Chee v. Tesla Inc.

• Court: District Court, N.D. California
• Decided: April 30, 2024
• Docket: 3:24-cv-00180
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 JEREMIAH CHEE, Case No. 24-cv-00180-TSH

8 Plaintiff, ORDER RE: MOTION TO COMPEL 9 v. ARBITRATION

10 TESLA INC., Re: Dkt. No. 14 11 Defendant.

12 13 I. INTRODUCTION 14 Pending before the Court is Tesla Inc.’s Motion to Compel Arbitration and Stay 15 Proceedings. ECF No. 14. Plaintiff Jeremiah Chee filed an Opposition (ECF No. 20) and 16 Defendant filed a Reply (ECF No. 23). The Court finds this matter suitable for disposition 17 without oral argument and VACATES the May 2, 2024 hearing. See Civ. L.R. 7-1(b). Having 18 considered the parties’ positions, relevant legal authority, and the record in this case, the Court 19 GRANTS Tesla’s motion for the following reasons.1 20 II. BACKGROUND 21 On December 7, 2023, Plaintiff Jeremiah Chee initiated this lawsuit in San Francisco 22 Superior Court against Defendant Tesla, Inc. d/b/a Tesla Motors, Inc. (“Tesla”), and Does 1-50, 23 alleging causes of action for (1) discrimination in violation of the Fair Employment and Housing 24 Act (“FEHA”), (2) retaliation in violation of the FEHA, (3) failure to take steps to prevent 25 discrimination and harassment, (4) failure to provide reasonable accommodation, (5) failure to 26 participate in the interactive process, (6) retaliation for exercising rights under the California 27 1 Family Rights Act, (7) retaliation in violation of California Labor Code section 230(a), (8) 2 wrongful termination, and (9) unfair and unlawful business practices; and seeking declaratory and 3 injunctive relief. See Complaint, ECF No. 1-1 at 1. On January 10, 2024, Defendant removed this 4 action to federal court based on diversity. Notice of Removal, ECF No. 1. 5 On February 22, 2024, Tesla filed the instant Motion to Compel Arbitration. ECF No. 14. 6 On March 7, 2024, Plaintiff filed an opposition to Defendant’s motion. ECF No. 20 (“Opp’n”). 7 On March 14, 2024, Defendant filed a reply. ECF No. 23 (“Reply”). 8 Defendant has proffered a copy of an offer of employment from Tesla to Plaintiff (“Offer 9 Letter”) dated July 8, 2021, which it says Plaintiff electronically signed on July 9, 2021. Decl. of 10 Ben Flesch, ECF No. 16 (“Flesch Decl.”) ¶ 10; Offer Letter, ECF No. 16-1 at 2–5. The four-page 11 Offer Letter includes an arbitration provision on the second page, which states:

12 [T]o ensure the rapid and economical resolution of disputes that may arise in connection with your employment with Tesla, you and Tesla 13 agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to your employment, or the 14 termination of your employment, will be resolved, to the fullest extent permitted by law by binding arbitration and private arbitration in your 15 city and state of employment conducted by the Judicial Arbitration and Mediation Services/Endispute, Inc. (“JAMS”), or its successors, 16 under the then current rules of JAMS for employment disputes…. 17 Offer Letter at 2. The last page of the Offer Letter includes an e-signature by Jeremiah Chee, 18 dated July 9, 2021. Id. at 5. 19 Plaintiff does not dispute that he signed the offer letter, nor does he contest that the offer 20 letter contained an arbitration provision and that his claims are encompassed within the scope of 21 the arbitration agreement. Instead, Plaintiff argues that the agreement is procedurally and 22 substantively unconscionable and, therefore, unenforceable. Opp’n at 5-6, 11–20. 23 III. LEGAL STANDARD 24 Under the Federal Arbitration Act (“FAA”), courts are required to enforce contractual 25 arbitration agreements except “upon such grounds as exist at law or in equity for the revocation of 26 any contract.” 9 U.S.C. § 2. The FAA “reflect[s] both a liberal federal policy favoring arbitration, 27 and the fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v. 1 role is to decide: “(1) whether there is an agreement to arbitrate between the parties; and (2) 2 whether the agreement covers the dispute.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 3 2015). “If the response is affirmative on both counts, then the [FAA] requires the court to enforce 4 the arbitration agreement in accordance with its terms.” Chiron Corp. v. Ortho Diagnostic Sys., 5 Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). “[A]ny doubts concerning the scope of arbitrable issues 6 should be resolved in favor of arbitration.” Id. at 1131 (citation omitted). 7 In deciding a motion to compel arbitration, courts must “treat the facts as they would when 8 ruling on a motion for summary judgment, construing all facts and reasonable inferences that can 9 be drawn from those facts in a light most favorable to the non-moving party.” Shepardson v. 10 Adecco USA, Inc., No. 15-cv-05102-EMC, 2016 WL 1322994 at *2 (N.D. Cal. Apr. 5, 2016) 11 (citing Chavez v. Bank of Am., No. 10-cv-653-JCS, 2011 WL 4712204, at *3 (N.D. Cal. Oct. 7, 12 2011)). To determine whether a state “common law rule makes an agreement to arbitrate 13 unenforceable, [the Court] must consider both the federal law of arbitration and the state rule at 14 issue.” Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1022 (9th Cir. 2016).2 15 IV. DISCUSSION 16 Defendant argues that the arbitration agreement is valid, is procedurally and substantively 17 fair, and encompasses Plaintiff’s claims, and should therefore be enforced. See Brief in support of 18 Motion to Compel Arbitration, ECF No. 15 at 1. Plaintiff argues that the agreement is 19 procedurally and substantively unconscionable and, therefore, unenforceable. Opp’n at 5. 20 1. Unconscionability 21 Under California law, a contract is unenforceable if it is both procedurally and 22 substantively unconscionable. Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal. 4th 23 2 Tesla seeks judicial notice of twenty-eight orders from various courts granting or affirming 24 decisions to grant motions to compel arbitration filed by Tesla or its affiliated entities. ECF No. 25 18. The Court takes notice of Exhibits A through BB as they are court records. See, e.g., Hunt v. Check Recovery Sys. Inc., 478 F. Supp. 2d 1157, 1160-61 (N.D. Cal. 2007) (“Judicial notice may 26 be taken of ‘adjudicative facts’ such as court records, pleadings.”); Horton v. JPMorgan Chase Bank, N.A., No. 15-CV-05322-WHO, 2016 WL 1139004, at *1 n.1 (N.D. Cal. Mar. 23, 2016) 27 (same). Plaintiff likewise seeks judicial notice of five court orders denying or affirming the denial 1 83, 114 (2000). “Unconscionability refers to ‘an absence of meaningful choice on the part of one 2 of the parties together with contract terms which are unreasonably favorable to the other party.’” 3 Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003) (quoting A&M Produce Co. 4 v. FMC Corp., 135 Cal. App. 3d 473, 486 (1982)). “Procedural unconscionability focuses on the 5 elements of oppression and surprise. Oppression arises from an inequality of bargaining power 6 which results in no real negotiation and an absence of meaningful choice. Surprise involves the 7 extent to which the terms of the bargain are hidden in a prolix printed form drafted by a party in a 8 superior bargaining position.” Serafin v. Balco Properties Ltd., LLC, 235 Cal. App. 4th 165, 177 9 (2015). “Substantive unconscionability focuses on the actual terms of the agreement and evaluates 10 whether they create ‘overly harsh’ or ‘one-sided’ results.’” Id. (quoting Roman v. Superior Court 11 172 Cal. App. 4th 1462, 1469 (2009)). 12 Procedural and substantive unconscionability “need not be present in the same degree.” 13 Lim v. TForce Logistics, LLC, 8 F.4th 992, 1000 (9th Cir. 2021) (quoting Poublon v. C.H. 14 Robinson Co., 846 F.3d 1251, 1260 (9th Cir. 2017)). Instead, courts employ a sliding scale in 15 which “the more substantively oppressive the contract term, the less evidence of procedural 16 unconscionability is required to come to the conclusion that the term is unenforceable, and vice 17 versa.” Id. The party seeking to establish an unconscionability defense must do so by a 18 preponderance of the evidence. Peng v. First Republic Bank, 219 Cal. App. 4th 1462, 1468 19 (2013); Serafin, 235 Cal. App. 4th at 172–73. 20 2. Procedural Unconscionability 21 “Procedural unconscionability concerns the manner in which the contract was negotiated 22 and the respective circumstances of the parties at that time, focusing on the level of oppression and 23 surprise involved in the agreement.” Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 922 (9th 24 Cir. 2013) (citing Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 783 (9th Cir. 2002); 25 A&M Produce, 135 Cal. App. 3d at 486). Plaintiff argues that the arbitration provision is 26 procedurally unconscionable because (1) it is adhesive, (2) it does not have an opt-out provision, 27 and (3) Tesla failed to provide the applicable arbitration rules. Opp’n at 11–14. Defendant argues 1 of surprise or oppression. Reply at 2–4. 2 a. Some Procedural Unconscionability Exists Because the Arbitration Agreement is a Contract of Adhesion 3 As to Plaintiff’s first two arguments, the Court agrees the arbitration agreement has some 4 degree of procedural unconscionability because it was part of a contract of adhesion, presented by 5 Tesla to Plaintiff on a take-it-or-leave-it basis with no opt-out provision. ECF No. 20-1 (“Chee 6 Decl.”) ¶ 3; Flesch Decl. ¶ 9. See, e.g., Baxter v. Genworth N. Am. Corp., 16 Cal. App. 5th 713, 7 723 (2017). 8 “Procedural unconscionability exists when the stronger party drafts the contract and 9 presents it to the weaker party on a take-it-or-leave-it basis.” Serafin, 235 Cal. App. 4th at 179. 10 Here, in order to begin his employment with Tesla, Plaintiff was required to sign the Offer Letter, 11 which included the arbitration agreement. Chee Decl. ¶ 3; Reply at 3. The arbitration agreement 12 is indisputably a contract of adhesion, which was presented to Plaintiff on a “take-it-or-leave-it” 13 basis. However, while a contract of adhesion “can establish some degree of procedural 14 unconscionability, a contract of adhesion is not per se unconscionable” and unenforceable on that 15 basis. Lim, 8 F.4th at 1000 (internal quotations omitted). See also Sanchez v. Carmax Auto 16 Superstores California, LLC, 224 Cal. App. 4th 398, 402 (2014) (confirming trial court’s finding 17 “that the agreement is required does not make it unenforceable, absent other factors.”); Lagatree v. 18 Luce, Forward, Hamilton & Scripps, 74 Cal. App. 4th 1105, 1127 (1999) (“a compulsory 19 predispute arbitration agreement is not rendered unenforceable just because it is required as a 20 condition of employment or offered on a ‘take it or leave it’ basis.”). 21 The Court finds the formatting of the Offer Letter also supports Plaintiff’s contention that 22 the arbitration agreement offered some element of surprise, albeit a marginal one. Plaintiff 23 contends the arbitration provision was “buried” in the Offer Letter, as it was not separate from the 24 Offer Letter and not preceded by any heading specifying that it was an arbitration agreement. 25 Opp’n at 7. The arbitration provision appeared midway through the second page of Plaintiff’s 26 Offer Letter in the same small print as the rest of the letter, with no headings, boldface, italicized, 27 or otherwise emphasized text to alert Plaintiff to the presence of the agreement. Offer Letter at 1 2. However, to the extent the arbitration provision was buried, it was buried shallowly; the Offer 2 Letter Chee signed was just four pages long, and the arbitration provision’s sub-provisions and 3 references to “[a]rbitrable claims” continued onto the third page of the letter. Id. at 2–3. See Lane 4 v. Francis Cap. Mgmt. LLC, 224 Cal. App. 4th 676, 689–90 (2014) (holding arbitration agreement 5 was not procedurally unconscionable where it “[was] just two pages and contain[ed] no terms 6 ‘hidden’ in the form.”). 7 The Court is unpersuaded by Plaintiff’s argument that the length of time he had to consider 8 the Offer Letter adds to the arbitration agreement’s procedural unconscionability. See Opp’n at 9 12. Plaintiff received the Offer Letter on July 8, 2021, and was given until July 12, 2021, to 10 indicate his acceptance. Chee Decl. ¶ 3; Flesch Decl. ¶¶ 8, 10; Offer Letter at 4. Plaintiff signed 11 the Offer Letter on July 9, 2021, one day after receiving the letter. Offer Letter at 4; Flesch Decl. 12 ¶ 10. Plaintiff does not contend that he attempted to obtain advice or further information on the 13 terms of the arbitration provision from any person or attorney and was unable to do so within the 14 time period provided. 15 Finally, Plaintiff argues that Defendant’s failure to provide the JAMS rules with the 16 arbitration agreement supports a finding of procedural unconscionability. Opp’n at 13–14. 17 Failure to provide the applicable arbitration rules is a factor that can support a finding of 18 procedural unconscionability. See, e.g., Carmona v. Lincoln Millennium Car Wash, Inc., 226 Cal. 19 App. 4th 74, 84 (2014); Carbajal v. CWPSC, Inc., 245 Cal. App. 4th 227, 244–46 (2016). “This 20 failure contributes to oppression because the employee is forced to go to another source to find out 21 the full import of what he or she is about to sign—and must go to that effort prior to signing.” 22 Carmona, 226 Cal. App. 4th at 84 (emphasis in original) (internal quotations omitted). Here, the 23 arbitration agreement provides that all disputes relating to Plaintiff’s employment or termination 24 of employment would be resolved by arbitration conducted by JAMS “under the then current rules 25 of JAMS for employment disputes.” Offer Letter at 2. Tesla did not attach a copy of the JAMS 26 rules to Plaintiff’s Offer Letter, nor did the Offer Letter include a link to the applicable rules. See 27 Offer Letter. Plaintiff does not recall anyone from Tesla informing him of the arbitration 1 Plaintiff’s reliance on Carbajal in support of this argument is misplaced. In Carbajal, the 2 plaintiff was asked to sign the arbitration agreement during her employment interview with the 3 defendant employer, and the defendant had failed even to “identify[] which of [the arbitration 4 provider’s] nearly 100 different sets of active rules [would] apply.” Carbajal, 245 Cal. App. 4th 5 at 234, 244 & n.3. Unlike the plaintiff in Carbajal, Plaintiff had four days to sign the Offer Letter, 6 during which he could have looked up the JAMS arbitration rules. Plaintiff does not dispute that 7 the JAMS rules were available online, nor does he argue that it would have been unclear which 8 rules applied had he attempted to read them online. 9 Plaintiff further relies on Zullo v. Sup. Ct., 197 Cal. App. 4th 477, 485–86 (2011), and 10 Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237, 1246 (2016), to argue that Tesla’s failure to provide 11 the JAMS rules supports a finding of procedural unconscionability. The Court in Zullo found that 12 the absence of the applicable arbitration rules “add[ed] a bit to the procedural unconscionability,” 13 noting that it was “oppressive to require the party to make an independent inquiry to find the 14 applicable rules in order to fully understand what she was about to sign.” Zullo, 197 Cal. App. 4th 15 at 485-86. Meanwhile the California Supreme Court in Baltazar held that an employer’s failure to 16 attach the applicable arbitration rules to an arbitration agreement could increase the agreement’s 17 procedural unconscionability where the substantive unconscionability of the rules was at 18 issue. Baltazar, 62 Cal. 4th at 1246. Here, Plaintiff argues that Rule 26 of the JAMS arbitration 19 rules is substantively unconscionable. Opp’n at 18–19. Accordingly, although the Court finds 20 Plaintiff’s objection to JAMS Rule 26 is without merit, Tesla’s failure to attach the rules could 21 support a finding of procedural unconscionability if this rule were “artfully hidden” by virtue of 22 being incorporated by reference. See Baltazar, 62 Cal.4th at 1246. However, this does not appear 23 to be the case. Plaintiff had four days to pull up the applicable arbitration rules online if he so 24 chose, and he does not contend that he wouldn’t have signed the Offer Letter if he had read 25 them. Because the rules were easily accessible to Plaintiff, Defendant’s failure to include them 26 with the arbitration agreement adds little to procedural unconscionability. 27 Accordingly, the Court finds the adhesive nature of the arbitration agreement, formatting 1 fails to show additional factors of oppression or surprise that would render the arbitration 2 agreement highly procedurally unconscionable. Hence, Plaintiff must demonstrate a high degree 3 of substantive unconscionability to render the agreement unenforceable. 4 3. Substantive Unconscionability 5 “A contract is substantively unconscionable when it is unjustifiably one-sided to such an 6 extent that it shocks the conscience.” Chavarria, 733 F.3d at 923 (internal quotations 7 omitted). “Although California courts have characterized substantive unconscionability in various 8 ways, [they] all . . . point to the central idea that unconscionability doctrine is concerned not with a 9 simple old-fashioned bad bargain but with terms that are unreasonably favorable to the more 10 powerful party.” Tompkins, 840 F.3d at 1023 (citations and internal quotations omitted). 11 Plaintiff argues the arbitration provision is substantively unconscionable because (1) the 12 arbitration agreement lacks mutuality, (2) Tesla’s Employee Non-Disclosure and Inventions 13 Assignment Agreement (NDIAA) subjects Plaintiff to a heightened standard of proof and gives 14 Defendant a right to injunctive relief without satisfying the criteria to warrant an injunction, (3) the 15 NDIAA includes a non-solicitation provision, (4) the arbitration agreement does not provide 16 adequate discovery, (5) Tesla is a JAMS is a repeat player, and (6) JAMS rules impose an 17 unconscionable confidentiality requirement. Opp’n at 14–19. Defendant argues the arbitration 18 agreement is not substantively unconscionable because the NDIAA is not at issue in this case, the 19 arbitration agreement provides for adequate discovery, requiring the use of JAMS does not 20 invalidate the agreement, and the JAMS rules do not contain an unconscionable confidentiality 21 provision. Reply at 6–9. 22 a. The Arbitration Agreement Provides for Adequate Discovery 23 Plaintiff argues that the arbitration agreement is substantively unconscionable because it 24 provides for limited discovery. The arbitration agreement states that the arbitrator “shall have the 25 authority to compel adequate discovery for the resolution of the dispute” and that “[Plaintiff] and 26 Tesla shall be entitled to all rights and remedies that [Plaintiff] or Tesla would be entitled to 27 pursue in a court of law.” Offer Letter at 2 (subsections (c), (f)). 1 party witnesses or obtaining third-party documents because the arbitration agreement “does not 2 specifically grant the arbitrator the power to subpoena individuals,” and the FAA does not 3 authorize an arbitrator to issue discovery subpoenas to non-parties, such as former Tesla 4 employees. Opp’n at 17; see CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 708 (9th Cir. 5 2017) (“We hold that section 7 of the FAA does not grant arbitrators the power to order third 6 parties to produce documents prior to an arbitration hearing”); Aixtron, Inc. v. Veeco Instruments 7 Inc., 52 Cal. App. 5th 360, 404 (2020) (holding that neither the FAA nor JAMS rules granted 8 arbitrator authority to issue prehearing discovery subpoena for business records and computers). 9 Although Plaintiff raises genuine concerns that arbitration inherently imposes some limitations on 10 discovery, Plaintiff offers no support for his contention that limitations on an arbitrator’s power 11 under the FAA can render an agreement to arbitrate substantively unconscionable. Here, the 12 arbitration provision does not place any limitations on discovery but rather allows the arbitrator to 13 compel “adequate discovery.” Offer Letter at 2 (subsection (c)). Accordingly, the Court finds the 14 arbitration agreement does not provide for limited discovery and is not substantively 15 unconscionable on that basis. 16 b. Defendant Being a “Repeat Player” Does Not Support a Finding of Substantive Unconscionability 17 The Court is unpersuaded by Plaintiff’s argument that the arbitration agreement is 18 substantively unlawful because Tesla is a “repeat player” with JAMS, since the arbitration 19 agreement mandates JAMS be used for all disputes between Tesla and employees subject to the 20 agreement. Opp’n at 17–18. Plaintiff offers no case law to suggest that an arbitration agreement 21 is substantively unconscionable because an employer has previously used, or routinely uses, a 22 particular arbitration organization, and the Court has found none. See Mercuro v. Superior Court, 23 96 Cal. App. 4th 167, 179 (2002) (“We too are not prepared to say without more evidence the 24 ‘repeat player effect’ is enough to render an arbitration agreement unconscionable.”); compare 25 Sanchez v. Western Pizza Enterprises, Inc., 172 Cal. App. 4th 154, 177-78 (2009) (finding 26 substantive unconscionability based on the repeat player effect where “the effective designation of 27 a single arbitrator in what appears to be a standard arbitration agreement applicable to a large 1 number of corporate employees gives rise to a significant risk of financial interdependence 2 between Western Pizza and the arbitrator, and an opportunity for Western Pizza to gain an 3 advantage through its knowledge of and experience with the arbitrator”) (emphasis added), 4 abrogated on other grounds, see Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 366 5 (2014). 6 c. JAMS Rule 26 Does Not Impose an Unconscionable Confidentiality Requirement 7 Plaintiff’s argument that JAMS Rule 26 imposes an unconscionable barrier to Plaintiff’s 8 ability to solicit third-party witnesses for arbitration proceedings is similarly unavailing. See 9 Opp’n at 18–19. Plaintiff cites Davis v. O’Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007), for 10 the proposition that confidentiality provisions stifle discovery by “prevent[ing] employees from 11 contacting other employees to assist in litigating (or arbitrating) an employee’s case.” O’Melveny, 12 485 F.3d at 1078; Opp’n at 19. However, as Plaintiff notes, JAMS Rule 26 states only that 13 “JAMS and the Arbitrator shall maintain the confidential nature of the Arbitration proceeding.” 14 Opp’n at 18. Plaintiff offers no evidence to indicate that JAMS Rule 26 imposes a confidentiality 15 obligation on the parties, rather than on JAMS and the arbitrator alone. See Atencio v. TuneCore, 16 Inc., No. 16-cv-1925-DMG-MRW, 2016 WL 11518598, at *9 (C.D. Cal. Sept. 29, 2016) (plaintiff 17 “misconstrues JAMS Rule 26, which plainly states that ‘JAMS and the Arbitrator shall maintain 18 the confidential nature of the Arbitration proceeding,’ not that the parties to the arbitration must 19 maintain confidentiality.”) (emphasis in original), aff’d, 843 F. App’x 42 (9th Cir. 2021). 20 d. The NDIAA Renders the Arbitration Agreement Unfairly One-Sided 21 Plaintiff makes several arguments regarding substantive unconscionability concerning the 22 “Non-Disclosure and Inventions Assignment Agreement” that accompanied Plaintiff’s Offer 23 Letter, rather than the arbitration agreement itself. See Tesla, Inc. Employee Non-Disclosure and 24 Inventions Assignment Agreement, ECF No. 16-1, 7–10 (“NDIAA”). First, Plaintiff argues that 25 the arbitration agreement is substantively unconscionable because “it lacks mutuality.” Opp’n 2, 26 14. Specifically, Plaintiff contends the NDIAA creates a lack of mutuality by allowing Tesla to 27 obtain legal and equitable remedies in the event of intellectual property, confidentiality, or 1 competition violations by an employee, notwithstanding the arbitration agreement. Opp’n at 2 15. Plaintiff further argues that the NDIAA subjects Plaintiff to a heightened standard of proof by 3 requiring Plaintiff to show by clear and convincing evidence that any information disclosed was 4 part of the public domain in the event of any disputes relating to the NDIAA. Opp’n at 15; see 5 NDIAA ¶ 1. Finally, Plaintiff contends the NDIAA is substantively unconscionable because it 6 includes a non-solicitation provision. Opp’n at 16–17. The Court finds this argument has merit, 7 but that the NDIAA is severable from the arbitration agreement. 8 “Courts have found a lack of sufficient mutuality where the agreement exempts from 9 arbitration the types of claims an employer is likely to bring against an employee.” Davis v. 10 Kozak, 53 Cal. App. 5th 897, 914 (2020). See also Carlson v. Home Team Pest Defense, Inc., 239 11 Cal. App. 4th 619, 634–635 (2015) (finding substantively unconscionable a carve-out from 12 arbitration agreement entitling employer to seek judicial intervention to “prevent[] or stop[] any 13 unfair or unlawful competition or solicitation of its customers and employees, and/or 14 misappropriation of its trade secrets.”). Here, although the NDIAA is contained in a separate 15 document from the Offer Letter containing the arbitration agreement at issue, it nonetheless carves 16 out the types of claims Tesla is likely to bring against employees from its arbitration agreement. 17 In doing so, the NDIAA effectively allows Tesla access to the courts for the claims it is most 18 likely to bring, while employees are required to arbitrate all other employment disputes. 19 Accordingly, the Court finds the NDIAA is unfairly one-sided and substantively unconscionable. 20 e. The NDIAA Can Be Severed From the Arbitration Agreement 21 “A trial court has the discretion to refuse to enforce an agreement as a whole if it is 22 permeated by the unconscionability.” Carmona, 226 Cal. App. 4th at 90. Plaintiff argues the 23 unconscionable provisions cannot be severed from the arbitration agreement because it is 24 permeated with unconscionability. Opp’n at 19–20. Defendant argues that if the Court finds any 25 provision to be unconscionable, the Court should sever such provision and enforce the remainder 26 of the agreement. Reply at 9–10. 27 As discussed above, the Court finds the arbitration agreement raises only minimal concerns 1 those created by the NDIAA. Thus, the Court finds the NDIAA can be severed from the Offer 2 Letter without affecting the arbitration agreement. See Armendariz, 24 Cal. 4th at 124; see also 3 || Frank v. Tesla, Inc., 22-cv-1590-MEMF, 2022 WL 18284398, at *8-9 (C.D. Cal. June 27, 2022) 4 || (finding Tesla “Proprietary Information and Inventions Agreement” substantively unconscionable 5 and severing from arbitration agreement). Because the NDIAA can be severed, the Court finds it 6 || does not render the arbitration agreement unenforceable. Accordingly, Plaintiffs claims arising 7 out of his employment with Tesla shall be addressed in arbitration. 8 Vv. CONCLUSION 9 For the reasons stated above, the Court GRANTS Defendant’s motion to compel 10 || arbitration. The Court ORDERS that the Non-Disclosure and Inventions Assignment Agreement 11 be severed and the remainder of the arbitration agreement be enforced. This action is STAYED 12 || pending arbitration of all claims determined by an arbitrator to be subject to the parties’ arbitration 5 13 agreement. The parties are directed to provide the Court with joint status updates on the 14 arbitration proceedings every 90 days from the date of this order. 3 15 IT IS SO ORDERED. 16

= 17 Dated: April 30, 2024 18 AY \- | THOMAS S. HIXSON 19 United States Magistrate Judge 20 21 22 23 24 25 26 27 28