶¶ 4-5.) 12

However, Green’s case is different than Haydon. Unlike Haydon, the terms of the Arbitration Agreement are not interspersed with numerous miscellaneous provisions. The plain terms of the Arbitration Agreement are very simple. First, the second sentence of the first paragraph states that the employee's signature of the Arbitration Agreement indicates Green was "voluntarily entering into this Agreement" and that she could "opt out if [she did] not wish to participate." (Hoglund Decl., ¶13, Ex. A.) The Arbitration Agreement further states in bolded text two pages later that "[a]cceptance of this Arbitration Agreement is not a mandatory condition of employment at the Company, and therefore an Employee may submit a statement notifying the Company that Employee wishes to opt out and not be subject to mandatory arbitration under this Agreement." (Hoglund Decl., ¶13, Ex. A, section 8.) Immediately thereafter, it outlined in simple terms that Green merely needed to submit a signed and dated letter to the company's general counsel notifying them of her intention to opt out and included the address for mailing. (Hoglund Decl., ¶13, Ex. A, section 8.)

Green further argues that the Arbitration Agreement was procedurally unconscionable where she asserts that the governing rules were not attached to the Arbitration Agreement. Green asserts that she was not provided with any copy of rules, nor was she directed to a website or resource where she could review them. (Green Decl., ¶ 7.) Green argues that as a result of this omission, she did not have a fair opportunity to “understand the scope, procedures, or limitations of arbitration.” (Green’s Opposition Papers, pg. 4, ln. 27.)

However, Green’s contentions are misplaced. The Arbitration Agreement provides for the description of the arbitral process from start to finish, including initiating the arbitration process, the discovery process, payment of arbitration fees, the rules of the hearing itself, and arbitral awards. (Hoglund Decl., ¶13, Ex. A, sections 1-5.)

Accordingly, the Court finds a very low level of procedural unconscionability typical of enforceable employment arbitration agreements.

Substantive Unconscionability

Substantive unconscionability focuses on overly harsh or one-sided results. (Armendariz, supra, 24 Cal.4th at p. 114.) Green argues that the Arbitration Agreement is substantively unconscionable because it the Arbitration Agreement lacks mutuality; the Arbitration Agreement is indefinite in time; and because the Arbitration Agreement precludes Green from pursuing an individual Private Attorney General Act claim. Each of these contentions are analyzed in turn.

Mutuality

Green argues that the agreement lacks mutuality under Cook v. University of Southern California (2024) 102 Cal.App.5th 312., and is therefore unconscionable. The court in that case found an arbitration agreement lacking in mutuality because: “The agreement requires Cook to arbitrate any and all claims she may have against USC ‘or any of its related entities, including but not limited to faculty practice plans, or its or their officers, trustees, administrators, employees or agents, in their capacity as such or otherwise.’ However, the agreement does not require USC's ‘related entities’ to arbitrate 13

their claims against Cook.” (Id. at p. 326.) “This confers a benefit on USC and its broadly defined ‘related entities’ that is not mutually afforded to Cook.” (Id. at p. 327.)

Green argues that the Arbitration Agreement is one-sided because Green is obliged to arbitrate her claims, (Green’s Moving papers, pg. 5, lns. 15-16), but “none of the third party entities, such as affiliates, subsidiaries, related companies or parent companies, do not have the obligation to arbitrate their claims against Plaintiff.” (Id., pg. 6, lns. 1-2.)

However, that is not the case, and either party can enforce the Arbitration Agreement:

"This Agreement applies to any legal dispute arising out of or related to Employee's employment with Tuff Shed, lnc. or one of its affiliates, subsidiaries, related companies or parent companies (the "Company") or termination of employment. [. . .] I . . UNDERSTAND THAT the Company and I are giving up our rights to a court or jury trial and agreeing to arbitrate claims and disputes covered by THISAgreement [sic]."

(Hoglund Decl., ¶13, Ex. A, Section 1 & Acknowledgment Section.)

Green further argues that the Arbitration Agreement lacks mutuality by analogizing her situation to Mercuro v. Sup. Ct. (2002) 96 Cal. App. 4th 167. In Mercuro, “[t]he arbitration agreement specifically cover[ed] claims for breach of express or implied contracts or covenants, tort claims, claims of discrimination based on race, sex, age or disability, and claims for violation of any federal, state or other governmental constitution, statute, ordinance, regulation or public policy.” (Id. at pp. 175-176.) But it “specifically exclude[d] ‘claims for injunctive and/or other equitable relief for intellectual property violations, unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information...’ ” (Id. at p. 176.) The court ultimately held the arbitration agreement unconscionable and unenforceable.

Green argues that Mercuro applies because the Arbitration Agreement states:

The Sole Limitation of this Agreement's application shall be that either you or the Company may seek in a court of competent jurisdiction temporary, preliminary or permanent injunctive relief or any other form of equitable relief, with regard to claims arising out of related to trade secrets, unfair competition and related covenants such as any covenants of nondisclosure, not to compete or not to solicit;

(Hoglund Decl., ¶13, Ex. A, Section 1, ¶3.)

Like Mercuro, the carve-out provision specifically applies only to claims normally brought by employers.

Tuff Shed’s efforts to downplay Mercuro’s applicability are unavailing. In Ronderos v. USF Reddaway, Inc. (9th Cir. 2024) 114 F.4th 1080, the Ninth Circuit found the arbitration agreement before it to be both procedurally and substantively unconscionable, so it is hardly authority for the principle that “modern courts” have “repeatedly” found carve outs for “things like intellectual property rights are only unlawful when” they apply only to employers. (Tuff Shed’s Reply Papers, pg. 5, lns. 24-28.) Ly v. Tesla, Inc. (ND. Cal. 2024) 757 F.Supp.3d 1033, does not assist Tuff Shed either, as that court’s ruling was based on the carve-out provision merely restating Code of Civil Procedure section 1281.8, and the court did not endorse a broad approval of asymmetrical provisions. Finally, Cisco Systems, Inc. v. Chung (ND. Cal. 2020) 462 F.Supp.3d 1024, turned on an ambiguity in the arbitration agreement and did not consider mutuality in the context of determining unconscionability. Cases are not authority for unaddressed propositions.

Finally, Tuff Shed analogizing to the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA) does nothing to advance its arguments. The EFAA renders arbitration agreements unenforceable "at the election of the person alleging" sexual assault or harassment with respect to those specific claims. (9 U.S.C. § 402(a).) It is an election statute, not a prohibition – it allows a proponent of a covered claim to escape an arbitration provision; it does not prohibit such arbitration provisions. It does not make arbitration agreements covering such claims illegal.

Green’s argument is that the specific carve-out provisions apply only to claims normally brought by employers, not employees. Sexual assault and harassment claims are generally brought by employees rather than employers.

Tuff Shed offers no business justification for the agreement’s lack of mutuality, as this carve-out effectively allows employers one-sided access to court. Accordingly, this Court determines that provision is substantively unconscionable.

Arbitration Agreement Duration

Green further argues that the Arbitration Agreement is substantively unconscionable because it does not specify a duration. (Green’s Opposition Papers, pg. 7, lns. 23-27.)

The clause at issue states as follows:

The Agreement also applies, without limitation excepting only the sole limitation set forth below (the “Sole Limitation”), to disputes with the Company or any entity or individual employed by or affiliated with the Company, arising out of or related to an application for employment, background check, privacy, an employment relationship involving the Company or the termination of that relationship (including post-employment defamation or retaliation), ...

(Hoglund Decl., ¶13, Ex. A, Section 1, ¶1.)

Here, there is no substantial unconscionability as this specific clause compels postemployment claims to arbitration where those claims are "rooted in the employment relationship." (Buckhorn v. St. Jude Heritage Medical Group (2004) 121 Cal.App.4th 1401, 1406-07.) This is different than Cook, supra (2024) 102 Cal.App.5th at 347, where the Arbitration Agreement’s scope is limited to claims arising out of Green’s employment.

PAGA Waiver

Green asserts the Arbitration Agreement contains a wholesale waiver of the right to bring a PAGA action. The Arbitration Agreement provides a PAGA specific clause under section 7, which reads as follows:

There will be no right or authority for any dispute to be brought, heard or arbitrated as representative or as a private attorney general representative action ("Private Attorney General Waiver"). Notwithstanding any other provision of this Agreement or the AAA Rules, disputes regarding the validity, enforceability or breach of the Private Attorney General Waiver may be resolved only by a civil court of competent jurisdiction and not by an arbitrator. The Private Attorney General Waiver does not apply to any claim you bring in arbitration as a private attorney general solely on your own behalf and not on behalf of or regarding others. This Private Attorney General Waiver shall be severable from this Agreement in any case in which a civil court of competent jurisdiction finds this Private Attorney General Waiver is invalid, unenforceable, unconscionable, void, or voidable. In such instances and where the claim is brought as a private attorney general, such private attorney general claim must be litigated in a civil court of competent jurisdiction.

(Hoglund Decl., ¶13, Ex. A, Section 7.)

Section 7 does not strip Green of PAGA standing. It waives the right to bring a dispute as a “private attorney general representative action," but then expressly carves out individual PAGA claims brought "solely on your own behalf and not on behalf of or regarding others." It further provides that if a court determines the waiver is unenforceable, representative PAGA claims "must be litigated in a civil court of competent jurisdiction."

In Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639 (Viking), the United States Supreme Court held that “the FAA preempts the rule of [Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348] insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Id. at p. 662.)

The express terms of Section 7 of the Arbitration Agreement and case law support the finding that the Arbitration Agreement only applies to representative PAGA claims and is not a invalid PAGA waiver. Therefore, the Arbitration Agreement is valid and the 16

Green’s individual PAGA claims can be compelled to arbitration. Accordingly, Green has failed to prove that the PAGA provisions of the Arbitration Agreement are substantively unconscionable.

Severability

Where appropriate, courts have discretion to sever or limit the application of unconscionable provisions and enforce the remainder of an arbitration agreement under Civil Code section 1670.5, subdivision (a). The court in Armendariz noted that invalidating the entire agreement is reserved for “when an agreement is ‘permeated’ by unconscionability.” (Armendariz, supra, (2000) 24 Cal.4th at p. 122.) As discussed above, the only unconscionable provision in the agreement is the “injunctive relief” provision. Particularly as the Arbitration Agreement has a severability clause (Hoglund Decl., ¶13, Ex. A, Section 13), and only one term is unenforceable, the injunctive relief provision can be severed and the remainder of the agreement is left intact

Stay

If a court of competent jurisdiction has ordered arbitration of an issue involved in a pending action, the court, upon motion of a party to the action, shall stay the action until an arbitration is had in accordance with the order to arbitrate. (Code Civ. Proc., § 1281.4.) “The trial court may exercise its discretion to stay the non-individual [PAGA] claims pending the outcome of the arbitration [of plaintiff’s individual PAGA claims] pursuant to section 1281.4 of the Code of Civil Procedure.” (Adolph v. Uber Technologies, Inc. (“Adolph”) (2023) 14 Cal.5th 1104, 1123.) The opposing party would need to present a convincing argument as to why this would be an impractical manner of proceeding. (Id., at 1124.)

Based on the foregoing, Tuff Shed’s motion to compel arbitration is granted. This action is stayed pending the completion of arbitration.

Pursuant to California Rules of Court, rule 3.1312(a), and Code of Civil Procedure section 1019.5, subdivision (a), no further written order is necessary. The minute order adopting this tentative ruling will serve as the order of the court and service by the clerk will constitute notice of the order.

Tentative Ruling

Issued By: KCK on 04/29/26. (Judge’s initials) (Date)

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