Ortiz vs. Guess? Retail, Inc.

Here, the arbitration agreement is adhesive. It is offered on Defendant’s pre-printed form, complete with version number in the bottom margin. There is no serious dispute that Plaintiff had no opportunity to negotiate the agreement’s terms.

Because the agreement is adhesive, “[t]he pertinent question...is whether circumstances of the contract’s formation created such oppression or surprise that closer scrutiny of its overall fairness is required.” (OTO, supra, 8 Cal.5th at p. 126.) “‘The circumstances relevant to establishing oppression include, but are not limited to (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.’” (Id. pp. 126-127)

Here, the circumstances indicate oppression. Plaintiff testifies that he was taken to a back office and given an iPad to electronically sign numerous onboarding documents, including the arbitration agreement. He testifies it would have been impossible to actually read the documents in the time Defendant gave him. Furthermore, he wasn’t given copies of the documents before or after signing, meaning he couldn’t have asked an attorney to review the documents for him. (Ortiz Decl. ¶¶ 3-4.) The Court credits Plaintiff’s testimony about his specific onboarding experience over senior human resources manager Tiffanie Young-Lau’s testimony about how the onboarding experience operates in general. (Supp. Young-Lau Decl. ¶ 4.)

Moreover, Plaintiff was reasonably under the impression that the arbitration agreement was a required condition of employment. Although the agreement says that “execution of this Agreement is not and was not a condition of Associate’s employment with the

Company” (Young-Lau Decl. Ex. A at p. 2), the policy acknowledgement Plaintiff filled out at onboarding says that “as a condition of your employment at GUESS? Inc., it is your responsibility and obligation to fully comply and abide by all terms and conditions stated within these documents.” (Ortiz Decl. Ex. 3 at p. 1.) Among “these documents” is the arbitration agreement. (Ibid.) To the extent there is any ambiguity or conflict between the policy acknowledgment and the arbitration agreement, the Court construes that ambiguity against Defendant, the drafter of the forms. (See Civ. Code § 1654.)

“Surprise” occurs “where the allegedly unconscionable provision is hidden within a prolix printed form.” (OTO, supra, 8 Cal.5th at p. 126.) Here, there is little if any evidence of surprise. The arbitration agreement was presented as a standalone document titled “AGREEMENT TO ARBITRATE ” in all-capital letters and bold typeface. It is roughly two-and-a-third pages long, and its language is clear.

Taking all of this into consideration, the Court finds a low to moderate degree of procedural unconscionability. Plaintiff’s situation appears to be about the same as the usual employmentrelated arbitration agreement.

B. Substantive Unconscionability

1. Waiver of Administrative Relief

The agreement states that employees may lodge complaints with administrative agencies, “provided, however, that in the event that any federal or state administrative agency or any other person brings any claim or action for monetary relief on Associate’s behalf, Associate waives the right to recover or receive any such monetary relief in such claim or action, and agrees to seek relief exclusively through arbitration pursuant to this Agreement.” (Young-Lau Decl. Ex. A at p. 1.) Plaintiff contends this is an unconscionable waiver of an employee’s right to relief obtained in the administrative process. The Court agrees.

In Hasty v. American Automobile Assn. (2023) 98 Cal.App.5th 1041, the appellate court considered a clause that provided “either party may file a charge or complaint with an appropriate governmental administrative agency, however, ‘the parties waive their right to any remedy or relief as a result of such charges or complaints brought by such governmental administrative agencies.’” (Id., at p. 1060.) The court noted that the Labor

Commissioner may investigate employee complaints and, following investigation, award the employee wages owed. The waiver of any relief from such a proceeding would “insulate[] the Association from such awards and precludes the employee from obtaining redress for labor violations that a government agency has determined exist and are well-founded.” (Ibid.) The court concluded, “A waiver of administrative remedies and relief, hidden in an arbitration agreement, is overly harsh and shocks the conscience.” (Ibid.)

The same is true here. If the Labor Commissioner were to award wages to Plaintiff following a complaint, Plaintiff would be barred from receiving them. This qualifies as overly harsh and shocks the conscience. Defendant’s argument that Plaintiff can still pursue administrative remedies in arbitration is not well-taken. The Labor Commissioner is empowered to prosecute wage recovery actions in the employee’s name in some circumstances. (See Lab. Code § 98.3.) Should the Labor Commissioner prosecute such an action here and recover wages, Plaintiff would be barred from receiving the wages recovered, even if he didn’t prosecute the case himself. This is unconscionable.

2. Arbitration Confidentiality

Again citing Hasty, Plaintiff argues the requirement that his arbitration be confidential is unconscionable. There, the arbitration agreement “provide[d] that ‘any and all disputes, claims, or causes of action, in law or equity, arising from or relating to [e]mployee’s employment or the termination of [e]mployee’s employment, including but not limited to statutory, contractual and other claims ... shall be resolved to the fullest extent permitted by law, by final, binding, and confidential arbitration.’” (Hasty, supra, 98 Cal.App.5th at p. 1061 (emphasis original).)

In denying arbitration, the trial court noted the confidentiality requirement barred the employee from conducting informal discovery, which would increase discovery costs and make it harder for the employee to prove a pattern of discrimination. (Ibid.) The appellate court affirmed, holding the confidentiality clause “benefits only the Association with respect to harassment, retaliation, and discrimination claims, such as the claims here, and is thus substantively unconscionable.” (Id., at p. 1062.)

Here, the agreement provides, “All arbitration proceedings are confidential unless applicable law provides otherwise. The arbitrator shall maintain the confidentiality of the arbitration to the extent the law permits, and shall have the authority to make appropriate rulings to safeguard that confidentiality.” (Young-Lau Decl. Ex. A at p. 2.) The Court finds this provision essentially

indistinguishable from the confidentiality clause in Hasty. Defendant argues the clause here makes only the arbitration proceedings themselves confidential, while Hasty’s clause made the entire arbitration proceeding confidential. This is a distinction without a difference. How can Plaintiff conduct informal discovery (i.e., speaking with fellow employees) without revealing that an arbitration proceeding exists?

Defendant also argues Hasty’s holding should be limited to the FEHA context. As noted above, the trial court found the confidentiality clause made it more difficult for the employee to prove a pattern of past discrimination, and the appellate court found the confidentiality clause was non-mutual as to the FEHA claims at issue in that case. In contrast, here Defendant argues that Plaintiff’s individual PAGA claim can be proven solely from reference to its wage and hour policies and compliance records and Plaintiff’s personnel records.

The Court disagrees. Plaintiff’s PAGA claim is largely based on an alleged exit bag check policy. Assuming such a policy exists, Plaintiff would have to prove that he was subject to the policy in order to prove a violation. That is, he would have to prove he brought a bag to work, had it checked upon exit, and that he was forced to remain on premises while off the clock. The testimony of other employees could assist in proving Plaintiff’s case. Moreover, Plaintiff complains of rest break violations caused by inadequate staffing during the busy holiday season.

Other employees could testify to these conditions, providing support for Plaintiff’s theory of the case. Since the arbitration must be kept confidential, the arbitration agreement effectively forecloses informal discovery by Plaintiff. While confidentiality clauses aren’t necessarily unconscionable if they are based on a legitimate commercial need (e.g., the protection of trade secrets), Defendant identifies no such need in its papers.

3. Costs Unique to Arbitration

With respect to allocation of fees and costs, the agreement provides: “To the extent required by applicable law, and only to this extent, the Company shall pay all costs uniquely attributable to arbitration, including the administrative fees and costs of the arbitrator. Otherwise, the costs of arbitration will be paid equally by Associate and the Company. Each party shall pay for its own reasonable costs (filing fees or other administrative expenses) and attorneys’ fees, if any. However, if any party prevails on a statutory claim that affords the prevailing party attorneys’ fees, or if there is a written agreement providing for attorneys’ fees, the Arbitrator may award reasonable fees to the prevailing party. The decision of the arbitrator shall be in writing and shall provide the

reasons for the award unless the parties agree otherwise.” (Young-Lau Decl. Ex. A at p. 2.)

Plaintiff contends this clause unconscionably allows the arbitrator to require that an employee pay costs unique to arbitration that wouldn’t be incurred in court. He reasons as follows: although the agreement says Defendant will pay all costs unique to arbitration, the arbitrator may award attorney’s fees if permitted by statute or agreement.

The Court disagrees. Plaintiff relies on Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242. There, the appellate court found unconscionable a clause “providing the arbitrator may impose costs, including the arbitration fee, on the losing party.” (Id., at p. 1249.) The agreement here lacks similar language. It allows the arbitrator to award reasonable attorneys’ fees in certain circumstances, but the only mention of costs unique to arbitration is a requirement that Defendant pay them. The agreement doesn’t unconscionably shift costs to a losing employee.

4. Limitation on Cost Recovery

Plaintiff also contends the fee and cost allocation clause impermissibly limits an employee’s right to recover prevailing party costs. Here, the Court agrees.

For costs other than those unique to arbitration, and for attorney’s fees, the agreement provides that each side shall bear their own costs and fees. “However, if any party prevails on a statutory claim that affords the prevailing party attorneys’ fees, or if there is a written agreement providing for attorneys’ fees, the Arbitrator may award reasonable fees to the prevailing party.” (Young-Lau Decl. Ex. A at p. 2.) The agreement allows the arbitrator to award attorney’s fees if permitted by statute, but it is silent as to costs. “The fact that the contract expressly so provides tends to negate any inference that the parties also intended another consequence to flow from the same event. Expressio unius est exclusio alterius.” (Stephenson v. Drever (1997) 16 Cal.4th 1167, 1175.)

Defendant notes that the agreement elsewhere authorizes the arbitrator “to award all relief, and only that relief, available under applicable law.” (Young-Lau Decl. Ex. A at p. 2.) Since a prevailing employee can recover costs under the Labor Code, Defendant argues this allows the arbitrator to award such costs. This language is found in a portion of the agreement discussing the

arbitrator’s powers in general. The arbitrator’s powers to allocate fees and costs are found in a portion of the agreement devoted specifically to that topic, and this portion only authorizes the arbitrator to allocate attorney fees. “Where general and specific provisions are inconsistent, the specific provision will control.” (1 Witkin, Summary of Cal. Law (11th ed. 2026) Contracts § 777.)

The agreement’s limitation on a prevailing employee’s ability to recover costs is substantively unconscionable.

5. Wholesale PAGA Waiver

Plaintiff contends the agreement contains an illegal wholesale PAGA waiver. The Court agrees.

The agreement provides, “By signing this Agreement, Associate and the Company each agree that, to the extent permitted by applicable law, claims against the other can be brought only in an individual capacity, and not as a . . . representative in any purported . . . representative, or private attorney general proceeding.” (Young-Lau Decl. Ex. A at p. 2.) PAGA actions are both representative actions (in that the employee is the representative of the State, which owns the claims) and private attorney general actions. By its terms, this is a wholesale PAGA waiver, which remains illegal. (See Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 662 (“that aspect of Iskanian is not preempted by the FAA”).)

Defendant raises two objections, both of which the Court finds unavailing. First, it contends the PAGA waiver is limited by the phrase “to the extent permitted by applicable law.” Wholesale PAGA waivers were ruled illegal in 2014 in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, and the United States Supreme Court expressly confirmed in Viking River that this rule wasn’t preempted by the FAA. Wholesale PAGA waivers have been illegal for 12 years, but Defendant nevertheless included one in its form, hoping boilerplate “to the extent permitted by applicable law” language would encourage a court to ignore the waiver. “The fact that the provision applies to only the ‘extent permitted by law’ does not save it because the employee would have no way of knowing what would be covered or not covered by this provision.” (Hasty, supra, 98 Cal.App.5th at p. 1062.)

The fact that an arbitration agreement with “to the fullest extent permitted by law” language resulted in partial enforcement of the agreement in Seifu v. Lyft (2023) 89 Cal. App. 5th 1129, 1135 does

not change the result. There, Lyft agreed the PAGA waiver was unenforceable as written (in that it violated Iskanian), and the plaintiff agreed that his individual PAGA claim could be sent to arbitration under Viking River. (See pp. 1138-1139.) The fight was over whether the non-individual PAGA claims had to be dismissed. Importantly, there was no dispute that the wholesale waiver was illegal and unenforceable.

Second, Defendant contends that under Viking River, the proper course of action is for the Court to rely on the agreement’s severance clause, split the PAGA claim into its individual and nonindividual components, and compel arbitration of the former. This is what Viking River says a court should do with an otherwise enforceable arbitration agreement. But it is irrelevant to the limited question at hand: whether a wholesale PAGA waiver is illegal, and thus unconscionable. Indeed, were a wholesale PAGA waiver not illegal and unconscionable, there would be no need to sever it as Viking River requires.

In short, the agreement’s wholesale PAGA waiver is substantively unconscionable. And while this alone would not prevent the Court from splitting the PAGA claim into individual and nonindividual components and compelling partial arbitration, it is considered here simply as one of many factors in the substantive unconscionability analysis.

6. Confidentiality Agreement

Plaintiff contends the confidentiality agreement, which he signed at the same time as his other onboarding documents, violates Labor Code § 232.5. He further contends that the confidentiality agreement should be read together with the arbitration agreement, so the confidentiality agreement should be considered part of the unconscionability analysis.

As to whether the agreements should be read together, Alberto v. Cambrian Homecare (2023) 91 Cal.App.5th 482 is directly on point. There, the employee signed a confidentiality agreement and an arbitration agreement on the same day. The appellate court held: “Here, we have no difficulty concluding that the Arbitration Agreement and the Confidentiality Agreement should be read together. They were executed on the same day. They were both separate aspects of a single primary transaction— Alberto’s hiring. They both governed, ultimately, the same issue— how to resolve disputes arising between Alberto and Cambrian arising from Alberto’s employment. Failing to read them together artificially segments the parties’ contractual relationship. Treating them separately fails to account for the overall dispute resolution

process the parties agreed upon.” (Id., at pp. 490-491.) Defendant’s arguments against reading the agreements together at page 3 of its reply are really arguments about whether the confidentiality agreement is unconscionable, not whether reading the agreements together is appropriate. The Court will follow Alberto and consider the two agreements together.

Labor Code § 232.5 bars an employer from requiring that an employee refrain from disclosing information about working conditions, with a limited carve-out for trade secrets and the like. The confidentiality agreement bars the employee from disclosing any “CONFIDENTIAL INFORMATION,” as defined, to third parties. (Ortiz Decl. Ex. 1 at p. 1.) “CONFIDENTIAL INFORMATION” includes, but is not limited to, a lengthy list of items that could reasonably be considered trade secrets. However, the list concludes: “or any other material relating in any manner whatsoever to the . . . employees (including the salaries of employees other than Associate and their abilities) of GUESS?.” (Ibid.)

The plain language of the confidentiality agreement bars employees from disclosing any information about working conditions, as that information is “material relating in any manner whatsoever to the . . . employees.” The confidentiality agreement is made “in consideration of GUESS’ employment or continuing employment.” (Ibid.) That is, it is a requirement that employees not disclose information (except their own salaries) about working conditions. This violates Labor Code § 232.5, and as such, is unconscionable.

7. Non-mutuality of Confidentiality Agreement

Finally, Plaintiff contends the confidentiality agreement is unconscionably non-mutual. It provides that Defendant’s confidential information “cannot reasonably be compensated in damages” and allows Defendant, but not Plaintiff, to seek “injunctive and other equitable relief” in a court “to prevent a breach of this Agreement.” (Id., at p. 2.)

Plaintiff again relies on Alberto when making this argument. His reliance is misplaced. As Alberto explains, “provisions that allow employers to seek a preliminary injunction outside of arbitration for breach of a confidentiality agreement are not, by themselves, unconscionable, simply because they primarily benefit employers.” (AIberto, supra, 91 Cal.App.5th at p. 492.) The provision in Alberto was unconscionable because of additional terms: it waived the employer’s need to post a bond, waived the employer’s need to show irreparable harm, and required the

employee to consent to entry of an immediate injunction. (Ibid.) The confidentiality agreement here requires the employee to agree that Defendant will suffer irreparable harm, which is one of the factors identified in Alberto. But the other factors—waiver of the bond requirement and employee consent to an immediate injunction—are missing. On the whole, the Court finds the confidentiality agreement sufficiently mutual.

C. Severance

The arbitration agreement contains a severability clause. Defendant urges the Court to simply sever any unconscionable terms. The Court declines to do so. While a severability analysis is not a mere counting exercise, there are numerous unconscionable provisions of the arbitration agreement (when read together with the confidentiality agreement) such that the agreement is permeated with unconscionability. Severing the offending terms and enforcing the arbitration agreement would “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.” (Ramirez v. Charter Communications, Inc. (2025) 108 Cal.App.5th 1297, 1303- 1304.)

Rather than sever the offending terms, the Court declines to enforce the arbitration agreement.

17 Red Granite Medial LLC vs. Paysafe Direct, LLC

2026-01542882

Defendant’s Motion to Compel Arbitration Case Management Conference Defendants Paysafe Direct, LLC, PNC Bank, N.A., and Citizens Bank, N.A. move to compel arbitration of the claims of plaintiffs Red Granite Media, LLC and Tumbleweed Fortress, LLC. For the reasons set forth below, the motion is GRANTED. Plaintiffs are each ordered to individually arbitrate their claims. Their class claims are dismissed without prejudice. This action is stayed pending completion of the individual arbitrations. An arbitration review conference shall take place on March 30, 2027 at 8:30 a.m. in Department CX-101.

Defendants’ unopposed request for judicial notice of the exhibits in Plaintiffs’ notice of errata is GRANTED.

GROUNDS FOR RULING