Little

Little v. Auto Stiegler, Inc.

Supreme Court of California

63 P.3d 979 (2003)

MORENO, J.

In this case, we consider four interlocking questions: (1) Is a provision in a mandatory employment arbitration agreement that permits either party to “appeal” an arbitration award of more than $50,000 to a second arbitrator, unconscionable; (2) if it is unconscionable, then should that unconscionable provision be severed from the rest of the arbitration agreement and the agreement enforced, or is the entire agreement invalid; (3) if the former, then in reviewing the rest of the arbitration agreement, do the minimum requirements for arbitration of unwaivable statutory claims that we set forth in Armendariz v. Foundation Health Psychcare Services, Inc. 6 P.3d 669 (Cal. 2000), apply also to claims that an employee was terminated in violation of public policy; (4) if yes, then must one of those requirements—that the employer imposing mandatory arbitration on the employee must pay all costs unique to arbitration—be reconsidered and revised in light of a post-Armendariz United States Supreme Court decision on arbitration cost sharing, Green Tree Financial Corp. v. Randolph 531 U.S. 79 (2000).
We conclude as follows: (1) the appellate arbitration provision for arbitration awards over $50,000 is unconscionable; (2) that provision should be severed and the rest of the arbitration agreement enforced; (3) a suit claiming wrongful termination in violation of public policy should be subject to the requirements set forth in Armendariz; and (4) Green Tree does not require that we modify Armendariz's cost requirements. We accordingly partly reverse the Court of Appeal's judgment.

I. Statement of Facts

Alexander M. Little worked for Auto Stiegler, Inc., an automobile dealership. Little eventually rose to become Auto Stiegler's service manager. He alleges that he was demoted, then terminated, for investigating and reporting warranty fraud. He filed an action against defendant for tortious demotion in violation of public policy; tortious termination in violation of public policy; breach of an implied contract of continued employment; and breach of the implied covenant of good faith and fair dealing. . .
Little signed three nearly identical arbitration agreements while employed by defendant in June 1995, October 1996, and January 1997. The most recent of the three stated as follows:

I agree that any claim, dispute, or controversy (including, but not limited to, any and all claims of discrimination and harassment) which would otherwise require or allow resort to any court or other governmental dispute resolution forum between myself and the Company. . . arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with, the Company, whether based on tort, contract, statutory, or equitable law, or otherwise, shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act, in conformity with the procedures of the California Arbitration Act. . . Awards exceeding $50,000.00 shall include the arbitrator's written reasoned opinion and, at either party's written request within 20 days after issuance of the award, shall be subject to reversal and remand, modification, or reduction following review of the record and arguments of the parties by a second arbitrator who shall, as far as practicable, proceed according to the law and procedures applicable to appellate review by the California Court of Appeal of a civil judgment following court trial. I understand by agreeing to this binding arbitration provision, both I and the Company give up our rights to trial by jury.

[T]he trial court . . .denied defendant's motion to compel arbitration. . . . The Court of Appeal reversed. . . . We granted review.

II. Discussion

A. Unconscionability of Appellate Arbitration Provision

. . . Little contends [the provision triggering an arbitration appeal following an award greater than $50,000] is unconscionable. We agree.
To briefly recapitulate the principles of unconscionability, the doctrine has “both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” Armendariz, supra, 6 P.3d at 690. The procedural element of an unconscionable contract generally takes the form of a contract of adhesion, “which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. In the case of preemployment arbitration contracts, the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for 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.” Id. It is clear in the present case that Auto Stiegler imposed on Little an adhesive arbitration agreement.
Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided. One such form, as in Armendariz, is the arbitration agreement's lack of a “modicum of bilaterality, ” wherein the employee's claims against the employer, but not the employer's claims against the employee, are subject to arbitration. Another kind of substantively unconscionable provision occurs when the party imposing arbitration mandates a post-arbitration proceeding, either judicial or arbitral, wholly or largely to its benefit at the expense of the party on which the arbitration is imposed. Two Court of Appeal cases have addressed this kind of unconscionability.
In Beynon v. Garden Grove Medical Group, 161 Cal. Rptr. 146 (Cal. Ct. App. 1980), the medical group imposed on its patients a mandatory arbitration agreement. Paragraph B of the agreement authorized the medical group, but not the patient, to reject the first arbitration award and submit the dispute to a second arbitration panel. The court held the provision unconscionable. . . .
Saika v. Gold, 56 Cal. Rptr. 2d 922 (Cal. Ct. App. 1996), also arose in the doctor/patient setting. The arbitration agreement in that case had a provision that permitted either party to reject an arbitration award of $25,000 or greater and request a trial de novo in superior court. The Court of Appeal refused to enforce the provision and instead directed the trial court to confirm the $325,000 award in the patient's favor. . . .
Auto Stiegler and its amici curiae make several arguments to distinguish this case from Beynon and Saika. First, they claim that the arbitration appeal provision applied evenhandedly to both parties and that, unlike the doctor/patient relationship in Saika, there is at least the possibility that an employer may be the plaintiff, for example in cases of misappropriation of trade secrets. But if that is the case, they fail to explain adequately the reasons for the $50,000 award threshold. From a plaintiff's perspective, the decision to resort to arbitral appeal would be made not according to the amount of the arbitration award but the potential value of the arbitration claim compared to the costs of the appeal. If the plaintiff and his or her attorney estimate that the potential value of the claim is substantial, and the arbitrator rules that the plaintiff takes nothing because of its erroneous understanding of a point of law, then it is rational for the plaintiff to appeal. Thus, the $50,000 threshold inordinately benefits defendants. Given the fact that Auto Stiegler was the party imposing the arbitration agreement and the $50,000 threshold, it is reasonable to conclude it imposed the threshold with the knowledge or belief that it would generally be the defendant.
Although parties may justify an asymmetrical arbitration agreement when there is a “legitimate commercial need,” that need must be “other than the employer's desire to maximize its advantage” in the arbitration process. Armendariz. There is no such justification for the $50,000 threshold. The explanation for the threshold offered by amicus curiae Maxie, Rheinheimer, Stephens & Vrevich—that an award in which there is less than that amount in controversy would not be worth going through the extra step of appellate arbitral review—makes sense only from a defendant's standpoint and cannot withstand scrutiny.
Auto Stiegler also argues that an arbitration appeal is less objectionable than a second arbitration, as in Beynon, or a trial de novo, as in Saika, because it is not permitting a wholly new proceeding, making the first arbitration illusory, but only permitting limited appellate review of the arbitral award. We fail to perceive a significant difference. Each of these provisions is geared toward giving the arbitral defendant a substantial opportunity to overturn a sizable arbitration award. . . .
We therefore conclude that the arbitral appeal provision in this particular agreement is unconscionably one-sided and may not be enforced. We next turn to the question whether this provision may be severed and the rest of the arbitration agreement enforced, or whether the entire agreement should be invalidated.

B. Is the Unconscionable Portion of the Agreement Severable?

In Armendariz, we reviewed the principles regarding the severance of illegal terms from an arbitration agreement. As we stated:

Two reasons for severing or restricting illegal terms rather than voiding the entire contract appear implicit in case law. The first is to prevent parties from gaining undeserved benefit or suffering undeserved detriment as a result of voiding the entire agreement—particularly when there has been full or partial performance of the contract. Second, more generally, the doctrine of severance attempts to conserve a contractual relationship if to do so would not be condoning an illegal scheme. The overarching inquiry is whether “the interests of justice . . . would be furthered” by severance. Moreover, courts must have the capacity to cure the unlawful contract through severance or restriction of the offending clause, which . . . is not invariably the case. (Armendariz, supra, P.3d at 696.)

Accordingly,

[c]ourts are to look to the various purposes of the contract. If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate. Id.

In Armendariz, we found two factors weighed against severance of the unlawful provisions.

First, the arbitration agreement contains more than one unlawful provision; it has both an unlawful damages provision and an unconscionably unilateral arbitration clause. Such multiple defects indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage. . . . Second, in the case of the agreement's lack of mutuality, . . . permeation [by an unlawful purpose] is indicated by the fact that there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement. Rather, the court would have to, in effect, reform the contract, not through severance or restriction, but by augmenting it with additional terms. Civil Code section 1670.5 does not authorize such reformation by augmentation, nor does the arbitration statute. Code of Civil Procedure section 1281.2 authorizes the court to refuse arbitration if grounds for revocation exist, not to reform the agreement to make it lawful. Nor do courts have any such power under their inherent limited authority to reform contracts. Armendariz, supra, 6 P.3d at 696-97.

Neither of these factors is operative in the present case. There is only a single provision that is unconscionable, the one-sided arbitration appeal. And no contract reformation is required—the offending provision can be severed and the rest of the arbitration agreement left intact. . . .
We therefore conclude that Auto Stiegler's arbitration agreement is valid and enforceable once the unconscionable appellate arbitration provision is deleted. Whether a court should refuse to enforce it on other grounds will be considered below.

C. Is Arbitration of a Tameny Claim Subject to the Minimal Procedural Requirements Set Forth in Armendariz?

In Tameny v. Atlantic Richfield Co. 610 P.2d 1330 (Cal. 1980), we recognized that although employers have the power to terminate employees at will, they may not terminate an employee for a reason that is contrary to public policy. Little claims that arbitration of Tameny claims are subject to the minimum requirements set forth in Armendariz, reviewed below. We agree.
In Armendariz, we held that arbitration of claims under the FEHA is subject to certain minimal requirements: (1) the arbitration agreement may not limit the damages normally available under the statute; (2) there must be discovery “sufficient to adequately arbitrate their statutory claim;” (3) there must be a written arbitration decision and judicial review “sufficient to ensure the arbitrators comply with the requirements of the statute;” and (4) the employer must “pay all types of costs that are unique to arbitration.”
These requirements were founded on the premise that certain statutory rights are unwaivable.

This unwaivability derives from two statutes that are themselves derived from public policy. First, Civil Code section 1668 states: “All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.” “Agreements whose object, directly or indirectly, is to exempt [their] parties from violation of the law are against public policy and may not be enforced.” Second, Civil Code section 3513 states, “Anyone may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.”

We concluded that the FEHA was enacted for public reasons and the rights it conferred on employees were unwaivable. We then concluded that the above requirements were necessary to enable an employee to vindicate these unwaivable rights in an arbitration forum.

A Tameny claim is almost by definition unwaivable. “[The] public policy exception to the at-will employment rule must be based on policies ‘carefully tethered to fundamental policies that are delineated in constitutional or statutory provisions….” Silo v. CHW Medical Foundation, 45 P.3d 1162 (Cal. 2002). Moreover, the public policy that is the basis for such a claim must be “’public’ in that it ‘affects society at large’ rather than the individual, must have been articulated at the time of discharge, and must be ‘fundamental’ and ‘substantial.’” Id. Thus, a legitimate Tameny claim is designed to protect a public interest and therefore “cannot be contravened by a private agreement.” Armendariz, supra, 6 P.3d at 680. In other words, an employment agreement that required employees to waive claims that they were terminated in violation of public policy would itself be contrary to public policy. Accordingly, because an employer cannot ask the employee to waive Tameny claims, it also cannot impose on the arbitration of these claims such burdens or procedural shortcomings as to preclude their vindication. Thus, the Armendariz requirements are as appropriate to the arbitration of Tameny claims as to unwaivable statutory claims.
Auto Stiegler cites Brown v. Wheat First Securities, Inc., 257 F.3d 821 (D.C.Cir.2001), which came to a contrary conclusion with respect to a claim for termination in violation of public policy under District of Columbia law. The court held that Cole v. Burns International Security Services 105 F.3d 1465 (D.C. Cir.1997), a case on which Armendariz relied, and which set forth requirements for arbitrating claims under title VII of the Civil Rights Act of 1964 similar to the Armendariz requirements, should be limited to federal statutory claims, not state tort claims derived from common law. . . .
The Brown court, in rejecting the extension of Cole to nonstatutory claims, pointed to language in Cole limiting its holding to such claims. The court further stated:

We also see no basis for extending Cole. As we have explained, our central rationale—respecting congressional intent—does not extend beyond the statutory context. Moreover, by enacting the Federal Arbitration Act, Congress manifested a liberal federal policy favoring arbitration agreements. The Act also pre-empted state restrictions on the enforcement of arbitration agreements. Gilmer, as we've seen, framed the question as whether dispute resolution under the FAA was consistent with the federal right-creating statute in question. For a common law claim under District of Columbia law, any such inconsistency would be resolved in favor of the only federal law involved, the FAA.

We disagree with the Brown court, at least insofar as its decision would be interpreted to preclude extension of the Armendariz requirements to Tameny claims. First, although Cole was a Title VII case properly focused on mandatory arbitration of federal statutory rights, its rationale extends beyond that context generally to unwaivable rights conferred for a public benefit. The statement in Gilmer that provides the point of departure in Cole “by agreeing to arbitrate a statutory claim, [an employee] does not forgo the substantive rights afforded by the statute; [he] only submits to their resolution in an arbitral, rather than a judicial, forum” would apply equally to nonstatutory public rights.
The Brown court's apparent position that only federal statutory rights may be subject to Cole's requirements, because any attempt to place conditions on arbitration based on state law would be preempted by the Federal Arbitration Act (FAA), is incorrect. The FAA provides that arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Thus, “[a] state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with [the text of §2 of the FAA].” Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 685 (1996). But under section 2 of the FAA, a state court may refuse to enforce an arbitration agreement based on “generally applicable contract defenses, such as fraud, duress, or unconscionability.” One such long-standing ground for refusing to enforce a contractual term is that it would force a party to forgo unwaivable public rights, as reviewed above.
Thus, while we recognize that a party compelled to arbitrate such rights does not waive them, but merely “submits to their resolution in an arbitral, rather than a judicial, forum,” Gilmer, arbitration cannot be misused to accomplish a de facto waiver of these rights. Accordingly, although the Armendariz requirements specifically concern arbitration agreements, they do not do so out of a generalized mistrust of arbitration per se, but from a recognition that some arbitration agreements and proceedings may harbor terms, conditions and practices that undermine the vindication of unwaivable rights. The Armendariz requirements are therefore applications of general state law contract principles regarding the unwaivability of public rights to the unique context of arbitration, and accordingly are not preempted by the FAA. . . .
[W]ith regard to arbitration costs at issue in this case and in Brown, the principle that arbitration costs may prevent arbitration claimants from effectively pursuing their public rights would apply with equal force to Tameny claims as to FEHA claims or to federal statutory claims. Nothing in the FAA prevents states from controlling arbitration costs imposed by adhesive contracts so that the remedy of prosecuting state statutory or common law public rights through arbitration is not rendered illusory. The Armendariz cost-shifting requirement is unique to arbitration only to the extent that arbitration, alone among contract provisions, may potentially require litigants to expend large sums to pay for the costs of the hearing that will decide his or her statutory other public rights. In other words, it is not the arbitration agreement itself but the imposition of arbitration forum costs that under certain circumstances violates state law.
Moreover, Armendariz's cost rule does not “require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.” Southland, 465 U.S. at 10. Rather, we simply required that employers pay arbitration forum costs under certain circumstances as a condition of arbitration. Nothing in the United States Supreme Court case law leads us to believe that a state requirement shifting arbitration costs in mandatory employment agreements to the employer pursuant to established state law contract doctrine violates the FAA.
Furthermore, Code of Civil Procedure section 1284.2, which provides that each party pay a pro rata share of arbitration costs unless the agreement provides otherwise, does not alter our conclusion. We held in Armendariz that this statute does not preclude the judicial imposition of proportionally greater costs on the employer in the case of FEHA claims. We reasoned that “the agreement to arbitrate a statutory claim is implicitly an agreement to abide by the substantive remedial provisions of the statute” and that the FEHA implicitly prohibited large arbitration costs that would stand as an obstacle to successfully pursuing rights conferred on the employee. We similarly conclude that an agreement to arbitrate a claim of wrongful termination contrary to public policy must be interpreted to implicitly include an agreement to proportion costs in a manner that is reasonable for the employee/claimant, in order to prevent the de facto waiver of unwaivable rights. . . .
Therefore, we conclude that a plaintiff/employee seeking to arbitrate a Tameny claim should have the benefit of the same minimal protections as for FEHA claims as a means of ensuring that they can effectively prosecute such a claim in the arbitral forum. These include the availability of damages remedies equal to those available in a Tameny suit brought in court, including punitive damages; discovery sufficient to adequately arbitrate Tameny claims; a written arbitration decision and judicial review sufficient to ensure that arbitrators have complied with the law respecting such claims; and allocation of arbitration costs so that they will not unduly burden the employee.
We have already rejected the contentions that the arbitration agreement in the present case limited Little's remedies or his ability to obtain adequate judicial review. Nor is it evident from the agreement that Little will be unable to obtain adequate discovery. Little argues, however, that there is a risk of burdensome costs being imposed on him, contrary to Armendariz. We consider this argument in the next part of our opinion.

D. Cost Sharing and Arbitration of Tameny Claims

Little argues that the arbitration agreement's silence on the issue of costs means that he would be statutorily compelled to share costs under Code of Civil Procedure section 1284.2, and that the imposition of such costs renders the arbitration agreement unenforceable. Armendariz did not conclude that an arbitration agreement silent on costs was unenforceable. On the contrary, we held we would infer from such silence an agreement that “the employer must bear the arbitration forum costs” and that “[t]he absence of specific provisions on arbitration costs would . . . not be grounds for denying the enforcement of an arbitration agreement.” Armendariz, supra, P.3d at 689.
The California Motorcar Dealers Association, amicus curiae on behalf of Auto Stiegler, argues that our holding on costs in Armendariz has been supplanted by the United States Supreme Court's holding in Green Tree. Because the allocation of arbitration costs will be at issue on remand, we address the relationship between Armendariz and Green Tree.
In Green Tree, the plaintiff, purchaser of a mobile home, sued her lender on various federal statutory grounds, including violation of the Truth in Lending Act for failing to disclose certain finance charges. The buyer's agreement with the lender contained a binding arbitration clause that included all statutory claims. The agreement was silent on the issue of who would pay the costs of arbitration. The district court granted the lender's motion to compel arbitration but the court of appeals reversed, holding that the agreement posed the risk that the plaintiff's “ability to vindicate her statutory rights would be undone by ‘steep’ arbitration costs, and therefore was unenforceable.”
The United States Supreme Court reversed. It first reaffirmed its longstanding position that statutory claims are arbitrable under the FAA absent the expression of congressional intent “to preclude a waiver of judicial remedies for the statutory rights at issue.” Finding no such expression in the TILA, the court proceeded to address the borrower's argument that silence on the matter of arbitration costs created an unacceptable risk that she might have to pay prohibitive costs and therefore not be able to vindicate her statutory rights through arbitration. The court stated: “The ‘risk’ that Randolph will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement.”
The court further explained:

To invalidate the agreement on that basis would undermine the “liberal federal policy favoring arbitration agreements.” It would also conflict with our prior holdings that the party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration. . . . Similarly, we believe that where, as here, a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs. Randolph did not meet that burden. How detailed the showing of prohibitive expense must be before the party seeking arbitration must come forward with contrary evidence is a matter we need not discuss; for in this case neither during discovery nor when the case was presented on the merits was there any timely showing at all on the point. The Court of Appeals therefore erred in deciding that the arbitration agreement's silence with respect to costs and fees rendered it unenforceable.

Although Green Tree was not an employment case, most courts interpreting it have done so in the employment context. . . .
Armendariz and Green Tree agree on two fundamental tenets. First, silence about costs in an arbitration agreement is not grounds for denying a motion to compel arbitration. Second, arbitration costs can present significant barriers to the vindication of statutory rights. Nonetheless, there may be a significant difference between the two cases. Although Green Tree did not elaborate on the kinds of cost-sharing arrangements that would be unenforceable, dicta in that case, and several federal cases cited above interpreting it, suggest that federal law requires only that employers not impose “prohibitively expensive” arbitration costs on the employee, and that determination of whether such costs have been imposed are to be made on a case-by-case basis. Armendariz, on the other hand, categorically imposes costs unique to arbitration on employers when unwaivable rights pursuant to a mandatory employment arbitration agreement are at stake. Assuming that Green Tree and Armendariz pose solutions to the problem of arbitration costs that are in some respects different, we do not agree with amicus curiae that the FAA requires states to comply with federal arbitration cost-sharing standards.
As reviewed in the previous part of this opinion, Armendariz's cost-shifting requirement is not preempted by the FAA. It is not a barrier to the enforcement of arbitration agreements, nor does it improperly disfavor arbitration in comparison to other contract clauses. Rather, it is derived from state contract law principles regarding the unwaivability of certain public rights in the context of a contract of adhesion. We do not discern from the United States Supreme Court's jurisprudence on FAA preemption a requirement that state law conform precisely with federal law as to the manner in which such public rights are protected. . . .
In short, for reasons stated above, we do not believe that the FAA requires state courts to adopt precisely the same means as federal courts to ensure that the vindication of public rights will not be stymied by burdensome arbitration costs. We continue to believe that Armendariz represents the soundest approach to the problem of arbitration costs in the context of mandatory employment arbitration. We therefore conclude that on remand the court compelling arbitration should require the employer to pay in this case “all types of costs that are unique to arbitration.”

III. Disposition

The judgment of the Court of Appeal is reversed insofar as it (1) permits enforcement of a clause allowing arbitral review only of awards greater than $50,000 and (2) requires arbitration of Little's Tameny claim, assuming he has adequately alleged such a claim, without requiring Auto Stiegler to pay arbitration forum costs as set forth in Armendariz. The cause is remanded to the Court of Appeal with instructions to direct the superior court to conduct further proceedings consistent with the views expressed in this opinion. In all other respects, the Court of Appeal's judgment is affirmed.

CONCURRING AND DISSENTING OPINION BY BAXTER, J.

Despite Green Tree, the instant majority retain Armendariz's “employer always pays” cost formula. The majority say Green Tree does not strictly require us to alter Armendariz's application of California contract law to the issue of arbitration costs. On that technical point, the majority may or may not be correct. . . . Green Tree holds in essence that even where the vindication of statutory rights is at stake, when courts interfere with an arbitration agreement by presuming undue cost to one party, they exhibit particular “hostility” and suspicion toward contractual arbitration, which the FAA was intended to prevent.
At direct odds with this principle is the current California requirement that the employer must always pay the employee's “forum costs” of arbitrating a statutory claim, regardless of actual need, and contrary to a California law that implies a cost-sharing term in every arbitration contract unless the parties expressly agree otherwise. I believe Green Tree warrants reconsideration of the Armendariz majority's views on cost allocation. . . .
Under the circumstances, I would overrule Armendariz's arbitrary cost allocation formula. In its place, I would adopt Green Tree's principle that if a party resists mandatory contractual arbitration of a statutory claim on grounds of undue cost, he must make a timely, particularized showing of the expected expense, and must also demonstrate that, in his particular case, this cost would make arbitration prohibitively expensive as compared to court litigation. Evidence on this issue could be presented to the court deciding a motion to compel arbitration. If the party opposing arbitration demonstrated prohibitive expense, the court could grant the motion to compel upon the condition that the proponent of arbitration accept, with the caveat discussed below, a more equitable allocation of costs. . . .

CONCURRING AND DISSENTING OPINION BY BROWN, J.

Like the majority, I find the appellate arbitration provision in the arbitration agreement unconscionable. I also agree that this “provision should be severed and the rest of the arbitration agreement enforced.” . . . Unlike the majority, [however,] I found Brown v. Wheat First Securities, Inc., 257 F.3d 821 (D.C. Cir. 2001), persuasive and would not apply Armendariz to Tameny claims. . . .
As explained above, we carefully limited the application of Armendariz to statutory rights. And our rationale for imposing the . . . Armendariz requirements on the arbitration of FEHA claims – respecting legislative intent – does not extend beyond the statutory context.
Indeed, we are precluded from doing so by both Congress and our own Legislature. Congress enacted the FAA “to assure those who desired arbitration and whose contracts related to interstate commerce that their expectations would not be undermined . . . by state courts. . . .” Southland Corp. v. Keating 465 U.S. 1, 13 (1984). Recognizing “the widespread unwillingness of state courts to enforce arbitration agreements”, Congress intended the FAA “to be a broad enactment appropriate in scope to meet the large problems Congress was addressing” – i.e., judicial hostility to arbitration – and “unencumbered by state-law constraints.” As such, the FAA preempts all state laws and rules disfavoring arbitration.
Of course, Congress is free to circumscribe the scope of its enactments. Consistent with this principle, the United States Supreme Court has recognized that the FAA does not govern if “Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991). Such an intention may, however, be discerned only from “the text [of a federal statute], its legislative history, or an ‘inherent conflict’ between arbitration and” that statute's underlying purposes. Thus, in the absence of a statute evidencing a clear congressional intent to restrict arbitration, the FAA controls and precludes courts from imposing their own arbitration-specific restrictions.
Similarly, California's arbitration scheme precludes California courts from restricting arbitrations in the absence of an express legislative intent to do so. . . . Absent certain statutorily enumerated grounds not relevant here, courts must enforce an arbitration agreement as written. While the Legislature may create exceptions to this strong statutory policy in favor of arbitration and selectively limit arbitrations, we may not.
Nonetheless, the majority does just that. A Tameny claim is a common law cause of action created by this court – and not by the Legislature. Thus, Tameny claims are a judicial – and not a legislative – construct, and the public policy underlying these claims “is inconsequential as a measure of [the Legislature's] interest in the stated policy.” Brown, 257 F.3d at 826. As a result, the majority's extension of Armendariz violates the FAA and our own statutory arbitration scheme. . . .
. . . The crucial question is whether there is any evidence of a congressional or legislative intent to place restrictions on the arbitration of Tameny claims. While the unwaivability of a statutory right established by the statute's text, history, or purpose may evidence such an intent, a judicial finding of unwaivability for public policy reasons cannot. Indeed, the public policy exception the majority adopts subjects most, if not all, tort claims to the . . . Armendariz requirements. “All claims not based on contract – including, for example, . . . defamation and tortious interference claims . . . – implement values that society has in one way or another thought deserving.” Brown, 257 F.3d at 826. Under this public policy rationale, “it is hard to see what falls outside it.” (Ibid.) . . .
Our extension of Armendariz to Tameny claims therefore usurps Congress's authority to establish “the supreme law of the land” and the Legislature's “responsibility to declare the public policy of the state.” Moreover, by imposing arbitration-specific restrictions that have no congressional or legislative basis, the majority not only undermines the “liberal federal policy favoring arbitration” but also contravenes California's “strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.”

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