Herman v. Brookdale Employee Services LLC

Background

Bruce Herman signed an employment contract with Brookdale Employee Services, LLC. He began working for Brookdale on October 10, 2018, and received several promotions. Brookdale terminated his employment on October 18, 2023, while he was serving as Assisted Living Director at Brookdale’s San José location.

Herman sued Brookdale in Santa Clara County Superior Court. He asserted ten causes of action concerning age and disability discrimination, retaliation, and denial of employment benefits. Brookdale removed the case to federal court based on diversity jurisdiction.

Herman had signed Brookdale’s Dispute Resolution Agreement on February 18, 2019. The agreement required Brookdale and Herman to resolve legal disputes arising out of or related to his employment—including disputes concerning compensation, termination, discrimination, harassment, retaliation, and other employment matters—through final and binding arbitration rather than a court or jury trial.

Brookdale’s Motion and Herman’s Defense

Brookdale moved under the Federal Arbitration Act to compel arbitration. Herman opposed the motion, arguing that the arbitration agreement was unconscionable, meaning unfairly imposed or unfair in its terms, and therefore unenforceable.

The court explained that arbitration agreements are generally enforceable as contracts but may be challenged using generally applicable contract defenses, including unconscionability. Under California law, unconscionability has procedural and substantive components. Procedural unconscionability concerns how the contract was formed, including pressure, unequal bargaining power, or surprise. Substantive unconscionability concerns whether the contract terms are overly harsh, oppressive, or unfairly one-sided. The two components are considered together on a sliding scale, and the party challenging the agreement bears the burden of proof.

Procedural Unconscionability

The court found that the agreement was a contract of adhesion because it was presented on a take-it-or-leave-it basis. That created a small degree of procedural unconscionability.

The court rejected Herman’s argument that the agreement involved substantial oppression or surprise. Unlike the circumstances in a case Herman relied on, Herman had worked for Brookdale for only a few months when the agreement was presented, and he did not allege that Brookdale reduced his pay for time spent reviewing it or prevented him from reviewing it before signing. The agreement advised him that he could consult an attorney.

The court also found that the arbitration agreement was not hidden. It was a separate, two-page document with a prominent heading, plain English, bolding and underlining, and organization by topic. Its scope clearly stated that employment-related legal disputes had to be resolved through final and binding arbitration. The court therefore found only minimal procedural unconscionability.

Substantive Unconscionability

Because the procedural unconscionability was minimal, Herman had to show a high degree of substantive unconscionability to invalidate the agreement.

Herman first argued that the agreement lacked mutuality. The court disagreed in most respects. The agreement applied to both Brookdale and Herman, allowed either party to begin arbitration, required both parties to arbitrate, and covered employment-related claims generally rather than only claims an employee might bring.

The court recognized that some provisions were not reciprocal in practice. The class-action waiver affected Herman more directly because he was the party who might bring a class action. The agreement also waived representative claims under California’s Private Attorneys General Act, while preserving Herman’s ability to arbitrate individual claims. The court stated that the representative-claim waiver was unenforceable under California law. But Herman had not asserted a Private Attorneys General Act claim, and the agreement contained a severability clause allowing the rest of the agreement to remain in effect. The court also noted that Brookdale was required to pay the arbitrator and all arbitration fees. Taken together, these provisions did not make the agreement impermissibly one-sided.

Herman next argued that the agreement was confusing or unfair. The court rejected his challenges to provisions assigning contract-interpretation disputes to the arbitrator and enforceability disputes to the court, explaining that this division reflected federal arbitration law. The absence of specified arbitration rules or a named arbitrator did not make the agreement unfair. Nor did the agreement’s encouragement that the parties try to resolve disputes informally before arbitration make it unconscionable; the court viewed that language as more aspirational than mandatory.

The court separately considered the agreement’s confidentiality provision. It found that the provision favored Brookdale to some degree because it could prevent future employees from learning about prior arbitrations. But the court concluded that this provision, standing alone, did not show enough substantive unfairness to invalidate the agreement, particularly because the agreement involved only minimal procedural unconscionability and did not contain the additional one-sided terms present in the case Herman cited.

Disposition

The court held that the arbitration agreement was enforceable despite minimal procedural unconscionability and some degree of substantive unconscionability in the confidentiality provision. It granted Brookdale’s motion to compel arbitration.

Because the arbitration agreement covered all of Herman’s claims and no party requested a stay of the court proceedings pending arbitration, the court dismissed the case. It stated that the parties could ask the court to appoint a mediator if they were unable to select one under the agreement, and it directed the Clerk to close the case.