Ghazi Farwana vs TESLA, INC.

II. LEGAL STANDARD

Defendant argues the Federal Arbitration Act (“FAA”) applies because Plaintiff’s “employment relationship with Tesla facilitated interstate commerce because Tesla’s business, and Plaintiff’s concomitant job duties, ultimately affected interstate commerce.” (Mtn. to Compel Arbitration at p. 3:19-21.) Under the FAA, the court’s role is limited to determining “(1) whether a valid agreement to arbitrate exists, and if it does (2) whether the agreement encompasses the dispute at issue.” (Chiron Corp. v. Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130.) To determine “whether a valid contract to arbitrate exists,” courts apply “ordinary state law principles that govern contract formation.” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1093 [citations omitted]; see also Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1170.)

Alternatively, Defendant argues the California Arbitration Act (“CAA”) governs the Arbitration Agreement. (Mtn. to Compel Arbitration at pp. 4:19-5:5.) Code of Civil Procedure section 1281.2 provides:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy in that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for rescission of the agreement . . . .

In determining the threshold question of whether an arbitration agreement exists between the parties, the court employs a three-step burden shifting analysis. (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755 (Iyere); see also Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.) The party seeking to compel

arbitration bears the initial burden of showing an agreement to arbitrate. If that burden is met, the burden shifts to the opposing party to show a factual dispute regarding the agreement’s existence. If the opposing party does so, then the burden shifts back to the proponent of arbitration to show the existence of a valid agreement by a preponderance of the evidence. (Iyere, supra, 87 Cal.App.5th at p. 755.)

III. ANALYSIS

The parties entered into a valid agreement to arbitrate. Plaintiff affixed his electronic signature to the offer letter on June 5, 2019. (Declaration of Ben Felsch [“Felsch Decl.”], Ex. A.) A party’s acceptance of an agreement to arbitrate may be express, as whether a party signs the agreement.” (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 777.) Moreover, “[u]nder Civil Code section 1633.7 . . . an electronic signature has the same legal effect as a handwritten signature.” (Espejo v.

Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.) The authenticity of an electronic signature may be established by detailing the “security precautions regarding transmission and use of an applicant’s unique username and password, as well as the steps an applicant would have to take to place his or her name on the signature line of the employment agreement.” (Id. at p. 1062.)

The Declaration of Ben Felsch provides that Defendant utilized a system called Avature between 2018 and 2022 for applicant tracking and onboarding its employees. (Felsch Decl. at ¶ 3.) All applicants were required to apply for positions through the Avature application process available through the Tesla Careers website. (Id. at ¶ 4.) The employment application required the applicant to create his or her own personal, secure profile by providing their information. (Ibid.) Applicants could not continue with the online application without creating a secure profile through the Avature system. (Felsch Decl. at ¶ 6.) Should Defendant choose to extend an offer of employment, the Avature system would send an email to the applicant with a restricted link to an offer letter. (Id. at ¶ 8.)

Records show Defendant sent Plaintiff an email containing a link to an offer letter on June 4, 2019. (Felsch Decl. at ¶ 9.) To accept the offer, Plaintiff had to go through a series of information fields in which he had to create his own e-signature by either typing his name or drawing his e-signature. (Id. at ¶ 10.) He would have to input his first and last name in the system and be required to click on a button titled “Click to Sign.” (Ibid.) Plaintiff would have to validate his e-signature by providing his email address to confirm his acceptance and signing of the offer. (Ibid.) As stated above, Plaintiff electronically signed the offer letter on June 5, 2019. (Felsch Decl., Ex. A.) Defendant’s account of this process is sufficient to authenticate Plaintiff’s signature and establish and agreement to arbitrate between the parties.

The scope of the agreement also covers Plaintiff’s claims. The agreement provides:

In addition, to ensure the rapid and economical resolution of disputes that may arise in connection with your employment with Tesla, you and Tesla agree that any and all disputes, claims, or causes of action, in law, or in equity, arising from or relating to your employment, or the termination of your employment, will be resolved, to the fullest extent permitted by law by final, binding and private arbitration in your city and state of employment conducted by the Judicial Arbitration and Mediation 5

Services/Endispute, Inc. (“JAMS”), or its successors, under the then current rules of JAMS for employment disputes; provided that: . . . .

(Felsch Decl., Ex. A.) Plaintiff’s claims for retaliation, discrimination, and harassment arise out of his employment relationship with Tesla, and therefore, fall under the scope of the arbitration agreement.

However, Plaintiff does not truly dispute that he signed the offer letter containing the agreement to arbitrate or that the scope of the agreement covers his claims. Instead, Plaintiff challenges the enforceability of the Agreement by arguing that it is unconscionable.

The party challenging a contractual arbitration provision bears the burden of proving that it is both procedurally and substantively unconscionable. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (OTO).) This may be done on a sliding scale, where the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required, and vice versa. (Id. at pp. 125-126.) Nevertheless, both must be shown. Procedural unconscionability focuses on oppression or surprise to the “weaker” party based on unequal bargaining power, whereas substantive unconscionability focuses on the terms of the agreement and whether they are overly harsh or one-sided. (OTO, supra, 8 Cal.5th at pp. 125- 129.) The Court thus proceeds to consider whether the agreement is procedurally and substantively unconscionable.

Procedural Unconscionability

The circumstances that the court examines to determine whether there was “oppression” in the signing of an agreement generally include: “ ‘(1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.’” (OTO, supra, 8 Cal.5th at pp. 126-127 [quoting (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348].)

Here, the offer letter is four pages long but does not specifically delineate the arbitration agreement through bold lettering, italics, or capitalized font. (Felsch Decl., Ex. A.) Instead, the arbitration agreement is embedded within the offer letter alongside other terms. (Ibid.) Procedural unconscionability has been found where the presence of an arbitration provision has not be distinguished through bold lettering, larger font, or capitalization. (See, e.g., Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1250-1251.)

Plaintiff was required to sign the offer letter as a condition of employment. The court in Davis v. Kozak (2020) 53 Cal.App.5th 897, 907 (Davis) noted that the unequal bargaining power between the parties, as a middle manger and multinational company, was significant in finding that the agreement was a contract of adhesion. However, “the cases uniformly agree that 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 (1999) 74 Cal.App.4th 1105, 1127.) Moreover, as also noted in Davis, this type of contract of adhesion in the employment context adds a modest amount of procedural 6

unconscionability and, the amount of procedural unconscionability is increased when the fact of an adhesion contract is combined with other issues. (See Davis, supra, 53 Cal.App.5th at p. 907; Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248.) Thus, the Court finds that a moderate degree of procedural unconscionability exists given the agreement’s presentation and adhesive nature.

Substantive Unconscionability

With regard to substantive unconscionability,

As the Armendariz court explained, based on “the principle of nonwaivability of statutory civil rights in the workplace,” there are “five minimum requirements for the lawful arbitration of such rights pursuant to a mandatory employment arbitration agreement. Such an arbitration agreement is lawful if it ‘(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum. Thus an employee who is made to use arbitration as a condition of employment “effectively may vindicate [his or her] statutory cause of action in the arbitral forum.’”’” (Armendariz, supra, 24 Cal.4th at p. 102.)

(Mills v. Facility Solutions Group, Inc. (2022) 84 Cal.App.5th 1035, 1052.)

The arbitration agreement satisfies these factors. The agreement provides for arbitration to be conducted by Judicial Arbitration and Mediation Services/Endispute (“JAMS”). (Felsch Decl., Ex. A.) Rule 7 of the JAMS Employment Arbitration Rules & Procedures (“JAMS Rules”) provides that “[t]he Arbitration shall be conducted by one neutral Arbitrator.” (Mtn. to Compel Arbitration at p. 10:12-14.) Rule 17 of the JAMS Rules also provides for discovery. (Id. at p. 10:15-21.) The agreement expressly provides that the arbitrator shall issue a written award and that the parties shall be entitled to all forms of relief available in court of law. (Felsch Decl., Ex.

A.) Furthermore, the agreement provides “Tesla shall pay all fees in excess of those which would be required if the dispute was decided in a court of law.” (Ibid.) While the agreement seemingly satisfies these factors, Plaintiff argues the agreement lacks mutuality.

Plaintiff first argues the agreement lacks mutuality because “the only claims subject to the arbitration agreement are only those that the employee is likely to bring” as it applies to any and all claims arising out of the employment relationship. (Opposition at p. 8:10-13.) Plaintiff argues “Tesla has reserved judicial remedies including injunctive relief to protect its own Confidential Information.” (Id. at p. 9:6-8.) Plaintiff further argues Defendant is likely to bring an action against an employee for a violation of the Non-Disclosure and Inventions Assignment Agreement (“NDA”). (Id. at p. 9:14-17.) However, as Defendant notes, the NDA is a separate document entirely from the arbitration agreement. (Reply at pp. 4:24-5:3.) Nevertheless, the two documents should be read together pursuant to Civil Code section 1642. 7

(Wise v. Tesla Motors, Inc. (2025) 117 Cal.App.5th 325, 333.) Even if Defendant is more likely to sue for a violation of the NDA, the arbitration agreement permits both parties to seek injunctive relief in court:

Nothing in this agreement is intended to prevent either you or Tesla from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration; thus, claims for temporary or emergency injunctive relief to preserve the status quo prior to and/or in aid of arbitration are permitted.

(Felsch Decl., Ex. A.) Moreover, employment contracts can provide a “margin of safety” to the party with the superior bargaining power as long as there is a legitimate commercial need for doing so that is explained in the contract itself. (Cook v. University of Southern California (2024) 102 Cal.App.5th 312, 324.) The agreement here explains that the unauthorized disclosure of confidential information or proprietary data could cause series and irreparable injury, thus justifying its right to seek injunctive relief. (Felsch Decl., Ex. A.) For these reasons, the Court does not find that the agreement lacks mutuality in this regard as both parties may pursue provisional remedies under the agreement.

Second, Plaintiff argues the bond waiver provision under the NDA is substantively unconscionable. (Opposition at pp. 10:20-11:9.) Section 6 of the NDA provides that Defendant shall “have the right to enforce this Agreement and any of its provisions by injunction, specific performance, or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.” (Reply Declaration of Hassan Aburish, Ex. A [emphasis added].)

It has been noted that “[a]n arbitration provision lacks mutuality and is substantively unconscionable when it authorizes the stronger party to obtain injunctive relief without establishing all of the essential elements for the issuance of a injunction.” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 250.) Thus, the Court agrees that this provision of the NDA is substantively unconscionable.

Third Plaintiff argues the agreement is substantively unconscionable because it prohibits him from pursuing a class representative action. (Opposition at p. 8:14-26.) The agreement provides “[t]he Parties agree that each may file claim against the other only in their individual capacities, and may not file claims as a plaintiff and/or participate as a representative in any representative action against the other, except to the extent this provision is enforceable under the applicable law[.]” (Felsch Decl., Ex.

A.) California and federal law have affirmed that class-waiver provisions in employment agreements are valid and enforceable. (See AT&T Mobility LLC v. Conception (2011) 563 U.S. 333, 348-352; Iskanian v. CLS Tramp, LLC (2014) 59 Cal.4th (Iskanian) 348; Epic Sys. Corp. v. Lewis (2018) 584 U.S. 497.) However, in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 644-645, the United States Supreme court left the holding of Iskanian undisturbed to the extent that it held that a blanket PAGA waiver is unconscionable under California law. (See Adolph v.

Uber Technologies (2023) 14 Cal.5th 1104, 1117.) Thus, the agreement is unconscionable only to the extent it includes a blanket PAGA waiver; however, the court notes that it is silent in this regard.

Since multiple unconscionable provisions have been identified, the Court considers whether they can be severed from the agreement. 8

Severability

“[W]hether to sever is within the trial court’s discretion.” (Navas v. Fresh Venture Foods, LLC (2002) 85 Cal.App.5th 626, 636-637.)

“ ‘In deciding whether the sever terms rather than to preclude enforcement of the provision altogether, the overarching inquiry is whether the interests of justice would be furthered by severance; the strong preference is to sever unless the agreement is “permeated” by unconscionability.’ [Citation.] [¶] An agreement to arbitrate is considered ‘permeated’ by unconscionability where it contains more than one unconscionable provision. [Citation.] ‘Such multiple defects indicate a systemic effort to impose arbitration on [the nondrafting party] not simply as an alternative to litigation, but as an inferior forum that works to the [drafting party’s] advantage.’ [Citation.]

An arbitration agreement is also deemed ‘permeated’ by unconscionability if ‘there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement.’ [Citation.] If ‘the court would have to in effect, reform the contract, not through severance or restriction, but by augmenting it with additional terms,’ the court must void the entire agreement.” (Mango v. The College Network, Inc. (2016) 1 Cal.App.5th 277, 292.)

(De Leon v. Pinnacle Property Management Services, LLC (2021) 72 Cal.App.5th 476, 492- 493.)

Plaintiff argues severance will not cure the unconscionability of the arbitration agreement and NDA. (Opposition at pp. 11:10-14:24.) Plaintiff maintains the agreement does not contain a severance clause. (Id. at p. 12:22.) To the contrary, the agreement provides:

If one or more of the provisions in this arbitration agreement, or any portion thereof, are deemed invalid, unenforceable, or void under the Federal Arbitration Act or other applicable law, then the remaining provisions, or portions thereof, shall not thereby be affected and will continue in full force and effect, and shall be given full effect without regard to the invalid, unenforceable, or void provision, or portion thereof.

(Felsch Decl., Ex. A.) Defendant maintains the unconscionable provisions pertaining to the waiver for non-individual PAGA clams can be severed from the agreement. (Reply at p. 7:24- 26.) The court agrees that severance is possible here without re-writing the terms of the agreement. Defendant has not filed for an injunction for the bond waiver to apply. Plaintiff has not brought a representative PAGA action, and the agreement is silent in this regard. In any event, as noted above, class action waivers are nevertheless enforceable. The severance of these terms will not change the central purpose of the agreement, which is for the parties to arbitrate any and all claims arising from their employment relationship. Accordingly, the 9

Court severs reference to the bond waiver provision in the NDA and leaves the remainder of the agreement undisturbed.

For these reasons, the Court GRANTS the Motion to Compel Arbitration. This action is hereby STAYED pending the outcome of arbitration. (Code Civ. Proc. § 1281.4; 9 U.S.C. § 3.)

IV. CONCLUSION

The Court GRANTS the Motion to Compel Arbitration. The Court further GRANTS Defendant’s Request for Judicial Notice pursuant to Evidence Code section 452, subdivision (d). This action is STAYED pending the outcome of arbitration.

The June 10, 2026 Further Case Management Conference is VACATED.

The matter shall be set for a Status Hearing re: Arbitration on January 29, 2027, at 11:00 a.m. in Department 13.

Moving party shall prepare and submit the final order, accompanied by the necessary Form EFS-020 within 10 days of the date of the hearing.

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