Jackson v. Tesla, Inc.

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ROY JACKSON, Case No. 24-cv-06110-WHO Plaintiff, 8 ORDER GRANTING MOTION TO 9 v. COMPEL AND STAY 10 TESLA, INC., et al., Re: Dkt. Nos. 9 and 10 Defendants. 11 12 Defendant Tesla, Inc. moves to compel the claims asserted by plaintiff Roy Jackson – 13 based on disability discrimination and wage and hour violations – to arbitration and stay this case. 14 Dkt. No. 10. The motion to compel and stay is GRANTED. 15 Jackson does not dispute that when he accepted Tesla’s offer of employment, he signed 16 both an Offer Letter and separately an Arbitration Agreement. Declaration of Ben Flesch (Dkt. 17 No. 11), Ex. A (Dkt. No. 11-1 “Offer Letter”), Ex. B (“Arbitration Agreement.”). The Arbitration 18 Agreement covers all claims “related to” his employment with Tesla. But he opposes the motion 19 to compel and stay, arguing that the Arbitration Agreement is both procedurally and substantively 20 unconscionable. Dkt. No. 16. 21 Whether a contract is unconscionable is a question of law. Patterson v. ITT Consumer Fin. 22 Corp., 14 Cal. App. 4th 1659, 1663 (Cal. Ct. App. 1993). In California, unconscionability 23 includes an “absence of meaningful choice on the part of one of the parties together with contract 24 terms which are unreasonably favorable to the other party.” Lhotka v. Geographic Expeditions, 25 Inc., 181 Cal. App. 4th 816, 821 (Cal. Ct. App. 2010) (citation omitted). Accordingly, 26 unconscionability has both a “procedural” and a “substantive” element. Id. 27 Procedural unconscionability occurs where a contract or clause involves oppression, 1 issue is hidden within a wordy document. Id. “California law treats contracts of adhesion, or at 2 least terms over which a party of lesser bargaining power had no opportunity to negotiate, as 3 procedurally unconscionable to at least some degree.” Bridge Fund Capital Corp. v. Fastbucks 4 Franchise Corp., 622 F.3d 996, 1004 (9th Cir. 2010). Substantive unconscionability occurs where 5 the provision at issue “reallocates risks in an objectively unreasonable or unexpected manner.” 6 Lhotka, 181 Cal. App. 4th at 821 (citation omitted). “Substantive unconscionability focuses on the 7 one-sidedness or overly harsh effect of the contract term or clause.” Id. at 824–25 (citation 8 omitted). 9 Both procedural and substantive unconscionability must be found before a term will be 10 deemed unenforceable, but both need not be present to the same degree. Rather, “the more 11 substantively oppressive the contract term, the less evidence of procedural unconscionability is 12 required to come to the conclusion that the term is unenforceable, and vice versa.” Armendariz v. 13 Found. Health Psychcare Servs., Inc., 24 Cal. 4th 83, 114 (Cal. 2000). 14 Jackson first argues that the Arbitration Agreement is procedurally unconscionable because 15 it was an adhesion contract and he was given less than one day to review, sign, and return the 16 Offer Letter and related Arbitration Agreement or else the job offer would expire. See Offer 17 Letter. He points out that in addition to the 3 page Offer Letter and 3 page Arbitration Agreement, 18 he was also required to review and agree to an Employee Non-Disclosure and Inventions 19 Assignment Agreement (“NDIAA”) which added to his burden of reviewing and seeking attorney 20 assistance to review the offer package within 24 hours. Oppo. at 5-6. 21 That said, Jackson signed the agreements on the same day it was presented. He has not, in 22 support of his opposition, presented any evidence by declaration or otherwise that he wanted to but 23 was unable to consult with an attorney during the 24 hour period, or that he was otherwise rushed 24 into accepting the offer package without being able to understand and consider all relevant terms. 25 Absent such evidence, any procedural unconscionability connected to a job offer made with an 26 arbitration is merely the type of “inherent” pressure that arises with employment offers. Cisneros 27 Alvarez v. Altamed Health Servs. Corp., 60 Cal. App. 5th 572, 591 (2021), as modified (Mar. 4, 1 agreement,” “[t]he agreement is not long, prolix, or complex” and there was no evidence of a 2 language barrier or inability to or intent to consult with a lawyer, employee “has not shown any 3 oppression apart from that inherent in the adhesive nature of the agreement.”). It amounts, at 4 most, to a low level or procedural unconscionability that does not make the Arbitration Agreement 5 unenforceable. See Trend Homes, Inc. v. Superior Ct., 131 Cal. App. 4th 950, 960 (2005) 6 (assuming “an imbalance of bargaining power” a contract of adhesion has “only a low level of 7 procedural unconscionability” where elements of surprise or misrepresentation are not present) 8 disapproved of on other grounds by Tarrant Bell Prop., LLC v. Superior Ct., 51 Cal. 4th 538 9 (2011)). 10 Jackson asserts that the Arbitration Agreement is substantively unconscionable because the 11 applicable JAMS Employment Arbitration Rules and Procedures that govern the Arbitration 12 Agreement do not allow sufficient discovery. Id. at 7-8. However, the Arbitration Agreement 13 provides that the JAMS arbitrator “shall have the authority to compel adequate discovery for the 14 resolution of the dispute.” Arbitration Agreement. As the California Supreme Court has 15 explained, “[a]llowing the arbitrator to deviate from agreed-upon default discovery limits ensures 16 that neither party will be unfairly hampered in pursuing a statutory claim based on circumstances 17 that arise post-formation. We note that giving the arbitrator authority to expand discovery based 18 on Armendariz’s requirement is one way the adequacy concern can be addressed.” Ramirez v. 19 Charter Commc'ns, Inc., 16 Cal. 5th 478, 506 (2024). The JAMS rules appliable here provide the 20 arbitrator with authority to require adequate discovery to address the claims raised in the 21 arbitration. The Arbitration Agreement is not substantively unconscionable. See, e.g., Chee v. 22 Tesla Inc., No. 24-CV-00180-TSH, 2024 WL 1898434, at *5 (N.D. Cal. Apr. 30, 2024) (rejecting 23 identical substantive unconscionability argument). 24 Jackson has shown only low level procedural unconscionability and no substantive 25 unconscionability. The Arbitration Agreement is enforceable and the motion to compel is 26 GRANTED. 27 Jackson’s claims in this action are STAYED. 1 dismissal or disposition of this action against any party. If further proceedings become necessary 2 || in this court, any party may initiate them as if this Order had not been entered. 3 IT IS SO ORDERED. 4 Dated: December 19, 2024

6 ® illiam H. Orrick 7 United States District Judge 8 9 10 11 12

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