Colombo v. BNC Mortgage

Filed 9/26/07 Colombo v. BNC Mortgage CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

----

Plaintiff Coleen Denise Colombo and five other female employees (collectively, plaintiffs) sued their employer, BNC Mortgage, Inc. (BNC), and three male employees of BNC for sexual harassment and retaliation. BNC petitioned to compel arbitration based on a signed arbitration agreement (Agreement) in which the participants agreed to submit any claim or controversy to arbitration. The trial court denied BNCs petition, finding the agreement lacked mutuality and constituted a contract of adhesion. BNC appeals, disputing both findings. We shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

As with any challenge to the validity of an arbitration agreement, we begin by reviewing the positions of the parties, the Agreement itself, and the circumstances surrounding its execution.

BNC, a mortgage lender, employed plaintiffs between 2003 and 2005. Plaintiffs signed the two-page Agreement entitled Mutual Agreement to Arbitrate.

The Agreement states, in part: [Plaintiffs and BNC] agree to settle by final and binding arbitration any claim or controversy arising out of or in any way relating to [plaintiffs] employment by [BNC], or ending of such employment (including, without limitation, any claims for wages or other compensation, and any claim of discrimination or harassment under local, state or federal statutory or common law, any claim for breach of any contract, express or implied, and any tort claim), that [BNC] may have against [plaintiffs] or that [plaintiffs] may have against [BNC] or any of its affiliates, or against any past or present director, officer, employee, consultant or agent of the company or any of its [sic] affiliates, in their capacity as such or otherwise.

The Agreement excludes relatively few claims from arbitration: claims by either party to compel arbitration, claims for workers compensation benefits, claims for unemployment compensation benefits, claims to enforce an arbitration award, and claims pursuant to a pension or benefit plan containing its own dispute resolution procedures. The Agreement also contains a severability clause stating: If this Arbitration Agreement is held to be void or unenforced [sic] with respect to a particular provision or to a particular claim or class of claims, that fact shall not affect the validity or enforceability of the Arbitration Agreement with respect to any other provision or any other claim or class of claims.

Plaintiffs presented evidence that BNC gave the Agreement to each new employee on the first day of work along with over 20 other new hire documents. BNC insisted plaintiffs complete the forms and agreements in the New Hire Orientation as soon as possible, giving them no opportunity to negotiate. Plaintiffs, in need of jobs and with no other employment alternatives, lacked the economic ability to negotiate. BNC contends this evidence was improperly submitted parol evidence.

The Agreement itself states that the signatory carefully read the Agreement; understood the Agreement; agreed to be bound by and comply with the Agreements terms; entered into the Agreement voluntarily; and understood that by signing the Agreement, both the signatory and BNC were giving up the right to a jury trial.

Plaintiffs also signed separate intellectual property agreements (IP Agreement), which confirmed BNCs rights to patents, trademarks, trade secrets, copyright, software, and other confidential information. The IP Agreement does not refer to the Agreement, nor does it mention arbitration. Instead, the IP Agreement contains language preserving BNCs rights in law and equity to seek remedies and damages for violation of the IP Agreement.

In November 2005 plaintiffs filed suit against BNC and its supervisors for sexual harassment and retaliation creating intolerable employment conditions that forced plaintiffs to resign. The complaint alleged harassment, discrimination, failure to prevent discrimination, retaliation, intentional infliction of emotional distress, defamation, wrongful termination in violation of public policy, breach of implied and/or express contract of continued employment, and breach of implied covenant of good faith and fair dealing.

BNC filed a petition to compel arbitration based on the Agreement. Plaintiffs opposed the motion, arguing the Agreement suffers from substantive unconscionability because it compels plaintiffs, but not BNC, to arbitrate claims. Plaintiffs also argued the Agreement is procedurally unconscionable as a contract of adhesion.

The trial court denied BNCs petition. The court cited plaintiffs claim that the Agreement lacked mutuality, since the IP Agreement had no arbitration provision while the Agreement does. Therefore, according to plaintiffs, the claims most likely to be brought by an employer allowed recourse to the courts, while those most likely to be brought by an employee do not. The court found the provisions requiring arbitration of employment disputes (brought by the employee) but not the IP disputes (brought by employer) were unfairly one-sided and not severable.

The court further found that the instruction to each plaintiff to hurry and sign all the forms, including the arbitration agreement, and the parties[] unequal bargaining power are sufficient to establish procedural unconscionability. In addition, the court determined: As a standardized contract drafted by the employer BNC with superior bargaining power, which plaintiffs were rushed to sign, with only the opportunity to accept or reject it, the contract is one of adhesion.

Following entry of judgment, BNC filed a timely notice of appeal.

DISCUSSION

I

The parties agree that we review de novo the trial courts denial of BNCs petition based on unconscionability. (Crippen v. Central Valley RV Outlet (2004) 124 Cal.App.4th 1159, 1164.)

Arbitration is favored as a voluntary means of resolving disputes, and this voluntariness has been its bedrock justification. Policies favoring the efficiency of private arbitration as a means of dispute resolution must sometimes yield to its fundamentally contractual nature, and to the requirement that the arbitration shall proceed as the parties themselves have agreed. Private arbitration may resolve disputes faster and more cheaply than judicial proceedings. However, private arbitration may also become an instrument of injustice imposed on a party on a take it or leave it basis. We must distinguish the former from the latter, to ensure that private arbitration agreements resolve disputes not only with speed and economy, but also with fairness. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 115 (Armendariz).)

An unconscionable contract may be unenforceable. If the court as a matter of law finds the contract or any contract clause is unconscionable, the court may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or limit the application of the unconscionable clause to avoid any unconscionable result. (Civ. Code, 1670.5, subd. (a).)

Unconscionability has both a substantive and a procedural element. The substantive element addresses the language of the agreement itself and focuses on whether the agreement contains overly harsh or one-sided results. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071 (Little).)

The procedural element focuses on the circumstances surrounding the execution of the agreement and considers whether there exists sufficient oppression or surprise to render the entire agreement unenforceable. (Armendariz, supra, 24 Cal.4th at p. 114.) Oppression refers to a lack of negotiation or meaningful choice about arbitration, forcing the party into a take it or leave it situation. (Fittante v. Palm Springs Motors, Inc. (2003) 105 Cal.App.4th 708, 723.) Surprise derives from the manner in which the arbitration obligations are presented to the employee and may involve the extent to which the terms are hidden in a form drafted by the employer. (Id. at pp. 722-723.)

An agreement to arbitrate is unenforceable only if it is both substantively and procedurally unconscionable. However, substantive and procedural unconscionability need not exist to the same degree. Instead, courts employ a sliding scale: [T]he 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. (Armendariz, supra, 24 Cal.4th at p. 114.)

II

BNC argues the trial court erred in finding the Agreement procedurally unconscionable. BNC contends that since plaintiffs signed the Agreement, which states they carefully read the document and knowingly and voluntarily consented to arbitration, they cannot establish procedural unconscionability. Further, since plaintiffs declarations contradict this express assertion, the court cannot consider them.

Procedural unconscionability exists where the employer presents a contract to the employee on a take it or leave it basis, denying the employee the chance to negotiate. The procedural element of an unconscionable contract generally takes the form of a contract of adhesion, imposed and drafted by the party of superior bargaining strength, which relegates to the signing party only the opportunity to adhere to the contract or reject it. (Little, supra, 29 Cal.4th at p. 1071.)

In the case of pre-employment arbitration contracts, the economic pressure exerted by employers on all but the most sought-after employees may be very strong because the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration requirement. (Little, supra, 29 Cal.3d at p. 1071.)

According to BNC, the plain language of the Agreement established beyond question the voluntary and consensual nature of the Agreement. Plaintiffs signed the Agreement in which they acknowledged they carefully read and understood the document, agreed to be bound by its terms, entered into the agreement voluntarily, and understood they and BNC were both giving up the right to try claims in court. The Agreements language, BNC contends, belies any contention that plaintiffs were forced to accept the Agreement on a take it or leave it basis.

BNC accuses plaintiffs of attempting to sidestep their arbitration responsibilities though self-serving declarations that flatly contradict the Agreements express representation that they signed the document voluntarily. Since plaintiffs declarations counter the express language of the Agreement, it is inadmissible parol evidence and cannot be considered.

Under BNCs reasoning, once an employee signs, at the employers behest, an arbitration agreement that states it was voluntarily entered into, the employee can never challenge the circumstances surrounding the execution of the agreement, since such evidence implicates the express terms of the agreement. If this position is correct, it is difficult to imagine how any employee could ever present evidence of procedural unconscionability. Once the agreement is signed, the employee loses any opportunity to challenge, or even explain, how the employees signature was obtained. Such a construct would indeed be a boon to employers, forestalling any procedural unconscionability argument so long as the agreement contains the magic words voluntarily entered into.

Such a result makes little sense. As plaintiffs point out, their declarations do not contradict the fact that they signed the Agreement voluntarily but instead state that they had no chance to negotiate the Agreements terms. They do not seek, through their declarations, to establish that their signatures were not voluntary, but that BNCs superior bargaining power prevented any negotiations over the terms of the Agreement.

We agree. The declarations do not challenge any express provision of the Agreement, but seek to show that the voluntary nature of their signatures is tainted by the take it or leave it nature of the bargaining power between the parties.

In addition, Civil Code section 1670.5 requires the court to resolve a claim of unconscionability by examining the circumstances surrounding the contract. When a party claims a contract was unconscionable at the time it was made, the parties may present evidence as to the contracts commercial setting to aid the court in making the determination. (Civ. Code,  1670.5, subds. (a) and (b).) Plaintiffs declarations present such evidence and are admissible.

BNC argues that even if admissible, plaintiffs declarations do not establish procedural unconscionability. BNC characterizes the declarations as simply stating plaintiffs may have felt hurried in their review of the Agreement and, at the time of signing, each needed the job. BNC minimizes and mischaracterizes the content of the declarations.

Plaintiff Cheryl McNeils declaration states that on her first day of work a BNC agent handed her a binder of new-hire paperwork and told her to just sign it. The agent told McNeil to return the documents ASAP so she could be put on payroll. According to McNeil: I had no opportunity to change any of the terms in the documents I signed. McNeil, a single mother, had gone into debt while underemployed and needed a full-time job with benefits. She had no other job offers.

Plaintiff Sylvia Vega-Sutfins declaration states that on the first day of work she was given a large binder of new-hire paperwork and was told to fill out and sign the documents immediately. The BNC agent waited for her to complete and sign the forms and then took them. The agent did not discuss any of the forms, and Vega-Sutfin had no opportunity to change any of the terms in the documents. Vega-Sutfin needed the job to allow her to live at home with her family and had no other offers.

Plaintiff Michelle Seymours declaration states that on her first day, she was given a large binder of new-hire paperwork and told to fill out the documents and sign them as soon as possible. She had no opportunity to change the terms of any document. Seymour, who had recently relocated, needed a job to make ends meet. She had no other offers of employment.

Colombos declaration states that when she began work, a BNC agent gave her a large binder of new-hire paperwork. She was told to fill out and sign the forms ASAP. According to Colombo, the hiring process was rushed and hectic. Colombo had no opportunity to read the documents carefully or to change any of the terms prior to signing. Colombo did not comment on the hiring procedure because she was in desperate need of a job. She had been on maternity leave and could no longer afford health insurance. The sole wage earner in her household, she had no other job prospects.

Plaintiff Isabel Guajardos declaration states that upon arrival at her new job, a BNC agent pointed to a binder of new-hire paperwork and told her to fill it out completely. She had no opportunity to make any changes. Since she desperately needed the job, Guajardo did not comment on the hiring process. Guajardo, the sole wage earner in her household, had no other job offers.

Finally, plaintiff Linda Howard-Jamess declaration states that when she arrived, a BNC agent gave her a binder of new-hire paperwork. She was directed to fill it out, sign, and return it to the corporate office overnight in the envelope provided. The supervisor told her to do it now. She had no opportunity to make any changes. Howard-James needed a full-time position with benefits and had no other job offers.

BNC argues these declarations do not show BNC instructed prospective employees to hurry and sign the documents. BNC claims the trial court erred in finding BNC instructed plaintiffs to hurry and sign all the forms including the arbitration agreements. The declarations do not support such a narrow reading.

Each declarant was presented with a large stack of forms and told to complete the forms immediately, now, ASAP, or as soon as possible. One declarant described the process as rushed and hectic. According to the declarations, BNC directed, or instructed, new hires to quickly, or hurriedly, complete and sign all the forms.

The declarations also belie BNCs claim that plaintiffs were provided with as much time as needed to review the Agreement prior to signing. BNC submitted no evidence to contradict or challenge plaintiffs description of the rushed atmosphere of the hiring process.

BNC also argues the declarations do not establish that plaintiffs were forced to accept the Agreement on a take it or leave it basis. According to BNC, plaintiffs failed to present any actual facts to support their assertions, since none of them attempted to change the Agreement. In support, BNC cites Trend Homes, Inc. v. Superior Court (2005) 131 Cal.App.4th 950 (Trend Homes).

However, Trend Homes involved a residential home purchase agreement, an agreement ordinarily more freely negotiable than an employment agreement. A home purchase agreement involves a buyer and seller of equal bargaining power in a situation where the buyer can simply walk away if the seller refuses to negotiate. Trend Homes noted the buyers failed to present evidence that they had no meaningful choice but to agree to the provision. (Trend Homes, supra, 131 Cal.App.4th at p. 958.) A home purchase agreement differs markedly from an employment contract, in which the employee enjoys less bargaining power and risks losing the job if he or she attempts to negotiate.

Nor do we find the other authority cited by BNC compels a plaintiff to show she attempted to negotiate in order to establish procedural unconscionability. In Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1534, the employer stated the arbitration provision was not negotiable. However, this statement did not establish procedural unconscionability. Instead, the court found the employee had no realistic ability to modify the terms of the employment contract based on the employees statements that the contract was presented to him on a take it or leave it basis. (Ibid.)

In Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, the employer stated the employee would not be able to work unless he signed the agreement. (Id. at p. 114.) However, the Martinezcourt found procedural unconscionability based on the evidence the employee had no opportunity to negotiate or to refuse to sign the arbitration agreement. (Ibid.) Similarly, in Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, it was not the employers threats to obtain the employees consent that tipped the balance, but the unequal bargaining power between employer and employee that established procedural unconscionability. (Id. at p. 175.)

We disagree with BNCs assertion that procedural unconscionability requires overt acts by the employer denying the employee the ability to negotiate, or stymied attempts by the employee to negotiate. Here, plaintiffs stated that in the hurried atmosphere of their first days on the job, they had no opportunity to make any changes to any of the documents. Nor does the Agreement state that the employee may make changes to its terms and conditions.

Finally, BNC challenges plaintiffs claim that they suffered from being in an inferior bargaining position. BNC argues plaintiffs merely declare, in conclusory fashion, that they had no other offers of employment. BNC faults plaintiffs for failing to present evidence as to how long they had been looking for work or the market for their specific jobs to show that finding alternative work might have been difficult. Since BNC cites no authority for imposing such a requirement, we decline to require such evidence to show procedural unconscionability.

Plaintiffs declarations establish the basis for the trial courts finding of procedural unconscionability. Plaintiffs were urged to hurriedly sign paperwork that included the Agreement. None of the plaintiffs had the opportunity to change any of the terms of the document. Each plaintiff needed her job, a job that required she sign the Agreement. Given the unequal bargaining power, the rushed atmosphere, and the lack of opportunity to question or change the arbitration obligation, we find the Agreement procedurally unconscionable.

III

BNC argues the trial court erred in finding the Agreement suffered from substantive unconscionability sufficient to render the entire Agreement invalid. BNC faults the courts finding that the Agreement was unfairly one-sided because it did not require the parties to arbitrate intellectual property disputes brought by BNC. BNC argues the Agreement equally compels both the employer and employee to arbitrate their claims, including claims based on the rights and obligations flowing from the separate IP Agreement.

To be valid, an arbitration agreement must not be unfairly one-sided; it must possess a modicum of bilaterality. (Armendariz, supra, 24 Cal.4th at p. 117.) An arbitration agreement lacks mutuality if it requires one contracting party, but not the other, to arbitrate all claims arising from the same transaction or occurrence or series of transactions or occurrences. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 657.)

An arbitration agreement need not mandate arbitration of all claims arising out of the employer-employee relationship. However, the doctrine of unconscionability limits the extent to which a stronger party may, through a contract of adhesion, impose the arbitration on the weaker party without accepting the forum for itself. (Armendariz, supra, 24 Cal.4th at pp. 118-120.)

The trial court found the BNC agreements required arbitration of employment disputes but not intellectual property disputes. BNC vehemently challenges the courts interpretation of the Agreement and the IP Agreement.

BNC argues the Agreement, by its express terms, binds both parties to arbitration. BNC is correct that the Agreement binds parties to arbitrate any claim or controversy arising out of or in any way relating to [plaintiffs] employment by [BNC], or ending of such employment . . . that [BNC] may have against [plaintiffs] or that [plaintiffs] may have against [BNC] . . . .

The Agreement also states: [Plaintiffs] and [BNC] acknowledge that this Arbitration constitutes the complete agreement of the parties on the subject matter contained herein, and supersedes any prior oral written [sic] agreement or understanding on the subject matter contained herein. However, intellectual property is mentioned nowhere in the Agreement.

Instead, BNC required each new hire to sign the IP Agreement, which covers intellectual property. The IP Agreement states: This agreement is the entire agreement and supersedes all previous and contemporaneous communications, representations, agreements or prior proposals regarding the subject matter hereof. . . . I understand and agree, however, that my obligations under this Agreement are in addition to any Firm policies that may exist from time to time regarding intellectual property.

In addition, the IP Agreement states that the rights set forth therein are not intended to be exclusive of any other rights at law or in equity. The IP Agreement signed by Guajardo, McNeil, and Vega provides: 1.8. Non-Exclusivity. Lehman Brothers Inc.s rights as set forth in this Agreement are not intended to be exclusive of any other rights of Lehman Brothers Inc. at law or in equity, and each and every right of Lehman Brothers Inc. hereunder shall be cumulative and shall be in addition to every other right hereunder and at law and in equity.^[1] The IP Agreement signed by Seymour includes a Remedies paragraph under which BNC expressly retains the rights, remedies or damages available . . . at law or in equity, including a preliminary and permanent injunction. The remedies paragraph contains no express reference to arbitration.

BNC contends the IP Agreement has no effect on, and is fully consistent with, [BNCs] arbitration obligations under the Agreement. According to BNC, although the IP Agreement preserves BNCs rights to take legal action to protect intellectual property, it is completely silent as to the forum for pursuing legal action. BNC denies any language in the IP Agreement allows it to pursue intellectual property claims in court. Therefore, under BNCs analysis, the IP Agreement is consistent with BNCs duty under the Agreement to arbitrate any intellectual property claims arising out of plaintiffs employment.

However, the trial court interpreted the Agreement and the IP Agreement completely differently. The court found the Agreement mandated that claims arising from employment be arbitrated. In contrast, the IP Agreement, which specifically pertains to intellectual property claims, did not mention arbitration, but instead allowed BNC to pursue such claims at law and equity. The court accepted plaintiffs argument and construed the language at law and equity to allow BNC to pursue intellectual property claims in court, not through arbitration.

The conflict between BNCs interpretation of the IP Agreement and the trial courts interpretation is not surprising, given the vague language of the IP Agreement regarding BNCs rights and remedies. While the Agreement mandates arbitration for all employment disputes, the IP Agreement is silent as to arbitration. Instead, the IP Agreement speaks cryptically of reserving BNCs rights at law and in equity without defining at law and in equity.

BNC is correct in noting that the IP Agreement does not explicitly state that BNC may pursue intellectual property disputes in court as opposed to arbitration. But if, as BNC posits, the Agreements arbitration clause covers intellectual property disputes, the rights at law and in equity language in the IP Agreement is superfluous. At best, the language is ambiguous. However, BNC is the source of the ambiguity, which permits it to choose a preferred construction based on the nature of the legal dispute. When confronted with a challenge to its arbitration agreement as unconscionable, as in the present case, it can argue that disputes under the IP Agreement involving its employees are subject to arbitration. However, had the present dispute involved a purported violation of the IP Agreement, BNC could just as plausibly claim that, as an aspect of its rights at law and in equity, it could seek judicial relief against an offending employee.

It is inherently unfair to give BNC such flexibility. Ordinarily, ambiguities in an arbitration agreement that is part of a contract of adhesion are strictly construed against the party with the stronger bargaining power. (Victoria v. Superior Court (1985) 40 Cal.3d 734, 742 (Victoria); Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 819, fn. 16; J.Alexander Securities, Inc. v. Mendez (1993) 17 Cal.App.4th 1083, 1094.) The term adhesion contract refers to standardized contract forms offered . . . on essentially a take it or leave it basis . . . . (Victoria, supra, 40 Cal.3d at p. 743.) Since we have found the Agreement to be procedurally unconscionable, presented to plaintiffs on a take it or leave it basis, we construe the ambiguity in the IP Agreement against BNC, the party with the stronger bargaining power. As applied to BNCs posture in the present litigation, we construe at law and in equity to mean in a court of law or equity. Thus construed, the IP Agreement permits BNC to pursue intellectual property claims in court while the Agreement limits employees to mandatory arbitration.

It is unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee. If such inequity exists, the employer must offer some reasonable justification for such one-sidedness based on business realities. (Armendariz, supra, 24 Cal.4th at p. 117.)

If the arbitration system established by the employer is indeed fair, then the employer as well as the employee should be willing to submit claims to arbitration. Without reasonable justification for this lack of mutuality, arbitration appears less as a forum for neutral dispute resolution and more as a means of maximizing employer advantage. Arbitration was not intended for this purpose. . . . [] [T]he doctrine of unconscionability limits the extent to which a stronger party may, through a contract of adhesion, impose the arbitration forum on the weaker party without accepting that forum for itself. (Armendariz, supra, 24 Cal.4th at p. 118.)

In Martinez, supra, 118 Cal.App.4th 107, the arbitration agreement applied to claims arising out of employment but excluded the employers intellectual property claims, which the employer could pursue in court. (Id. at pp. 111-112, fn. 1.) The court found an arbitration agreement substantively unconscionable if it requires an employee to arbitrate claims he or she is most likely to assert while simultaneously permitting the employer to litigate in court the claims it is most likely to assert against its employees. The Martinez court reasoned: Claims for unpaid wages, wrongful termination, employment discrimination and the like invariably are brought by employees, while claims involving trade secrets, misuse or disclosure of confidential information, and unfair competition typically are asserted only by employers. (Id. at p. 115.) Applying these principles, the court found the arbitration agreement unconscionable.

In a similar case, Mercuro, supra, 96 Cal.App.4th 167, an arbitration agreement covered claims brought by employees for a variety of tort and discrimination causes of action but specifically excluded claims for the employers intellectual property. (Id. at pp. 175-176.) The court found the arbitration agreement unconscionable, reasoning: An employee terminated for stealing trade secrets, for example, must arbitrate his wrongful termination claim under the agreement but [the employer] can avoid a corresponding obligation to arbitrate its trade secrets claim against the employee by the simple expedient of requesting injunctive or declaratory relief. (Id. at p. 176.)

In these cases, courts found arbitration agreements unconscionably one-sided if the agreement expressly or implicitly removes the claims most often asserted by the employer from arbitration. (Armendariz, supra, 24 Cal.4th at p. 120; Martinez, supra, 118 Cal.App.4th at p. 115; Mercuro, supra, 98 Cal.App.4th at pp. 175-177.) Here, while the Agreement requires the arbitration of employment-related claims, most frequently brought by employees, the IP Agreement allows intellectual property claims, most frequently brought by the employer, to be brought in court. This inequity renders the Agreement substantively unconscionable.

BNC disagrees with this conclusion, repeatedly referring to the IP Agreement as separate and irrelevant. However, BNC required prospective employees to sign both the Agreement and the IP Agreement. The IP Agreement was neither irrelevant nor separate in BNCs eyes.^[2]

We agree with the trial courts assessment that the Agreement subjects employment disputes to arbitration, but the IP Agreement allows for legal recourse in intellectual property disputes. As such, the Agreement lacks mutuality and is substantively unconscionable.

DISPOSITION

The judgment is affirmed. Plaintiffs shall recover costs on appeal.

RAYE , Acting P.J.

We concur:

HULL, J.

ROBIE , J.

Publication courtesy of San Diego free legal advice.

Analysis and review provided by Santee Property line Lawyers.

^[1] BNC is apparently an affiliate of Lehman Brothers Inc.

^[2] BNC argues the IP Agreement cannot be asserted by plaintiff Colombo because she, unlike the other plaintiffs, failed to produce evidence she signed the IP Agreement. However, as Colombo points out, although BNC failed to provide Colombo with her signed copy of the IP Agreement, BNC required all employees to sign the documents in the new-hire orientation. These documents included both the Agreement and the IP Agreement. Therefore, BNCs requirement provides circumstantial evidence that the new-hire paperwork BNC required Colombo to sign included the IP Agreement.