Stirlen v. Supercuts, Inc.

Opinion

The San Francisco Superior Court refused to enforce a compulsory arbitration clause of an employment contract on the grounds it *1525 was against public policy and unconscionable. We find this determination correct and hold that, in the circumstances of this case, the governing state law pertaining to unconscionable contracts (Civ. Code, § 1670.5) is not preempted by the Federal Arbitration Act. (9 U.S.C. §§ 1-14.)

I.

Defendants Supercuts, Inc., and David E. Lipson, its president and chief executive officer (hereinafter collectively referred to as Supercuts), appeal from an order denying their motion to compel arbitration of a dispute relating to the termination from employment of plaintiff William N. Stirlen.

Supercuts, a Delaware corporation that conducts a national hair care franchise business, employed Stirlen as its vice-president and chief financial officer from January 1993 until March 1994, when he was terminated.

Stirlen commenced this wrongful discharge case in December 1994. His complaint alleged seven causes of action for (1) a judicial declaration that an arbitration clause in his employment contract was null and void in certain particulars and unenforceable; (2) wrongful termination in violation of public policy; (3) defamation; (4) intentional misrepresentation; (5) violation of Labor Code section 970, governing certain knowingly false representations inducing workers “to change from one place to another"; (6) breach of contract; and (7) breach of the implied covenant of good faith and fair dealing.

Supercuts demurred to all causes of action except the first, pertaining to the validity of the arbitration clause, and the fifth, alleging violation of Labor Code section 970. On May 10, 1995, the superior court sustained the demurrer without leave to amend with respect to the sixth and seventh causes of action for breach of contract and the implied covenant. The court overruled the demurrer with respect to the causes of action for wrongful termination, defamation, and intentional misrepresentation.

On April 21, 1995, while the demurrer was pending, Supercuts moved to compel arbitration under the compulsory arbitration provision of an employment contract between the parties. The court denied the motion, as we have said, on the grounds the provision, considered in its entirety, was unconscionable and therefore unenforceable.

After answering the complaint, Supercuts filed this timely appeal. An order dismissing or denying a motion to compel arbitration is directly appealable. (Code Civ. Proc., § 1294, subd. (a).)

*1526 II.

The complaint alleges that on numerous occasions in late 1993 and early 1994 Stirlen informed Lipson and other corporate officers of various operating problems he felt contributed to the general decline in Supercuts’ retail profits and of “accounting irregularities” he feared might be in violation of state and federal statutes and regulations. Stirlen also expressed concern that the decline in profits “was being hidden in the books and from public shareholders.” At a meeting in November 1993, Stirlen provided senior managers quarterly statements indicating that, before accounting “adjustments,” Supercuts’ earnings level moved only laterally or actually declined during the previous seven quarters. Though Lipson assertedly expressed anger at the production of these statements, Stirlen reiterated his concerns in a memo to Lipson in January of 1994. After Stirlen brought these concerns to the company’s auditor, Lipson allegedly reprimanded him, accused him of being a “troublemaker” and told him that if he did not reverse his position on the issues taken to the auditor he would no longer be considered a “member of the team.”

At the end of February 1994, Lipson called Stirlen to his office and suspended him from his job. He was terminated the following month. The complaint avers the termination was unjustified, that Stirlen had never been informed he was not fulfilling his responsibilities as chief financial officer or otherwise doing a poor job, and had never been disciplined or advised that his employment was in jeopardy. Thereafter, Lipson assertedly represented to independent securities analysts that Stirlen was responsible for erroneous accounting entries or “adjustments” that resulted in a decline in earnings from 70 cents to 63 cents per share, and that, as a result “Bill Stirlen is no longer with the company.” News articles and investment reports on Super-cuts at about this time attributed the company’s declining earnings to “improper bookkeeping procedures” and said the individuals “deemed responsible for the irregularities were asked to leave the Company.” One news article quoted Lipson to the effect that Stirlen had lost his job as a result of “sloppy and inappropriate accounting.”

On July 21, 1994, Supercuts’ general counsel wrote Stirlen’s counsel rejecting the latter’s prelitigation settlement demand and stating that the dispute should be submitted to binding arbitration, as specified in the employment contract. Stirlen never responded to this and a subsequent request to arbitrate made prior to the filing of the motion to compel arbitration.

III.

Code of Civil Procedure section 1281.2 provides in material part that “[o]n petition of a party to an arbitration agreement alleging the existence of *1527 a written agreement to arbitrate a controversy and 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 . . . .” In a petition to compel arbitration under this statute, “the moving party, in essence, requests specific performance of a contractual agreement to arbitrate the controversy. [Citation.] The trial court must determine in advance whether there is a duty to arbitrate the controversy. [Citation.] This determination ‘necessarily requires the court to examine and, to a limited extent, construe the underlying agreement.’ [Citation.]” (Green v. Mt. Diablo Hospital Dist. (1989) 207 Cal.App.3d 63, 69 [254 Cal.Rptr. 689].)

The determination of the validity of an arbitration clause, which may be made only “upon such grounds as exist for the revocation of any contract” (Code Civ. Proc., § 1281), “is solely a judicial function unless it turns upon the credibility of extrinsic evidence; accordingly, an appellate court is not bound by a trial court’s construction of a contract based solely upon the terms of the instrument without the aid of evidence.” (Merrick v. Writers Guild of America, West, Inc. (1982) 130 Cal.App.3d 212, 217 [181 Cal.Rptr. 530].) 1 Thus, in cases such as this, in which extrinsic evidence was not presented, “[determinations of arbitrability, like the interpretation of any contractual provision, are subject to de novo review.” (Republic of Nicaragua v. Standard Fruit Co. (9th Cir. 1991) 937 F.2d 469, 474.) 2

IV.

The employment contract between the parties, formally denominated “Agreement Regarding Trade Secrets, Inventions, Employment and Competition,” consists of 23 paragraphs. Throughout, Stirlen is referred to as “Executive,” “he/she” or “his/her,” and Supercuts is referred to as “the Company.” The first six paragraphs briefly describe Stirlen’s duties, the fact that his employment is at will, his compensation and fringe benefits, and other compensation he may receive as well as the manner in which he will be reimbursed for certain expenses.

*1528 Paragraph 7 provides that any inventions, improvements, ideas or discoveries relating to the company’s business that the employee may conceive during the period of employment, whether patentable or not, must be disclosed and assigned to the company and “shall be the sole and exclusive property of the Company.” Paragraph 8 states that certain confidential and proprietary information to which the employee may have access shall constitute trade secrets which the employee shall hot disclose to third persons without company authorization. Under paragraph 9 the employee agrees to deliver to the company “at the termination of his/her employment, or at any other time that the Company may request,” all information and equipment the employee may then have under his or her control, which is “the sole property of the Company.” Under paragraph 10 the employee agrees that during the period of employment with the company and for two years thereafter he or she will not directly or indirectly engage in any similar business within the United States and specified Canadian territories, and will not attempt to induce other employees to leave the company, or franchisee to discontinue its relationship with the company, or customer or supplier to cease doing business with the company.

Paragraph 11 is entitled “Submission to Jurisdiction; Arbitration” and comprises what we refer to in this opinion as the “arbitration clause.” This provision consists of four subparagraphs.

Subparagraph (a), which pertains to claims that need not be submitted to arbitration, provides as follows: “Any action initiated by the Company seeking specific performance or injunctive or other equitable relief in connection with any breach or violation of Paragraphs 7, 8, 9, or 10 of this Agreement may be maintained in any federal or state court having jurisdiction over Marin County, California. The parties hereby submit themselves to the jurisdiction of any such court for the purpose of resolving all such actions, waive any objections to the service of any such court, and agree not to challenge the exclusive jurisdiction of such court.” The parties further agree that in the event Supercuts commences an action against the employee for violation of the provisions contained in paragraphs 7, 8, 9 or 10, “Executive’s employment hereunder and the Company’s payment of Salary, benefits, and/or any unpaid Severance Compensation (as provided in Paragraph 13 herein) shall cease, without penalty to the Company, pending the outcome of such action or, if the parties submit any such claim to arbitration hereunder, pending the outcome of such arbitration.”

Subparagraph (b) of paragraph 11 states that, “[ejxcept as provided in Paragraph 11. a. hereinabove, in the event there is any dispute arising out of Executive’s employment with the Company, the termination of that employment, or arising out of this Agreement, whether such dispute gives rise or *1529 may give rise to a cause of action in contract or tort or based on any other theory or statute, including but not limited to the California Fair Employment & Housing Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, or any other act or statute, Executive and the Company agree that exclusive recourse shall be to submit any such dispute to final and binding arbitration pursuant to the provisions of the Federal Arbitration Act (9 U.S.C. § 1 et seq.), if applicable, or the provisions of Title 9 of Part III of the California Code of Civil Procedure, commencing at § 1280, or any successor or replacement statutes, if the Federal Arbitration Act does not apply, upon a request submitted in writing in accordance with the notice provisions of this Agreement to the other party to this Agreement within one (1) year of the date the dispute arose, or, in the case of a dispute arising out of the termination of Executive’s employment, within one (1) year of the date Executive’s employment was terminated. The failure to timely request arbitration hereunder shall constitute a complete waiver of all rights to raise any claims in any forum, arising out of any dispute described herein. The one (1) year limitations period within which to request arbitration shall not be subject to tolling, equitable or otherwise.”

Subparagraph (c) of paragraph 11 restricts the remedies available in arbitration. The parties agree that “in arbitration, the exclusive remedy for alleged violation of this Agreement or the terms conditions, or covenants of employment, and for any harm alleged in connection with any dispute subject to arbitration hereunder (including, without limitation, causes of action arising in tort), shall be a money award not to exceed the amount of actual damages for breach of contract, less any proper offset for mitigation of such damages, and the parties shall not be entitled to any other remedy at law or in equity, including but not limited to other money damages, exemplary damages, specific performance, and/or injunctive relief.”

The final subparagraph of paragraph 11, subparagraph (d), prescribes the method for choosing an arbitrator and provides that the arbitrators decision “will be final and binding on the parties,” the arbitrator’s fees will be shared by the parties, the arbitration shall be held in Marin County, and “the arbitrator shall not have the power to alter, amend, or modify any of the provisions of this agreement.”

The trial court’s determination that the arbitration clause offended public policy related to the provision of subparagraph (c) of the arbitration clause that the “exclusive remedy” for any violation of any claim required to be submitted to arbitration “shall be a money award not to exceed the amount of actual damages for breach of contract,” specifically excluding, among other *1530 things, exemplary damages. The court found that this restriction violates Civil Code section 1668, which provides that “[a]ll contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.” We need not separately address the question whether the restriction on employee remedies is “against the policy of the law” within the meaning of this statute. As will be seen, the restriction bears as well on the question of unconscionability and can be most efficaciously addressed in that context.

V.

The trial court succinctly explained its conclusion that the arbitration clause was “so one-sided as to be unconscionable” as follows: “Defendants can use the court system for certain claims, but the plaintiff must use arbitration for all his, with very limited damages. The plaintiff gives up significant rights, and defendant is protected from liability for all fraud, willful injury or violation of law.”

The judicially developed criteria for determining whether an arbitration clause is unconscionable and therefore unenforceable are set forth in Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807 [171 Cal.Rptr. 604, 623 P.2d 165] (Scissor-Tail), which the trial court explicitly relied upon. The analysis commences with the determination whether the agreement to arbitrate is a contract of adhesion. If it is, the court must then determine whether other factors operate to render it unenforceable. “Generally speaking,” the court declared, “there are two judicially imposed limitations on the enforcement of adhesion contracts or provisions thereof. The first is that such a contract or provision which does not fall within the reasonable expectations of the weaker or ‘adhering’ party will not be enforced against him. [Citations.] The second—a principle of equity applicable to all contracts generally—is that a contract or provision, even if consistent with the reasonable expectation of the parties, will be denied enforcement if, considered in its context, it is unduly oppressive or ‘unconscionable.’ [Citations.]” (Id., at p. 820.) In other words, an adhesive contract “would remain fully enforceable unless (1) all or part of the contract fell outside the reasonable expectations of the weaker party or (2) it was unduly oppressive or unconscionable under applicable principles of equity.” (Izzi v. Mesquite Country Club (1986) 186 Cal.App.3d 1309, 1317 [231 Cal.Rptr. 315], italics added, citing Keating v. Superior Court (1982) 31 Cal.3d 584, 594 [183 Cal.Rptr. 360, 645 P.2d 1192].)

In 1979, after initiation of the trial proceedings in Scissor-Tail, the Legislature enacted Civil Code section 1670.5, and thereby adopted the doctrine *1531 of unconscionability enunciated in section 2-302 of the Uniform Commercial Code, except that section 1670.5 applies to all contracts, not just those for the sale of goods. 3 (A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 485 [186 Cal.Rptr. 114].) Section 1670.5, which is identical to section 2-302 of the U.C.C. and is set forth in its entirety in the margin below, 4 does not itself provide a definition of what is or is not “unconscionable,” which suggests the concept cannot be satisfactorily defined in the abstract. The closest the comments to the Uniform Commercial Code come to a definition is the declaration that the “basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.” (U. Com. Code, § 2-302, com. 1.)

The Uniform Commercial Code doctrine of unconscionability adopted in Civil Code section 1670.5 mandates an analysis that is not materially different from that described in Scissor-Tail. The two approaches were harmonized in Perdue v. Crocker National Bank (1985) 38 Cal.3d 913 [216 Cal.Rptr. 345, 702 P.2d 503], where the court observed that “[b]oth pathways should lead to the same result.” (Id., at p. 925, fn. 9.) 5 Under the Uniform Commercial Code provision, “ ‘[u]nconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.’ [Citations.] Phrased another way, unconscionability has both a ‘procedural’ and a ‘substantive’ element. [Citations.]

*1532 “The procedural element focuses on two factors: ‘oppression’ and ‘surprise.’ [Citations.] ‘Oppression’ arises from an inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice.’ [Citations.] ‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms. [Citations.]” (A & M Produce Co. v. FMC Corp., supra, 135 Cal.App.3d 473, 486.) 6

Substantive unconscionability is less easily explained. “Cases have talked in terms of ‘overly harsh’ or ‘one-sided’ results. [Citations.] One commentator has pointed out, however, that ‘. . . unconscionability turns not only on a “one-sided” result, but also on an absence of “justification” for it.’ [citation], which is only to say that substantive unconscionability must be evaluated as of the time the contract was made. [Citation.] The most detailed and specific commentaries observe that a contract is largely an allocation of risks between the parties, and therefore that a contractual term is substantively suspect if it reallocates the risks of the bargain in an objectively unreasonable or unexpected manner. [Citations.] But not all unreasonable risk allocations are unconscionable; rather enforceability of the clause is tied to the procedural aspects of unconscionability . . . such that the greater the unfair surprise or inequality of bargaining power, the less unreasonable the risk reallocation which will be tolerated. [Citation.]” (A & M Produce Co. v. FMC Corp., supra, 135 Cal.App.3d atp. 487.) In California Grocers Assn. v. Bank of America, supra, 22 Cal.App.4th 205, this court rejected the “reasonableness” standard applied in A & M Produce Co. v. FMC Corp., supra, 135 Cal.App.3d at pp. 486-487, as being inherently subjective. (California Grocers Assn. v. Bank of America, supra, 22 Cal.App.4th at p. 214.) We instead reverted to the traditional standard of unconscionability—contract terms so one-sided as to “shock the conscience.” (Ibid.; accord, American Software Inc. v. Ali (1996) 46 Cal.App.4th 1386 [54 Cal.Rptr.2d 477].)

One commentator sums up the matter as follows: “ ‘[procedural unconscionability’ has to do with matters relating to freedom of assent. ‘Substantive unconscionability ’ involves the imposition of harsh or oppressive terms on one who has assented freely to them.” (Hawkland, Uniform Commercial *1533 Code Series (1996) § 2-302:02 (Art. 2), p. 246.) The prevailing view is that these two elements 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. (Id., § 2-302:03 (Art. 2), p. 249, and cases cited at fn. 4; id., § 2-302:05 (Art. 2), p. 266.) This is consistent with the concept of unconscionability articulated in Scissor-Tail. (Perdue v. Crocker National Bank, supra, 38 Cal.3d at p. 925, fn. 5; A & M Produce, Inc. v. FMC Corp., supra, 135 Cal.App.3d at p. 487.)

In the present case, the threshold question is whether the subject arbitration clause is part of a contract of adhesion, thereby establishing the necessary element of procedural unconscionability.

A.

The standard definition of a “contract of adhesion” is ‘“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.’ ” (Scissor-Tail, supra, 28 Cal.3d at p. 817, quoting Neal v. State Farm Ins. Cos. (1961) 188 Cal.App.2d 690, 694 [10 Cal.Rptr. 781], opn. by Tobriner, J.)

Supercuts maintains that the contract here is not adhesive because it did not have superior bargaining strength. It emphasizes that Stirlen was not a person desperately seeking employment but a successful and sophisticated corporate executive Supercuts sought out and “hired away” from a highly paid position with a major corporation “by "offering him an annual salary of $150,000, and then agreeing to remunerative ‘extras’ not included in the standard executive employment agreement,” such as generous stock options, a bonus plan, a supplemental retirement plan, and a $10,000 “signing bonus.” We are unpersuaded.

For one thing, Stirlen does not even arguably possess the bargaining strength of the plaintiff in Scissor-Tail, Bill Graham, who was the dominant rock music impresario of his generation. Noting that virtually all concert artists with whom Graham wished to do business belonged to the labor union that prepared the contract at issue, and that such artists were not permitted to sign any form of contract other than the one prepared by the union, the court concluded that “. . . Graham, whatever his asserted prominence in the industry, was required by the realities of his business as a concert promoter to sign [union] form contracts,” so that in effect “he was presented with the nonnegotiable option of accepting such contracts [as proposed] or not at all.” (Scissor-Tail, supra, 28 Cal.3d at pp. 818-819.)

*1534 In the present case Stirlen appears to have had no realistic ability to modify the terms of the employment contract. Undisputed evidence shows that the terms of the contract, which were cast in generic and gender-neutral language, were presented to him after he accepted employment and were described as standard provisions that were not negotiable. The only negotiating between the parties regarding the conditions of Stirlen’s employment related to the stock options, bonus and retirement plans, and other “extras,” but these matters were the subject of a separate letter agreement Stirlen executed on January 25, 1993, more than a month before he signed the employment contract. Moreover, the letter agreement adverted to the “standard employment contract” Stirlen would be required to sign, noting that the terms of the letter agreement did not supplant but were “[i]n addition to the standard provisions of the contract . . . .” Stirlen’s assertions that the employment contract was presented to him on a “take it or leave it basis” and that every other corporate officer was required to and had signed an identical agreement, were not disputed. We agree with the trial court’s determination that the agreement to arbitrate was part of a contract of adhesion.

Having determined that the procedural element of unconscionability is present in this case, we turn to the matter of substantive unconscionability.

B.

Implicitly conceding that the manifest one-sidedness of the arbitration clause appears objectively unreasonable on its face, Supercuts argues (1) that Stirlen is “estopped” from claiming it is unconscionable; (2) that the restriction on remedies, which Supercuts apparently considers the only substantively unconscionable aspect of the arbitration clause, was “revoked or waived” and therefore does not apply in this case; and (3) that, properly understood, the remaining provisions of the arbitration clause are not unconscionable. We reject all of these contentions.

1.

Supercuts claims Stirlen is “estopped” from claiming the arbitration clause is unconscionable because he “was too bright and too well experienced in the machinations of corporate management to sign an agreement that was ‘unduly oppressive.’ ” This argument relates not so much to whether the contract is unduly oppressive as to whether it is adhesive, a matter we need not revisit. The suggestion that a contract or clause cannot be unconscionable if it is accepted by a knowledgeable party has been repudiated by our Supreme Court. As explained in Scissor-Tail, an adhesion contract or provision thereof will be denied enforcement if it is unduly oppressive “even if *1535 consistent with the reasonable expectations of the parties.” (Scissor-Tail, supra, 28 Cal.3d at p. 820, italics added, citing, as examples, Steven v. Fidelity & Casualty Co. (1962) 58 Cal.2d 862, 878-879 [27 Cal.Rptr. 172, 377 P.2d 284] and Jacklich v. Baer (1943) 57 Cal.App.2d 684 [135 P.2d 179].) Scissor-Tail shows that our Supreme Court is among the many courts that “have begun to recognize that experienced but legally unsophisticated businessmen may be unfairly surprised by unconscionable contract terms. [Citations.]” (A & M Produce Co. v. FMC Corp., supra, 135 Cal.App.3d 473, 489-490.)

2.

Supercuts does not contest the finding that the restriction on remedies is against public policy within the meaning of Civil Code section 1668 nor otherwise defend the restriction. It argues instead that the restriction does not apply in this case.

On July 21, 1994, after Supercuts learned Stirlen was considering a suit for wrongful termination, its general counsel, Lawrence D. Imber, sent Stirlen’s counsel a letter reminding her of the arbitration clause. Imber stated that, in the event Stirlen intended to “assert a claim based on a statute, constitutional rights, etc. by which damages other than for contract breaches are permitted; ... I will be willing to confer on the arbitrator authority to issue an award consistent with law, should the arbitrator, of course, find liability on the part of Supercuts in the first place.” Supercuts maintains that “[b]y this offer [it] was essentially waiving or revoking paragraph 11(c) of the agreement.”

Unimpressed with this contention, the trial court viewed the July 21 letter as merely a concession of the invalidity of the restriction on remedies and the one-sidedness of the entire arbitration clause. We agree the letter does not effectuate a revocation or waiver of the restriction on remedies. Among other things, Supercuts’ “waiver or revocation” theory cannot be reconciled with the integration clauses of the employment contract. Paragraph 18 provides that the contract “may not be modified or amended by oral agreement, or course of conduct, but only by an agreement in writing signed by the parties.” Paragraph 20 similarly provides that the terms of the contract embody “the complete agreement and understanding between the parties” and states the agreement of the parties “that no representations, inducements, promises or agreements, orally or otherwise, have been made by a party or anyone acting on behalf of a party that are not embodied herein, and that no other agreement or promise, whether oral or written, express or implied, shall be valid or binding.” In light of these provisions, the July 21 letter can *1536 be seen, at most, as an offer to modify the contract; 7 an offer that was never accepted. No existing rule of contract law permits a party to resuscitate a legally defective contract merely by offering to change it. Suffice it for present purposes to conclude that the restriction on remedies remains a part of the arbitration clause and is therefore relevant to the question whether that clause is unconscionable within the meaning of Civil Code section 1670.5.

3.

Finally coming to grips with the issue at the heart of this case, Supercuts alternatively claims the arbitration clause is not one-sided, and therefore unconscionable, because the apparent disparities are actually reasonable and fair. Its chief argument is that violation of the employer rights described in paragraphs 7, 8, 9, and 10 of the employment contract, pertaining to patent infringement, improper use of confidential information and competition, pose “an immediate threat to business operations” and therefore require immediate access to the courts, which alone can provide meaningful “emergency relief.” According to Supercuts, “[s]imple business realities underscore a need for this type of immediate access to court-ordered relief which is simply not present in the context of the standard employment dispute.”

We agree a contract can provide a “margin of safety” that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable. (See Hawkland, Uniform Commercial Code Series, supra, § 2-302:05 (Art. 2), p. 268.) However, unless the “business realities” that create the special need for such an advantage are explained in the contract itself, which is not the case here, it must be factually established. Thus, subdivision (b) of Civil Code section 1670.5 provides that “[w]hen it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.” This language reflects “legislative recognition that a claim of unconscionability often cannot be determined merely by examining the face of the contract, but will require inquiry into its setting, purpose, and effect.” (Perdue v. Crocker National Bank, supra, 38 Cal.3d 913, 926; see also Rosenthal v. Great Western Financial Securities, Corp., supra, 14 Cal.4th at pp. 412-415.)

Supercuts failed to provide the trial court evidence of the “business realities” it now relies upon because it was unwilling to concede during the *1537 proceedings below that it had any advantage under the arbitration clause that needed to be justified. 8 This evidentiary deficiency can be overlooked, however, because, the “business realities” belatedly claimed to justify the many advantages Supercuts enjoys under the arbitration clause would not provide such justification even if they had been factually established.

The forms of emergency judicial relief Supercuts asserts it must have are available to a party compelled to arbitrate a dispute. Code of Civil Procedure section 1281.8, subdivision (b), provides, as material, that “[a] party to an arbitration agreement may file in the court in the county in which an arbitration proceeding is pending, or if an arbitration proceeding has not commenced, in any proper court, an application for a provisional remedy in connection with an arbitrable controversy, but only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without provisional relief.” As we noted in Woolley v. Embassy Suites, Inc. (1991) 227 Cal.App.3d 1520 [278 Cal.Rptr. 719], “[s]ection 1281.8 was enacted primarily to allow a party to an arbitration [or subject to an arbitration agreement] to obtain provisional judicial remedies without waiving the right to arbitrate, as some early cases had suggested. [Citations.] The statute covers not merely injunctions, but all provisional remedies, including attachments, temporary protective orders, writs of possession and appointments of receivers.” (Id., at p. 1527; Jordan-Lyon Productions, Ltd. v. Cineplex Odeon Corp. (1994) 29 Cal.App.4th 1459, 1471 [35 Cal.Rptr.2d 200].) 9 The unilateral right to litigate rather than arbitrate claims therefore cannot be justified by the need for provisional remedies. Furthermore, justification would be lacking even if Supercuts could show that its legitimate dispute resolution needs could not always be met through arbitration, for that is also true with respect to employee claims.

While it may often be advantageous for employees to submit employment disputes to arbitration, it may also be disadvantageous. For example, arbitral discovery is ordinarily much more limited than judicial discovery, which may seriously compromise an employee’s ability to prove discrimination or unfair treatment. (Bales, Compulsory Arbitration of Employment Claims: A *1538 Practical Guide to Designing and Implementing Enforceable Agreements (1995) 47 Baylor L.Rev. 591, 608-609 [It “would be impossible” for employees to prove disparate treatment “without the opportunity to obtain from [employers] statistical information about the employment practice in question.”]; but see Gilmer v. Interstate/Johnson Lane Corp., supra, 500 U.S. at p. 31 [114 L.Ed.2d at pp. 40-41].) Procedural protections available in arbitration are inferior in other ways to those employees may obtain in a judicial forum. As the Ninth Circuit noted in Prudential Ins. Co. of America v. Lai (9th Cir. 1994) 42 F.3d 1299, in California “. . . the privacy rights of victims of sexual harassment are protected by statutes limiting discovery and admissibility of plaintiff’s sexual history in a judicial proceeding.” (Id., at p. 1305, fn. 4.) No such statutory protection is provided an employee compelled to arbitrate a claim of sexual harassment against an employer under an agreement of the sort presented here, in which the parties do not agree that the civil discovery statutes shall apply. (See Code Civ. Proc., §§ 1283.05, subd. (a), 1283.1.) 10

Further, except in extraordinary circumstances, parties who submit a dispute to private arbitration also give up their right to review of an adverse decision. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 32 [10 Cal.Rptr.2d 183, 832 P.2d 899]; Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th 362, 375; Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269 [52 Cal.Rptr.2d 115, 914 P.2d 193].) Thus, unlike Supercuts, which can obtain judicial review