Childres v. Arrowhead Central Credit Union

Plaintiff contends that the AA was bundled together with lengthy company policies and procedures totaling at least 130 pages. (Childres Decl., ¶¶3-4.) Plaintiff states he was required to complete various forms before he could begin working, including the AA document, and that he was told he had to complete each document to continue with his employment. (Childres Decl., ¶¶3, 7.) Childres states that during the onboarding process, nobody from ACCU told him verbally that he could consult an attorney or refuse to agree to any particular document and still keep the position. (Childres Decl., ¶7.) Childres relates that he was required to complete the documents without assistance or supervision such that he had no opportunity to ask questions or negotiate terms and the documents were presented to him as mandatory conditions of employment. (Childres Decl., ¶¶8, 9.)

Conditioning employment on the acceptance of arbitration agreements generally satisfies the procedural unconscionability requirement, particularly among employees who are not “the most sought-after” and few employees are in a position to refuse a job because of an arbitration requirement. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071, quoting Armendariz, supra, 24 Cal.4th at p. 115.)

Plaintiff has shown adequately that the AA here exhibits a moderate degree of procedural unconscionability given the manner in which it was presented to him and because it is fundamentally an adhesion contract.

Substantive Unconscionability Plaintiff advances three reasons why the AA is substantively unconscionable: 1) it contains an unlawful wholesale representative action waiver; 2) the confidentiality clause bars disclosure of arbitration existence and results; 3) with the Team Member Confidentiality & Non- Disclosure Policy, they chill Plaintiff’s ability to investigate and vindicate statutory rights in violation of Labor Code section 232.

1. Unlawful Wholesale Representative Action Waiver

Paragraph two of the AA specifies that the arbitrator shall not have the authority to fashion a proceeding as a class, collective, or representative action or to award relief to a group of current or former employees or applicants. (Weller Decl., Exh. A, ¶2.) “All claims covered by this Agreement may be brought and resolved on an individual basis only.” (Ibid.) The clause further provides that each side waives any right to bring claims as class, collective, or representative actions and, except as otherwise required under applicable law, each side shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person. (Ibid.)

Plaintiff contends this language unequivocally requires him and all employees to waive entirely the right to bring or participate in representative PAGA actions and such wholesale waiver is unenforceable as a matter of California public policy. The Supreme Court held that agreements requiring employees to waive representative PAGA claims are invalid because they undermine the state’s interest in enforcing the Labor Code. (Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal.4th 348, 383 (Iskanian), overruled on other grounds by Quach v. Calif. Commerce Club, Inc. (2024) 16 Cal.5th 562.) Thus, “an employee’s right to bring a PAGA action is unwaivable.” (Id., at p. 383.) However, individual PAGA claims may be

compelled to arbitration. (Adolph v. Uber Techs., Inc. (2023) 14 Cal.5th 1104, 1118 (Adolph); Viking River Cruises v. Moriana (2022) 596 U.S. 639, 662 (Viking River).)

“Viking River requires enforcement of agreements to arbitrate a PAGA plaintiff’s individual claims if the agreement is covered by the FAA.” (Adolph, supra, 14 Cal.5th at p. 1119.) The Viking River Court held that to the extent the arbitration agreement there purported to waive representative PAGA claims, it is invalid but its severability clause salvaged Viking’s entitlement to enforce the agreement insofar as it mandated arbitration of the individual PAGA claim. (Viking River, supra, 596 U.S. at p. 662.)

Here, the AA contains a severability clause stating that if any portion is found to be unenforceable, such portion will be severed and the remaining portion shall continue to be enforceable. (Weller Decl., Exh. A, ¶7.) To the extent that the AA here intends to preclude Plaintiff from bringing representative PAGA claims outside of arbitration, such provision is invalid under Iskanian, supra, and warrants severance. Thus, just like in Viking River, the severability clause salvages ACCU’s entitlement to enforce the agreement insofar as it mandates arbitration of Plaintiff Childres’s individual PAGA claim, which is consistent with Adolph and Viking River, supra. In this regard, the AA here is not substantively unconscionable because any offending portion may be severed with respect to the representative PAGA claims.

Consequently, the Court severs any portion of the AA that restricts or waives Plaintiff’s ability to pursue representative PAGA actions outside of arbitration and finds that the AA does not preclude Plaintiff from pursuing individual PAGA claims in arbitration.

2. Confidentiality Clause Barring Disclosure of Existence, Content, or Results of Arbitration

Paragraph 5 of the AA states: “Except as may be permitted or required by law, neither a party nor the arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties.” (Weller Decl., Exh. A, ¶5.) Plaintiff contends this term is substantively unconscionable because it bars Plaintiff from disclosing the existence of an arbitration along with its content and outcome, which overwhelmingly benefits employers.

In Murrey v. Super. Ct. (2023) 87 Cal.App.5th 1223 (Murrey), plaintiff sued her employer GE for gender and sex harassment, Labor Code violations, and retaliation related to alleged sexual harassment by her supervisor. (Id., at p. 1231.) GE compelled plaintiff to arbitration then plaintiff sought writ review which the appellate court granted, finding procedural and substantive unconscionability that indicated a concerted effort to impose on an employee a forum with distinct advantages for the employer. (Id., at 1256.)

GE’s arbitration clause included a confidentiality clause forcing Murrey not to publish or disseminate the arbitration award. (Id., at pp. 1253-1254.) GE did not identify a commercial need for the proceedings to remain confidential. (Id., at p. 1254.) “GE's confidentiality provision serves no purpose other than to benefit GE. Future employees cannot take advantage of findings in past arbitrations or prove a pattern of discrimination and/or retaliation.” (Id., at p. 1255.) The court further observed that keeping past findings secret undermines an employee’s confidence in 3

the fairness and honesty of the arbitration process and potentially discourages an employee from pursuing a valid discrimination claim. (Ibid.) The court held that GE’s confidentiality provision was substantively unconscionable. (Ibid.)

Here, ACCU’s confidentiality clause is much broader than GE’s in the Murrey case because ACCU’s clause prohibits a party from disclosing the existence and contents of the arbitration, whereas GE’s prevented dissemination of the award only. In its reply brief, ACCU argues the confidentiality term preserves disclosures that California or federal law affirmatively permit or require. This argument is not persuasive, particularly in light of the Murrey court’s analysis that confidentiality prevents future employees from proving a pattern of bad conduct (e.g., discrimination or retaliation or as applicable here, wage and hour violations).

ACCU also failed to identify any legitimate commercial need for confidentiality of the arbitration process. ACCU does not suggest that the court sever the confidentiality clause, which indicates its tacit desire to preserve the confidentiality clause and secure an unfair benefit to itself, which the Murrey court condemned. (Murrey, supra, 87 Cal.App.5th at p. 1255.)

Thus, while the Court finds that the confidentiality provision imposes a moderate degree of substantive unconscionability, it is severable and severs the confidentiality language from paragraph 5 of the AA.

3. The Team Member Confidentiality & Non-Disclosure Policy is Substantively Unconscionable

Plaintiff argues that a Team Member Confidentiality & Non-Disclosure Policy (Team Member Policy), which he executed contemporaneously with the AA, includes a sweeping confidentiality clause that prevents employees as a condition of employment from disclosing confidential or proprietary information directly or indirectly.

Plaintiff does not include a copy of the Team Member Policy with his opposition papers, so there is no evidence submitted containing the exact language for the court to examine. In its reply brief, ACCU includes an unauthenticated copy of what it purports to be the Team Member Policy, but with no declaration to lay foundation or authenticate it, that document is not before the court properly. Moreover, the document attached to ACCU’s reply brief does not have a cover page or title page, so the court cannot verify that the excerpt provided is from the Team Member Policy referenced in Plaintiff’s opposition or that it is the version that Plaintiff purportedly signed.

Because the court cannot evaluate the language of the Team Member Policy, Plaintiff’s arguments related to that document fail necessarily.

Severance of Offending Terms in the AA Plaintiff urges the court to find that the AA here is permeated with unconscionability and refuse to sever any offending terms, relying on Armendariz which states that courts may not reform contracts to save them from illegality. (Armendariz, supra, 24 Cal.4th at p. 125.) But as the Murrey court explained, under Armendariz, if the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced but if the illegality is collateral to 4

the main purpose of the contract and can be severed, then such severance is appropriate. (Murrey, supra, 87 Cal.App.5th at p. 1255, quoting Armendariz, supra, 24 Cal.4th at p. 124.)

Here, the Court can sever the confidentiality clause found at the last sentence of paragraph 5 in the AA because it is collateral to the main purpose of the contract, which is to resolve any disputes or claims in arbitration. (Weller Decl., Exh. A, ¶5.) As explained above, the court also may sever the language that restricts or waives Plaintiff’s ability to pursue representative PAGA actions outside of arbitration, because again, the AA’s main purpose is to resolve claims in arbitration.

Thus, even though the AA here exhibits a moderate degree of procedural unconscionability, and the confidentiality clause demonstrates some substantive unconscionability, it may be severed. As a result, there is no substantive unconscionability that tarnishes the AA. An unconscionability defense requires a mixture of procedural and substantive unconscionability, which does not exist here once the two offending provisions are severed.

Consequently, the Court declines to find that the AA is permeated with unconscionability and grants ACCU’s motion to compel arbitration of Plaintiff’s claims except for the representative PAGA cause of action.

Dismissing the Class Claims ACCU argues the class action claims should be dismissed because of the AA’s class action waiver which is enforceable. (Epic Systems Corp. v. Lewis (2018) 138 S.Ct. 1612, 1632 (Epic).) The Epic high court stated: “Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.” (Id., at p. 1619.)

Here, the AA expressly states that Employee and Company agree that each will not assert class action claims against the other in arbitration or otherwise. (Weller Decl., Exh. A, ¶2.) In opposition, Plaintiff does not address the request to dismiss the class claims. Therefore, the Court grants ACCU’s motion to dismiss the class action claims.

Stay the PAGA Representative Claim Plaintiff does not oppose the motion to stay. ACCU’s motion to stay the action pending completing of arbitration is granted.

Dated: August 4 2026

____________________________ Judge Kory Mathewson

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