Marfone vs. Harvey & Company, LLC

Both agreements contain the same arbitration clause.

Plaintiffs are not signatories to HEP and HPI Agreements. (See Block Decl., Exs. 3, 4; Compl., Exs. 2, 3.) However, each time they purchased or were granted equity interests governed by these agreements, Plaintiffs signed Exhibit B- 1 and B-2 forms, which state in signing they each have “read[], understand[], and agree[] to be bound by all of the provisions of the Operating Agreement of the Company . . . .” (See Block Decl., ¶¶ 5, 6, Exs. C, D; see also Compl., ¶51.)

Plaintiffs admit signing the Employment Arbitration Agreement. (Meyers Decl. ¶ 7; Matthews Decl. ¶ 6; Marfone Decl. ¶ 6.) They also admit signing B-1 and B-2 forms when the acquired equity. (See Marfone Decl. ¶¶ 13, 14, 18, 19; Matthews Decl. ¶¶ 9-14; Meyers Decl. ¶¶ 10- 12, 10.)

Thus, Plaintiffs do not dispute the existence of these arbitration agreements. Instead, they contend the Proprietary Information and invention Assignment Agreement (“PIIAA”) governs and supersedes the prior agreements. Plaintiffs signed the PIIAA in November 2023. (Marfone Decl. ¶ 20, Ex. 2; Matthews Decl. ¶ 15, Ex. 4; Meyers Decl. ¶ 13, Ex. 5.)

The PIIAA requires Plaintiffs, as “a condition of [their] employment or continued employment” with Defendants, to not “misuse, publish or disclose to any person, firm, corporation or entity any confidential and proprietary

information and trade secrets of the Company.” (Marfone Decl., Ex. 2, ¶ 2(a).) The PIIAA includes a forum selection clause requiring “[a]ny and every legal proceeding” arising from the agreement be brought in California courts. (Marfone Decl., Ex. 2, § 8(h).) The PIIAA also includes an integration clause stating the PIIAA sets forth the entire agreement between the parties “relating to the subject matter herein and fully supersedes any and all prior discussions, agreements and understandings, written or oral, with respect to the subject matter herein.” (Marfone Decl., Ex. 2, § 8(i).)

Plaintiffs contend the PIIAA covers the substance of this litigation because a core issue in this case is whether H&C improperly determined Plaintiffs committed employment violations by breaching the PIIAA to justify improperly withholding equity payments from Plaintiffs and triggering forced buybacks. Therefore, according to Plaintiffs, the PIIAA is directly implicated in Plaintiffs’ claims.

Plaintiffs’ arguments lack merit. The PIIAA does not supersede the Employment Arbitration Agreement, HEP Agreement or the HPI Agreement because they do not pertain to the same subject matter. The subject matter of the PIIAA is protecting the company’s confidential and trade secret materials. The subject matter of the Employment Arbitration Agreement is Plaintiffs’ employment. (See Manakata Decl., Exs. A-C, ¶ 1.) The subject matter of the HEP and HPI Agreements is to “to buy, hold, receive, sell, or otherwise invest in Investments; to exercise all rights, powers, privileges, and other incidents of ownership or possession with respect to Investments held or owned by the Company.” (See Block Decl., Ex. A, ¶ 1.2; see also Ex. B, ¶1.2.)

Further, while Plaintiffs mention the PIIAA in their complaint, Plaintiffs have not brought claims under it. Instead, they brought claims under the HEP and HPI Agreements alleging those agreements are valid, enforceable and Defendants breached them. (Compl., ¶¶ 147-166.)

Unconscionability

Plaintiffs contend the arbitration agreements are procedurally and substantively unconscionable.

“[U]nconscionability has both a ‘procedural’ and a ‘substantive’ element, the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.” (Armendariz v.

Found. Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) “The prevailing view is that [procedural 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.” (Ibid.)

In the employment context, the court must consider five factors to determine whether an arbitration agreement is enforceable. (Armendariz, supra, 24 Cal.4th at p. 102.) The agreement must: 1) provide for a neutral arbitrator; 2) provide for more than minimal discovery; 3) require the arbitrator to issue a written decision; 4) provide for the same remedies that would otherwise be available to the employee 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. (Ibid.)

Procedurally, Plaintiffs argue the arbitration agreements are adhesion contracts which were required for Plaintiffs’ employment; Plaintiffs were not told the terms were negotiable, were pressured to return the agreements promptly, and were not advised they could consult with counsel; Defendants deliberately hid the terms of the arbitration agreements; and Defendants failed to explain how the different arbitration agreements interacted.

Substantively, Plaintiffs contend the arbitration agreements lack basic mutuality and fail to implement the core requirements set forth in Armendariz.

Procedural Unconscionability

“Procedural unconscionability addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power.” (Ramirez v. Charter Communications, Inc. (2024) 16 Cal. 5th 478, 492 [cleaned up].)

“[A] compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis.” (Lagatree v. Luce, Forward, Hamilton, & Scripps LLC (1999) 74 Cal.App.4th 1105, 1127.) “[U]nder both federal and state law, an employee’s rights to a jury trial and a judicial forum can be validly waived by agreement, even where the waiver is required as a condition of employment.” (Id. at p. 1128.) “Courts have observed that when, as here, there is no other indication of oppression or surprise, the degree of procedural unconscionability of an

adhesion agreement is low, and the agreement will be enforceable unless the degree of substantive unconscionability is high.” (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1470 [cleaned up].)

As discussed above, California courts have rejected Plaintiffs’ argument an agreement is unconscionable merely because it requires arbitration of claims as a prerequisite to employment. Plaintiffs present no evidence they asked to modify a term and were refused, or they asked for more time to review or asked to speak to counsel and were refused. Plaintiffs have not established oppression.

As to surprise, the Employment Arbitration Agreements state in bold and capital letters that, in signing the agreement, the Plaintiffs were agreeing to arbitrate any and all disputes arising from their employment and cautions the Plaintiffs not to sign until they have read the acknowledgment and agreement. (See Munakata Decl., Ex. A-C.) Plaintiffs have not established surprise.

However, as to the HEP and HPI Agreements, Plaintiffs presented evidence they did not receive the HEP Agreement until well after they had signed the HEP B-1 and B-2 exhibits, and Plaintiffs had already contributed capital to their HPI investments before obtaining access to the HPI Agreement. (Matthews Decl. ¶¶ 10, 11, 13; Marfone Decl. ¶¶ 14, 17; Meyers Decl. ¶ 10.) Further, the exhibits themselves did not mention arbitration and instead merely referenced the Operating Agreements. (Block Decl., Exs. C, D.) Thus, Plaintiffs have established some surprise as to the HEP and HPI Agreements.

Accordingly, Plaintiffs have established a moderate degree of procedural unconscionability as to the HEP and HPI Agreements.

Substantive Unconscionability

To show substantive unconscionability, a plaintiff must show that its terms are so one-sided as to “shock the conscience.” (Prima Donna Dev. Corp. v. Wells Fargo Bank, N.A. (2019) 42 Cal.App.5th 22, 38.) “[T]he California Supreme Court has confirmed that a one-sided contract is not necessarily unconscionable.” (Tompkins v. 23andMe, Inc. (9th Cir. 2016) 840 F.3d 1016, 1030.)

Plaintiffs contend the arbitration agreements lack mutuality because when read together with the PIIAA, they create a one-sided dispute resolution scheme where claims typically brought by employees (e.g., wage and hour claims) are compelled to arbitration, whereas claims more traditionally

brought by employers (e.g., confidentiality and trade secret claims) are preserved for the court.

The court declines to read Employment Arbitration Agreements and the HEP and HPI Agreements together with the PIIAA because there is no evidence these agreements were “made as parts of substantially one transaction”. (See Silva v. Cross Country Healthcare, Inc. (2025) 111 Cal.App.5th 1311, 1322 [finding the arbitration agreement must be read together with the employment agreement because they were both executed during each plaintiff’s hiring process]; see also Civ. Code, § 1642 [“[s]everal contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together.”].)

Plaintiffs also contend the Employment Arbitration Agreements do not meet the Armendariz requirements because they contain no provisions affirmatively stating Plaintiffs are entitled to all remedies available in court and they do not require H&C to bear the costs unique to arbitration.

However, under Armendariz, “an arbitration agreement may not limit statutorily imposed remedies . . . .” (Armendariz, supra, 24 Cal.4th at p. 103.) It does not require an arbitration agreement to affirmatively state the employee is entitled to all remedies available in court. Here, the Employment Arbitration Agreements do not limit any statutorily imposed remedies.

As to fees, Armendariz invalidates arbitration agreements in which the employer requires the “employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in Court.” (Armendariz, supra, 24 Cal.4th at pp. 110-111.) Here, the Employment Arbitration Agreements contain no such requirement. Plaintiffs do not dispute the other Armendariz elements.

Plaintiffs contend the HEP and HPI Agreements do not meet any of the Armendariz requirements. Plaintiffs’ argument fails. Armendariz does not apply to Plaintiffs’ breach of contract claims because they are “not based on the FEHA or a fundamental public policy that is tied to a constitutional or statutory provision.” (See Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1289 [finding Armendariz did not apply because the case concerned a contract claim for a $5 million to $8

million bonus and a $500,000 severance payment and not a fundamental public policy].)

The court therefore finds none of the arbitration agreements are substantively unconscionable, and therefore Plaintiffs cannot establish unconscionability.

The case is STAYED pending arbitration.

Arbitration Status Review set for 5/20/2027 at 1:30 PM. The parties are ORDERED to file a Joint Status Report 5 days prior.

Clerk to give notice.

6 Boyd vs. Motion to Strike Portions of Complaint Fernandez Off calendar at request of moving party. 30-2025- 01523882-CU- PA-CJC 7 Byer vs. City of Motion for Relief from Untimely Memorandum of La Palma Costs 30-2024- Plaintiff’s Motion for Relief from Untimely Memorandum of 01394359-CU- Costs is GRANTED. OE-CJC Notice of entry of judgment was served via email on 12/22/2025, but Plaintiff’s counsel did not file the memorandum of costs until 2/17/2026 (57 days later) due to a calendaring error.

The court rejects defendant’s contention the court is limited to the 30-day extension in California Rules of Court, rule 3.1700(b)(3). Plaintiff seeks relief on grounds of inadvertence or excusable neglect. (Code Civ. Proc., § 473, subd. (b); see Pollard v. Saxe & Yolles Dev. Co. (1974) 12 Cal.3d 374, 381 [“In the absence of prejudice, the trial court has broad discretion in allowing relief on grounds of inadvertence from a failure to timely file a cost bill.”]; see also Hoover Community Hotel Development Corp. v. Thomson (1985) 168 Cal.App.3d 485, 488 [limitation of time to file costs bill is not jurisdictional].)

Plaintiff has demonstrated the calendaring error was the result of counsel’s excusable neglect involving a new legal assistant who mistakenly calendared the memorandum of costs due at the same time as the motion for attorney fees.

Defendant has not demonstrated substantial prejudice. Defendant is granted leave to file a motion to strike or tax costs within 15 days.