Davis v. Kozak

Filed 8/19/20
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

SCOTT DAVIS,
Plaintiff and A156234
Respondent,
(Alameda County
v. Super. Ct. No.
STEFAN KOZAK et al., RG18907104)
Defendants and
Appellants.

SCOTT DAVIS,
Plaintiff and A156238
Respondent,
v. (Alameda County
RED BULL NORTH Super. Ct. No.
AMERICA, INC., RG18916491)
Defendant and
Appellant.

This consolidated appeal arises out of plaintiff Scott Davis’s lawsuit
against executives of Red Bull North America, Inc. (Red Bull) for age and sex
harassment in violation of the Fair Employment and Housing Act (FEHA,
Gov. Code § 12940) and related tort claims. Red Bull and its executives
appeal from the trial court’s orders denying their motions to compel
arbitration of Davis’s claims. We conclude that the arbitration agreement
between Davis and Red Bull was unconscionable and unenforceable, and that

1
the trial court properly refused enforcement of the entire agreement.
Accordingly, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In June 2018, Davis filed a complaint against individual defendants
Stefan Kozak, Ryan Conway, Edward Hayden, Christopher Trombetta, and
Mark Russ for age and sex harassment and hostile work environment in
violation of the FEHA, and for intentional and negligent infliction of
emotional distress. Davis alleged he was 56 years old, had been employed by
Red Bull for 15 years, and was in a mid-level managerial sales position from
2007 until he was wrongfully terminated in April 2018. In the first cause of
action for harassment and hostile work environment based on age, Davis
alleged that the individual defendants—all high-ranking executives within
the company—consistently made derogatory comments and subjected Davis
to harassing conduct related to his age, and passed him over for promotions
and terminated his employment due to his age. In the second cause of action
for harassment and hostile work environment based on sex, Davis alleged he
was subjected to a hostile and abusive work environment because he
witnessed the individual defendants and/or others sexually harassing and/or
permitting sexual harassment of women in the workplace, and his complaints
and assistance to others in making complaints about the hostile work
environment led to further harassment against him. Davis’s emotional
distress claims derived from the same allegations of age and sex
harassment.1

1 The civil complaint attached a copy of Davis’s administrative complaint
with the Department of Fair Employment and Housing (DFEH) and the
DFEH’s right-to-sue letter issued to Davis in May 2018.

2
 Shortly after Davis filed his complaint, Red Bull notified Davis of the
company’s decision to initiate arbitration and seek a declaration that the
claims alleged in Davis’s DFEH complaint were without merit. When Davis
refused to submit to arbitration, Red Bull filed a demand for arbitration with
the American Arbitration Association (AAA).
In July 2018, the individual defendants moved to compel Davis to
submit his claims to arbitration.
Davis then filed a separate lawsuit against Red Bull seeking a
declaratory judgment that the claims set forth in his DFEH complaint were
not subject to the arbitration agreement and that the arbitration agreement
was not binding on him. He further sought temporary and permanent
injunctive relief staying Red Bull’s arbitration until the final adjudication of
his civil action against the individual defendants. In response, Red Bull filed
its own motion to compel arbitration of Davis’s claims.
The Arbitration Agreement
In seeking arbitration of the dispute, appellants relied on the “Red Bull
North America, Inc. Binding Arbitration Agreement” signed by Davis on
September 29, 2003 (hereafter, the arbitration agreement or agreement).
The arbitration agreement is printed on Red Bull letterhead and
consists of 18 paragraphs over three pages. It states in relevant part that
Davis, “in consideration of [his] employment with [Red Bull]” agreed that
“[a]ny and all disputes which involve or relate in any way to [his]
employment (or termination of employment) with Red Bull, except for
obligations under the Employee Confidentiality Agreement with Red Bull,
shall be submitted to and resolved by final and binding arbitration.”
The arbitration agreement further specifies it is “intended to cover all
civil claims which involve or relate in any way to [Davis’s] employment (or

3
termination of employment) with Red Bull, including, but not limited to,
claims of employment discrimination or harassment on the basis of . . . sex,
age, . . . claims based on violation of public policy or statue [sic], claims for
wrongful discharge, [and] claims for emotional distress . . . .”
Under its procedures for initiating arbitration, the agreement provides
that within 30 days of receipt of a notice of arbitration, “Red Bull and I will
attempt to agree upon a mutually acceptable arbitrator. If Red Bull and I are
unable to agree upon [an] arbitrator, we will submit the dispute to the
[AAA].” The agreement further states that “arbitration shall be conducted in
accordance with the laws of the state in which the arbitration is conducted
and the rules and requirements of the arbitration service being utilized,
specifically any rules applicable to employment disputes, to the extent that
such rules and requirements do not conflict with the terms of this
Agreement.”
Regarding arbitral discovery, the agreement states: “Either party shall
be entitled to conduct a limited amount of discovery prior to the arbitration
hearing. Either party may take a maximum of two (2) depositions. Either
party may apply to the arbitrator for further discovery. Such further
discovery may, in the discretion of the arbitrator, be awarded upon a showing
of sufficient cause.”2

2 At paragraph 7, the arbitration agreement allows each party to make a
written demand for “a list of witnesses, including experts, to be called and/or
copies of documents to be introduced at the hearing.” The demand must be
served at least 40 days prior to the hearing, and the list and copies of
documents must be delivered within 25 days of service of the demand.
“Neither party may call any witness or introduce any document omitted from
a response to such a demand.”

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 Hearing, Decision, and Appeal
In a detailed tentative opinion, the trial court was prepared to grant
appellants’ motions to compel. After finding that appellants had met their
burden of showing Davis was a party to a written agreement requiring him to
submit the controversy alleged in his complaint to arbitration, the court
determined that Davis had failed to show the agreement was unenforceable
under principles of unconscionability, with the exception of the discovery
limitation, which the court found to be severable. The court also found that
the individual defendants had standing as nonsignatories to enforce the
arbitration agreement under agency and estoppel principles.
After the hearing, however, the trial court reversed course. The court
not only concluded the individual defendants could not enforce the arbitration
agreement, but it also determined the agreement itself is unconscionable and
unenforceable. On the latter point, the court found the agreement
procedurally unconscionable because it involves an “added level of ‘surprise’ ”
by failing to specify which arbitration service would be utilized or which set of
arbitration rules would apply to the arbitration. The court further found the
agreement substantively unconscionable because (1) its language pertains
only to the employee, not Red Bull, and therefore, the agreement to arbitrate
is not mutual; (2) non-mutuality is further demonstrated by the “substantial
‘carve-out’ for the types of claims [Red Bull] would be likely to bring against
Plaintiff” for disputes relating to obligations under the Employee
Confidentiality Agreement; and (3) the arbitral discovery process is limited
and does not guarantee adequate discovery for vindication of Davis’s FEHA
claims. The trial court denied both motions to compel.

5
 Appellants timely appealed. (Code Civ. Proc.,3 § 1294, subd. (a).)
DISCUSSION
“California law, like federal law, favors enforcement of valid arbitration
agreements,” allowing that they “may only be invalidated for the same
reasons as other contracts.” (Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83, 97–98 (Armendariz).) Generally
applicable contract defenses such as unconscionability remain applicable to
invalidate arbitration agreements. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111,
125 (OTO).)
The unconscionability doctrine has both procedural and substantive
elements, “the former focusing on oppression or surprise due to unequal
bargaining power, the latter on overly harsh or one-sided results.” (Sonic-
Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133 (Sonic).) Both must
be shown for the defense to be established, but not necessarily in the same
degree. (OTO, supra, 8 Cal.5th at p. 125.) We evaluate unconscionability on
a sliding scale, so that the more substantively one-sided the contract term,
the less evidence of procedural unconscionability is required to conclude that
the term is unenforceable, and vice versa. (Id. at pp. 125–126.) “The
ultimate issue in every case is whether the terms of the contract are
sufficiently unfair, in view of all relevant circumstances, that a court should
withhold enforcement.” (Sanchez v. Valencia Holding Co., LLC (2015) 61
Cal.4th 899, 912 (Sanchez).) When unconscionability is shown, the trial court
has discretion either to refuse to enforce the contract or to strike the
unconscionable provision and enforce the remainder of the contract. (Civ.
Code, § 1670.5, subd. (a); Armendariz, supra, 24 Cal.4th at p. 122.)

3 Further statutory references are to the Code of Civil Procedure unless
otherwise indicated.

6
 “On appeal from the denial of a motion to compel arbitration,
‘[u]nconscionability findings are reviewed de novo if they are based on
declarations that raise “no meaningful factual disputes.” [Citation.]
However, where an unconscionability determination “is based upon the trial
court’s resolution of conflicts in the evidence, or on the factual inferences
which may be drawn therefrom, we consider the evidence in the light most
favorable to the court’s determination and review those aspects of the
determination for substantial evidence.” ’ ” (Lhotka v. Geographic
Expeditions, Inc. (2010) 181 Cal.App.4th 816, 820–821 (Lhotka).)
The principal questions posed in this appeal are whether the
arbitration agreement is unconscionable, and if so, whether the trial court
should have severed the offending provisions rather than refuse enforcement
of the agreement as a whole. An additional question is whether the trial
court erred in finding that the individual defendants, as nonsignatories, lack
standing to enforce the agreement. We address these questions in order, as
resolution of the first two may obviate the need to reach the third.
A. Procedural Unconscionability
“Procedural unconscionability focuses on ‘ “ ‘oppression’ ” ’ or
‘ “ ‘surprise’ ” ’ due to unequal bargaining power. [Citation.] ‘Oppression
arises from an inequality of bargaining power that results in no real
negotiation and an absence of meaningful choice. Surprise involves the
extent to which the supposedly agreed-upon terms are hidden in a prolix
printed form drafted by the party seeking to enforce them.’ ” (Baxter v.
Genworth North America Corp. (2017) 16 Cal.App.5th 713, 722 (Baxter).)
“Unconscionability analysis begins with an inquiry into whether the
contract is one of adhesion. [Citation.] ‘The term [contract of adhesion]
signifies a standardized contract, which, imposed and drafted by the party of

7
superior bargaining strength, relegates to the subscribing party only the
opportunity to adhere to the contract or reject it.’ ” (Armendariz, supra, 24
Cal.4th at p. 113.) “Arbitration contracts imposed as a condition of
employment are typically adhesive.” (OTO, supra, 8 Cal.5th at p. 126.)
The arbitration agreement here is a form contract on Red Bull
letterhead with spaces for the employee’s name and signature. It states at
the outset that Davis’s agreement to its terms is “in consideration of” his
employment with Red Bull. In his declaration in opposition to the motions to
compel, Davis attested that the agreement was presented to him “as a
condition of employment along with a stack of other documents, and on a
‘take-it-or-leave-it’ basis.” He further attested on information and belief that
the agreement “was provided to all employees and its terms were never
altered based on a negotiation with an employee,” and that he “had no
opportunity to negotiate over the terms of this Agreement. Were I to attempt
to do so, Red Bull likely would have ceased considering me for the position.”
Though appellants are correct that Davis’s declaration is speculative in
some respects, the record sufficiently demonstrates that the arbitration
agreement was presented as a standardized, non-negotiable term of Davis’s
employment. Appellants do not contend that Davis could have opted out of
the arbitration agreement or negotiated his employment contract without
one. (Sanchez, supra, 61 Cal.4th at p. 914; Serpa v. California Surety
Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 (Serpa).) Although
appellants seize on Davis’s acknowledgment that he did not actually attempt
to negotiate the arbitration terms, a complaining party need not show it tried
to negotiate standardized contract terms to establish procedural
unconscionability. (OTO, supra, 8 Cal.5th at p. 127; Carbajal v. CWPSC, Inc.
(2016) 245 Cal.App.4th 227, 244 (Carbajal).)

8
 The record also sufficiently demonstrates the parties’ unequal
bargaining positions. There is no dispute that Red Bull was, at all relevant
times, a large and prominent multinational corporation, a point reinforced by
the declaration of Red Bull’s human resources director describing the size
and scope of Red Bull’s business in the beverage industry. Davis, in
comparison, was hired by the company in 2003 to a middle manager position.
On this record, the unequal bargaining power between Red Bull and Davis
was reasonably apparent from the parties’ relationship. (Carbajal, supra,
245 Cal.App.4th at p. 244.) Indeed, “few employees are in a position to refuse
a job because of an arbitration requirement.” (Armendariz, supra, 24 Cal.4th
at p. 115.) Furthermore, because Red Bull presented the arbitration
agreement in the context of hiring Davis as a new employee, we must be
“particularly attuned” to the danger of oppression and overreaching in this
setting. (OTO, supra, 8 Cal.5th at p. 127.) Accordingly, we conclude Davis
carried his burden to show the arbitration agreement was a contract of
adhesion.
By itself, however, adhesion establishes only a “low” degree of
procedural unconscionability. (Serpa, supra, 215 Cal.App.4th at p. 704.)
Davis did not attempt to show other sharp practices on the part of Red Bull,
such as lying, manipulating, or placing him under duress. (Baltazar v.
Forever 21 (2016) 62 Cal.4th 1237, 1245 (Baltazar).) And we disagree with
Davis’s characterization of the arbitration agreement as unreasonably prolix
or complex. The agreement is set forth in a standalone three-page document,
clearly labeled “Binding Arbitration Agreement,” with standard-sized and
readable text. With the exception of a few paragraphs, the agreement does
not contain overly long or complicated sentences or use statutory references

9
and legal jargon. (Cf. OTO, supra, 8 Cal.5th at p. 128 [sentences were
“complex, filled with statutory references and legal jargon”].)
Nor do we find, as the trial court did, an element of surprise in the
agreement’s failure to identify a specific arbitration provider. The agreement
clearly spells out that the parties will attempt to mutually agree on an
arbitrator, and if that fails, the parties will utilize the services of AAA.
Reasonably construed, the provision affords Davis the opportunity to
negotiate for a preferred arbitrator, with AAA as the fallback if the parties
cannot agree. There is nothing surprising or hidden in this regard.
The trial court also found an element of surprise in the arbitration
agreement’s failure to identify the particular arbitral rules that would apply.
But the primary option under the agreement is for the parties to mutually
agree upon an arbitrator, and for arbitration to be conducted in accordance
with the provider’s “rules applicable to employment disputes” to the extent
they do not conflict with the agreement. Consequently, the applicable rules
could not be precisely identified at the time of contracting.
Appellants insist there is no potential for surprise because, in the event
the parties could not agree on an arbitrator, then the “rules applicable to
employment disputes” can only refer to the AAA Employment Arbitration
Rules and Mediation Procedures, which are currently accessible on the AAA
website. Appellants emphasize that both the 2002 version (in effect when
Davis was hired) and the 2009 current version of the AAA rules state that the
rules applicable to a given dispute are those in effect “at the time the demand
for arbitration . . . is received by the AAA.” Citing Evans v. Centerstone
Development Co. (2005) 134 Cal.App.4th 151, 158 (Evans) and Lucas v. Gund,
Inc. (C.D.Cal. 2006) 450 F.Supp.2d 1125, 1131–1132 (Lucas), appellants
maintain that when an agreement does not specify which version of the

10
arbitral rules applies to a particular dispute but references rules that do,
those rules control. Davis counters that the agreement remains unclear
because it does not identify which version of the rules would apply, and the
current 2009 version of the AAA employment rules was not in effect at the
time of contracting.
The precise question before us is not determining which version of the
AAA rules applies, but whether the arbitration agreement’s failure in the
first place to identify the applicable version heightens the degree of
procedural unconscionability. (See Carbajal, supra, 245 Cal.App.4th at
pp. 244–245 [oppression is increased when employer not only fails to provide
rules “but also fails to clearly identify which rules will govern so the
employee could locate and review them”].) Carbajal distinguished both
Evans and Lucas as cases relying on “similar provisions in other alternative
dispute rules to resolve conflicts over which version of a particular set of rules
applied, for example, the 2000 or the 2002 version of the same rules.”
(Carbajal, at p. 247.) As Carbajal observed, “[n]either case was called upon
to determine whether the underlying arbitration provision was procedurally
unconscionable for failing to designate the governing rules.” (Ibid.)
That said, the full scope of Carbajal’s procedural unconscionability
rationale is in question after the Supreme Court issued its decision in
Baltazar, supra, 62 Cal.4th 1237, shortly after Carbajal was published. (See
Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248–
249.) In Baltazar, the Supreme Court held that the failure to provide a copy
of the arbitral rules, standing alone, does not heighten the degree of
procedural unconscionability. Baltazar noted that in the cases where the
failure to provide the arbitral rules supported a finding of procedural
unconscionability, the “claim depended in some manner on the arbitration

11
rules in question. [Citations.] These cases thus stand for the proposition
that 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.” (Baltazar, at p. 1246.)
It logically follows from Baltazar that a viable claim of procedural
unconscionability for failure to identify the particular version of the
applicable arbitral rules—like a claim for failure to attach the rules
themselves—depends in some manner on the substantive unfairness of a
term or terms contained within the unidentified version of the rules
applicable to the dispute. (See Peng v. First Republic Bank (2013) 219
Cal.App.4th 1462, 1470–1472 (Peng) [no heightened procedural
unconscionability due to failure to attach arbitral rules or identify them with
clarity].) That is, if the unidentified rules are not themselves substantively
unfair, then the employer cannot be faulted for vaguely referring to such
rules. Notably, Davis does not contend that either the 2002 or the 2009
version of the AAA employment rules contained substantively unconscionable
terms.
Furthermore, to the extent Carbajal remains viable with regard to
Davis’s theory of procedural unconscionability, the case is factually
distinguishable. In Carbajal, the plaintiff was asked to sign an arbitration
agreement during her interview, and the employer’s most knowledgeable
person conceded that even he did not know which AAA rules applied under
the arbitration provision. (Carbajal, supra, 245 Cal.App.4th at p. 244.)
Davis does not similarly claim that he was given insufficient time to consider
the arbitration agreement before signing it or that he was otherwise unable
to access the AAA rules at the time of contracting.

12
 In sum, we conclude Davis has not adequately shown a heightened
degree of procedural unconscionability with regard to the agreement’s non-
identification of a specific arbitration provider or the version of the arbitral
rules that would apply in a given dispute. Davis has, however, demonstrated
a low degree of procedural unconscionability based on the agreement’s
adhesive nature. (Serpa, supra, 215 Cal.App.4th at p. 704.)
B. Substantive Unconscionability
In assessing substantive unconscionability, we look to the terms of the
parties’ agreement to “ensure[] that contracts, particularly contracts of
adhesion, do not impose terms that have been variously described as
‘ “ ‘overly harsh’ ” ’ [citation], ‘ “unduly oppressive” ’ [citation], ‘ “so one-sided
as to ‘shock the conscience’ ” ’ [citation], or ‘unfairly one-sided.’ ” (Sonic,
supra, 57 Cal.4th at p. 1145.) These formulations “all mean the same thing.”
(Sanchez, supra, 61 Cal.4th at p. 911.) Substantive unconscionability “ ‘is
concerned not with “a simple old-fashioned bad bargain” [citation], but with
terms that are “unreasonably favorable to the more powerful party.” ’ ”
(Ibid.) “[T]he paramount consideration in assessing [substantive]
conscionability is mutuality.” (Abramson v. Juniper Networks, Inc. (2004)
115 Cal.App.4th 638, 657 (Abramson).) “Agreements to arbitrate must
contain at least ‘ “a modicum of bilaterality” ’ to avoid unconscionability.”
(Id., citing Armendariz, supra, 24 Cal.4th at p. 119.)
In making this determination, courts often look to whether the
agreement meets a minimum level of fairness based on the factors set forth in
Armendariz. (Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1248.)
Among these factors is the requirement that there must be discovery
sufficient to adequately arbitrate a party’s claims. (Armendariz, supra, 24
Cal.4th at pp. 102–106.)

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 1. Discovery
A limitation on discovery is an important way in which arbitration can
provide a simplified and streamlined procedure for the resolution of disputes.
(Dotson v. Amgen (2010) 181 Cal.App.4th 975, 983 (Dotson); Armendariz,
supra, 24 Cal.4th at p. 106, fn. 11.) At the same time, “[a]dequate discovery
is indispensable for the vindication of statutory claims” (Fitz v. NCR Corp.
(2004) 118 Cal.App.4th 702, 715), and “[t]he denial of adequate discovery in
arbitration proceedings leads to the de facto frustration of” statutory rights
(Armendariz, supra, 24 Cal.4th at p. 104). In this context, “adequate” does
not mean “unfettered.” (Mercuro v. Superior Court (2002) 96 Cal.App.4th
167, 184 (Mercuro).) In striking the appropriate balance between the desired
simplicity of limited discovery and an employee’s statutory rights, courts
assess the amount of default discovery permitted under the arbitration
agreement, the standard for obtaining additional discovery, and whether the
plaintiffs have demonstrated that the discovery limitations will prevent them
from adequately arbitrating their statutory claims. (Poublon v. C.H.
Robinson Co. (9th Cir. 2017) 846 F.3d 1251, 1270 (Poublon).)
The arbitration agreement here permits each party to take a maximum
of two depositions. It contains no express provisions entitling the parties to
propound interrogatories, requests for admission, or demands for production
all relevant documents.4 Appellants emphasize that despite these
limitations, the arbitrator retains the authority to order additional discovery

4 At oral argument, appellants suggested that paragraph 7 of the
agreement provides for document discovery by permitting each party to make
a written demand for documents. (See ante, fn. 2.) Paragraph 7 is not the
equivalent of a discovery provision since, by its terms, the responding party is
not required to produce documents that it does not intend to introduce at the
arbitration hearing.

14
on a showing of “sufficient cause.” According to appellants, this standard is
equivalent to “good cause,” which was approved by the courts in Mercuro and
Poublon, and is “not different in substance from the standards approved in
Roman [v. Superior Court (2009) 172 Cal.App.4th 1462 (Roman)] or Dotson,
supra.” Appellants’ reliance on these authorities is misplaced.
As this court previously observed in Baxter, the discovery provision in
Dotson permitted additional discovery by the arbitrator on “a simple ‘showing
of need.’ ” (Baxter, supra, 16 Cal.App.5th at p. 729, citing Dotson, supra, 181
Cal.App.4th at pp. 978, 984.) Baxter agreed with Dotson that such a showing
“did not impose an unreasonable limitation on the arbitrator’s authority to
increase discovery” and held that the “showing of need” standard was less
onerous than a “good and sufficient cause” standard. (Baxter at p. 729.) And
as relevant here, the arbitration clause in Dotson explicitly permitted more
discovery than the agreement before us. (Dotson, supra, 181 Cal.App.4th at
p. 982 [parties allowed at least two depositions (of an individual and any
expert) and also to make document demands to any party in arbitration].)
Roman also involved a substantively different standard for discovery.
There, the arbitration agreement incorporated the 1997 AAA rules, which
stated the arbitrator had authority to order “such discovery, by way of
deposition, interrogatory, document production, or otherwise, as the
arbitrator considers necessary to a full and fair exploration of the issues in
dispute, consistent with the expedited nature of arbitration.”5 (Roman,
supra, 172 Cal.App.4th at p. 1475.) But rather than adopting AAA discovery
procedures, Red Bull’s arbitration agreement provides instead for default
discovery that makes no mention of written discovery or document

5 The current version of the AAA employment rules contains the same
discovery provision.

15
production, that limits depositions to two per party, and that uses a less-
defined “sufficient cause” standard for obtaining additional discovery.
And even assuming the “sufficient cause” standard here is equivalent to
the “good cause” standard approved in Mercuro and Poublon, both Mercuro
and Poublon emphasized that the plaintiffs before them had made no
showing whatsoever of an inability to vindicate their statutory rights under
the discovery standards provided in the subject arbitration agreements.
(Mercuro, supra, 96 Cal.App.4th at p. 183; Poublon, supra, 846 F.3d at
p. 1271; cf. Ontiveros v. DHL Express (USA), Inc. (2008) 164 Cal.App.4th 494,
513 [employee estimated need to take at least 15 to 20 depositions].)
Here, in contrast, the record amply supports Davis’s contention that he
would be unable to vindicate his statutory rights under the discovery
limitations of the arbitration agreement. Davis had a 15-year work history
with Red Bull, and he offered facts tending to show that the alleged age and
sex harassment “dramatically increas[ed]” since 2010 and continued until his
termination in 2018. At the root of Davis’s complaint is the theory that Red
Bull executives promoted a risky youth-centered culture that glorified
partying and substance abuse and looked the other way at reports of sexual
harassment and battery. As a result, Davis claims, he was often subjected to
ageist slurs directed at him in the presence of multiple witnesses, and was
harassed by having to witness the sexual harassment and abuse of multiple
women, including Red Bull employees. Davis’s claims are also based on
retaliatory harassment resulting from his reports of harassment of himself
and others and his participation in formal investigations of these reports.
Finally, he claims that he and other similarly-situated older employees were
passed up for promotions despite their superior qualifications, and that he
was terminated because of his age. Relevant documents would include, at

16
minimum, those relating to Davis’s work performance, discipline and
termination, the reports of age and sex harassment by Davis and others, and
the company’s internal investigations. In short, Davis has demonstrated that
he has a factually complex case involving numerous percipient witnesses,
executives, and investigators6 and that the arbitration agreement’s default
limitations on discovery are almost certainly inadequate to permit his fair
pursuit of these claims. (See Armendariz, supra, 24 Cal.4th at p. 104 [denial
of adequate discovery in arbitration leads to de facto frustration of statutory
rights]; Dougherty v. Roseville Heritage Partners (2020) 47 Cal.App.5th 93,
106 (Dougherty) [discovery limitations permitting depositions only in
exceptional cases and providing for no interrogatories or requests for
admission “[ran] the risk of frustrating plaintiffs’ statutory rights”].)
In so concluding, we take our cue from Baxter, supra, 16 Cal.App.5th
732, which reached a similar conclusion where an arbitral discovery process
featured default limitations that inhibited the plaintiff’s ability to fairly
pursue her claims against a former employer for discrimination and
retaliation in violation of the FEHA. (Baxter, at p. 729.) In Baxter, the

6 As a sample of the potential evidentiary scope of this case, the
complaint alleges there were multiple witnesses to Russ’s ageist slurs against
Davis at Red Bull events and meetings. Davis also names a former Red Bull
employee who was purportedly known to routinely sexually harass women at
the company and was accused by a Red Bull employee of sexual
assault/battery. Davis further names various supervisors to whom reports
about sexual assault and battery were made. He also identifies several
members of Red Bull’s human resources department who investigated his
and others’ allegations of sex harassment, including human resources
employees who purportedly made comments suggestive of pretextual and
sham investigations. Finally, Davis names at least two similarly-situated
individuals who purportedly experienced age bias at the company. Notably,
appellants do not dispute the potential relevance of these anticipated
witnesses and their testimony to Davis’s claims.

17
plaintiff had a 12-year employment history with the defendant, and she made
a factual showing that the outcome of her claims would depend upon several
percipient witnesses, six of whom were identified by name in the complaint,
and the relevant documents would include those relating to the defendant’s
family leave practices, evaluation policies, reorganization, prior complaints
similar to the plaintiff’s, communications concerning her discipline and
termination, and the defendant’s internal investigation. (Baxter, at pp. 728–
729.) The parties’ arbitration agreement, however, contained the following
default discovery limitations: the defendant’s employees would receive
documents from their personnel and medical files, and each party would be
permitted to propound up to 10 interrogatories and five written requests for
documents to the other party, and to depose two individuals for a total of no
more than eight hours. (Id. at p. 727.) The arbitrator was authorized to
order further discovery “ ‘for good and sufficient cause shown.’ ” (Ibid.)
As Baxter explained, the default discovery allowed under the foregoing
provisions was “low,” the burden placed on the plaintiff “to justify additional
discovery is somewhat greater than a simple showing of need or good cause,”
and the plaintiff had “established as a factual matter that she will likely need
to conduct at least three to five times the number of depositions allowed”
under the default limitations. (Baxter, supra, 16 Cal.App.5th at p. 730.)
Under the circumstances, Baxter determined that the default levels of
discovery would be inadequate to vindicate the plaintiff’s FEHA rights. (Id.
at pp. 728–729 [distinguishing Mercuro]) and that it was “reasonable to
conclude that her ability to prove her claims would be frustrated” (id. at
p. 730).
In concluding the arbitral discovery limitations would frustrate the
plaintiff’s ability to prove her claims, Baxter made the observation—equally

18
relevant here—that “[e]mployment disputes are factually complex, and their
outcomes ‘are often determined by the testimony of multiple percipient
witnesses, as well as written information about the disputed employment
practice.’ [Citation.] Seemingly neutral limitations on discovery in
employment disputes may be nonmutual in effect. ‘ “This is because the
employer already has in its possession many of the documents relevant to an
employment discrimination case as well as having in its employ many of the
relevant witnesses.” ’ ” (Baxter, supra, 16 Cal.App.5th at p. 727.)7
We assume, as we must, that any selected arbitrator will operate in a
reasonable manner in conformity with the law. (Dotson, supra, 181
Cal.App.4th at p. 984.) But under the circumstances presented here, it is
reasonable to conclude that the particular terms of the arbitration agreement
appear to constrain an arbitrator’s efforts to expand discovery to the extent
necessary to vindicate Davis’s statutory rights. (See Baxter, supra, 16
Cal.App.5th at p. 730; Dougherty, supra, 47 Cal.App.5th at p. 106.)

7 After the conclusion of briefing, appellants filed a notice of new
authority citing Torrecillas v. Fitness Internat., LLC (2020) 52 Cal.App.5th
485 (Torrecillas). There, the appellate court held that Baxter required an
evidentiary showing, not merely argument, that arbitral discovery would be
inadequate. (Torrecillas, at p. 497.) On the contrary, in Baxter, the factual
complexity of the plaintiff’s case was established by the complaint, which
named at least six percipient witnesses that would have to be deposed.
(Baxter, supra, 16 Cal.App.5th at pp. 727–728.) Likewise, the factual
complexity of Davis’s matter is established by facts appearing on the face of
his complaint, and appellants do not contend that these witnesses are not
relevant or necessary to establishing his claims. Furthermore, Torrecillas is
materially distinguishable by the amount of default arbitral discovery
available in that case. (Torrecillas, at p. 497 [requiring initial production of
relevant documents and allowing five depositions, 30 interrogatories, and
requests for documents used to support interrogatory responses].)

19
Accordingly, we agree with the trial court that the discovery limitations in
the subject arbitration agreement are substantively unconscionable.
2. Mutuality
We next review the arbitration agreement for “the paramount
consideration” of mutuality. (Abramson, supra, 115 Cal.App.4th at p. 657.)
Courts have found a lack of sufficient mutuality where the agreement
exempts from arbitration the types of claims an employer is likely to bring
against an employee. (Carlson v. Home Team Pest Defense, Inc. (2015) 239
Cal.App.4th 619, 634–635 [excluding employer’s “most likely claims” to
enforce anticompetitive covenants and confidentiality provisions while
employee “was required to relinquish her access to the courts for all of her
nonstatutory claims”]; Stirlen v. Supercuts (1997) 51 Cal.App.4th 1519, 1536–
1542 (Stirlen) [excluding claims pertaining to patent infringement and
improper use of confidential information and competition].)
We initially reject Davis’s broad contention that the entire arbitration
agreement lacks mutuality because of the repeated phrasing “I agree” and
the absence of a signature line for Red Bull. (Roman, supra, 172 Cal.App.4th
at p. 1466 [use of “I agree” language in arbitration clause that expressly
covers “all disputes” creates mutual agreement to arbitrate].) That the
agreement was drafted on Red Bull letterhead is an indication the company
intended to be bound by the agreement. (Serafin v. Balco Properties Ltd.,
LLC (2015) 235 Cal.App.4th 165, 176–177; Cruise v. Kroger Co. (2015) 233
Cal.App.4th 390, 398.) Furthermore, the agreement specifically discusses
what “Red Bull or I” must do in order to “initiate” arbitration. As a whole,
the agreement is thus reasonably construed as both parties consenting to
arbitration of any disputes either party brings involving or relating to Davis’s

20
employment, with the one notable exception discussed below. (Bigler v.
Harker School (2013) 213 Cal.App.4th 727, 737–738.)
The sole exception to arbitration under the agreement is for disputes
that involve “obligations under the Employee Confidentiality Agreement with
Red Bull.”8 Appellants contend this provision is mutual because Davis can
sue in court for any claims he has against Red Bull relating to inventions or
intellectual property belonging solely to him. We disagree, as such disputes
would not involve any “obligations” under the Employee Confidentiality
Agreement.9
The opening recitals of the Employee Confidentiality Agreement make
clear its provisions protect only “Confidential Information,” which is
specifically defined as the “proprietary and confidential information relating

8 We note here that under the arbitration agreement, Davis does not
waive the right to file claims or complaints with administrative agencies such
as the United States Equal Opportunity Commission. But in assessing
mutuality, the relevant concern is whether the agreement allows the stronger
party to file civil actions.
9 Appellants contend it is improper to consider the language of the
Employee Confidentiality Agreement in interpreting the scope of the
arbitration agreement. The law is otherwise. (See Shaw v. Regents of
University of California (1997) 58 Cal.App.4th 44, 54 [arbitration agreement
may expressly incorporate by reference another document]; Civ. Code, § 1642
[several contracts relating to same matters between same parties and made
as parts of substantially one transaction are to be taken together].)
Appellants’ reliance on Lara v. Onsite Health, Inc. (N.D. Cal. 2012) 896
F.Supp.2d 831 is unavailing because the arbitration agreement there did not
expressly incorporate by reference, let alone expressly exempt from
arbitration disputes relating to, the separate proprietary information
agreement. (Id. at p. 842.) So is their reliance on Bruni v. Didion (2008) 160
Cal.App.4th 1272 and Cotchett, Pitre & McCarthy v. Universal Paragon Corp.
(2010) 187 Cal.App.4th 1405. Those decisions simply stand for the general
proposition that if the court concludes the arbitration clause is not
unconscionable, it must compel arbitration and leave it to up to the arbitrator
to determine whether the contract as a whole is unconscionable.

21
to, owned by and regularly used by the Company, or its parent and other
affiliated companies, including but not limited to financial information,
proprietary information relating to formulas, developmental or experimental
work, trade secrets, techniques, know-how, discoveries, inventions,
marketing information including statistical analyses, pricing structures,
business strategies, plans for market expansion, information regarding
customers, supplies and distributors, address/contacts lists (collectively,
Confidential Information).” (Italics added.) The employee then agrees to
“maintain the confidentiality of all Confidential Information” as so defined.
There is no corresponding obligation of the company relating to any
proprietary information of the employee. The agreement’s section on
remedies states: “In the event of a breach or threatened breach of this
Agreement by the Employee, the Company shall be entitled to all remedies
available at law and equity, including injunctive relief and recovery from the
Employee.” (Emphasis added.) Elsewhere, the Employee Confidentiality
Agreement requires employees to assign to Red Bull any work product they
develop during their employment, but in delineating the scope of this
assignment, states “this Agreement shall not apply to any invention the
Employee develops entirely on his/her own time without the use of the
Company’s equipment, supplies, facilities or trade secrets” unless the
invention relates to the company’s business or to the employee’s work for the
company. (Emphasis added.)
In short, the Employee Confidentiality Agreement only obligates Red
Bull’s employees to protect the company’s confidential and proprietary
information, not vice versa. The confidentiality agreement expressly states it
“shall not apply”—and identifies no obligations on the company’s part—with
regard to any inventions or information belonging solely to its employees.

22
Accordingly, the exemption from arbitration for disputes involving
“obligations under the Employee Confidentiality Agreement” lacks mutuality
in two ways. First, any theoretical claim that Davis may have against Red
Bull for wrongfully using his inventions or intellectual property is not a
dispute involving the breach of any “obligations” under the confidentiality
agreement and would therefore fall within the scope of the parties’
arbitration agreement. Second, and in a broader sense, the arbitration
agreement effectively exempts from arbitration the types of claims Red Bull
is most likely to bring against an employee such as Davis. (Carlson v. Home
Team Pest Defense, Inc., supra, 239 Cal.App.4th at pp. 634–635; Stirlen,
supra, 51 Cal.App.4th at pp. 1536–1542.)
Substantive unconscionability “turns not only on a ‘one-sided’ result,
but also on an absence of ‘justification’ for it.” (Stirlen, supra, 51 Cal.App.4th
at p. 1532.) As our Supreme Court has recognized, 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.” (Baltazar, supra, 62 Cal.4th at p. 1250.) Red
Bull, however, makes no attempt to justify the differential treatment created
by the carve-out provision for disputes arising out of the Employee
Confidential Agreement. Indeed, the record includes a revised Red Bull
arbitration agreement that, while not applicable here, no longer contains an
exemption for such disputes.10
To recap, we are presented here with only a minimal showing of
procedural unconscionability based on adhesion. Accordingly, a “high” degree
of substantive unconscionability is required to find the agreement

10 Appellants do not dispute Davis’s attestation that he was never
presented with and did not sign this revised agreement.

23
unenforceable (Peng, supra, 219 Cal.App.4th at p. 1470), and we conclude
that threshold is met. Due to the carve-out provision for the Employee
Confidentiality Agreement, the “paramount” concern of mutuality
(Abramson, supra, 115 Cal.App.4th at p. 650) is lacking, and Red Bull, as the
party with superior bargaining strength, fails to articulate any legitimate
business reason for the exemption. When considered in combination with the
discovery limitations discussed in part B.1., ante, the carve-out provision
allows Red Bull to litigate the types of claims it would most likely bring
against employees in civil court with the full panoply of discovery at its
disposal, while employees like Davis have no choice but to arbitrate even the
most factually complex statutory claims subject to a discovery process that is
far more restrictive and does not impact Red Bull in the same way for
company-initiated claims. On this record, we conclude Davis has a made a
sufficiently strong combined showing of procedural and substantive
unconscionability to render the arbitration agreement unenforceable.
C. Severance
The decision to sever rests in the trial court’s discretion and is reviewed
for abuse of discretion. (Armendariz, supra, 24 Cal.4th at pp. 121–125;
Lhotka, supra, 181 Cal.App.4th at p. 821.)
In Armendariz, the Supreme Court held that Civil Code section 1670.5,
subdivision (a), authorizes a court to refuse enforcement of a contract that is
“permeated” by unconscionability. (Armendariz, supra, 24 Cal.4th at
pp. 121–122.) In declining to enforce the subject arbitration agreement due
to its “unlawful damages provision and an unconscionably unilateral
arbitration clause,” Armendariz observed that these “multiple defects
indicate a systematic effort to impose arbitration on an employee not simply

24
as an alternative to litigation, but as an inferior forum that works to the
employer’s advantage.” (Id. at p. 124.)
As explained in parts B.1. and B.2., ante, the arbitration agreement
here suffers from multiple defects that work to Red Bull’s distinct advantage,
namely, a restrictive arbitral discovery process that appears inadequate to
protect vindication of Davis’s statutory rights, plus an unjustified, non-
mutual provision that exempts Red Bull’s most likely claims against
employees from arbitration and allows it to pursue such claims in court with
full discovery, trial, and appeal rights. Because these unconscionable
provisions together indicate Red Bull’s self-interested effort to impose an
inferior forum on its employees, the trial court was within its discretion to
conclude the agreement was permeated by unconscionability and should not
be enforced.
Because the trial court did not explicitly address severance in its final
orders, Red Bull contends that the court completely failed to exercise its
discretion with regard to severance, and that this by itself requires reversal.
This contention is belied by the record. There is nothing in the record
indicating the trial court disregarded the parties’ briefing of the severance
issue, and the court’s awareness of its discretion is demonstrated by its initial
ruling tentatively ordering severance, which the court evidently abandoned
when finalizing its orders denying appellants’ motions to compel. 11

11 Having concluded that the arbitration agreement is unconscionable and
unenforceable in its entirety, we need not address whether the individual
defendants have standing to enforce it. We therefore deny Red Bull’s request
for judicial notice of a new complaint filed by Davis against Red Bull during
the pendency of this appeal, as its relevance pertains solely to this moot
issue.

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 DISPOSITION
The orders denying the motions to compel are affirmed. Davis is
entitled to his costs on appeal.

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 FUJISAKI, J.

We concur.

SIGGINS, P.J.

JACKSON, J.

(A156234)

27
Superior Court of Alameda County

Robert D. McGuiness, Judge.

Mitchell Silberberg & Knupp, Adam Levin, Stephen A. Rossi, and Elana
Moses; for Defendants and Appellants.

Peretz & Associates, Yosef Peretz, and Ruth L. Israely for Plaintiff and
Respondent.

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