STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al.

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

Tentative Ruling

NOTICE:

Consistent with Local Rule 1.06(B), any party requesting oral argument on any matter on this calendar must comply with the following procedure:

To request limited oral argument, on any matter on this calendar, you must call the Department 16C Oral Argument Request Line at (916) 874-1475 by 4:00 p.m. the Court day before the hearing and advise opposing counsel. At the time of requesting oral argument, the requesting party shall leave a voice mail message: a) identifying themselves as the party requesting oral argument; b) indicating the specific matter/motion for which they are requesting oral argument; and c) confirming that it has notified the opposing party of its intention to appear and that opposing party may appear via Zoom using the Zoom link and Meeting ID indicated below. If no request for oral argument is made, the tentative ruling becomes the final order of the Court.

Unless ordered to appear in person by the Court, parties may appear remotely either telephonically or by video conference via the Zoom video/audio conference platform with notice to the Court and all other parties in accordance with Code of Civil Procedure §367.75. Although remote participation is not required, the Court will presume all parties are appearing remotely for non-evidentiary civil hearings.

The Department 16C Zoom Link is https://saccourt-cagov.zoomgov.com/j/16030877014 and the Zoom Meeting ID is 160 3087 7014. To appear on Zoom telephonically, call (833) 568-8864 and enter the Zoom Meeting ID referenced above. NO COURTCALL APPEARANCES WILL BE ACCEPTED.

Parties requesting services of a court reporter will need to arrange for private court reporter services at their own expense, pursuant to Government code §68086 and California Rules of Court, Rule 2.956. Requirements for requesting a court reporter are listed on the Court Reporter Services webpage available on the Sacramento Superior

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

Court website at https://saccourt.ca.gov/general-information/court-reporter-servicestranscripts. Parties may contact Court- Approved Official Reporters Pro Tempore by utilizing the list of Court Approved Official Reporters Pro Tempore available at https://saccourt.ca.gov/home/showpublisheddocument/227/639084034465370000.

A Stipulation and Appointment of Official Reporter Pro Tempore (CV/E-206) is required to be signed by each party, the private court reporter, and the Judge prior to the hearing, if not using a reporter from the Court’s Approved Official Reporter Pro Tempore list. Once the form is signed it must be filed with the clerk. If a litigant has been granted a fee waiver and requests a court reporter, the party must submit a Request for Court Reporter by a Party with a Fee Waiver (CV/E-211) and it must be filed with the clerk at least 10 days prior to the hearing or at the time the proceeding is scheduled if less than 10 days away. Once approved, the clerk will forward the form to the Court Reporter’s Office and an official reporter will be provided.

*** EFFECTIVE APRIL 13, 2026, THIS DEPARTMENT HAS MOVED TO THE TANI G. CANTIL- SAKAUYE COURTHOUSE LOCATED AT 500 G STREET IN SACRAMENTO, CA 95814. ALL HEARINGS NOTICED FOR DEPARTMENT 54 WILL BE HEARD IN DEPARTMENT 16C OF THE NEW COURTHOUSE. ***

Defendant Stran Loyalty Solutions, LLC’s (“Defendant”) Motion to Compel Arbitration is DENIED, as follows.

The Notice of Motion does not provide notice of the Court’s tentative ruling system, as required by Local Rule 1.06(D). Defendant’s counsel is directed to contact opposing counsel forthwith to advise counsel of Local Rule 1.06 and the Court’s tentative ruling procedure. If Defendant’s counsel is unable to contact opposing counsel prior to the hearing, they shall be available at the hearing in the event opposing counsel appears without following the procedures set forth in Local Rule 1.06(B).

///

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

Background

This is an employment law (wage and hour) action arising out of Plaintiff Kailan Straw’s former employment with Defendant and Co-Defendant Josh Blake (collectively referred to herein as “Defendants”). The Complaint alleges eleven causes of action against Defendants for violations of the Labor Code, breach of employment contract, breach of the implied covenant of good faith and fair dealing, conversion, and unfair business practices under Business and Professions Code sections 17200, et seq. Plaintiff alleges Blake was the President of the Gander Group, which was later acquired by Defendant. (Compl. ¶ 3.) Plaintiff alleges that following Defendant’s acquisition of the Gander Group in 2024, Defendants continued to operate under the original name, but significant changes were implemented. (Compl. ¶ 14.)

Plaintiff began his employment with Defendants on October 19, 2019, as VP of Client Services. (Compl. ¶ 11.) He alleges his compensation was structured on a commission basis under a commission agreement signed in October 2023. (Compl. ¶ 12.)

After Defendant’s asset purchase closed, employees were provided written offer letters, which included a summary of the applicable compensation structure and commission framework. (Decl. of Bruce Batcheller ISO Reply ¶ 8.) Subsequently, in April 2025, a group of employees, including Plaintiff, was presented with a PowerPoint presentation and accompanying memorandum concerning a revised commission structure. (Id. at ¶ 9.) The new commission structure and other terms were set forth in an Employment Agreement, which was emailed to Plaintiff on April 25, 2025 (“Employment Agreement”). (Id. at ¶ 11.) The Employment Agreement was presented to the employees as a “commissions structure change, nothing more.” (Pl.’s Decl. ISO Opp’n ¶¶ 6, 8.) Plaintiff acknowledges electronically signing the Employment Agreement via DocuSign on or about April 30, 2025. (Id. at ¶ 5.)

Paragraph 12 of the Employment Agreement included an arbitration provision (“Arbitration Clause”), which states in full:

12. Arbitration. The parties agree that any dispute, controversy or claim arising out of or relating to this Agreement, its enforcement or interpretation, or any other matter arising from Employee’s employment with Employer

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

or Employee’s termination therefrom including any claim of violations of Employee’s common law, statutory, or contractual rights, to the extent permitted by law, shall be submitted to final, binding, and confidential arbitration, to be held in Orange County, California by one arbitrator or retired judge pursuant to the Rules set forth in the California Code of Civil Procedure §§1281-1288.8, including § 1283.05. Anything contrary notwithstanding, any party may seek preliminary, interim or emergency injunctive relief from any court of competent jurisdiction prior to or pending the outcome of any arbitration.

The prevailing party in any action or proceeding shall be entitled to, in addition to all other relief, reasonable attorney fees as well as all costs of the arbitration from the non-prevailing party to the extent permitted by law. The arbitrator shall be authorized to order specific performance, injunctive relief and/or other equitable relief in addition to other authorized actions. The arbitrator will be required to include a written finding of fact and conclusions in any decision or award, which is to be submitted within thirty (30) days from the closing of the hearing.

Judgment may be entered on the arbitrator's award in any court having jurisdiction.

(Employment Agreement ¶ 12, attached as Ex. A to the Decl. of Bruce Batcheller ISO Mot.)

Plaintiff avers that he did not know the Employment Agreement contained an arbitration provision at the time he signed it. (Pl.’s Decl. ISO Opp’n ¶ 7.) The Arbitration Clause is on page 2 of a 5-page document. The Arbitration Clause is printed in the same size and type font as all other paragraphs in the document. Slides from the PowerPoint presentation given in connection with the Employment Agreement do not reference arbitration. (PowerPoint Slides, attached as Ex. G to the Second Decl. of Bruce Batcheller ISO Reply.)

On January 9, 2026, Plaintiff’s counsel sent a demand letter and a Request for Personnel and Payroll records to Defendant and the Gander Group. (Decl. of Kyle R. DeCamp ISO Opp’n ¶ 3.) The January 9, 2026 Records Request letter stated in the

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

third to last paragraph of the 3-page letter:

If Gander Group and Stran Loyalty Solutions believes Mr. Straw is bound by any arbitration agreement, please identify the purported written agreement within 21 days of this letter. If you fail to do so, we will presume that Gander Group and Stran Loyalty Solutions waives its right to arbitrate any employment dispute with Mr. Straw.

(Decl. of Bruce Batcheller ISO Reply ¶¶ 2-3, Ex. C.) On February 13, 2026, Plaintiff’s counsel sent a second Request for Personnel and Payroll Records to Defendant, which contained the identical arbitration agreement demand. (Decl. of Kyle R. DeCamp ISO Opp’n ¶ 6.) Neither the Gander Group nor Defendant identified an arbitration agreement in response to these letters.

Plaintiff filed the Complaint in this action on February 17, 2026 and subsequently propounded a first set of written discovery to Defendant. (Decl. of Kyle R. DeCamp ISO Opp’n ¶ 8.)

Defendant filed the instant motion and a motion to transfer venue on May 18, 2026. The Presiding Judge denied Defendant’s venue motion on July 10, 2026.

Legal Standard

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy, the Court shall order the petitioner and the respondent to arbitrate the matter if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) the right to compel arbitration was waived by the petitioner; (b) grounds exist for the revocation of the agreement; or, (c) a party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., §1281.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)

///

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

Section 2 of the Federal Arbitration Act (“FAA”) is essentially the same:

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 an agreement in writing to submit to arbitration an existing controversy . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. . . .

Under both the FAA and state law, the threshold questions presented by a petition to compel arbitration are: (1) whether a valid agreement to arbitrate exists and, if so, (2) whether the agreement encompasses the dispute at issue. (See United States ex rel. Welch v. My Left Foot Children’s Therapy, LLC (9th Cir. 2017) 871 F.3d 791, 796; Maxwell v. Atria Management Co., LLC (2024) 105 Cal.App.5th 230, 241.)

“A party seeking to compel arbitration of a dispute ‘bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.’ [Citation.]” (Jenks v. DLA Piper Rudnick Gray Cary US LLP (2015) 243 Cal.App.4th 1, 8; see also Pinnacle Museum Tower Ass’n v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [deciding application of an arbitration clause under the FAA].)

When determining whether parties have agreed to submit to arbitration, courts apply state-law principles of contract formation and interpretation. (Suski v. Coinbase, Inc. (2022) 55 F.4th 1227, 1230; Victoria v. Superior Court (1985) 40 Cal.3d 734, 739, 745- 747.)

Both the state and federal arbitration statutes reflect a recognized public policy favoring arbitration. (Knight, et al., Cal. Prac. Guide: Alternative Dispute Resolution (The Rutter Group 2025 Update) ¶ 5:76.)

Discussion

Defendant moves for an order compelling arbitration of all claims pursuant to the Arbitration Clause, arguing that it broadly encompasses all disputes arising out of or

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

relating to the Employment Agreement and the parties’ employment relationship. Defendant further argues that there is no basis to invalidate the Arbitration Clause.

Plaintiff opposes the motion, rejoining that Defendant has not met its burden of proving the existence of a valid, enforceable arbitration agreement, and even if it had, the purported agreement is unenforceable on the grounds of waiver and unconscionability.

The Court addresses the parties’ arguments in turn.

A. Existence of a Valid, Enforceable Arbitration Agreement

Plaintiff argues that Defendant cannot meet its burden of proving that a valid arbitration agreement exists between the parties because, despite two written requests from Plaintiff’s counsel, Defendant failed to identify any arbitration agreement. Plaintiff argues: “Defendant’s failure to timely identify and produce the agreement it now relies upon undermines any claim that a valid, mutually assented-to arbitration agreement governs Plaintiff’s employment claims.” (Opp’n 5:9-10.)

Plaintiff concedes that he signed the Employment Agreement, which includes the Arbitration Clause. (Pl.’s Decl. ISO Opp’n ¶ 5.) Further, he does not dispute that the scope of the Arbitration Clause covers his claims. Rather, he argues only that Defendant’s failure to produce the Employment Agreement in response to his prelitigation written requests somehow belies that an arbitration agreement exists. The Court disagrees. While Defendant’s failure to identify the Employment Agreement may be relevant to the defense of waiver, it cannot disprove the existence of a valid arbitration agreement between the parties.

The Court finds that Defendant has met its burden of showing that a valid agreement to arbitrate exists between the parties – the Arbitration Clause – and that it encompasses Plaintiff’s claims against it.

Accordingly, the Court moves on to consider whether Plaintiff has proven the existence of a defense.

B. Unconscionability

Plaintiff argues that the Arbitration Clause is both procedurally and substantively

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

unconscionable and, therefore, cannot be enforced.

“The general principles of unconscionability are well established. A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party.” [Citation.] We have referred to these two aspects of unconscionability as its “procedural and substantive elements.” [Citation.] The procedural element concerns “the circumstances of contract negotiation and formation,” particularly “oppression or surprise due to unequal bargaining power.” [Citation.] The substantive element, by contrast, concerns “the fairness of an agreement’s actual terms,” i.e., whether those terms “are overly harsh or one-sided.” [Citation.]

“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.’” [Citation.]

When there is substantial procedural unconscionability, “even a relatively low degree of substantive unconscionability may suffice to render the agreement unenforceable.” [Citation.] “Substantive terms that, in the abstract, might not support an unconscionability finding take on greater weight when imposed by a procedure that is demonstrably oppressive. Although procedural unconscionability alone does not invalidate a contract, its existence requires courts to closely scrutinize the substantive terms ‘to ensure they are not manifestly unfair or one-sided.’” [Citation.] “The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

view of all relevant circumstances, that a court should withhold enforcement.” [Citation.]

(Fuentes v. Empire Nissan, Inc. (2026) 19 Cal.5th 93, 102-103.)

1) Procedural Unconscionability

Plaintiff argues that the Arbitration Clause is procedurally unconscionable because it is a contract of adhesion, was inconspicuously included in the Employment Agreement, which Defendant presented mid-employment as a commission structure change, and failed to provide the applicable rules of arbitration, i.e., Code of Civil Procedure sections 1281-1288.8. (Id. at 7:28-9:12.)

“Some procedural unconscionability is present whenever an 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.”’ [Citation.]” (Fuentes, supra, 19 Cal.5th at p. 103.)

Here, the Court agrees that the Arbitration Agreement is a contract of adhesion, as it was provided on a take-it-or-leave-it basis. “The question then becomes one of the degree of procedural unconscionability, and by extension, the degree of scrutiny with which [the Court] search[es] the substance of the agreement’s terms for unfairness and one-sidedness.” (Fuentes, supra, at p. 104.) “A greater degree of procedural unconscionability is present when the circumstances of a contract’s formation evince ‘oppression’ or ‘surprise’ beyond that usually present in a contract of adhesion. [Citation.]” (Ibid.)

“Oppression occurs where a contract involves lack of negotiation and meaningful choice.” (Fuentes, supra, at p. 104 [internal quotation marks and citations omitted].) “Courts must be particularly attuned to this danger in the employment setting, where economic pressure exerted by employers on all but the most sought-after employees may be particularly acute.” (Ibid. [internal quotation marks and citation omitted].)

“‘[S]urprise’ is present when an agreement’s meaning is difficult to ascertain, such as when the allegedly unconscionable provision is hidden within a prolix printed form. Small font size and illegibility can also support a finding of surprise.” (Fuentes, supra, at p. 104 [internal quotation marks and citations omitted].)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

“Few employees are in a position to forfeit a job and the benefits they have accrued . . . to avoid . . . arbitration terms that are forced upon them by their employer” in a take it or leave it manner. (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 722.) Further, the circumstances surrounding Plaintiff’s signing of the Employment Agreement added an element of surprise because of how the Employment Agreement was presented to the employees, and since the Arbitration Clause was not distinguished in the agreement by bold or larger font, etc.

However, the Court finds that the degree of procedural unconscionability in this case is not increased by the fact that the arbitration rules referenced in the Arbitration Clause – the California Arbitration Act – were not provided to Plaintiff. The applicable rules were clearly identified in the Arbitration Clause and were easily accessible to Plaintiff. Under such circumstances, the failure to attach a copy of the rules does not render the Arbitration Agreement procedurally unconscionable. (See Lane v.

Francis Capital Management, LLC (2014) 224 Cal.App.4th 676, 691 [“There could be no surprise, as the arbitration rules referenced in the agreement were easily accessible to the parties – the . . . rules are available on the internet.”]; Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1470-1472 [concluding the failure to attach governing arbitration rules, alone, is insufficient to support a finding of procedural unconscionability]; Bigler v. Harker School (2013) 213 Cal.App.4th 727, 737 [“We agree that the absence of the [arbitration] rules is of minor significance to our analysis.”].)

Under the totality of the circumstances, the Court finds an intermediate degree of procedural unconscionability.

2) Substantive Unconscionability

The substantive unconscionability analysis examines the fairness of a contract’s terms. This analysis ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as overly harsh, unduly oppressive, so one-sided as to shock the conscience, or unfairly one-sided. All of these formulations point to the central idea that the unconscionability doctrine is concerned not with a simple old-fashioned bad bargain, but with terms that are unreasonably favorable to the more powerful party.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

[W]here, as here, the written agreement has been prepared entirely by the employer, it is a well established rule of construction that any ambiguities must be construed against the drafting employer and in favor of the nondrafting employee. Ultimately, the question is whether [the nondrafting employee], through oppression and surprise, was coerced or misled into making an unfair bargain.

(Fuentes, supra, 19 Cal.5th at p. 106 [internal quotation marks and citations omitted.) In assessing substantive unconscionability, the “paramount consideration” is mutuality of the agreement to arbitrate. (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 241.)

Plaintiff contends that the Arbitration Agreement is substantively unconscionable, arguing that it has multiple one-sided provisions, including its forum selection clause, a punishing fee-shifting clause, mandatory confidentiality, and the lack of a provision requiring Defendant to bear arbitration costs in violation of Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (“Armendariz”). (Opp’n 2:16-21, 8:16-25.)

The Court addresses each of these arguments.

a. Forum Selection Clause

Plaintiff argues that the Arbitration Clause’s requirement that arbitration be held in Orange County despite the fact that Plaintiff resides in Sacramento County and performed his job duties remotely from there “imposes a practical hardship a Sacramento Court would not.” (Opp’n 8:21-25.) In support of his opposition, Plaintiff avers that “[t]raveling to Orange County to participate in arbitration proceedings would impose a significant financial burden on me, including the personal expense of travel, as Defendant would no longer be reimbursing those costs.” (Pl.’s Decl. ISO Opp’n ¶ 13.)

“In cases with a contractual forum clause, . . . the burden of proof is on the party resisting the forum to demonstrate the selected forum ‘would be unavailable or unable to accomplish substantial justice or that no rational basis exists for the choice of forum. Neither inconvenience nor the additional expense of litigating in the selected forum is a factor to be considered.” (Ramos v. Super. Ct. (2018) 28 Cal.App.5th 1042, 1067.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

Plaintiff’s opposition and supporting evidence do not meet this standard. (See, e.g., Tompkins v. 23andMe, Inc. (2016) 840 F.3d 1016, 1029-1030 [applying California law and finding that “‘mere inconvenience and additional expense’ does not make the locale unreasonable”].)

b. Fee-Shifting Clause

Plaintiff cites the Arbitration Clause’s fee-shifting provision as one of the one-sided provisions that is substantively unconscionable under Armendariz. (Opp’n 2:16-21.) The subject provision states: “The prevailing party in any action or proceeding shall be entitled to, in addition to all other relief, reasonable attorney fees as well as all costs of the arbitration from the non-prevailing party to the extent permitted by law.”

Defendant does not respond to this argument in its reply brief.

In Armendariz, the California Supreme Court held that mandatory employment arbitration agreements covering unwaivable statutory rights must satisfy several elements of essential fairness to be enforceable: (1) use of a neutral arbitrator, (2) provide more than minimal discovery, (3) provide a written arbitration award, (4) provide all types of relief that would otherwise be available in court, and (5) the employer must pay all costs unique to arbitration. Although Armendariz arose in the context of claims under the Fair Employment and Housing Act, the Supreme Court’s reasoning was tied to unwaivable statutory claims more broadly, and courts have extended its holding to other statutory schemes, including wage-and-hour violations under the Labor Code. (See, e.g., OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111; Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064.)

While Armendariz specifically addresses arbitration forum costs that are unique to arbitration, subsequent cases have extended Armendariz’s reasoning to hold that bilateral prevailing party attorneys’ fees/costs provisions violate Armendariz when they depart from asymmetric fee-shifting rules provided by FEHA and analogous statutes. (Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478, 508-512.) Such provisions violate Armendariz on two grounds. First, such a provision violates the requirement that an employer must bear all costs unique to arbitration. Second, a bilateral prevailing party fee provision that departs from a statutory asymmetric standard exposes the employee to a potential fee obligation that would not exist in court. (See,

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

e.g., Ramirez, supra, at pp. 508-512; Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 709-710; Carbajal v. CWPSC, Inc. (2016) 246 Cal.App.4th 227, 250-252.)

Here, the Arbitration Clause’s bilateral prevailing party attorneys’ fees/costs provision is substantively unconscionable because it would allow Defendant to recover attorneys’ fees and costs that would not otherwise be available in court under the applicable Labor Code attorneys’ fees provisions. (See Mills v. Facility Solutions Group, Inc. (2022) 84 Cal.App.5th 1035, 1055-1058 [discussing Labor Code sections 218.5, 1194, 2802 respective attorneys’ fees provisions].)[1]

c. Confidentiality Clause

The Arbitration Clause provides that “any dispute, controversy or claim arising out of or relating to [the Employment Agreement] . . . or any other matter arising from [Plaintiff’s] employment . . . or termination . . . shall be submitted to final, binding, and confidential arbitration.” (Emphasis added.) Plaintiff argues that the Arbitration Clause’s confidentiality requirement is substantively unconscionable because it only benefits Defendant. (Opp’n 2:17-21.)

Defendant does not respond to this argument in its reply brief.

“[A] confidentiality provision in an arbitration agreement is not per se unconscionable when it is based on a legitimate commercial need (such as to protect trade secrets or proprietary information).” (Murrey v. Superior Court (2023) 87 Cal.App.5th 1223, 1254; see also Knight, et al., Cal. Practice Guide: Alternative Dispute Resolution (The Rutter Group 2025 Update) ¶ 5:155.2k.) However, broad confidentiality provisions have been held unconscionable where they have a one-sided effect, even if they are facially mutual. (Knight, et al., supra, at ¶ 5:155.2k.)

Such is often the case in arbitration agreements entered into in an employment context. (See Murrey v. Superior Court (2023) 87 Cal.App.5th 1223, 1254 [finding confidentiality clause unconscionable in the context of a workplace sexual harassment complaint, stating “although confidentiality provisions are facially neutral, they usually favor companies over individuals”]; Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1066-1067 [“[R]equiring discrimination cases be kept secret unreasonably favors the employer to the detriment of employees seeking to vindicate unwaivable statutory rights and may discourage potential plaintiffs from filing discrimination cases.”].)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

Here, the Court finds that the subject confidentiality provision is broad and would unfairly favor Defendant over Plaintiff. Accordingly, the Arbitration Agreement’s requirement that the arbitration be confidential is substantively unconscionable.

3) Severance

As discussed above, the Court has concluded that Plaintiff has demonstrated an intermediate amount of procedural unconscionability and that some degree of substantive unconscionability exists for the Arbitration Clause’s fee-shifting and confidentiality provisions.

Accordingly, the Court must decide whether it may sever the provisions of the Arbitration Clause that it finds to be substantively unconscionable.

Pursuant to Civil Code section 1670.5, when a court finds a contractual clause to be unconscionable, the court has discretion to refuse to enforce the contract, sever any unconscionable clause, or limit application of the unconscionable clause. (Ramirez, supra, 16 Cal.5th at p. Cal. 5th at 513; see also Ronderos v. USF Reddaway, Inc. (9th Cir. 2024) 114 F.4th 1080, 1099.)

“No bright-line rule requires a court to refuse enforcement if a contract has more than one unconscionable term. Likewise, a court is not required to sever or restrict an unconscionable term if an agreement has only a single such term.” (Ramirez, supra, at p. 516.) Instead, the appropriate inquiry is “qualitative and accounts for each factor” the California Supreme Court identified in Armendariz. (Ibid.)

At the outset, a court should ask whether “the central purpose of the contract is tainted with illegality.” (Armendariz, supra, 24 Cal.4th at p. 124.) If so, the contract cannot be cured, and the court should refuse to enforce it. If that is not the case, the court should go on to ask first, whether the contract’s unconscionability can be cured purely through severance or restriction of its terms, or whether reformation by augmentation is necessary. (See Armendariz, supra, 24 Cal.4th at pp. 124-125.) If no “reformation is required,” the offending provision can be severed or limited,

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

and “the rest of the arbitration agreement left intact,” then severance or restriction is the preferred course for provisions that are collateral to the agreement’s main purpose. [Citations.] If the unconscionability cannot be cured by extirpating or limiting the offending provisions, but instead requires augmentation to cure the unconscionability, then the court should refuse to enforce the contract. [Citations.] Courts cannot “rewrite agreements and impose terms to which neither party has agreed.” [Citation.]

Even if a contract can be cured, the court should also ask whether the unconscionability should be cured through severance or restriction because the interests of justice would be furthered by such actions. (Armendariz, supra, 24 Cal.4th at p. 124.) This part of the inquiry focuses on whether mere severance of the unconscionable terms would function to condone an illegal scheme and whether the defects in the agreement indicate that the stronger party engaged in a systematic effort to impose arbitration on the weaker party not simply as an alternative to litigation, but to secure a forum that works to the stronger party’s advantage. (Ibid.) If the answer to either question is yes, the court should refuse to enforce the agreement.

In conducting this analysis, the court may also consider the deterrent effect of each option. As Mills v. Facility Solutions Group, Inc. (2022) 84 Cal.App.5th 1035 explained, severing multiple unconscionable provisions from an agreement and enforcing the remainder could “create an incentive for an employer to draft a one-sided arbitration agreement in the hope employees would not challenge the unlawful provisions, but if they do, the court would simply modify the agreement to include the bilateral terms the employer should have included in the first place.” (Id. at p. 1045.) Although there are no bright-line numerical rules regarding severance, it is fair to say that the greater the number of unconscionable provisions a contract contains the

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

less likely it is that severance will be the appropriate remedy.

Finally, if the contract contains a severance clause, the court should take it into account as an expression of the parties’ intent that an agreement curable by removing defective terms should otherwise be enforced. [Citations.] That said, we note that the parties to an agreement cannot divest a trial court of its discretion under Civil Code section 1670.5 by including such a severance clause. [Citation.]

Accordingly, courts may liberally sever any unconscionable portion of a contract and enforce the rest when: the illegality is collateral to the contract’s main purpose; it is possible to cure the illegality by means of severance; and enforcing the balance of the contract would be in the interests of justice. [Citations.]

(Ramirez, at p. 516-517.)

Applying the foregoing standard to this case, the Court declines to sever the offending provisions from the Arbitration Clause. The Arbitration Agreement’s degree of procedural unconscionability is moderate, and the substantively unconscionable provisions impact two out of the Arbitration Clause’s six sentences. (See, e.g. Murphy v. Check ‘N Go of Calif., Inc. (2007) 156 Cal.App.4th 138, 149, abrogated on other grounds by AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333 [“[A]t least two aspects of the arbitration agreement are unconscionable . . . . ‘[G]iven the multiple unlawful provisions, the trial court did not abuse its discretion in concluding that the arbitration agreement is permeated by an unlawful purpose’ and that the agreement as a whole should not be enforced.”]; see also Ronderos v.

USF Reddaway, Inc. (9th Cir. 2024) 114 F.4th 1080, 1099-1104 [applying California law, discussing the trial court’s range of discretion in deciding whether severance is appropriate, and stating a trial court can consider the degree of procedural unconscionability and whether the arbitration agreement contains more than one unlawful provision in deciding whether severance is appropriate].)

///

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

26CV003601: STRAW vs STRAN LOYALTY SOLUTIONS, LLC, et al. 07/23/2026 Hearing on Motion to Compel Arbitration in Department 16C

Conclusion

For the stated reasons, the motion to compel arbitration is denied. In light of its ruling, the Court need not reach Plaintiff’s arguments concerning waiver or any representative claims brought under the Private Attorneys General Act (“PAGA”).

Further, this action is stayed pending the completion of the arbitration. (Code Civ. Proc., § 1281.4.)

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc., § 1019.5; Cal. Rules of Court, rule 3.1312.)

[1] To the extent Plaintiff separately argues that the Arbitration Clause’s silence on the issue of which party is responsible for the payment of the costs of arbitration is substantively unconscionable (see Opp’n 8:16-20), the Court disagrees. (See Armendariz, supra, at pp. 107-113 [holding that where an arbitration agreement was silent on the issue of the payment of arbitration costs and was governed by Code of Civil Procedure section 1284.2, the arbitration agreement would be interpreted as requiring the employer to bear the arbitration forum costs].)