Lorrie Poublon v. C.H. Robinson Co.

                 FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


LORRIE POUBLON, an individual, on          No. 15-55143
behalf of herself, and on behalf of all
persons similarly situated,                   D.C. No.
                    Plaintiff-Appellee,    2:12-cv-06654-
                                             CAS-MAN
                  v.

C.H. ROBINSON COMPANY; C.H.                  OPINION
ROBINSON WORLDWIDE, INC.,
            Defendants-Appellants.


      Appeal from the United States District Court
          for the Central District of California
      Christina A. Snyder, District Judge, Presiding

        Argued and Submitted December 9, 2016
                 Pasadena, California

                  Filed February 3, 2017

     Before: Consuelo M. Callahan, Carlos T. Bea,
          and Sandra S. Ikuta, Circuit Judges.

                 Opinion by Judge Ikuta
2                  POUBLON V. C.H. ROBINSON

                            SUMMARY*


                             Arbitration

    The panel reversed the district court’s order denying
defendants’ motion to stay proceedings, compel arbitration of
claims arising out of the plaintiff’s employment, and dismiss
class and representative claims.

     The panel reversed the district court’s holding that the
dispute resolution provision in an Incentive Bonus Agreement
signed by the plaintiff was both procedurally and
substantively unconscionable under California law. The
panel concluded that, even though the Incentive Bonus
Agreement was an adhesion contract, there was a low degree
of procedural unconscionability.          As to substantive
unconscionability, the defendants did not contest the district
court’s holding that a judicial carve-out provision was
substantively unconscionable. The panel held that a waiver
of representative claims was not substantively unconscionable
even though the waiver of the plaintiff’s claim under
California’s Private Attorneys General Act was not
enforceable under California law. A venue provision, a
confidentiality provision, a sanctions provision, a unilateral
modification provision, and limitations on discovery also
were not substantively unconscionable.

    The panel concluded that the dispute resolution provision
was valid and enforceable once the judicial carve-out was
extirpated and the waiver of representative claims was

    *
      This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
               POUBLON V. C.H. ROBINSON                   3

limited to non-PAGA claims. The panel remanded the case
to the district court.


                        COUNSEL

Jack S. Sholkoff (argued), Christopher W. Decker, and
Kathleen J. Choi, Ogletree Deakins Nash Smoak & Stewart
P.C., Los Angeles, California, for Defendants-Appellants.

Kyle R. Nordrehaug (argued) and Norman B. Blumenthal,
Blumenthal Nordrehaug & Bhowmik, La Jolla, California, for
Plaintiff-Appellee.


                        OPINION

IKUTA, Circuit Judge:

    Plaintiff Lorrie Poublon entered into an agreement with
defendants C.H. Robinson Co. and C.H. Robinson
Worldwide, Inc. (collectively, “C.H. Robinson”) to arbitrate
claims arising out of her employment. In the present action,
the district court denied C.H. Robinson’s motion to stay,
compel arbitration, and dismiss class and representative
claims, concluding that the dispute resolution provision was
unconscionable. We hold that the dispute resolution
provision is not tainted with illegality and any invalid
portions can be severed, and therefore reverse.

                             I

   Poublon began working for C.H. Robinson on May 7,
2007, as an Account Manager in Los Angeles, California.
4              POUBLON V. C.H. ROBINSON

While employed at C.H. Robinson, Poublon signed an
agreement titled “Incentive Bonus Agreement” each
December in order to receive a financial bonus. The
Incentive Bonus Agreement was a short one-page document
with eight provisions. The seventh provision, which had the
heading “Dispute Resolution,” contained four separate
paragraphs. The first paragraph stated:

       You and the Company agree that, except as
       provided below, all Claims the Company
       might bring against You and all claims You
       might bring against the Company and/or any
       of its officers, directors, or employees shall be
       deemed waived unless submitted to
       mediation, then, if mediation is unsuccessful,
       to final and binding arbitration in accordance
       with the Employment Arbitration Rules and
       Mediation Procedures of the American
       Arbitration Association, modified as follows:
       (1) the arbitration need not actually be
       administered by the American Arbitration
       Association; (2) any mediation or arbitration
       shall be governed by the Company’s
       Employment Dispute Mediation/Arbitration
       Procedure, which is available on the Company
       intranet; (3) dispositive motions shall be
       permissible and not disfavored in any
       arbitration, and the standard for deciding such
       motions shall be the same as under Rule 56 of
       the Federal Rules of Civil Procedure;
       (4) except on a substantial showing of good
       cause, discovery will be limited to the
       exchange of relevant documents and three
       depositions per side; and (5) except as
               POUBLON V. C.H. ROBINSON                   5

       mutually agreed at the time between You and
       the Company, neither You nor the Company
       may bring any Claim combined with or on
       behalf of any other person or entity, whether
       on a collective, representative, or class action
       basis or any other basis. In the case of any
       conflict between the rules and procedures for
       either mediation or arbitration, the priority
       and order of precedence shall be as follows:
       (1) the rules and procedures stated herein;
       (2) the Company’s Employment Dispute
       Mediation/Arbitration Procedure; (3) the
       Employment Arbitration Rules and Mediation
       Procedures of the American Arbitration
       Association.

The second paragraph stated, in pertinent part:

       This Dispute Resolution Agreement shall not
       apply to any of the following: (1) Worker’s
       Compensation claims; (2) claims related to
       unemployment insurance; and (3) any claims
       by the Company that include a request for
       injunctive or equitable relief, including,
       without limitation, claims related to its
       enforcement of any restrictive covenants, non-
       competition obligations, non-solicitation
       obligations and/or confidential information
       provisions contained in any Company policy
       and/or employment agreement(s) entered into
       between You and the Company and/or any
       claims to protect the Company’s trade secrets,
       confidential or proprietary information,
6               POUBLON V. C.H. ROBINSON

       trademarks, copyrights, patents, or other
       intellectual property.

The fourth paragraph provided:

       If any portion of this dispute resolution
       provision is determined to be void or
       unenforceable, then the remaining portions of
       this Agreement shall continue in full force and
       effect, and this Agreement may be modified to
       the extent necessary, consistent with its
       fundamental purpose and intent, in order to
       make it enforceable.

    In December 2011, as in prior years, Poublon met with
her supervisor, Gerry Nelson, to discuss her compensation
and bonuses for the following year. At this meeting, Nelson
gave Poublon the Incentive Bonus Agreement to take home
and review. He told her that the agreement would have to be
signed and returned within a specified time period in order for
her to receive her bonus. Poublon and Nelson did not discuss
the dispute resolution provision. Poublon later asked Nelson
“what would happen if [she] did not sign the document,” and
he responded that “failure to sign would result in [Poublon]
not being paid [her] bonus.” On December 23, 2011, Poublon
signed the Incentive Bonus Agreement and returned it to C.H.
Robinson. Poublon’s employment at C.H. Robinson ended in
February 2012.

    In March 2012, Poublon alleged that C.H. Robinson had
misclassified her as exempt from overtime pay requirements
and demanded mediation of her claims pursuant to the terms
of the Incentive Bonus Agreement that she had signed in
2011. After mediation was unsuccessful, Poublon filed a
                POUBLON V. C.H. ROBINSON                    7

class action complaint against C.H. Robinson in Los Angeles
County Superior Court, making the same misclassification
claims on behalf of herself and other employees.

    In August 2012, C.H. Robinson removed Poublon’s
action to a federal district court. Poublon filed a First
Amended Complaint, which added a claim on behalf of
California under the Private Attorneys General Act (PAGA),
Cal. Labor Code §§ 2698–2699.5. The district court denied
C.H. Robinson’s motion to compel arbitration, holding that
the dispute resolution provision was both procedurally and
substantively unconscionable, and therefore unenforceable.
C.H. Robinson timely appealed.

                              II

                              A

    We have jurisdiction under 9 U.S.C. § 16(a)(1). We
review the denial of a motion to compel arbitration de novo.
Brown v. Dillard’s, Inc., 430 F.3d 1004, 1009 (9th Cir. 2005).
We review factual findings for clear error, Balen v. Holland
Am. Line Inc., 583 F.3d 647, 652 (9th Cir. 2009), and review
“[t]he interpretation and meaning of contract provisions” de
novo, Lee v. Intelius Inc., 737 F.3d 1254, 1258 (9th Cir.
2013).

                              B

    The Federal Arbitration Act (FAA) requires courts to
“place arbitration agreements on an equal footing with other
contracts, and enforce them according to their terms.” AT&T
Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)
(internal citation omitted). Section 2 of the FAA makes
8                     POUBLON V. C.H. ROBINSON

agreements to arbitrate “valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2.1 The final clause
of § 2, generally referred to as the savings clause, “permits
agreements to arbitrate to be invalidated by ‘generally
applicable contract defenses, such as fraud, duress, or
unconscionability,’ but not by defenses that apply only to
arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue.” Concepcion, 563 U.S. at
339 (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S.
681, 687 (1996)). “Any doubts about the scope of arbitrable
issues, including applicable contract defenses, are to be
resolved in favor of arbitration.” Tompkins v. 23andMe, Inc.,
840 F.3d 1016, 1022 (9th Cir. 2016).

    Section 2 of the FAA preempts state statutes and state
common law principles that “undercut the enforceability of
arbitration agreements,” unless the savings clause applies.
Southland Corp. v. Keating, 465 U.S. 1, 16 (1984); see also
Concepcion, 563 U.S. at 343–44; Sakkab v. Luxottica Retail
N. Am., Inc., 803 F.3d 425, 432 (9th Cir. 2015). In other
words, a court cannot enforce state laws that apply to


    1
        9 U.S.C. § 2 states, in full:

           A written provision in any maritime transaction or a
           contract evidencing a transaction involving commerce
           to settle by arbitration a controversy thereafter arising
           out of such contract or transaction, or the refusal to
           perform the whole or any part thereof, or an agreement
           in writing to submit to arbitration an existing
           controversy arising out of such a contract, transaction,
           or refusal, shall be valid, irrevocable, and enforceable,
           save upon such grounds as exist at law or in equity for
           the revocation of any contract.
                POUBLON V. C.H. ROBINSON                    9

agreements to arbitrate but not to contracts more generally.
See Mortensen v. Bresnan Commc’ns, LLC, 722 F.3d 1151,
1159 (9th Cir. 2013) (“Any general state-law contract defense
. . . that has a disproportionate effect on arbitration is
displaced by the FAA.”).

    Here, Poublon argues that the dispute resolution provision
in the Incentive Bonus Agreement is unenforceable under
California’s unconscionability doctrine. As the California
Supreme Court has noted, California’s “unconscionability
standard is, as it must be, the same for arbitration and
nonarbitration agreements.” Sanchez v. Valencia Holding
Co., LLC, 61 Cal. 4th 899, 912 (2015). Recent California
Supreme Court cases have demonstrated how this principle
applies to California’s unconscionability doctrine. See
Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237 (2016);
Sanchez, 61 Cal. 4th at 911; Sonic-Calabasas A, Inc. v.
Moreno, 57 Cal. 4th 1109, 1143–45 (2013) (Sonic II). In our
evaluation of Poublon’s claim, we apply principles derived
from these cases, as well as other precedent articulating
California’s general unconscionability standard.           See
Tompkins, 840 F.3d at 1024 (holding that “we are bound by
the California Supreme Court’s most recent articulation of its
[general unconscionability] standard”).

    Under California law, “the party opposing arbitration
bears the burden of proving any defense, such as
unconscionability.” Pinnacle Museum Tower Ass’n v.
Pinnacle Mkt. Dev. (US), LLC, 55 Cal. 4th 223, 236 (2012).
In order to establish such a defense, the party opposing
arbitration must demonstrate that the contract as a whole or
a specific clause in the contract is both procedurally and
substantively unconscionable. Sanchez, 61 Cal. 4th at 910.
Procedural and substantive unconscionability “need not be
10              POUBLON V. C.H. ROBINSON

present in the same degree.” Id. Rather, there is a sliding
scale: “the more substantively oppressive the contract term,
the less evidence of procedural unconscionability is required
to come to the conclusion that the term is unenforceable, and
vice versa.” Id. (quoting Armendariz v. Found. Health
Psychcare Servs., Inc., 24 Cal. 4th 83, 114 (2000)). We
therefore must consider both procedural and substantive
unconscionability.

    The procedural element of unconscionability focuses on
“oppression or surprise due to unequal bargaining power.”
Pinnacle, 55 Cal. 4th at 246. “The oppression that creates
procedural unconscionability arises from an inequality of
bargaining power that results in no real negotiation and an
absence of meaningful choice.” Grand Prospect Partners,
L.P. v. Ross Dress for Less, Inc., 232 Cal. App. 4th 1332,
1347–48, as modified on denial of reh’g (Feb. 9, 2015).
California courts have held that oppression may be
established by showing the contract was one of adhesion or
by showing from the “totality of the circumstances
surrounding the negotiation and formation of the contract”
that it was oppressive. Id. at 1348.

    “The term [contract of adhesion] signifies 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.”
Armendariz, 24 Cal. 4th at 113 (quoting Neal v. State Farm
Ins. Cos., 188 Cal. App. 2d 690, 694 (1961)). While
California courts have found that “the adhesive nature of the
contract is sufficient to establish some degree of procedural
unconscionability” in a range of circumstances, Sanchez, 61
Cal. 4th at 915, the California Supreme Court has not adopted
a rule that an adhesion contract is per se unconscionable, see
                   POUBLON V. C.H. ROBINSON                            11

id. at 914–15; see also Morris v. Redwood Empire Bancorp,
128 Cal. App. 4th 1305, 1320 (2005) (“Although adhesion
contracts often are procedurally oppressive, this is not always
the case.”). In the employment context, if an employee must
sign a non-negotiable employment agreement as a condition
of employment but “there is no other indication of oppression
or surprise,”2 then “the agreement will be enforceable unless
the degree of substantive unconscionability is high.” Serpa
v. Cal. Sur. Investigations, Inc., 215 Cal. App. 4th 695, 704,
as modified (Apr. 19, 2013), as modified (Apr. 26, 2013)
(internal quotation marks omitted); see also Ajamian v.
CantorCO2e, L.P., 203 Cal. App. 4th 771, 796 (2012).

    California courts have articulated numerous standards for
determining substantive unconscionability. Courts have held
that the agreement must be “overly harsh,” “unduly
oppressive,” “unreasonably favorable,” or must “shock the
conscience.” Sanchez, 61 Cal. 4th at 911 (emphasis omitted).
“[T]hese formulations, used throughout [California] case law,
all mean the same thing.” Id. The “central idea” is that “the
unconscionability doctrine is concerned not with a simple
old-fashioned bad bargain but with terms that are
unreasonably favorable to the more powerful party.”
Baltazar, 62 Cal. 4th at 1244 (internal quotation marks and
citations omitted). “Not all one-sided contract provisions are
unconscionable.” Sanchez, 61 Cal. 4th at 911.



    2
      For purposes of determining procedural unconscionability, the
California Supreme Court has held that “surprise or other sharp practices”
may arise when a party with less bargaining power is not told about an
unusual provision, or the party is otherwise “lied to, placed under duress,
or otherwise manipulated into signing the arbitration agreement.”
Baltazar, 62 Cal. 4th at 1245.
12              POUBLON V. C.H. ROBINSON

                              III

    We now apply these standards to Poublon’s claim that the
dispute resolution provision in the Incentive Bonus
Agreement is procedurally unconscionable to a high degree
and contains eight substantively unconscionable provisions.

                              A

    We begin with the issue of procedural unconscionability.
C.H. Robinson concedes that the Incentive Bonus Agreement
meets California’s definition of an adhesion contract, because
there was unequal bargaining power between the employer
and employee, and the agreement was presented to Poublon
on a take-it-or-leave-it basis. Under California law, “[t]he
adhesive nature of the employment contract requires us to be
‘particularly attuned’ to [a former employee’s] claim of
unconscionability.”      Baltazar, 62 Cal. 4th at 1245.
Nevertheless, the adhesive nature of a contract, without more,
would give rise to a low degree of procedural
unconscionability at most. See id. (stating that the court does
not subject a typical employment contract or other adhesion
contract “to the same degree of scrutiny as ‘[c]ontracts of
adhesion that involve surprise or other sharp practices’”
(quoting Gentry v. Superior Court, 42 Cal. 4th 443, 469
(2007))); see also Serpa, 215 Cal. App. 4th at 704; Ajamian,
203 Cal. App. 4th at 796. We therefore turn to the question
whether there are other indications of oppression or surprise
that would lead California courts to conclude that the degree
of procedural unconscionability is high.

   Poublon raises two arguments on this point. First,
Poublon argues that the dispute resolution provision was
oppressive because C.H. Robinson failed to provide her with
                POUBLON V. C.H. ROBINSON                    13

a copy of the American Arbitration Association’s rules or
C.H. Robinson’s Employment Dispute Mediation/Arbitration
Procedure (the “Arbitration Procedure”), which were
incorporated by reference in the dispute resolution provision.
We disagree. Baltazar rejected an employee’s claim that the
employer’s failure to provide a copy of the American
Arbitration Association’s rules, which were incorporated by
reference in the arbitration agreement, gave rise to a “greater
degree of procedural unconscionability.” 62 Cal. 4th at 1246.
While “courts will more closely scrutinize the substantive
unconscionability of terms that were ‘artfully hidden’ by the
simple expedient of incorporating them by reference rather
than including them in or attaching them to the arbitration
agreement,” incorporation by reference, without more, does
not affect the finding of procedural unconscionability. Id.
(quoting Harper v. Ultimo, 113 Cal. App. 4th 1402, 1406
(2003)). Baltazar’s holding is consistent with California’s
general rule that “parties may validly incorporate by
reference into their contract the terms of another document”
provided certain conditions are met. Slaught v. Bencomo
Roofing Co., 25 Cal. App. 4th 744, 748 (1994) (quoting Baker
v. Aubry, 216 Cal. App. 3d 1259, 1264 (1989)); see also Lane
v. Francis Capital Mgmt. LLC, 224 Cal. App. 4th 676, 692
(2014) (“Like any other contract, an arbitration agreement
may incorporate other documents by reference.”).
Accordingly, while we may “more closely scrutinize the
substantive unconscionability” of terms appearing only in the
American Arbitration Association’s rules or C.H. Robinson’s
Arbitration Procedure, Baltazar, 62 Cal. 4th at 1246, the
incorporation of these documents by reference does not
support Poublon’s claim that the dispute resolution provision
was oppressive.
14               POUBLON V. C.H. ROBINSON

    Second, Poublon states that the dispute resolution
provision was oppressive because she believed signing the
agreement was necessary not only to receive bonuses, but
also to remain employed. This argument fails, because there
is no evidence in the record that C.H. Robinson ever stated or
suggested that Poublon would be fired for failing to sign the
agreement. To the contrary, the record shows that in response
to Poublon’s question regarding what would happen if she did
not sign the agreement, Nelson responded only that she would
not receive her bonus. Poublon points to a statement in the
Incentive Bonus Agreement that provides: “In consideration
for Your continued employment, Your eligibility for a bonus
incentive, and the mutual promises set forth in this
Agreement, You and the Company hereby agree as follows.”
But this boilerplate merely establishes there is consideration
for the agreement; it does not state that failure to sign the
agreement will result in termination from employment. By
contrast, when the Incentive Bonus Agreement expressly
addresses termination, it states only that “[e]mployment with
the Company is ‘at-will’” and the employee or the Company
can terminate the employment at any time. Poublon’s
unsupported belief that she might be terminated if she failed
to sign the agreement does not provide a basis for her claim
that the dispute resolution provision was oppressive. Cf.
Ayoob v. Ayoob, 74 Cal. App. 2d 236, 250 (1946) (holding
that a “self-serving declaration” was “without sufficient
probative value . . . to establish the intent of the appellant or
the truth of a fact declared”). Moreover, this argument would
fail even if Poublon presented evidence that signing the
Incentive Bonus Agreement were a condition of her
employment. Poublon has not established any other element
of oppression or surprise associated with the employment
agreement, and therefore under California law, “the degree of
procedural unconscionability of [such] an adhesion agreement
                POUBLON V. C.H. ROBINSON                     15

is low, and the agreement will be enforceable unless the
degree of substantive unconscionability is high.” Serpa,
215 Cal. App. 4th at 704 (internal quotation marks omitted);
see also Baltazar, 62 Cal. 4th at 1245; Ajamian, 203 Cal.
App. 4th at 796.

                               B

    We now turn to Poublon’s argument that eight provisions
in the Incentive Bonus Agreement are substantively
unconscionable. We first consider the language in the dispute
resolution provision itself, and then turn to the language in
the Arbitration Procedure, which is incorporated in the
dispute resolution provision by reference.

                               1

    The Judicial Carve-Out Provision. The dispute resolution
provision requires employees to submit all claims against
C.H. Robinson to arbitration, but preserves C.H. Robinson’s
right to seek judicial resolution of “any claims by the
Company that include a request for injunctive or equitable
relief, including,” certain restrictive covenants and
intellectual property rights. The district court held that the
judicial resolution carve-out was substantively
unconscionable. On appeal, C.H. Robinson does not contest
the district court’s holding that the carve-out for equitable or
injunctive relief was substantively unconscionable.
Accordingly, any argument that the judicial carve-out was not
substantively unconscionable has been waived. Martinez-
Serrano v. INS, 94 F.3d 1256, 1259–60 (9th Cir. 1996).
16              POUBLON V. C.H. ROBINSON

                              2

    Waiver of Representative Claims. The dispute resolution
provision states that “except as mutually agreed at the time
between You and the Company, neither You nor the
Company may bring any Claim combined with or on behalf
of any other person or entity, whether on a collective,
representative, or class action basis or any other basis.” The
parties do not dispute that this provision denies Poublon the
right to bring her representative PAGA claim, and we agree.
In Iskanian v. CLS Transportation Los Angeles, LLC, the
California Supreme Court held that where “an employment
agreement compels the waiver of representative claims,”
whether or not the agreement specifically references PAGA,
it “frustrates the PAGA’s objectives” and “is contrary to
public policy and unenforceable as a matter of state law.”
59 Cal. 4th 348, 384 (2014). This holding is not preempted
by the FAA and is the controlling rule of California contract
law. Sakkab, 803 F.3d at 439.

    Poublon argues that because the waiver of a
representative PAGA claim is unenforceable, it is also
substantively unconscionable. This is incorrect. Under
California law, “[c]ontracts can be contrary to public policy
but not unconscionable and vice versa.” Sonic-Calabasas A,
Inc. v. Moreno, 51 Cal. 4th 659, 686–87, cert. granted,
judgment vacated on other grounds, 132 S. Ct. 496 (2011)
(Sonic I) (internal citations omitted); see also Securitas Sec.
Servs. USA, Inc. v. Superior Court, 234 Cal. App. 4th 1109,
1123 (2015) (holding that the determination “whether an
agreement has been validly formed, and whether its terms are
adhesive or unconscionable . . . are different from the
determination of whether [the employee] entered into a
knowing and intelligent waiver of her right to bring a PAGA
                 POUBLON V. C.H. ROBINSON                     17

claim . . . or whether Iskanian compels a conclusion that such
a waiver is unenforceable as against public policy”). We are
not aware of a California case holding that a PAGA waiver is
substantively unconscionable. Nor has Poublon directed us
to a case holding that the waiver of a representative claim,
other than a PAGA claim, is substantively unconscionable.

     By contrast, the Supreme Court has suggested that
arbitration agreements can generally waive collective, class-
wide, and representative claims. In Concepcion, an
arbitration agreement “required that claims be brought in the
parties’ ‘individual capacity, and not as a plaintiff or class
member in any purported class or representative
proceeding.’” 563 U.S. at 336. Because the California
Supreme Court had developed a rule that such provisions
were unconscionable, we denied a company’s motion to
compel arbitration. Id. at 338. The Supreme Court reversed,
holding that this state court rule was preempted by the FAA,
because “[t]he overarching purpose of the FAA . . . is to
ensure the enforcement of arbitration agreements according
to their terms so as to facilitate streamlined proceedings,” and
“[r]equiring the availability of classwide arbitration interferes
with fundamental attributes of arbitration and thus creates a
scheme inconsistent with the FAA.” Id. at 344. Accordingly,
even if the parties cannot lawfully agree to waive a PAGA
representative action, Concepcion weighs sharply against
holding that the waiver of other representative, collective or
class action claims, as provided in the dispute resolution
provision, is unconscionable. Therefore, the unenforceability
of the waiver of a PAGA representative action does not make
this provision substantively unconscionable.
18             POUBLON V. C.H. ROBINSON

                             3

   The Venue Provision. Section II(f) of the Arbitration
Procedure, “Venue and Place of Hearing,” provides:

       The venue of any Dispute shall be Hennepin
       County, MN. Unless the Parties otherwise
       agree or the Arbitrator otherwise directs for
       good reason, any hearing shall be conducted
       and deemed held in that county of venue, at a
       place convenient to the Parties as so
       designated by the Arbitrator.

    Relying on cases decided prior to Sanchez, Poublon
claims that this venue provision is substantively
unconscionable because it requires her to litigate her
California claims in Minnesota, a thousand miles away from
her home in California. We have previously rejected this
argument. See Tompkins, 840 F.3d at 1027. As we
explained, the California Supreme Court has stated that
California courts must enforce a forum selection clause
unless the clause is unreasonable because “the forum selected
would be unavailable or unable to accomplish substantial
justice”; inconvenience and expense of the forum alone is not
sufficient. Id. (quoting Smith, Valentino & Smith, Inc. v.
Superior Court, 17 Cal. 3d 491, 494 (1976) (in bank)).

   As in Tompkins, Poublon has not met the burden of
proving that the forum selection clause in the Arbitration
Procedure is unreasonable. For one, even if the venue
provision required arbitration to take place in Hennepin
County, Minnesota, the forum is not “unavailable or unable
to accomplish substantial justice.” See id. Moreover,
Poublon’s interpretation of this venue provision is wrong: on
                 POUBLON V. C.H. ROBINSON                     19

its face, the provision does not require a Minnesota venue, but
allows the parties to agree on a different venue, and allows
the arbitrator to select a different venue “for good reason.”
An arbitrator would have good reason to change the venue if
Poublon could demonstrate that Minnesota would be “so
gravely difficult and inconvenient that [the plaintiffs] will for
all practical purposes be deprived of [their] day in court.”
Aral v. EarthLink, Inc., 134 Cal. App. 4th 544, 561 (2005)
(quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 18
(1972)). When determining the validity of an arbitration
procedure, “[w]e assume that the arbitrator will operate in a
reasonable manner in conformity with the law.” Dotson v.
Amgen, Inc., 181 Cal. App. 4th 975, 984 (2010).
Accordingly, we conclude that this venue provision in the
Arbitration Procedure is not substantively unconscionable.

                               4

   The Confidentiality Provision. Section II(h) of the
Arbitration Procedure, “Confidentiality,” provides:

        All aspects of the arbitration, including
        without limitation, the record of the
        proceeding, are confidential and shall not be
        open to the public, except (a) to the extent
        both Parties agree otherwise in writing, (b) as
        may be appropriate in any subsequent
        proceedings between the Parties, or (c) as may
        otherwise be appropriate in response to a
        governmental agency or legal process,
        provided that the Party upon whom such
        process is served shall give immediate notice
        of such process to the other Party and afford
20                 POUBLON V. C.H. ROBINSON

         the other Party an appropriate opportunity to
         object to such process.

     Poublon claims that this provision is substantively
unconscionable because keeping the arbitration proceedings
secret under threat of a sanction order by the arbitrator
unfairly favors employers. In making this argument, Poublon
relies on our decision in Pokorny v. Quixtar, Inc., which held
that a confidentiality requirement in the arbitration agreement
is substantively unconscionable when it (1) allows defendants
to learn as “repeat player[s]” in the arbitration process, while
preventing employees from learning from similar prior cases,
or (2) prevents plaintiffs from investigating or engaging in
discovery by limiting contact with other employees. 601 F.3d
987, 1001–03 (9th Cir. 2010).3

   This argument fails. Several years after Pokorny was
decided, the California Court of Appeal considered a trial
court’s denial of an employer’s motion to compel arbitration.
Sanchez v. CarMax Auto Superstores Cal. LLC, 224 Cal.


     3
      The confidentiality provision in Pokorny prevented distributors from
disclosing “to any other person not directly involved in the conciliation or
arbitration process (a) the substance of, or basis for, the claim; (b) the
content of any testimony or other evidence presented at an arbitration
hearing or obtained through discovery; or (c) the terms [or] amount of any
arbitration award.” 601 F.3d at 1001. This provision took effect as soon
as the distributor became “aware of a potential Rule violation or of a claim
against” another distributor or against Quixtar, the defendant company.
Id. We interpreted this provision as barring distributors from disclosing
their claim and “the evidence supporting it.” Id. Quixtar, on the other
hand, could “mak[e] such disclosures up until the time [a distributor]
formally demands arbitration,” and could “avoid the confidentiality
requirement altogether when it brings its own claims against [a distributor]
because it is not required to first assert those claims using the Quixtar
ADR process.” Id.
                POUBLON V. C.H. ROBINSON                     21

App. 4th 398 (2014), review denied (June 11, 2014). The
employee opposed the motion, on the ground that the
arbitration agreement was unconscionable. Id. at 401.
Among the allegedly unconscionable provisions was a
confidentiality provision requiring “that the arbitration
(including the hearing and record of the proceeding) be
confidential and not open to the public unless the parties
agree otherwise, or as appropriate in any subsequent
proceeding between the parties, or as otherwise may be
appropriate in response to governmental or legal process.”
Id. at 408. The trial court held that this provision, along with
others in the agreement, unreasonably favored the employer
because “they inhibit employees from discovering evidence
from each other” while “[n]o such restrictions are applied in
a court action.” Id. The California Court of Appeal rejected
this reasoning, holding that there is nothing unreasonable or
prejudicial about “a secrecy provision with respect to the
parties themselves,” and the provision requiring
confidentiality was not unconscionable. Id. (quoting
Woodside Homes of Cal., Inc. v. Superior Court, 107 Cal.
App. 4th 723, 732 (2003)).

    This holding is directly on point. The confidentiality
provisions in both the Arbitration Procedure at issue here and
in CarMax are substantially identical: they both require that
the arbitration, including the record of the proceeding, be
confidential, and they both include the same enumerated
exceptions. See id. Moreover, the California Court of
Appeal rejected the same policy argument that Poublon
makes here, namely that such confidentiality provisions
“inhibit employees from discovering evidence from each
other.” See id.
22              POUBLON V. C.H. ROBINSON

    In the absence of any decision on this issue from the
California Supreme Court, we are bound by CarMax, as the
ruling of the highest state court issued to date. While the
state’s Supreme Court is “the final arbiter of what is state
law,” there are “many rules of decision commonly accepted
and acted upon by the bar and inferior courts which are
nevertheless laws of the state although the highest court of the
state has never passed upon them.” West v. Am Tel. & Tel.
Co., 311 U.S. 223, 236 (1940). “A state appellate court’s
announcement of a rule of law is a datum for ascertaining
state law which is not to be disregarded by a federal court
unless it is convinced by other persuasive data that the highest
court of the state would decide otherwise.” Miller v. Cty. of
Santa Cruz, 39 F.3d 1030, 1036 n.5 (9th Cir. 1994), as
amended (Dec. 27, 1994) (quoting Hicks v. Feiock, 485 U.S.
624, 630 (1988)) (internal quotation marks omitted). Federal
courts are required to “ascertain from all the available data
what the state law is and apply it rather than to prescribe a
different rule, however superior it may appear from the
viewpoint of ‘general law’ and however much the state rule
may have departed from prior decisions of the federal courts.”
 Am Tel. & Tel. Co., 311 U.S. at 237. This approach is
consistent with the longstanding principle that state law
should be applied consistently in federal and state courts, a
goal that “would be thwarted if the federal courts were free to
choose their own rules of decision whenever the highest court
of the state has not spoken.” Id. at 236.

    Here, there is no “persuasive data,” Miller, 39 F.3d at
1036 n.5, that the California Supreme Court would reach a
different conclusion than CarMax, and the fact that the
California Supreme Court declined to review CarMax
supports this conclusion. See Tenneco W., Inc. v. Marathon
Oil Co., 756 F.2d 769, 771 (9th Cir. 1985) (noting the
                   POUBLON V. C.H. ROBINSON                             23

importance of relying on a state appellate court’s ruling is
heightened when “the highest court has refused to review the
lower court’s decision” (quoting Am Tel & Tel. Co., 311 U.S.
at 236)). Poublon does not cite any California case reaching
a different conclusion than CarMax.

     Moreover, our prior decisions on this issue did not rely on
any California law. Rather, in holding that a confidentiality
provision was substantively unconscionable, Pokorny relied
only on our decisions in Davis v. O’Melveny & Myers,
485 F.3d 1066 (9th Cir. 2007), and Ting v. AT&T, 319 F.3d
1126 (9th Cir. 2003). Davis, in turn, relied on Ting and a
decision of the Washington Supreme Court, see Davis,
485 F.3d at 1078–79 (citing Zuver v. Airtouch Commc’ns,
Inc., 153 Wash. 2d 293, 313 (2004) (en banc)), while Ting,
relied solely on a D.C. Circuit decision, 319 F.3d at 1151–52
(citing Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465 (D.C.
Cir. 1997)). Now that we have available data establishing
“what the state law is” regarding a closely similar
confidentiality provision, we are bound to apply it, even
though “the state rule may have departed from prior decisions
of the federal courts.” Am Tel & Tel. Co., 311 U.S. at 237.4
Accordingly, the confidentiality provision in the Arbitration
Procedure is not substantively unconscionable.


    4
      Even if Pokorny and related cases remained relevant to our analysis
of California law, the policy concerns that drove these decisions are not
applicable in this case. First, where the number of putative class members
is smaller than the thousands in Davis and the millions in Ting, the “repeat
player” concerns are mitigated. See Kilgore v. KeyBank Nat’l Ass’n,
718 F.3d 1052, 1059 n.9 (9th Cir. 2013) (en banc). Poublon’s suit
involves around 250 class members. Second, the scope of the
confidentiality provision in the dispute resolution provision is narrower
than in our prior cases, which mitigates Pokorny’s concern that plaintiffs
will be limited in their ability to share information.
24             POUBLON V. C.H. ROBINSON

                             5

   Sanctions Provision. Section II(p) of the Arbitration
Procedure, “Sanctions,” states:

       The Arbitrator may award either Party its
       reasonable attorneys’ fees and costs, including
       reasonable expenses associated with
       production of witnesses or proof, upon a
       finding that the claim or counterclaim was
       frivolous or brought to harass the Employee,
       the Company or the Company’s personnel.

       The Arbitrator may award either Party its
       reasonable attorneys’ fees and costs, including
       reasonable expenses associated with
       production of witnesses or proof, upon a
       finding that the other Party (a) engaged in
       unreasonable delay, (b) failed to cooperate in
       discovery, or (c) failed to comply with
       requirements of confidentiality.

    Under California law, “[i]n the context of mandatory
employment arbitration of unwaivable statutory rights, . . .
arbitration agreements ‘cannot generally require 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.’” Sanchez, 61 Cal. 4th at 918 (quoting
Armendariz, 24 Cal. 4th at 110–11).

    Poublon argues that the sanctions provision violates this
rule and is substantively unconscionable for two reasons.
First, she argues that the provision permits an award of
attorneys’ fees in favor of the employer even though under
                    POUBLON V. C.H. ROBINSON                           25

section 1194 of the California Labor Code, only the employee
is entitled to attorneys’ fees when prevailing on a
misclassification claim.5 Second, she argues that the
provision violates California law because it gives the
arbitrator the option to award attorneys’ fees to the prevailing
employee, while section 1194 gives the prevailing employee
an absolute right to recover attorneys’ fees.

    We disagree with both arguments. First, Poublon
misconstrues the sanctions provision as authorizing the
arbitrator to award attorneys’ fees to the prevailing party in
the arbitration. On its face, it does not give the arbitrator
such power. Rather, the provision authorizes the arbitrator to
award attorneys’ fees against a party that brought a frivolous
or harassing claim, or in the course of the proceeding,
engaged in unreasonable delay, failed to cooperate in
discovery, or violated confidentiality requirements. In other
words, the clause provides for the imposition of attorneys’
fees as a sanction for bad behavior. As such, it is consistent
with sections 128.7 and 2023.030(a) of the California Code
of Civil Procedure, which authorize courts to impose similar
sanctions in judicial proceedings. Indeed, Poublon has not
identified a circumstance in which the sanctions available



   5
       California Labor Code section 1194(a) provides:

          (a) Notwithstanding any agreement to work for a lesser
          wage, any employee receiving less than the legal
          minimum wage or the legal overtime compensation
          applicable to the employee is entitled to recover in a
          civil action the unpaid balance of the full amount of this
          minimum wage or overtime compensation, including
          interest thereon, reasonable attorney’s fees, and costs of
          suit.
26                  POUBLON V. C.H. ROBINSON

under the Arbitration Procedure would not be available in a
judicial proceeding.6

    Second, because the sanctions provision is silent on
whether an arbitrator can award attorneys’ fees to a prevailing
employee, it is not inconsistent with section 1194 of the
California Labor Code. Rather, the Arbitration Procedure
requires the arbitrator to comply with applicable California
law, which would include section 1194 to the extent
applicable. See Section II(j), “Applicable Law and Burden of
Persuasion,” (“The principles of applicable substantive
common, decisional and statutory law shall control the
disposition of each Dispute.”). Accordingly, the sanctions
provision is not substantively unconscionable.

                                      6

    Unilateral Modification. Poublon argues that the dispute
resolution provision is substantively unconscionable because
it unfairly permits C.H. Robinson to change the arbitration
rules unilaterally and terms merely by changing its rules on
its corporate intranet. Poublon apparently relies on the
language in the agreement that “any mediation or arbitration
shall be governed by the Company’s Employment Dispute
Mediation/Arbitration Procedure, which is available on the
Company intranet.”




     6
       In connection with this point, Poublon argues that in prior litigation,
C.H. Robinson conceded that the arbitration agreement potentially offered
it attorneys’ fees for which it might not otherwise be eligible under
California law. The record does not establish such a concession; rather,
C.H. Robinson declined to contest this issue.
                POUBLON V. C.H. ROBINSON                     27

     This claim is meritless. Under California law, a contract
and a document incorporated by reference into the contract
are read together as a single document, see Standard Iron
Works v. Globe Jewelry & Loan, Inc., 164 Cal. App. 2d 108,
117 (1958), and “what is being incorporated must actually
exist at the time of the incorporation, so the parties can know
exactly what they are incorporating,” Gilbert St. Developers,
LLC v. La Quinta Homes, LLC, 174 Cal. App. 4th 1185, 1194
(2009) (emphasis omitted). “Put another way, to have a valid
incorporation by reference, the terms of the document being
incorporated must be known or easily available to the
contracting parties.” Id. (internal quotation marks omitted).
If a provision or term of an incorporated document “does not
exist at the time of incorporation by reference,” then it “fails
the elementary test of being known or easily available at the
time of incorporation.” Id. Accordingly, at the time Poublon
executed the Incentive Bonus Agreement, it incorporated the
then-existing Arbitration Procedure, regardless whether this
document was attached to the contract or was posted on the
company intranet. See DVD Copy Control Ass’n, Inc. v.
Kaleidescape, Inc., 176 Cal. App. 4th 697, 714 (2009) (“The
clear and unequivocal reference to the extrinsic document and
the contemporaneous availability of its terms shows that, at
the time of contracting, the parties consented to those terms.”
(emphasis added)); see also Shaw v. Regents of Univ. of Cal.,
58 Cal. App. 4th 44, 55–56 (1997) (holding that a patent
agreement between a teacher and university incorporated the
terms of a patent policy in effect at the time the teacher
signed the agreement). While the parties may agree to
incorporate a document as it is updated or amended, see
Tompkins, 840 F.3d at 1032 n.9 (construing a contract that
expressly permitted the defendant to “make changes to the
[contract] from time to time”), the parties did not do so here;
nothing in the dispute resolution provision gives C.H.
28             POUBLON V. C.H. ROBINSON

Robinson the authority to modify any part of the agreement
unilaterally, including any incorporated document.
Moreover, even had C.H. Robinson included a unilateral
modification clause, “California courts have held that the
implied covenant of good faith and fair dealing prevents a
party from exercising its rights under a unilateral
modification clause in a way that would make it
unconscionable.” Id. at 1033. Accordingly, the incorporation
provision is not substantively unconscionable.

                             7

    Discovery Limitations. Both the dispute resolution
provision and the Arbitration Procedure address the scope of
discovery. The dispute resolution provision includes the
following:

       [E]xcept on a substantial showing of good
       cause, discovery will be limited to the
       exchange of relevant documents and three
       depositions per side . . . In the case of any
       conflict between the rules and procedures for
       either mediation or arbitration, the priority
       and order of precedence shall be as follows:
       (1) the rules and procedures stated herein;
       (2) the Company’s Employment Dispute
       Mediation/Arbitration Procedure; (3) the
       Employment Arbitration Rules and Mediation
       Procedures of the American Arbitration
       Association.

   Section II(g) of the Arbitration Procedure, “Pre-Hearing
Discovery,” provides four paragraphs of guidance on the
conduct of discovery. As relevant here, the section provides:
                POUBLON V. C.H. ROBINSON                   29

       Upon request, either Party shall be entitled to
       receive, prior to the hearing, information and
       copies of documents that meet the criteria for
       discovery. Upon request, the Employee shall
       also be entitled to a true copy of his or her
       personnel records kept in the ordinary course
       of business (including without limitation any
       and all performance valuations), other than
       records relating to pre-employment
       procedures and any reference checks, subject
       to any condition or limitation imposed by the
       Arbitrator upon a showing of good cause.

       Upon request, the Employee shall be entitled,
       at least thirty (30) days in advance of the
       commencement of the hearing, to take at least
       one deposition of a Company representative
       designated by the Employee. . . . Any dispute
       relative to discovery shall be presented to the
       Arbitrator for final and binding resolution.
       The Arbitrator may grant, upon good cause
       shown, either Party’s request for discovery in
       addition to or limiting that for which this
       paragraph expressly provides.

    Poublon argues that these limitations on discovery are
substantively unconscionable, because they allow less
discovery than the federal rules and are insufficient to allow
her to arbitrate her claims.

   Again, we reject this argument. The California Supreme
Court has made clear that “limitation on discovery is one
important component of the ‘simplicity, informality, and
expedition of arbitration.’” Armendariz, 24 Cal. 4th 83 at 106
30              POUBLON V. C.H. ROBINSON

n.11 (quoting Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20, 31 (1991)); see also Dotson, 181 Cal. App. 4th
at 983 (holding that “discovery limitations are an integral and
permissible part of the arbitration process”). Because
“arbitration is meant to be a streamlined procedure,” parties
may agree to limit the number of depositions and impose
other restrictions. Dotson, 181 Cal. App. 4th at 983. But
while limitations on discovery are permissible in an
arbitration agreement, California has made clear that a court
must balance the “desirable simplicity” of limiting discovery
with employees’ need for discovery “sufficient to adequately
arbitrate their statutory claim, including access to essential
documents and witnesses, as determined by the arbitrator(s)
and subject to limited judicial review.” Armendariz, 24 Cal.
4th at 106.

     In finding this balance, California courts look to the
amount of discovery permitted, the standard for obtaining
additional discovery, and the evidence presented by plaintiffs
that the discovery limitations will prevent them from
adequately arbitrating their statutory claims. Fitz v. NCR
Corp., 118 Cal. App. 4th 702, 715–18 (2004); CarMax,
224 Cal. App. 4th at 404–06. In Fitz, the court considered an
agreement that limited the plaintiff to two depositions and no
written discovery, with additional discovery permitted only
if the requesting party could demonstrate a compelling need,
meaning that a fair hearing would be impossible without
additional discovery. 118 Cal. App. 4th at 717–18. The
employee estimated that she would have to depose eight to
ten witnesses in order to vindicate her claim against the
employer. Id. at 717. The court concluded that the only way
the employee could gain access to “necessary information to
prove the claim is to get permission from the arbitrator for
additional discovery” under the burdensome impossibility
                POUBLON V. C.H. ROBINSON                   31

standard. Id. Because the employee should not “be forced to
demonstrate this impossibility to an arbitrator before being
granted access to the type of discovery that is necessary for
a fair opportunity to vindicate her claim,” the California
Court of Appeal held that the discovery limitations were
substantively unconscionable. Id. at 719.

    In CarMax, by contrast, the dispute resolution provision
provided for “disclosure of relevant documents and
production of the personnel file upon request, with each party
under a continuing obligation to supplement its initial
disclosure” and limited “each party to 20 interrogatories and
three depositions.” 224 Cal. App. 4th at 404. The dispute
resolution provision also stated “that on request of any party
and a showing of ‘substantial need,’ the arbitrator may allow
additional discovery if it ‘is not unduly burdensome and will
not unduly delay the conclusion of the arbitration.’” Id.
Further, the employee did not show “how the limitation on
discovery would prevent him from vindicating his rights in
his particular case.” Id. Rather, the employee argued that the
substantial need standard was per se too stringent. Id. The
California Court of Appeal rejected this argument, noting that
in the dispute resolution provision at issue in its case, the
discovery provisions were “considerably more liberal” than
they were in Fitz, and the employee could get additional
discovery merely by showing substantial need, rather than
compelling need as in Fitz. Id. at 405. CarMax also noted
that the employee did not “make any showing that he could
not maintain his claim without more discovery than that
provided by the agreement.” Id. Accordingly, CarMax
concluded that the discovery provisions were not
substantively unconscionable. Id. at 405–06.
32              POUBLON V. C.H. ROBINSON

    Here, the discovery limitations and evidence presented are
more similar to those in CarMax than those in Fitz. Reading
the dispute resolution provision and the Arbitration Procedure
together, Poublon can obtain all “relevant documents,”
request her personnel records, and take three depositions.
Poublon can obtain additional discovery merely by showing
good cause, which would include a demonstrated need for
discovery “sufficient to adequately arbitrate” her claim. See
Armendariz, 24 Cal. 4th at 106. Finally, Poublon fails to
make any showing that she would be unable to vindicate her
rights under the standard provided in the agreement. See
CarMax, 224 Cal. App. 4th at 405–06. Accordingly, the
discovery limitations provision is not substantively
unconscionable.

                               8

    Reaffirmation Clause. The final provision in the
Incentive Bonus Agreement states: “I reaffirm and agree
anew to abide by all of my prior agreements with Company
as a necessary condition of receiving the benefits under this
Agreement.” Poublon contends that this reaffirmation
provision means that she is reaffirming an illegal
noncompetition agreement with C.H. Robinson. We decline
to consider this argument. This provision is not part of the
dispute resolution provision, either directly or as incorporated
by reference. Our “authority to review portions of the
contract outside the arbitration provision is limited.”
Tompkins, 840 F.3d at 1032. Rent-A-Center, West, Inc. v.
Jackson stated that “[i]t may be that” where a plaintiff
challenges “the validity under § 2 of the precise agreement to
arbitrate at issue” on the ground that certain general contract
provisions “as applied” to the agreement to arbitrate render
it unconscionable, such a “challenge should [be] considered
                 POUBLON V. C.H. ROBINSON                      33

by the court.” 561 U.S. 63, 71, 74 (2010) (emphasis in
original). Here, Poublon fails to explain how the provision
reaffirming prior agreements applies to the agreement to
arbitrate so as to render it unconscionable. Therefore, it is up
to the arbitrator to evaluate whether the provision reaffirming
previous agreements is unenforceable.

                                C

    If a California court concludes that a contract contains
one or more unconscionable clause, it may: (1) refuse to
enforce a contract that was “unconscionable at the time it was
made”; (2) “enforce the remainder of the contract without the
unconscionable clause”; or (3) “limit the application of any
unconscionable clause as to avoid any unconscionable result.”
Cal. Civ. Code § 1670.5(a). A court may “refuse to enforce
the entire agreement” only when it is “‘permeated’ by
unconscionability.” Armendariz, 24 Cal. 4th at 122 (citing
Cal. Civ. Code § 1670.5, Legis. Comm. Comments, n.2); see
also Ajamian, 203 Cal. App. 4th at 802 (“[T]he strong
preference is to sever unless the agreement is ‘permeated’ by
unconscionability.” (emphasis omitted)).

     “Where a contract has several distinct objects, of which
one at least is lawful, and one at least is unlawful, in whole or
in part, the contract is void as to the latter and valid as to the
rest.” Cal. Civ. Code § 1599; see also Fair v. Bakhtiari,
195 Cal. App. 4th 1135, 1157 (2011) (“Civil Code section
1599 codifies the common law doctrine of severability of
contracts.”). By contrast, a contract is permeated with
unlawfulness (and severance is inappropriate) where “[t]he
good cannot be separated from the bad, or rather the bad
enters into and permeates the whole contract, so that none of
it can be said to be good.” Keene v. Harling, 61 Cal. 2d 318,
34               POUBLON V. C.H. ROBINSON

322 (1964) (quoting Santa Clara Val. M. & L. Co. v. Hayes,
76 Cal. 387, 393 (1888)). In other words,“[i]f the central
purpose of the contract is tainted with illegality, then the
contract as a whole cannot be enforced.” Marathon Entm’t,
Inc. v. Blasi, 42 Cal. 4th 974, 996 (2008) (internal quotation
marks and citations omitted). On the other hand, “[i]f the
illegality is collateral to the main purpose of the contract, and
the illegal provision can be extirpated from the contract by
means of severance or restriction, then such severance and
restriction are appropriate.” Id.

    In Armendariz, the California Supreme Court considered
whether a trial court had abused its discretion in refusing to
enforce a contract due to the presence of two unlawful
provisions in an arbitration agreement. 24 Cal. 4th at 122–27.
The court first reiterated the general rule that a court should
not enforce a contract if its central purpose is “tainted with
illegality,” but should enforce the contract if “the illegality is
collateral to the main purpose of the contract” and the illegal
provisions “can be extirpated from the contract by means of
severance or restriction.” Id. at 124. Applying this rule,
Armendariz concluded that the trial court had not abused its
discretion because two factors weighed against severing the
unlawful provisions. First, the court noted that the arbitration
agreement contained “more than one unlawful provision; it
has both an unlawful damages provision and an
unconscionably unilateral arbitration clause.” Id. According
to the court, “[s]uch multiple defects indicate a systematic
effort to impose arbitration on an employee not simply as an
alternative to litigation, but as an inferior forum that works to
the employer’s advantage.” Id. Second, Armendariz stated
that the contract as a whole lacked mutuality, and therefore
“there is no single provision a court can strike or restrict in
order to remove the unconscionable taint from the
                   POUBLON V. C.H. ROBINSON                            35

agreement.” Id. at 124–25. Armendariz concluded that
“severance or restriction” would not cure the
unconscionability, and therefore “it must void the entire
agreement.” Id. at 125.

    Poublon argues that an agreement is necessarily
permeated by unconscionability if more than one clause in the
agreement is unconscionable or illegal. We disagree;
California courts have not adopted such a per se rule.
Following Armendariz, California courts have held that a
factor weighing against severance exists when “the agreement
contains more than one objectionable term” which “may
indicate a systematic effort to impose arbitration on an
employee.” Ontiveros v. DHL Exp. (USA), Inc., 164 Cal.
App. 4th 494, 515 (2008) (internal quotation marks omitted).
But this is only one of the relevant factors; California courts
also consider whether “the central purpose of the contract is
tainted with illegality,” and whether “there is no single
provision a court can strike or restrict in order to remove the
unconscionable taint from the agreement.” Id.; see also Little
v. Auto Stiegler, Inc., 29 Cal. 4th 1064, 1074 (2003); Mercuro
v. Superior Court, 96 Cal. App. 4th 167, 184–85 (2002).7 In

    7
       Poublon argues that Magno v. Coll. Network, Inc., supports her
contention that California has adopted a per se “two-strikes” rule, because
it states that “[a]n agreement to arbitrate is considered ‘permeated’ by
unconscionability where it contains more than one unconscionable
provision.” 1 Cal. App. 5th 277, 292 (2016). We disagree. Magno
followed this statement by reciting the rule that an arbitration agreement
is 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,” and then proceeded to affirm
the trial court’s decision to void the entire arbitration agreement only
because the unconscionability could not be cured by severance. Id. at
292–93. Reading the sentence excerpted by Poublon in context, therefore,
Magno is consistent with the California Supreme Court’s decision in
36                POUBLON V. C.H. ROBINSON

each case, the dispositive question is whether “the central
purpose of the contract” is so tainted with illegality that there
is no lawful object of the contract to enforce. Marathon
Entm’t, 42 Cal. 4th at 996.

    In this case, severance is appropriate. Per C.H.
Robinson’s concession, there is one unconscionable clause in
the dispute resolution provision, the portion of the dispute
resolution provision that permits C.H. Robinson, but not
Poublon, to seek judicial resolution of specified claims. This
provision can be extirpated without affecting the remainder
of the paragraph and is “collateral to the main purpose of the
contract,” which is to require arbitration of disputes. Id.
Second, the waiver of representative claims is unenforceable
to the extent it prevents an employee from bringing a PAGA
action. This clause can be limited without affecting the
remainder of the agreement. Iskanian, 59 Cal. 4th at 391
(holding that an employer “cannot compel the waiver of [the
employee’s] representative PAGA claim but that the
agreement is otherwise enforceable according to its terms”);
see also Sakkab, 803 F.3d at 440 (limiting the PAGA waiver
and holding that non-PAGA claims must be arbitrated).
Finally, the fourth paragraph of the dispute resolution
provision allowing modifications “to the extent necessary,
consistent with [the agreement’s] fundamental purpose and
intent, in order to make it enforceable” makes clear that the
parties intended for any invalid portion of the agreement to be
restricted.




Armendariz, 24 Cal. 4th at 122–27, and Sanchez, 61 Cal. 4th at 912, as
well as with California’s “very liberal view of severability,” Adair v.
Stockton Unified Sch. Dist., 162 Cal. App. 4th 1436, 1450 (2008).
                POUBLON V. C.H. ROBINSON                    37

    Accordingly, we conclude that the dispute resolution
provision is valid and enforceable once the judicial carve-out
clause is extirpated and the waiver of representative claims is
limited to non-PAGA claims, and the district court erred in
holding otherwise.

   REVERSED AND REMANDED.