Saheli v. White Mem'l Med. Ctr.

Accountability Act (HIPAA) by physicians who were sending confidential protected health information by unsecured and unauthorized means. Over the next few

manner to the claims described in (i) through (iv) of this paragraph, whether based on a statu[t]e, public policy, or otherwise." However, per the Arbitration Agreement's "carve-out" provision, "[c]laims for unemployment compensation, claims under the National Labor Relations Act, claims under PAGA [Private Attorney General Act], claims for workers' compensation benefits, and any claim that is non-arbitrable under applicable state or federal law are not arbitrable under this [Arbitration Agreement]."

Saheli opposed Defendants' petition, arguing the Arbitration Agreement was unenforceable with respect to her Ralph Act and Bane Act claims because it failed to comply with certain requirements for arbitration agreements mandated by those acts. Defendants countered that such requirements are preempted by the FAA.

The trial court granted the petition in part and compelled Saheli to arbitrate all her claims except those under the Ralph Act and Bane Act. The court found that, per the terms of the Arbitration Agreement, the parties agreed not to arbitrate claims that are not arbitrable under California law. It further determined that, pursuant to sections 51.7 and 52.1, the waiver of any forum or procedure under the Ralph Act and Bane Act is unenforceable unless expressly not made as a condition of entering into a contract for services. Because Defendants failed to show the parties expressly agreed the Arbitration Agreement was not a condition of entering into a contract for services, the court concluded the agreement is unenforceable with respect to the Ralph Act and Bane Act claims. The trial court declined to consider whether these requirements are preempted by the FAA. Although not asserted as a defense by Saheli, the court proceeded to find the Arbitration Agreement is not unconscionable. It then compelled arbitration of Saheli's non-Ralph Act and - Bane Act claims.

Defendants appealed.

is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit. Just as they may limit by contract the issues which they will arbitrate, [citation], so too may they specify by contract the rules under which that arbitration will be conducted." ( Ibid . ) Under these principles, the parties "might choose to have portions of their contract governed by the law of Tibet, the law of pre-revolutionary Russia, or (as is relevant here) the law of California" irrespective of that law's preemption by the FAA. ( DIRECTV, Inc. v. Imburgia (2015) ---U.S. ----, 136 S.Ct. 463 , 468, 193 L.Ed.2d 365 ( Imburgia ); see Best Interiors, Inc. v. Millie & Severson, Inc. (2008) 161 Cal.App.4th 1320 , 1326, 75 Cal.Rptr.3d 1 ["even if the FAA applies ... the parties may agree that California law governs their agreement to arbitrate"].)

Here, the Arbitration Agreement provides that the parties agree not to arbitrate claims that are not arbitrable under "applicable state ... law." In

is to be inferred, if possible, solely from the written provisions of the contract. ( Id. , § 1639.) The "clear and explicit" meaning of these provisions, interpreted in their "ordinary and popular sense," unless "used by the parties in a technical sense or a special meaning is given to them by usage" ( id ., § 1644), controls judicial interpretation. ( Id. , § 1638.)' [Citations.] A [contract] provision will be considered ambiguous when it is capable of two or more

are we concerned with the parties' understanding of the state of California law when they entered into the Arbitration Agreement. (See Imburgia, supra , 136 S.Ct. at pp. 468-469 [disregarding fact that parties would have understood Discover Bank rule to be valid law when they entered into the arbitration agreement].) Instead, we are concerned only with the meaning of the phrase "applicable state ... law" as understood by the parties when they entered into the Arbitration Agreement. ( § 1636 [a "contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting"].) As we discussed, the ordinary meaning of the phrase does not encompass preempted state law. The supposed distinction between Imburgia and the present case does not warrant a contrary interpretation.

II. The Ralph Act and Bane Act are Preempted by the FAA to the Extent They Condition the Enforceability of Arbitration Agreements on Compliance with Special Requirements Not Applicable to Contracts Generally

Given our interpretation of the phrase "applicable state ... law," the Arbitration Agreement's failure to comply with state law that is preempted by federal law does not provide a basis for the trial court to deny Defendants' petition to compel arbitration. Here, the trial court denied in part Defendants' petition to compel arbitration after determining the Arbitration Agreement failed to comply with certain requirements found in the Ralph Act and Bane Act. Accordingly, to determine if the trial court erred, we must decide

to deter violence." ( Stamps v. Superior Court (2006) 136 Cal.App.4th 1441 , 1447, 39 Cal.Rptr.3d 706 .) Section 52.1, subdivision (a), "provides that if a person interferes, or attempts to interfere, by threats, intimidation, or coercion, with the exercise or enjoyment of the constitutional or statutory rights of 'any individual or individuals,' the Attorney General, or any district or city attorney, may bring a civil action for equitable or injunctive relief. Subdivision (b) allows '[a]ny individual' so interfered with to sue for damages [under section 52]." ( Venegas, supra , 32 Cal.4th at p. 841, 11 Cal.Rptr.3d 692 , 87 P.3d 1 .) In addition to damages, the individual may seek "injunctive relief, and other appropriate equitable relief to protect the peaceable exercise or enjoyment of the right or rights secured, including appropriate equitable and declaratory relief to eliminate a pattern or practice of conduct ...." ( § 52.1, subd. (b).) A violation of a temporary restraining order or temporary or permanent injunction issued under section 52.1"may be

(

burden to show his or her assent was involuntary. ( Evid. Code, § 500 ["a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the ... defense that he is asserting"]; Townsend v. Wingler (1952) 114 Cal.App.2d 64 , 68, 249 P.2d 613 [party seeking to invalidate contract has burden of showing fraud, undue influence, or coercion]; Fio Rito v. Fio Rito (1961) 194 Cal.App.2d 311 , 322, 14 Cal.Rptr. 845 [defendant had burden of proving affirmative defense of duress].) It is also well-established that there is no general prohibition on contract terms that are required as a condition of a contract or of providing or receiving goods or services. (See, e.g., Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807 , 819-820, 171 Cal.Rptr. 604 , 623 P.2d 165 , fns. omitted ["a contract of adhesion is fully enforceable according to its terms [citations] unless certain other factors are present which, under established legal rules-legislative or judicial-operate to render it otherwise"]; Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105 , 1127-1128, 88 Cal.Rptr.2d 664 ["under both federal and state law, an employee's rights to a jury trial and a judicial forum can be validly waived by agreement, even where the waiver is required as a condition of employment"]; Franco v. Arakelian Enterprises, Inc. (2015) 234 Cal.App.4th 947 , 956, 184 Cal.Rptr.3d 501 ["waivers that are obtained as a condition of employment and that limit employees' ability to vindicate statutory employee protections[ ]are not categorically invalid or unenforceable"].) Sections 51.7's and 52.1's special requirements for waivers of judicial forums and procedures in connection with Ralph Act and Bane Act claims-and consequently their limitations on the enforcement of arbitration agreements related to such claims-contravene these general rules of contracts. As such, the special requirements are preempted by the FAA. ( Doctor's Associates, supra , 517 U.S. at p. 687, 116 S.Ct. 1652 [state law is preempted if it "conditions the enforceability of arbitration agreements on compliance with a special ... requirement not applicable to contracts generally"].)

The legislative history of AB 2617 confirms that the Ralph Act's and Bane Act's special requirements represent a hostility to arbitration and their purpose is primarily, if not exclusively, to discourage arbitration of Ralph

agreement. ( Harvard-Westlake, supra , at p. 847, 98 Cal.Rptr.3d 300 .) The Court of Appeal reversed the award of fees, finding that an individual cannot waive the Ralph Act's and Bane Act's prohibition on a defendant's recovery of attorney fees. ( Id . at p. 866, 98 Cal.Rptr.3d 300 .) The Assembly Report criticizes the Harvard-Westlake court for "failing to acknowledge that ... requiring a party to allow a private arbitrator to decide hate crimes violations is, inherently, a waiver of rights and procedures provided by the statutes." (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 2617 (2013-2014 Reg. Sess.) April 25, 2014, p. 7.)

The Assembly report proceeds to detail numerous supposed shortcomings of arbitration. Under a section titled "Private Arbitration Is Essentially Unregulated And Highly Controversial When It Is Mandatory, Rather Than Voluntary," the report notes that "arbitrators are not regulated in any fashion; they need not be trained in the law, or even apply the law in a particular dispute, or render a decision consistent with the evidence presented to them. What evidence is presented may, in fact, be incomplete because parties in arbitration have no legal right to obtain evidence in support of their claims or defenses, or the claims or defenses of the other party, contrary to the longstanding discovery practice in public courts. ... There is no need to justify [the arbitrator's] decision because the law and the evidence need not be followed and because there is no right for any party to appeal or obtain an independent review of the arbitrator's ruling unless the contract expressly so provides." (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 2617 (2013-2014 Reg. Sess.) April 25, 2014, at pp. 5-6.)

Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223 , 245, 145 Cal.Rptr.3d 514 , 282 P.3d 1217 [FAA preempts requirements "such as proof of actual notice, meaningful reflection, signature by all parties, and/or a unilateral modification clause favoring the nondrafting party"]; Scott v. Yoho (2016) 248 Cal.App.4th 392 , 204 Cal.Rptr.3d 89 [FAA preempts Code of Civil Procedure section 1295's 30-day cancellation period for certain arbitration agreements related to medical disputes].) Rather, it is sufficient, as is the case here, that the state law "conditions the enforceability of arbitration agreements on compliance with a special ... requirement not applicable to contracts generally." ( Doctor's Associates, supra , 517 U.S. at p. 687, 116 S.Ct. 1652 .)

We also reject Saheli's assertion that the FAA "displaces" the Ralph Act and Bane Act, and therefore Defendants must show that "Congress

Keating v. Superior Court, supra , 31 Cal.3d 584 at p. 602, 183 Cal.Rptr. 360 , 645 P.2d 1192 .) The United States Supreme Court reversed, holding that, to the extent Corporations Code section 31512 prohibits arbitration of California Franchise Investment Law claims, it is preempted by the FAA. ( Southland , supra , 465 U.S. at p. 10, 104 S.Ct. 852 .)

Sanchez, supra , 61 Cal.4th at p. 924, 190 Cal.Rptr.3d 812 , 353 P.3d 741 ; Concepcion, supra , 563 U.S. at pp. 341-342, 131 S.Ct. 1740 .) Moreover, were we to accept Saheli's argument, the Legislature could circumvent the FAA by simply declaring a restriction on arbitration agreements equally applicable to the waiver of other rights under a particular statutory scheme. Given the ease with which the Legislature could avoid preemption in this manner, such a rule would, in practice, render ineffective section 2 of the FAA. (See Southland, supra , 465 U.S. at p. 16, fn. 11, 104 S.Ct. 852 .)

2. The Ralph Act's And Bane Act's Special Requirements Do Not Codify the Doctrine of Unconscionability

Saheli suggests sections 51.7's and 52.1's special requirements fall within section 2's saving clause because they are a codification of the existing doctrine of unconscionability. We find no merit to this argument.

A court may refuse to enforce contracts or clauses in contracts that are unconscionable. (§ 1670.5, subd. (a).) " '[U]unconscionability 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. [Citation.] 'The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.' [Citation.] But they need not be present in the same degree. 'Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.' [Citations.] In other words, the 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 v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 , 114, 99 Cal.Rptr.2d 745 , 6 P.3d 669 , abrogated on other grounds by Concepcion, supra , 563 U.S. 333 , 131 S.Ct. 1740 .)

Sections 51.7's and 52.1's special requirements for arbitration agreements are not simply a codification of the above-described principles. Although the special requirements potentially reflect elements of procedural unconscionability, they say nothing about substantive unconscionability. Thus, to find that sections 51.7's and 52.1's prohibitions on the enforcement of certain arbitration agreements codify existing rules of unconscionability would require us to declare all agreements to arbitrate Ralph Act and Bane Act

companies to hide their wrongdoing. Or the court might simply say that such agreements are exculpatory-restricting discovery would be of greater benefit to the company than the consumer, since the former is more likely to be sued than to sue. [Citation.] And, the reasoning would continue, because such a rule applies the general principle of unconscionability or public-policy disapproval of exculpatory agreements, it is applicable to 'any' contract and thus preserved by § 2 of the FAA. In practice, of course, the rule would have a disproportionate impact on arbitration agreements ...." ( Id . at pp. 341-342, 131 S.Ct. 1740 .) As such, it would be preempted by the FAA.

A declaration that all agreements to arbitrate Ralph Act and Bane Act claims are per se substantively unconscionable would necessarily be premised on the uniqueness of an agreement to arbitrate. Indeed, we could not reach such a conclusion without finding, for whatever reason, that it is inherently unfair to require a party to arbitrate Ralph Act and Bane Act claims. Stated otherwise, Saheli essentially urges us to declare that arbitration, in the abstract and without regard to the specific procedures to which the parties agreed, is fundamentally incapable of fairly adjudicating an entire class of claims. Such a rule would itself represent an improper hostility toward arbitration that would not be permitted under the FAA.

Even if the FAA permitted such a declaration, sections 51.7's and 52.1's special requirements would still be inconsistent with the existing doctrine of unconscionability. First, by declaring unconscionable arbitration agreements that fail to comply with certain procedural requirements, sections 51.7 and 52.1 preclude courts from performing the sliding scale analysis typically employed to determine whether a specific arbitration agreement is enforceable. In addition, sections 51.7 and 52.1 alter the burden of proving unconscionability. Generally, the burden is on the party opposing arbitration to show an arbitration agreement is unconscionable. (

Ralph Act or Bane Act claim to arbitration.

In passing, and without any explanation or citation to the record or authority, Saheli asserts the Arbitration Agreement precludes injunctive relief. Contrary to this assertion, the Arbitration Agreement provides that the rights of the parties "shall be the same as those available to them in a court of competent jurisdiction." Further, it expressly empowers the arbitrator to award "such remedies as could be awarded by a court under the applicable substantive law, which may include injunctive or other equitable relief."

We also find no merit to concerns expressed in the legislative history of AB 2617 that an arbitrator could not provide meaningful, immediate relief-such as a temporary restraining order or preliminary injunction-to prevent the sort of abuse prohibited under the Ralph Act and Bane Act. (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 2617 (2013-2014 Reg. Sess.) April 25, 2014, p. 7.) Such concerns are addressed by Code of Civil Procedure section 1281.8, which provides that a party to an arbitration agreement may seek from a court a preliminary injunction or temporary restraining order if "the award to which the applicant may be entitled may be rendered ineffectual without provisional relief." ( Code Civ. Proc., § 1281.8, subd. (b).)

Tanguilig v. Bloomingdale's, Inc., supra , 5 Cal.App.5th at p. 678, 210 Cal.Rptr.3d 352 .)

An action by an individual asserting Ralph Act and Bane Act claims is fundamentally different from a PAGA action. Although the government has the authority to pursue Ralph Act and Bane Act claims, an aggrieved individual asserting such claims does not act as a proxy for the state. Instead, the individual pursues the claims "in his or her own name and on his or her own behalf ...." ( § 52.1, subd. (b).) In addition, unlike PAGA, the Ralph Act and Bane Act do not require that an individual provide the state notice of her claims and the opportunity to pursue them in the first instance. We are also aware of no authority providing that the state is a real party in interest in individual Ralph Act or Bane Act claims. Given such fundamental differences

in the face of various challenges to their enforceability or

pursued both by victimized individuals and by government agencies-to rid our state of hate crimes and related conduct. For the Legislature to determine that it is "unconscionable, against public policy, and unenforceable" for one party to force a waiver of those rights and remedies on another as a condition of entering into a contract for goods or services seems to be well within its power.

The majority strikes down the Legislature's determination by relying on two lines of authority: the latter holds that a blanket assumption that arbitration provisions are substantively unconscionable is impermissibly hostile to arbitration; the former holds that a statute hostile to arbitration cannot be saved by being dressed up in language also hostile to other procedures. I have little abstract quarrel with either holding; I concur but with the concern that, in our desire to not be impermissibly hostile to arbitration, we are coming unnecessarily close to elevating arbitration above any other procedures and remedies to the derogation of our right to have disputes tried in civil courts.

The Ralph Act and Bane Act preclude mandatory, predispute waivers of "any legal right, penalty, remedy, forum, or procedure for violation" of the statutes. ( Civ. Code, § 51.7, subd. (b)(4).) A Ralph Act violation justifies an award of exemplary damages, civil penalties, and attorney's fees. ( Civ. Code, § 52, subd. (b).) Any person claiming to be aggrieved by such a violation may pursue a complaint with the Department of Fair Employment and

the trial court and is not before us here. This is therefore not the proper case to address the issue further.

them in a court of competent jurisdiction. The decision of the arbitrator shall be final and binding on all parties."

"Arbitrable claims" under the Arbitration Agreement are defined as "those claims ... that arise out of, or are related to, (i) a claim of employment discrimination ...; (ii) a claim of wrongful or unlawful termination of employment, including claims of constructive discharge; (iii) a claim for wages or other compensation; (iv) a tort claim or any other claim in which punitive damages or emotional distress damages could be awarded that arose out of, or is related to, the employment relationship; (v) a claim that is related in any

constructions, both of which are reasonable. [Citation.] But language in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract." [Citation.]' " ( TRB Investments, Inc. v. Fireman's Fund Ins. Co, supra, at p. 27, 50 Cal.Rptr.3d 597 , 145 P.3d 472 .) The United States Supreme Court has cautioned that we may not apply such rules in a way that "does not place arbitration contracts 'on equal footing with all other contracts,' [citation]." ( Imburgia, supra , 136 S.Ct. at p. 471.)

In Imburgia, supra , 136 S.Ct. 463 , the United States Supreme Court held that language very similar to that now before us unambiguously excluded state law preempted by the FAA, and a contrary interpretation would itself be preempted by the FAA. In that case, the plaintiffs entered into service agreements with DIRECTV that contained arbitration agreements and waivers of class arbitration. ( Id . at p. 466.) The agreements provided that if the "law of your state" makes waivers of class arbitration unenforceable, the entire arbitration provision is unenforceable. At the time the parties entered into the agreements, California law would have made the class arbitration waivers unenforceable under what is referred to as the Discover Bank rule. (See Discover Bank v. Superior Court (2005) 36 Cal.4th 148 , 162-163, 30 Cal.Rptr.3d 76 , 113 P.3d 1100 .)

In 2008, the plaintiffs brought an action against DIRECTV in California state court. ( Imburgia, supra , 136 S.Ct. at p. 466.) DIRECTV did not attempt to compel arbitration, presumably because the Discover Bank rule would have rendered the arbitration agreements unenforceable. While the action was pending, the United States Supreme Court decided AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333 , 131 S.Ct. 1740 , 179 L.Ed.2d 742 ( Concepcion ), which concluded the FAA preempts the Discover Bank rule. In effect, this meant class arbitration waivers were now enforceable if contained in agreements governed by the FAA. Sometime thereafter, DIRECTV moved to compel arbitration of the plaintiffs' claims. ( Imburgia, supra , at p. 466.)

Despite Concepcion 's invalidation of the Discover Bank rule, a California Court of Appeal denied DIRECTV's motion to compel arbitration. The court determined the phrase "law of your state" contained in the service contracts referred to California law notwithstanding its preemption by the FAA. The court reasoned that the phrase was ambiguous and should therefore be construed against the drafter, DIRECTV. ( Id . at p. 467.) Based on this interpretation, the court concluded the arbitration agreements remained unenforceable.

The United States Supreme Court reversed. ( Imburgia, supra , 136 S.Ct. at p. 471.) It held that, because the Court of Appeal employed principles and reasoning not applicable to contracts generally, its "interpretation of the phrase 'law of your state' does not place arbitration contracts 'on equal footing with all other contracts,' [citation]. For that reason, it does not give 'due regard ... to the federal policy favoring arbitration.' [Citation.] Thus, the Court of Appeal's interpretation is preempted by

whether those requirements are preempted by the FAA. We find that they are preempted, and the trial court erroneously denied the petition to compel arbitration of these claims.

A. The Ralph Act and Bane Act

"The Legislature's focused effort to combat discriminatory and pernicious conduct often referred to as hate crimes began with the 1976 enactment of Civil Code section 51.7, commonly referred to as the 'Ralph Civil Rights Act' or the 'Ralph Act.' " ( Venegas v. County of Los Angeles (2004) 32 Cal.4th 820 , 845, 11 Cal.Rptr.3d 692 , 87 P.3d 1 , conc. opn. of Baxter, J. ( Venegas ).) The Ralph Act broadly provides that all persons "have the right to be free from any violence, or intimidation by threat of violence, committed against their persons or property" because of, among other things, the person's race, religion, national origin, sex, sexual orientation, or position in a labor dispute. ( § 51.7, subd. (a).) Persons who violate section 51.7 are liable for actual and exemplary damages, a civil penalty of $25,000, and attorney fees. (§ 52, subd. (b); Venegas, supra , at p. 842, 11 Cal.Rptr.3d 692 , 87 P.3d 1 .)

A civil action for a violation of the Ralph Act may be brought by an aggrieved individual, the Attorney General, a district attorney, or a city attorney. (See § 52, subd. (c).) Regardless of who initiates the action, any civil penalties recovered shall be awarded to the person denied the right provided by the Ralph Act. (§ 52, subd. (b)(2).) In addition to a civil action, an aggrieved individual may file a complaint with the Department of Fair Employment and Housing. (§ 52, subd. (f).)

Ten years after enacting the Ralph Act, the Legislature enacted section 52.1-commonly referred to as the "Tom Bane Civil Rights Act" or "Bane Act"-which was "intended to supplement the Ralph Civil Rights Act as an additional legislative effort

punished either by prosecution under Section 422.77 of the Penal Code, or by a proceeding for contempt." ( § 52.1, subd. (i).)

In 2014, the Legislature passed Assembly Bill No. 2617 (AB 2617), which limited the circumstances under which an individual may waive his or her rights under the Ralph Act and Bane Act, including the right to a judicial forum and procedures. As amended, section 51.7 now provides that "[a]ny waiver of any legal right, penalty, remedy, forum, or procedure for a violation of this section, including the right to file and pursue a civil action or complaint with, or otherwise notify, the Attorney General or any other public prosecutor, or law enforcement agency, the Department of Fair Employment and Housing, or any other governmental entity shall be knowing and voluntary, and in writing, and expressly not made as a condition of entering into a contract for goods or services or as a condition of providing or receiving goods and services." ( § 51.7, subd. (3).)

It further provides that "[a]ny waiver of any legal right, penalty, remedy, forum, or procedure for a violation of this section that is required as a condition of entering into a contract for goods or services shall be deemed involuntary, unconscionable, against public policy, and unenforceable." ( § 51.7, subd. (4).) In addition, any "person who seeks to enforce a waiver of any legal right, penalty, remedy, forum, or procedure for a violation of this section shall have the burden of proving that the waiver was knowing and voluntary and not made as a condition of the contract or of providing or receiving the goods or services." ( § 51.7, subd. (5).) AB 2617 amended the Bane Act to provide that the "rights, penalties, remedies, forums, and procedures of this section shall not be waived by contract except as provided in Section 51.7." ( § 52.1, subd. (l).)

B. FAA Preemption

"The FAA was designed 'to overrule the judiciary's longstanding refusal to enforce agreements to arbitrate,' [citation], and to place such agreements ' "upon the same footing as other contracts," ' [Citation.] While Congress was no doubt aware that the Act would encourage the expeditious resolution of disputes, its passage 'was motivated, first and foremost, by a congressional desire to enforce agreements into which parties had entered.' [Citation.]" ( Volt, supra , 489 U.S. at p. 478, 109 S.Ct. 1248 .)

Section 2 of the FAA "declares written provisions for arbitration 'valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.' 9 U.S.C. § 2 ."

Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681 , 683, 116 S.Ct. 1652 , 134 L.Ed.2d 902 ( Doctor's Associates ).) By enacting section 2, " 'Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.' [Citation.]" ( Perry v. Thomas (1987) 482 U.S. 483 , 489, 107 S.Ct. 2520 , 96 L.Ed.2d 426 ( Perry ).) Section 2"requires courts to place arbitration agreements 'on equal footing with all other contracts.' [Citations.]" ( Kindred Nursing Centers Ltd. Partnership v. Clark (2017) ---U.S. ----, 137 S.Ct. 1421 , 1424, 197 L.Ed.2d 806 ( Kindred Nursing ).) It precludes "[s]tates from singling out arbitration provisions for suspect status," ( Doctor's Associates, supra , 517 U.S. at p. 687, 116 S.Ct. 1652 ), no matter how laudable the reasons for doing so, ( Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 , 384, 173 Cal.Rptr.3d 289 , 327 P.3d 129 ( Iskanian ) ). In effect, section 2 of the FAA "preempts any state rule discriminating on its face against arbitration-for example, a 'law prohibit[ing] outright the arbitration of a particular type of claim.' [Citation.] And not only that: The [FAA] also displaces any rule that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements." ( Kindred Nursing, supra , 137 S.Ct. at p. 1426 ; see Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899 , 924, 190 Cal.Rptr.3d 812 , 353 P.3d 741 ( Sanchez ) ["a state rule can be preempted not only when it facially discriminates against arbitration but also when it disfavors arbitration as applied"].) Under section 2's saving clause, a state court may invalidate an arbitration agreement under generally applicable contract defenses, such as fraud, duress, or unconscionability, but not under a defense that is specific to arbitration agreements. ( Doctor's Associates, supra , 517 U.S. at p. 687, 116 S.Ct. 1652 .)

C. Analysis

The Ralph Act and Bane Act, as amended by AB 2617, unquestionably discriminate against arbitration by placing special restrictions on waivers of judicial forums and procedures in connection with claims brought under those acts. In effect, sections 51.7 and 52.1 deem an agreement to arbitrate such claims unenforceable unless the party seeking to enforce it proves (1) the other party knowingly and voluntarily agreed to arbitration, and (2) the arbitration agreement was not made a condition of a contract for goods or services or of providing or receiving goods or services. ( §§ 51.7, subd. (b)(5) ; 52.1, subd. (l).) For the reasons we discuss, we conclude these restrictions are preempted by the FAA. Accordingly, the trial court's reliance on special requirements found in sections 51.7 and 52.1 to deny in part Defendants' petition to compel arbitration was in error.

Sections 51.7's and 52.1's special requirements for agreements to arbitrate Ralph Act and Bane Act claims do not apply to contracts generally.

For example, the party seeking to enforce a contract generally need not prove the other party knowingly agreed to each term contained in a written contract. ( Randas v. YMCA of Metropolitan Los Angeles (1993) 17 Cal.App.4th 158 , 163, 21 Cal.Rptr.2d 245 [" '[o]rdinarily, one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms' "]; Marin Storage & Trucking, Inc. v. BencoContracting & Engineering, Inc. (2001) 89 Cal.App.4th 1042 , 1049, 107 Cal.Rptr.2d 645 [same].) Moreover, although mutual assent to a contract is essential, (§§ 1550, 1565), the party opposing enforcement of a contract generally has the

intended to disrupt the statutory enforcement scheme" and "interfere with California's ability to curb discriminatory violence." The premises of Saheli's argument are flawed. The FAA does not displace the Ralph Act and Bane Act. Nor does it interfere with their enforcement schemes or California's ability to curb discriminatory violence. Instead, the FAA simply mandates that we treat agreements to arbitrate, including agreements to arbitrate Ralph Act and Bane Act claims, as we would other contracts. The special requirements in sections 51.7 and 52.1 do not comport with this mandate, and are therefore preempted by the FAA.

1. The Ralph Act's And Bane Act's Special Requirements Do Not Avoid Preemption by Virtue of their Application to the Waiver of Any Legal Right, Penalty, Remedy, Forum, or Procedure

Saheli contends that sections 51.7's and 52.1's special requirements avoid preemption because they apply to the waiver of "any legal right, penalty, remedy, forum, or procedure" under the Ralph Act and Bane Act. According to Saheli, because the requirements are not targeted solely at arbitration agreements, they fall within section 2's saving clause as grounds that exist at law or in equity for the revocation of any contract. We disagree.

In Southland Corp. v. Keating (1984) 465 U.S. 1 , 104 S.Ct. 852 , 79 L.Ed.2d 1 ( Southland ), the United States Supreme Court rejected a similar argument to the one advanced by Saheli. In Southland , our nation's high court reversed a California Supreme Court decision holding that Corporations Code section 31512 prohibits arbitration of claims brought under the Franchise Investment Law. (See Keating v. Superior Court (1982) 31 Cal.3d 584 , 596-597, 183 Cal.Rptr. 360 , 645 P.2d 1192 .) Corporations Code section 31512 provides, "Any condition, stipulation or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this law or any rule or order hereunder is void." After finding such language prohibits agreements to waive a judicial forum, the California Supreme Court determined such a prohibition was not preempted by the FAA. The court reasoned that "[s]uch exceptions to the general principle of arbitrability, like those expressed in California's Franchise Investment Law, do not reflect hostility toward arbitration, nor do they constitute an obstacle to the general enforcement of arbitration agreements in a manner consistent with federal law. Rather, such exceptions are narrowly confined to rights and remedies created by state regulatory statutes, and represent a determination that the public interest is best served by maintaining access to the remedies which the Legislature has provided." (

In his dissent in part, Justice Stevens asserted a nearly identical argument to that advanced by Saheli in this case. Like Saheli, Justice Stevens argued the California Supreme Court's application of Corporations Code section 31512 to preclude arbitration was proper because it was based on such grounds as exist at law or in equity for the revocation of any contract. ( Southland, supra , 465 U.S. at p. 20, 104 S.Ct. 852 , dis. opn. of Stevens, J.) He explained, "A contract which is deemed void is surely revocable at law or in equity, and the California legislature has declared all conditions purporting to waive compliance with the protections of the Franchise Investment Law, including but not limited to arbitration provisions, void as a matter of public policy." ( Ibid . )

The majority rejected Justice Stevens's argument, stating: "[T]he defense to arbitration found in the California Franchise Investment Law is not a ground that exists at law or in equity 'for the revocation of any contract' but merely a ground that exists for the revocation of arbitration provisions in contracts subject to the California Franchise Investment Law. Moreover, under this dissenting view, 'a state policy of providing special protection for franchisees ... can be recognized without impairing the basic purposes of the federal statute.' [Citation.] If we accepted this analysis, states could wholly eviscerate congressional intent to place arbitration agreements 'upon the same footing as other contracts,' [citation], simply by passing statutes such as the Franchise Investment Law. We have rejected this analysis because it is in conflict with the Arbitration Act and would permit states to override the declared policy requiring enforcement of arbitration agreements." ( Southland, supra , 465 U.S. at pp. 16-17, fn. 11, 104 S.Ct. 852 .)

Sanchez, supra , 61 Cal.4th 899 , 190 Cal.Rptr.3d 812 , 353 P.3d 741 is also instructive. In Sanchez, the California Supreme Court held that the Consumers Legal Remedies Act's (CLRA) prohibition on the waiver of class actions is preempted by the FAA, despite the fact that the CLRA prohibits the waiver of numerous other statutory rights. ( Id . at pp. 923-924, 190 Cal.Rptr.3d 812 , 353 P.3d 741 ; see §§ 1751 & 1780.) Our state's high court rejected the plaintiff's argument that enforcement of the anti-waiver provision "merely puts arbitration agreements on an equal footing with other contracts," reasoning that "a state rule can be preempted not only when it facially discriminates against arbitration but also when it disfavors arbitration as applied." ( Sanchez, supra , 61 Cal.4th at p. 924, 190 Cal.Rptr.3d 812 , 353 P.3d 741 , citing Concepcion, supra , 563 U.S. at pp. 341-342, 131 S.Ct. 1740 .)

Saheli's argument fails for the reasons articulated by the courts in Southland and Sanchez . Sections 51.7's and 52.1's special requirements for waivers of judicial forums or procedures are not "ground[s] that exist [ ] at law or in equity 'for the revocation of any contract' but merely [ ] ground[s] that exists for the revocation of arbitration provisions in contracts subject to" the

Ralph Act and Bane Act. ( Southland, supra , 465 U.S. at p. 16, fn. 11, 104 S.Ct. 852 .) Although sections 51.7 and 52.1 place the same restrictions on waivers of various other statutory rights, the statutes unquestionably disfavor arbitration as applied. (See

claims, regardless of their actual terms, to be substantively unconscionable. Such a blanket rule is not permitted under the FAA.

In Concepcion , the United States Supreme Court cautioned that even when a court purports to apply a doctrine normally thought to be generally applicable, such as unconscionability, it may not " 'rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what ... the state legislature cannot.' [Citation.]" ( Concepcion, supra , 563 U.S. at p. 341, 131 S.Ct. 1740 .) According to our nation's high court, "[a]n obvious illustration of this point would be a case finding unconscionable or unenforceable as against public policy consumer arbitration agreements that fail to provide for judicially monitored discovery. ... A court might reason that no consumer would knowingly waive his right to full discovery, as this would enable

Sanchez, supra , 61 Cal.4th at p. 911, 190 Cal.Rptr.3d 812 , 353 P.3d 741 ["[b]ecause unconscionability is a contract defense, the party asserting the defense bears the burden of proof"]; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951 , 972, 64 Cal.Rptr.2d 843 , 938 P.2d 903 ["a party opposing [a] petition [to arbitrate] bears the burden of proving by a preponderance of the evidence any fact necessary to its defense"].) Sections 51.7 and 52.1, however, place the burden on the party seeking to enforce the arbitration agreement to show it was made knowingly and voluntarily and not as a condition of the contract or of providing or receiving goods or services. ( § 51.7, subd. (b)(5).) In effect, this shifts the burden to the party seeking enforcement to show that the arbitration agreement is not unconscionable. In that way, sections 51.7 and 52.1 depart from the preexisting doctrine of unconscionability, and treat arbitration agreements differently from other types of contracts. Such discriminatory treatment is not permitted under the FAA.

3. An Agreement to Arbitrate Ralph Act and Bane Act Claims Does Not Require the Waiver of Substantive Rights or Remedies

Finally, we reject Saheli's various arguments that sections 51.7's and 52.1's special requirements avoid preemption because they are consistent with general California law restricting the waiver of certain substantive rights and remedies. The fundamental flaw with all of these arguments is that Saheli has failed to identify any substantive rights or remedies that are necessarily waived simply by submitting a

Saheli's reliance on McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 , 216 Cal.Rptr.3d 627 , 393 P.3d 85 (prohibiting the waiver of certain statutory remedies under the CLRA, UCL, and FAL), and Iskanian, supra , 59 Cal.4th 348 , 173 Cal.Rptr.3d 289 , 327 P.3d 129 (prohibiting the waiver of PAGA claims) is misplaced. Unlike the present controversy, those cases involved agreements to completely waive, in any forum, certain unwaivable substantive rights and remedies. Here, in contrast, the Arbitration Agreement does not mandate the waiver of any substantive rights or remedies. Nor has Saheli identified any substantive rights or remedies necessarily waived by virtue of agreeing to arbitrate Ralph Act or Bane Act claims.

Although Courts of Appeal have relied on Iskanian to limit pre-dispute agreements to arbitrate PAGA claims, (see Betancourt v. Prudential Overall Supply (2017) 9 Cal.App.5th 439 , 445-446, 215 Cal.Rptr.3d 344 ; Tanguilig v. Bloomingdale's, Inc. (2016) 5 Cal.App.5th 665 , 678, 210 Cal.Rptr.3d 352 ), the reasoning employed by those courts is not applicable here. In limiting the enforceability of arbitration agreements related to PAGA claims, those courts relied on the fact that a PAGA action is not a "dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state , which alleges directly or through its agents-either the [Labor and Workforce Development] Agency or aggrieved employees-that the employer has violated the Labor Code." ( Iskanian, supra , 59 Cal.4th at pp. 386-387, 173 Cal.Rptr.3d 289 , 327 P.3d 129 .) Consistent with the representative nature of such actions, prior to asserting a PAGA claim, an individual must give notice to the Labor and Workforce Development Agency (Agency), and may only pursue the claim if the Agency declines to investigate the alleged violation or issue a citation. (See Lab. Code, § 2699.3.) Accordingly, "[b]ecause a PAGA plaintiff, whether suing solely on behalf of himself or herself or also on behalf of other employees, acts as a proxy for the state only with the state's acquiescence (see § 2699.3 ) and seeks civil penalties largely payable to the state via a judgment that will be binding on the state, a PAGA claim cannot be ordered to arbitration without the state's consent." (

on hate crimes, states that "U.S. residents experienced an average of 250,000 hate crime victimizations each year from 2004 to 2015." (Hate Crime Victimization, 2004-2015 < https://www.bjs.gov/content/pub/pdf/hcv0415.pdf> (as of March 13, 2018).) Hate conduct takes its toll not only on individual victims

See Kindred Nursing Centers Ltd. P'ship v. Clark (2017) ---U.S. ----, 137 S.Ct. 1421 , 1426, 197 L.Ed.2d 806 .) Our state legislature went to great lengths in 2014 to craft amendments to the Ralph Act and Bane Act that would fit within traditional notions of unconscionability. Those amendments provide that a predispute agreement to waive any rights or remedies under the statutes imposed as a mandatory condition of entering into a contract for goods or services is deemed unconscionable. ( Civ. Code, §§ 51.7, subd. (b)(4) & 52.1, subd. (i).) In my view, this statutory provision encompasses elements of both procedural and substantive unconscionability. Procedurally, a contract which requires the predispute waiver of rights or remedies as a condition of entering into a contract for goods or services may very well be adhesive and contain other elements of procedural unconscionability identified by our Supreme Court in Armendariz v. Foundation Health Psychcare Servs. (2000) 24 Cal.4th 83 , 99 Cal.Rptr.2d 745 , 6 P.3d 669 .

Substantively, the Legislature has determined that protections against hate crimes are sufficiently compelling, and implicate important public policies, such that their waiver is so unfair and one-sided as to be substantively unconscionable. This seems perfectly reasonable to me. The Ralph Act and Bane Act provide remedies-to be

Housing. ( Civ. Code, § 52, subd. (f).) The Bane Act additionally provides for injunctive relief, and a violation of such an injunction may be criminally punished. ( Civ. Code, § 52.1, subds. (b), (i).) Under the 2014 amendments, none of these remedies and procedures can be waived by a clause inserted as a mandatory condition in a contract for goods or services. But only that part of the amendments which prevents such a waiver of the right to pursue a judicial remedy is here held unenforceable. In short, we are today holding that the California Legislature can rationally forbid an adhesive predispute waiver of exemplary damages, civil penalties, attorney fees, administrative complaints, and injunctive relief, but it cannot forbid an adhesive predispute waiver of the judicial remedy. The FAA prevents a state from treating arbitration more harshly than any other procedure; I do not believe it requires us to treat it more favorably than any other procedure.

I observe, however, that in opposition to respondents' petition to compel arbitration, appellant failed to develop an unconscionability defense. The bulk of her opposition to the petition was directed toward the argument that the arbitration provision in her employment contract excluded Ralph Act and Bane Act claims by its very terms, an argument unavailing under Imburgia . To the extent she argued unconscionability at all, she simply stated that the Ralph Act and Bane Act incorporated the common law doctrine of unconscionability, and suggested that the arbitration clause in this case was procedurally unconscionable because "by all indications, Plaintiff did, in fact, have no choice but to accept the terms of the arbitration clause in order to enter into the employment agreement with Defendants." She submitted no declaration setting forth the circumstances in which she had signed the agreement, or stating that why she believed it to be mandatory. Nor did she argue in any way why the particular arbitration clause in this case was substantively unconscionable. As the procedural unconscionability argument was unsupported by evidence and the substantive unconscionability point was devoid of either evidence or argument, unconscionability was not properly pursued before