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OTO, L.L.C. v. Kho

Supreme Court of California

August 29, 2019, Opinion Filed



 [***719]   [**684]  CORRIGAN, J.—Here, we again consider the enforceability of an agreement requiring arbitration of wage disputes.  [*118] Sonic-Calabasas A, Inc. v.  [*118] Moreno (2011) 51 Cal.4th 659 [121 Cal. Rptr. 3d 58, 247 P.3d 130] (Sonic I) concluded that such arbitration agreements are categorically unconscionable because workers waive their statutory rights to a “Berman hearing” and related procedures designed to assist in the recovery of unpaid wages. (See Lab. Code, § 98 et seq.)1 Rather than invalidating the entire agreement, however, Sonic I held that while Berman protections could not be waived, any party [****2]  dissatisfied with the Berman hearing's result could move the dispute to arbitration. (Sonic I, at pp. 669, 675.) The United States Supreme Court vacated that judgment and remanded for consideration in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333 [179 L. Ed. 2d 742, 131 S. Ct. 1740] (Concepcion). Thereafter, we determined Sonic I's categorical rule of unconscionability was preempted by the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.). (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1146 [163 Cal. Rptr. 3d 269, 311 P.3d 184] (Sonic II).) We held instead that an arbitration agreement is not categorically unconscionable solely because it entails a waiver of the Berman procedure. An agreement to arbitrate wage disputes can be enforceable so long as it provides an accessible and affordable [**685]  process for resolving those disputes. (Id. at p. 1146.)

We originally granted review in this case to decide whether an arbitral scheme resembling civil litigation can constitute a sufficiently accessible and affordable process. Because the facts here involve an unusually high degree of procedural unconscionability, however, a definitive resolution of that specific question is unnecessary. Even if a litigation-like arbitration procedure may be an acceptable substitute for the Berman process in other circumstances, an employee may not be coerced or misled into accepting this trade. Considering the oppressive circumstances [****3]  present here, we conclude the agreement was unconscionable, rendering it unenforceable.

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8 Cal. 5th 111 *; 447 P.3d 680 **; 251 Cal. Rptr. 3d 714 ***; 2019 Cal. LEXIS 6241 ****; 170 Lab. Cas. (CCH) P61,989; 2019 WL 4065524

OTO, L.L.C., Plaintiff and Appellant, v. KEN KHO, Defendant and Respondent; JULIE A. SU, as Labor Commissioner, etc., Intervener and Appellant.

Subsequent History: Reported at Oto, L.L.C. v. Kho; Su, 2019 Cal. LEXIS 6608 (Cal., Aug. 29, 2019)

US Supreme Court certiorari denied by Oto v. Kho, 2020 U.S. LEXIS 3049 (U.S., June 8, 2020)

Prior History:  [****1] Superior Court of Alameda County, No. RG15781961, Evelio M. Grillo, Judge. First Appellate District, Division One, No. A147564.

OTO, L.L.C. v. Kho, 14 Cal. App. 5th 691, 222 Cal. Rptr. 3d 506, 2017 Cal. App. LEXIS 723 (Aug. 21, 2017)


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Business & Corporate Compliance, Alternative Dispute Resolution, Arbitration, Arbitrability, Federal Arbitration Act, Arbitration Agreements, Contracts Law, Defenses, Unconscionability, Unconscionability, Pretrial Matters, Judicial Review, Civil Procedure, Appeals, Standards of Review, De Novo Review, Validity of ADR Methods, Adhesion Contracts, Labor & Employment Law, Conditions & Terms, Arbitration Provisions, Enforcement, Wage & Hour Laws, Administrative Proceedings, Enforcement Provisions, Administrative Law, Judicial Review, Remedies, Mandamus, Writs, Common Law Writs, Justiciability, Exhaustion of Remedies, Administrative Remedies