Peloquin et al v. Tesla, Inc.

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United States District Court
Northern District of California
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
LINDA PELOQUIN, et al.,
Plaintiffs,
v.
TESLA, INC.,
Defendant.
Case No. 25-cv-06690-AMO
ORDER GRANTING MOTION TO
COMPEL ARBITRATION
Re: Dkt. No. 25
This is an employment discrimination action brought under California’s Fair Employment
and Housing Act (“FEHA”). Defendant Tesla, Inc.’s (“Tesla”) motion to compel arbitration and
stay proceedings was heard before this Court on February 12, 2026. The Court requested further
briefing from the parties, which they submitted on February 20, 2026. Having read all the parties’
papers and carefully considered their arguments therein and those made at the hearing, as well as
the relevant legal authority, the Court hereby GRANTS the motion to compel arbitration for the
following reasons.
I. BACKGROUND
On August 23, 2018, Tesla hired Plaintiff Ozell Murray as a Production Specialist with the
physical security team at its Fremont facility in California. See Dkt. No. 25-1 (offer letter). As a
Production Specialist, Murray was responsible for ensuring safety and order at the Fremont
facility. (Amended Complaint). First Am. Compl. (Dkt. No. 15, “FAC”) ¶ 174.
Murray received an offer letter at the beginning of his employment. The offer letter
provided in relevant part:
[T]o ensure the rapid and economical resolution of disputes that may
arise in connection with your employment with Tesla, you and Tesla
agree that any and all disputes, claims, or causes of action, in law or
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equity, arising from or relating to your employment, or the
termination of your employment, will be resolved, to the fullest
extent permitted by law by final, binding and confidential arbitration
in your city and state of employment conducted by the Judicial
Arbitration and Mediation Services/Endispute, Inc. (“JAMS”), or its
successors, under the then current rules of JAMS for employment
disputes.
Dkt. No. 25-1 at 3-4.
On August 7, 2025, Plaintiffs Ozell Murray, Sharnique Martin, Linda Peloquin, Tiara
Paulino, Adam Chow, and Gregory Vass together filed this lawsuit. Dkt. No. 1. On October 17,
2025, the Plaintiffs filed an Amended Complaint. Dkt. No. 15. Plaintiffs assert claims for
retaliation under Cal. Gov. Code § 12940(h) and Cal. Labor Code § 1102.5(b), hostile work
environment under Cal. Gov. Code § 12940(j), race discrimination under Cal. Gov. Code
§ 12940(a), disability discrimination under Cal. Gov. Code § 12940(a), (h), (j), failure to prevent
unlawful discrimination, harassment, and retaliation under Cal. Gov. Code § 12940(k), failure to
engage in the interactive process under Cal. Gov. Code § 12940(n), failure to accommodate under
Cal. Gov. Code § 12940(m), wrongful termination in violation of public policy, and constructive
termination in violation of public policy. See generally FAC.
On October 29, 2025, all Plaintiffs except for Murray agreed to submit their claims to
arbitration. See Dkt. Nos. 16 & 17.
II. DISCUSSION
Tesla moves to compel Murray’s claims to arbitration. The Court first considers Tesla’s
request for judicial notice before turning to the merits of the motion.
A. Request for Judicial Notice
Federal Rule of Evidence 201 provides that a federal court “may judicially notice a fact
that is not subject to reasonable dispute because it . . . can be accurately and readily determined
from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b)(2). This
includes “undisputed matters of public record . . . [such as] documents on file in federal or state
courts.” Harris v. Cnty. of Orange, 682 F.3d 1126, 1132 (9th Cir. 2012) (citations omitted).
However, a court may not take judicial notice of any disputed facts, even if stated in those same
public records. Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001).
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Here, Tesla seeks judicial notice of 42 orders issued by state and federal courts granting or
affirming decisions to grant motions to compel filed by Tesla in other cases. See Dkt. No. 26.
Murray does not oppose this request. See generally Dkt. No. 31. As court records, these orders
are proper subjects of judicial notice. In addition, Tesla seeks judicial notice of the current
Judicial Arbitration and Mediation Services/Endispute, Inc. (“JAMS”) Employment Arbitration
Rules & Procedures. See Dkt. No. 50. They are an undisputed matter of public record. The Court
therefore grants Tesla’s request for judicial notice as unopposed.
B. Motion to Compel Arbitration
Tesla moves to compel Murray’s claims to arbitration and to stay the case. Dkt. No. 25.
The Federal Arbitration Act (“FAA”) provides that written arbitration agreements in contracts
“evidencing a transaction involving commerce . . . shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation of any contract.” AT&T
Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting 9 U.S.C. § 2). The FAA reflects
a “liberal federal policy favoring arbitration agreements.” Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 25 (1991) (quoting Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U.S. 1, 24 (1983)). The FAA “mandates that district courts shall direct
the parties to proceed to arbitration on issues as to which an arbitration agreement has been
signed.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985). However, “arbitration is a
matter of contract and a party cannot be required to submit to arbitration any dispute which he has
not agreed so to submit.” Howsam v. Dean Witter Reynolds, 537 U.S. 79, 83 (2002). Where a
valid agreement to arbitrate exists and encompasses the dispute at issue, “then the [FAA] requires
the court to enforce the arbitration agreement in accordance with its terms.” Chiron Corp. v.
Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (internal citations omitted).
When evaluating whether a party is bound by an arbitration agreement, federal courts
“ ‘apply ordinary state-law principles that govern the formation of contracts’ to decide whether an
agreement to arbitrate exists.” Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279, 1283
(9th Cir. 2017) (quoting First Options of Chi. Inc. v. Kaplan, 514 U.S. 938, 944 (1995)); see also
Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2002) (noting that although the
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FAA preempts state laws that are only applicable to arbitration agreements, general contract
principles and defenses “grounded in state contract law, may operate to invalidate arbitration
agreements”) (citing Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). To form a
contract under California law, there must be “actual or constructive notice of the agreement” and a
“manifest[ation of] mutual assent.” Oberstein v. Live Nation Ent., Inc., 60 F.4th 505, 512-13 (9th
Cir. 2023). If the foundational elements are satisfied, the agreement shall be enforced so long as it
is fair and conscionable. The plaintiff bears the burden of showing that an arbitration agreement is
unconscionable. Poublon v. C.H. Robinson Co., 846 F.3d 1251, 1260 (9th Cir. 2017); Engalla v.
Permanente Med. Grp., Inc., 15 Cal. 4th 951, 972 (1997) (“a party opposing the petition [to
compel arbitration] bears the burden of proving by a preponderance of the evidence any fact
necessary to its defense”).
Murray does not dispute that he signed the Offer Letter containing the arbitration
provision, nor does he contest that the offer letter contained an arbitration provision and that his
claims are encompassed within the scope of the arbitration agreement. Instead, Murray argues that
the arbitration agreement is unconscionable and, therefore, unenforceable. Additionally, Murray
contends that the agreement is unenforceable as against public policy. The Court considers
Murray’s unconscionability arguments before turning to his latter argument.
1. Unconscionability
“It is well-established that unconscionability is a generally applicable contract defense,
which may render an arbitration provision unenforceable.” Nagrampa v. MailCoups, Inc., 469
F.3d 1257, 1280 (9th Cir. 2006). Under California law, a court may refuse to enforce a provision
when it is procedurally and substantively unconscionable. Id. at 1280. Although both forms of
unconscionability must be present, “they need not be present in the same degree.” Sanchez v.
Valencia Holding Co., LLC, 61 Cal. 4th 899, 910 (2015) (citation omitted). The two forms of
unconscionability operate on a “sliding scale.” Armendariz v. Foundation Health Psychcare
Services, Inc., 24 Cal. 4th 83, 114 (2000). “[T]he more substantively oppressive a contract term,
the less procedurally unconscionable it must be to be deemed unenforceable, and vice versa.” Id.
at 114. “[T]he party opposing arbitration bears the burden of proving any defense, such as
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unconscionability.” Luong v. Sper Micro Computer, Inc., No. 24-CV-02440-BLF, 2024 WL
4681605, at *3 (N.D. Cal. Nov. 4, 2024).
The Court first determines whether Murray has established procedural unconscionability
before considering whether he has shown substantive unconscionability.
a. Procedural Unconscionability
Procedural unconscionability exists where there is “oppression or surprise due to unequal
bargaining power.” Lim v. TForce Logistics, LLC, 8 F.4th 992, 1000 (9th Cir. 2021) (quoting
Pinnacle Museum Tower Ass’n v. Pinnacle Mkt Dev., LLC, 55 Cal. 4th 223, 236 (2012)).
“Oppression” concerns “an inequality of bargaining power that results in no real negotiation and
an absence of meaningful choice.” Lim, 8 F.4th at 1000 (quoting Poublon, 846 F.3d at 1260).
California law provides that oppression may be established by showing that an agreement was a
contract of adhesion, Lim, 8 F.4th at 923, which is a contract “imposed and drafted by the party of
superior bargaining strength, relegat[ing] to the subscribing party only the opportunity to adhere to
the contract or reject it,” Poublon, 846 F.3d at 1260 (quoting Armendariz, 24 Cal. 4th at 113); see
also OTO, LLC v. Kho, 8 Cal. 5th 111, 126 (2019) (“An adhesive contract is standardized,
generally on a preprinted form, and offered by the party with superior bargaining power on a take-
it-or-leave-it basis.” (quotation marks and citations omitted)). “Ordinary contracts of adhesion,
although they are indispensable facts of modern life that are generally enforced, contain a degree
of procedural unconscionability even without any notable surprises, and bear within them the clear
danger of oppression and overreaching.” Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237, 1244
(2016) (quotation marks and citation omitted).
Tesla does not dispute that the arbitration agreement is a contract of adhesion but argues
there is no other evidence of oppression or surprise. See Dkt. No. 40 at 3-4. “If the contract is
adhesive, the court must then determine whether other factors are present which, under established
legal rules – legislative or judicial – operate to render it [unenforceable].” Armendariz, 24 Cal. 4th
at 113 (alteration in original) (quotations and citation omitted). Such factors that may establish
oppression include:
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(1) the amount of time the party is given to consider the proposed
contract; (2) the amount and type of pressure exerted on the party to
sign the proposed contract; (3) the length of the proposed contract
and the length and complexity of the challenged provision; (4) the
education and experience of the party; and (5) whether the party’s
review of the proposed contract was aided by an attorney.
OTO, 8 Cal. 5th at 126-27 (citation omitted). California courts have consistently held that the fact
that an arbitration agreement is an adhesion contract does not render it automatically
unenforceable as unconscionable. See, e.g., Sanchez v. Carmax Auto Superstores Calif., LLC, 224
Cal. App. 4th 398, 402 (2014) (“[T]hat the agreement is required does not make it unenforceable,
absent other factors.”); Lagatree v. Luce, Forward, Hamilton & Scripps, 74 Cal. App. 4th 1105,
1127 (1999) (“[T]he cases uniformly agree that a compulsory predispute arbitration agreement is
not rendered unenforceable just because it is required as a condition of employment or offered on
a ‘take it or leave it’ basis.”). In fact, where the arbitration provisions presented in a contract of
adhesion are highlighted for the employee, any procedural unconscionability is “limited.” Serafin
v. Balco Props. Ltd., LLC, 235 Cal. App. 4th 165, 179 (2015).
Murray contends that his arbitration agreement is procedurally unconscionable because
(1) it was a contract of adhesion – acceptance of the agreement was a condition of employment,
(2) the agreement was offered without opportunity for negotiation or modification in the context of
unequal bargaining power, (3) he did not have the opportunity to understand it and because he felt
economic pressure to accept it, and (4) the arbitration provision was “buried in text and legal
language.” Dkt. No. 31 at 13-14.
To the extent Murray advances that the arbitration agreement was the result of oppression,
his arguments fail. The offer letter is four pages long, and Murray points to no evidence that Tesla
exerted pressure on him, denied him sufficient time to consider the contract, or deprived him of
the opportunity to review the contract with an attorney. These factors weigh against a finding of
oppression. See Collins v. Virtela Tech. Servs., Inc., No. C 12-613 CW, 2012 WL 4466551, at *14
(N.D. Cal. Sept. 26, 2012) (finding arbitration agreement enforceable where there was “no
evidence that Plaintiff was subject to significant external pressure driving him to sign the
documents without taking time to review them or have someone else review them”). Indeed, other
courts to consider nearly identical circumstances, including a nearly identical offer letter and
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arbitration agreement, have held that such arguments of oppression fall short of establishing the
oppression necessary for procedural unconscionability. See Chee v. Tesla, Inc., 732 F. Supp. 3d
1056, 1064 (N.D. Cal. 2024); Ly v. Tesla, Inc., 757 F. Supp. 3d 1033, 1043-45 (N.D. Cal. 2024).
Finally, Murray’s contention that he lacked a meaningful opportunity to understand and assess the
arbitration agreement fails because it is well established that the failure to read or understand an
arbitration clause does not preclude its enforcement. See, e.g., Harris v. TAP Worldwide, LLC,
248 Cal. App. 4th 373, 383 (2016) (“The fact that defendant either chose not to read or take the
time to understand these provisions is legally irrelevant.”); Pinnacle Museum Tower Ass’n, 55 Cal.
4th 223, 226 (2012) (“An arbitration clause within a contract may be binding on a party even if the
party never actually read the clause.”). Murray fails to establish oppression that would support a
finding of procedural unconscionability, so the Court turns to whether he establishes surprise.
“Surprise involves the extent to which the contract clearly discloses its terms as well as the
reasonable expectations of the weaker party.” Chavarria v. Ralphs Grocery Co., 733 F.3d 916,
922 (9th Cir. 2013) (citations omitted). “An agreement may thwart understanding by hiding the
challenged provision, or by using language – for example, complex statements filled with legal
jargon – rendering the substance of the challenged provision opaque.” Long Beach Unified Sch.
Dist. v. Margaret Williams, LLC, 43 Cal. App. 5th 87, 104 (2019).
Murray asserts that there was surprise because the arbitration agreement was purportedly
“buried” in the offer letter without any bold text or heading to signify its existence. Dkt. No. 31 at
7. The Court disagrees. The arbitration agreement was not buried in a voluminous contract or
otherwise hidden. As noted above, it appears on pages two and three of a four-page offer letter, in
the same, standard-sized text, with bold and italic formatting emphasizing the words “final,
binding and confidential arbitration.” See Dkt. No. 25-1 at 3-4. The inclusion of the arbitration
provision in standard format in a relatively brief offer letter does not support procedural
unconscionability. See Chee, 732 F. Supp. 3d at 1063-64 (finding arbitration provision contained
in a nearly identical four-page offer letter was not “buried”). The Court concludes that there was
nothing “surprising” about the arbitration agreement.
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Accordingly, the Court finds the adhesive nature of the arbitration agreement presents a
small degree of procedural unconscionability, but Murray fails to show additional factors of
oppression or surprise that would render the arbitration agreement highly procedurally
unconscionable. In the employment context, “if an employee must sign a non-negotiable
employment agreement as a condition of employment but there is no other indication of
oppression or surprise, then the agreement will be enforceable unless the degree of substantive
unconscionability is high.” Poublon, 846 F.3d at 1261. The Court thus turns to consider whether
Murray demonstrates a sufficiently high degree of substantive unconscionability to render the
agreement unenforceable.
b. Substantive Unconscionability
Substantive unconscionability exists where terms are “overly harsh,” “unduly oppressive,”
“unreasonably favorable,” or “shock the conscience.” Poublon, 846 F.3d at 1261 (citing Sanchez
v. Valencia Holding Co., LLC, 61 Cal. 4th 899, 910-11 (2015)). “Not all one-sided contract
provisions are unconscionable.” Sanchez, 61 Cal. 4th at 911. Substantive unconscionability exists
where terms are “unreasonably favorable to the more powerful party,” not simply an “old-
fashioned bad bargain.” Baltazar, 62 Cal. 4th at 1244 (citation omitted). Said another way, a
contract term is not substantively unconscionable when it merely gives one side a greater benefit;
rather the term must be so one-sided as to shock the conscience. Pinnacle Museum Tower Ass’n,
55 Cal. 4th at 246. The Court takes up in turn Murray’s arguments regarding the substantive
unconscionability of the arbitration agreement.
i. FEHA’s Administrative Framework
Murray argues that the arbitration agreement is substantively unconscionable because it
does not allow him to pursue administrative claims under FEHA. Dkt. No. 31 at 15. Murray
emphasizes that provisions having “the effect of dispensing with [the administrative] process
before a statutory FEHA claim must be arbitrated” create substantive unconscionability. Id. at 15
(quoting Baxter v. Genworth N. Am. Corp., 16 Cal. App. 5th 713, 734-35 (2017)).
But here, the arbitration agreement does not restrict Murray from pursuing any
administrative claim, including a claim under FEHA. Instead, it provides in relevant part,
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Arbitrable claims do not include, and this Agreement does not apply
to or otherwise restrict, administrative claims you may bring before
any government agency where, as a matter of law, the parties may
not restrict your ability to file such claims (including discrimination
and/or retaliation claims filed with the Equal Employment
Opportunity Commission and unfair labor practice charges filed
with the National Labor Relations Board). Otherwise, it is agreed
that arbitration shall be the exclusive remedy for administrative
claims.
Dkt. No. 25-1 at 4. The arbitration agreement thus explicitly states he is free to pursue any
administrative claims, and Murray’s contention that the arbitration agreement interferes with civil
rights enforcement fails. Murray fails to establish substantive unconscionability on this basis.
ii. Mutuality
Under California law, mutuality generally requires only that the arbitration clause itself be
bilateral. See Armendariz, 24 Cal. 4th at 117. Raising the spectre of a lack of mutuality, Murray
asserts that “Tesla preserves a carve out for certain disputes whose underlying occurrences still
spring from the employment relationship”; however, he cites no examples of carved-out disputes.
Dkt. No. 31 at 16. The arbitration agreement instead states that Murray “and Tesla agree that any
and all disputes, claims, or causes of action, in law or equity, arising from or relating to [Murray’s]
employment, or the termination of [Murray’s] employment will be resolved, to the fullest extent
permitted by law by final, binding and confidential arbitration[.]” Dkt. No. 25-1 at 3-4 (emphasis
omitted). Murray fails to identify any portion of the arbitration agreement that permits Tesla to
pursue claims in an alternative forum – Tesla and Murray are equally bound pursue claims relating
to the employment relationship in arbitration. Therefore, the arbitration agreement does not fail as
substantively unconscionable for lack of mutuality.
iii. Confidentiality
Murray also argues that the arbitration agreement is substantively unconscionable because
it requires Murray to submit his claims to “confidential” arbitration. Dkt. No. 31 at 16-17. Where
an agreement had “no commercial need for requiring employment-related proceedings to remain
confidential,” the California Court of Appeal found a confidentiality clause to be unconscionable
because it “benefits only [the employer] with respect to harassment, retaliation, and discrimination
claims.” Hasty v. Am. Auto. Assn. etc., 98 Cal. App. 5th 1041, 1062 (2023). Courts are skeptical
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of such provisions because they operate to prevent plaintiffs from gathering supporting evidence
for their claims, inhibit plaintiffs from informally contacting witnesses outside of discovery,
increase costs by requiring formal depositions, and discourage potential plaintiffs from filing
discrimination cases. Ramos v. Superior Ct., 28 Cal. App. 5th 1042, 1065-67 (2018).
Here, Tesla offers no commercial justification for the confidentiality provision. The
confidentiality provision is thus unconscionable because it “hampers an employee’s ability to
prove a pattern of discrimination or to take advantage of findings in past arbitrations” in the
absence of a commercial justification. Ramos, 28 Cal. App. 5th at 1066 (citation omitted). While
it is not clear that the claims here require such a showing, the arbitration agreement would apply
equally to such claims, and the unconscionability of an arbitration agreement is measured not by
reference to the plaintiff’s specific claims, but by looking to “general factors” present at the time
of contract formation. See Ramirez, 16 Cal. 5th at 506. Accordingly, the confidentiality provision
is substantively unconscionable.
iv. Single Plaintiff Requirement
Murray contends that the arbitration agreement’s single-plaintiff requirement and
class/representative waivers also establish the arbitration agreement as substantively
unconscionable. Tesla requires claims to be brought solely in an “individual capacity,”
prohibiting class or representative mechanisms.1 Dkt. No. 25-1 at 4. Murray primarily focuses on
California Court of Appeal opinions that recognize class and collective waivers in arbitration
agreements to be harsh and one-sided because they restrict only employee-initiated collective
remedies, not any category of claims employers typically bring. Dkt. No. 31 at 17-18 (citing
Hasty, 98 Cal. App. 5th at 1062-63; Navas v. Fresh Venture Foods, LLC, 85 Cal. App. 5th 626,
636 (2022)).
However, federal courts have found that the FAA displaces state law where state law might
find unconscionable a class or collective action waiver in an arbitration agreement. In Epic
Systems Corp. v. Lewis, the United States Supreme Court addressed whether employees are
1 Though Murray contends that it also bars “private attorney general” proceedings, Dkt. No. 31 at
17, that language is not included within the agreement.
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permitted to bring their claims in class or collective actions, regardless of their agreement with
their employers, and held that a group of employees could not rely on a federal statute to void their
agreement to arbitrate disputes with their employer through one-on-one arbitration. Id., 584 U.S.
497, 502 (2018) (“In the [FAA], Congress has instructed federal courts to enforce arbitration
agreements according to their terms – including terms providing for individualized proceedings.”).
There, the Court considered the applicability of the National Labor Relations Act and confirmed
that it does not conflict with the FAA’s command to enforce bilateral arbitration agreements. Id.
at 510-16. The Court held that the FAA requires courts “to enforce, not override, the terms of the
arbitration agreement” regardless of whether a countervailing rule arises under federal law or state
law. Id. at 510; see also Concepcion, 563 U.S. at 341-45; Perez Bautista v. Juul Labs, Inc., 478 F.
Supp. 3d 865, 871 (N.D. Cal. 2020). Since then, the premise that state law can invalidate an
arbitration agreement as unconscionable based on a class or collective action waiver has found
little support in federal courts. See Armstrong v. Michaels Stores, Inc., 59 F.4th 1011, 1013 (9th
Cir. 2023); Reno v. W. Cab Co., No. 18-cv-00840-APG-NJK, 2020 WL 5606897, at *4 (D. Nev.
Sep. 18, 2020) (“Consequently, under the FAA, class or collective action waivers in arbitration
agreements are enforceable even if state law would find those provisions unconscionable or
against state public policy.”); see also Kilgore v. KeyBank, Nat’l Ass’n, 718 F.3d 1052, 1058 (9th
Cir. 2013). “As a result, class and collective action waivers are enforceable in arbitration
agreements in employment actions and do not provide grounds to deny a motion to compel
arbitration.” Connell v. ByteDance, Inc., No. 24-CV-07859-NC, 2025 WL 1828472, at *19 (N.D.
Cal. July 1, 2025) (citing Armstrong, 59 F.4th at 1013; Whitworth v. SolarCity Corp., 336 F. Supp.
3d 1119, 1127 (N.D. Cal. 2018); Jasso v. Money Mart Express, Inc., 879 F. Supp. 2d 1038, 1048-
49 (N.D. Cal. 2012)).
As noted above, the Court ordered the parties to submit supplemental briefing regarding
the application of Epic Systems Corp. v. Lewis to the arbitration agreement in this case. See Dkt.
Nos. 48, 51 (supplemental briefs dated February 20, 2025). Murray contends in his supplemental
brief that his unconscionability argument centers on principles of contract formation rather than
state law doctrines resisting arbitration, and he points to several California state court opinions
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holding individual arbitration provisions unconscionable. Dkt. No. 51 at 3. However, Murray’s
contention that the arbitration agreement is rendered unenforceable simply “because it requires
bilateral arbitration” is a state law defense “that impermissibly disfavors arbitration” and which
must give way under the FAA. Epic Sys. Corp., 584 U.S. at 509-10; see also Concepcion, 563
U.S. at 341-45. Therefore, the single plaintiff requirement in Murray’s arbitration agreement with
Tesla does not support a finding of substantive unconscionability here.
v. Ambiguity of JAMS Rules
Murray asserts that the arbitration agreement’s reference to the JAMS rules is ambiguous
because the JAMS rules are everchanging and that he had no way of knowing which rules would
govern if and when he brought claims against Tesla. Dkt. No. 31 at 18. Tesla responds that
Murray fails to identify any rule to which he objects. Dkt. No. 40 at 8.
The California Supreme Court has already addressed and disposed of a substantively
identical argument. In Baltazar v. Forever 21, the court found that, where the plaintiff objected to
reliance on an arbitration service’s rules in the operative agreement yet did not identify an
arbitration service rule that he believed was unconscionable, the employer’s failure to provide the
applicable arbitration rules did not deem the provision unconscionable. See id., 62 Cal. 4th at
1246. Responding to the plaintiff’s argument of substantive unconscionability based on terms
“artfully hidden” in the arbitration service’s rules, the state’s high court pointed out that the
plaintiff failed to identify an objectionable rule and held,
Baltazar’s argument accordingly might have force if her
unconscionability challenge concerned some element of the AAA
rules of which she had been unaware when she signed the arbitration
agreement. But her challenge to the enforcement of the agreement
has nothing to do with the AAA rules; her challenge concerns only
matters that were clearly delineated in the agreement she signed.
Baltazar, 62 Cal. 4th at 1246.
Similarly, here, Murray does not identify a single JAMS rule to which he actually objects.
Murray only vaguely contends that the instability of the JAMS rules gives rise to substantive
unconscionability. Following Baltazar, the fact that Tesla did not identify each JAMS rule that
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would be applicable to Murray’s claims does not support a finding of substantive
unconscionability.
* * *
In sum, the Court finds no substantive unconscionability with respect to the arbitration
agreement’s implication for FEHA administrative claims, mutuality, and single-plaintiff
provisions, but finds that the confidentiality provision is substantively unconscionable. The Court
next considers whether the confidentiality provision is severable.
c. Severability
Having found that the arbitration agreement is both procedurally and substantively
unconscionable, albeit to a limited degree, the Court contemplates whether the unconscionable
portions of the Agreement can be severed and the remainder of the arbitration agreement enforced.
If the court finds “the contract or any clause of the contract to have been unconscionable at the
time it was made the court may refuse to enforce the contract, or it may enforce the remainder of
the contract without the unconscionable clause, or it may so limit the application of any
unconscionable clause as to avoid any unconscionable result.” Cal. Civ. Code § 1670.5(a). The
trial court has “some discretion as to whether to sever or restrict the unconscionable provision or
whether to refuse to enforce the entire agreement.” Armendariz, 24 Cal. 4th at 122. However,
“the strong legislative and judicial preference is to sever the offending term and enforce the
balance of the agreement.” Dotson v. Amgen, Inc., 181 Cal. App. 4th 975, 985-86 (2010).
When deciding whether to sever an unconscionable provision, the “dispositive question is
whether ‘the central purpose of the contract’ is so tainted with illegality that there is no lawful
object of the contract to enforce.” Poublon, 846 F.3d at 1273 (citation omitted). In determining
whether the entire agreement is tainted by the unconscionable provisions, courts consider two
factors: (1) whether “the agreement contains more than one objectionable term” and (2) whether
“there is no single provision a court can strike or restrict in order to remove the unconscionable
taint from the agreement.” Id. “Severance is not permitted if the court would be required to
augment the contract with additional terms” or if the term was drafted in bad faith. Lim, 8 F.4th at
1005-06.
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As discussed above, the Court finds the arbitration agreement raises only minimal concerns
of procedural unconscionability as a contract of adhesion, and it raises minimal concerns of
substantive unconscionability in its requirement to maintain confidentiality of the arbitration. The
offending provision of the arbitration agreement, requiring confidentiality, does not “permeate”
the offer letter or the arbitration provision, and it does not require reforming or re-writing the
agreement. The unconscionable portion of the arbitration agreement may be remedied by severing
the confidentiality requirement from the arbitration agreement, as provided by the contract’s
severance provision, without disrupting the arbitration agreement’s primary objective of
submitting Murray’s claims to arbitration with JAMS before a neutral arbitrator. See Dkt. No. 25-
1 at 4 (“If one or more of the provisions in this arbitration agreement . . . are deemed invalid,
unenforceable, or void under . . . applicable law, then the remaining provisions, or portions
thereof, shall not thereby be affected . . . and shall be given full effect”). Further, severing the
provision would both conserve a legal contractual relationship between Murray and Tesla and
prevent avoidance of the Arbitration Agreement entirely. Ronderos, 114 F.4th at 1100. Thus, the
court concludes severing the confidentiality provision is appropriate.2
2. Unenforceability as Against Public Policy
Murray argues that the arbitration argument is unenforceable because it contravenes
California public policy as articulated in McGill v. Citibank N.A., 2 Cal. 5th 945 (2017). See Dkt.
No. 31 at 19-20. In McGill, the California Supreme Court held that arbitration provisions are
invalid and unenforceable if they purport to waive a plaintiff’s statutory right to seek public
injunctive relief in all forums. See 2 Cal. 5th at 954-67. The plaintiff in that case brought claims
under California consumer protection statutes and sought an injunction prohibiting the defendant
from continuing to engage in its allegedly illegal and deceptive practices. Id. at 952. The
defendant sought to compel arbitration, and the California Supreme Court held that the arbitration
provision was unenforceable because it waived the plaintiff’s right to seek public injunctive relief
2 Severing the confidentiality requirement of the arbitration agreement does not interfere with
JAMS Rule 26, which requires the arbitrator and the arbitration service (not necessarily the
parties) to maintain confidentiality and protect sensitive information.
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under these statutes regardless of the forum. Id. at 954. The Ninth Circuit has since interpreted
California case law to establish that if a contract allows plaintiffs to seek public injunctive relief
through arbitration it does not violate the McGill rule and is enforceable. See DiCarlo v.
MoneyLion, Inc., 988 F.3d 1148, 1158 (9th Cir. 2021) (enforcing an arbitration agreement where
public injunctive relief was sought for UCL, FAL, and CLRA claims).
Here, the offer letter provides in part, “Nothing in this agreement is intended to prevent
either you or Tesla from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration.” Dkt. No. 25-1 at 4. Murray does not explain how the
arbitration agreement at issue here waives his right to pursue public injunctive relief and the Court
sees no indication that it does. Murray overstates the breadth of McGill, and his circuitous
argument that the arbitration agreement impedes enforcement of his rights under FEHA finds no
basis in the McGill decision. See Dkt. No. 31 at 20-21. Because the arbitration agreement at issue
does not “purport to waive [a party’s] right to request in any forum . . . public injunctive relief,”
the rule under McGill is not implicated. McGill, 2 Cal. 5th at 961. The Court therefore rejects
Murray’s argument that the arbitration agreement is unenforceable on this basis.
C. Motion to Stay
Tesla moves to stay these proceedings pending arbitration. “When a district court finds
that a lawsuit involves an arbitrable dispute, and a party requests a stay pending arbitration, § 3 of
the FAA compels the court to stay the proceeding.” Smith v. Spizzirri, 601 U.S. 472, 478 (2024).
Tesla’s motion to stay is therefore GRANTED.
III. CONCLUSION
For the foregoing reasons, the Court GRANTS Tesla’s motion to compel and motion to
stay. The parties SHALL FILE a joint status report on June 1, 2026, and every 90 days
thereafter, to inform the Court of the status of the arbitration proceedings.
IT IS SO ORDERED.
Dated: February 23, 2026
ARACELI MARTÍNEZ-OLGUÍN
United States District Judge
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