Wednesday, June 24, 2026
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Ninth Circuit Says District Court Judge Applied State Unconscionability Cases Too Broadly
Opinion Says California Jurisprudence Finding Arbitration Agreements to Be Unenforceable Based on Sweeping Scope Does Not Apply Where Other Terms Indicate Intent to Limit to Employment Context
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday revived a company’s request to compel arbitration in a putative class action accusing it of violating California labor laws, saying that a judge misapplied state unconscionability cases, which have invalidated employment contracts that provide sweeping coverage for all claims, to an agreement containing other terms indicating an intent to limit the scope to work-related causes of action.
At issue is language in the defendant’s “Mutual Arbitration Agreement” (“MAA”), signed by the employee during his onboarding process, which provides:
“Covered Claims include, but are not limited to, any claim for breach of contract, for any provision of federal or state labor code or a Wage Order,…for wrongful termination, for unfair competition, for discrimination, harassment, or unlawful retaliation, for violation of…any federal, state, or local laws to the full extent permitted by applicable…law….”
Circuit Judge Lawrence VanDyke authored yesterday’s opinion, joined in by Circuit Judge Eric C. Tung and Senior Circuit Judge Richard C. Tallman. VanDyke acknowledged the 2024 state Court of Appeal decision by this district’s Div. Four in Cook v. University of Southern California, which found that a provision requiring the arbitration of “all claims, whether or not arising out of…employment” was substantively unconscionable.
However, VanDyke reasoned that the case, and others like it, are distinguishable because the MAA contained other provisions that evince an intent to limit the application of the agreement to employment-related claims, declaring:
“Under California law, ‘[w]here a contract is susceptible to two interpretations,…a court should select [that which] makes the contract valid.’…Cocom cites the conflicting rule that ambiguities…are construed against the drafter….But California law establishes a hierarchy…: interpreting a contract against the drafter should only be done ‘[i]n cases of uncertainty not removed by the preceding rules.’…One of those ‘preceding rules’ is the instruction to favor interpretations that render the contract legal.”
The question arose after Robert Cocom filed a putative class-action complaint against his former employer, ABM Aviation Inc., and other unnamed responsible parties in Los Angeles Superior Court on Aug. 27, 2024, asserting state wage-and-hour causes of action. ABM removed the case to federal court the following month, asserting diversity between the California plaintiff and the company, a citizen of Georgia and Texas.
In October 2024, ABM moved to compel arbitration and to strike any class allegations based on a provision in the MMA specifying that “Covered Claims must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.”
After Cocom asserted that the agreement was unconscionable under California law, District Court Judge Wesley L. Hsu of the Central District of California denied the defendant’s requests in December 2024, opining:
“The Cook agreement required arbitration of all claims ‘whether or not arising out of Employee’s University employment, remuneration or termination.’…ABM’s Arbitration Agreement, likewise, covers claims beyond those arising out of Cocom’s employment because it explicitly notes that it covers claims ‘including, but not limited to those arising from and/or relating in any way’ to Cocom’s employment, hiring or termination.”
Hsu also took issue with the agreement being “indefinite in duration” and “non-mutual,” which he said, together with the breadth, were “the exact three issues” that compelled the Div. Four to affirm the trial court’s declination to sever the offending terms in Cook. He declared:
“As such, the Court declines to sever offending terms and instead refuses to enforce the entirety of the Arbitration Agreement, including the class waiver.”
Unconscionability Defense
Saying that “[u]nconscionability” is [a] defense” recognized by the Federal Arbitration Act, VanDyke noted that “California employs a sliding scale approach to [procedural and substantive] unconscionability.” Turning to the latter category, he opined:
“Because we conclude that most of the MAA’s challenged provisions are not substantively unconscionable, and that any remaining unconscionable provisions can be properly severed, Cocom’s unconscionability defense fails. The lack of substantive unconscionability is dispositive, so we need not address Cocom’s arguments about procedural unconscionability.”
Distinguishing the Cook decision, he wrote:
“As an initial matter, the MAA lacks the language underlying the Cook court’s interpretation of the agreement’s scope. There, the agreement explicitly covered claims ‘whether or not arising out of [Cook’s] University employment, remuneration or termination.’…The only indication that the MAA could be read in similarly broad fashion is the ‘including but not limited to’ language in the definition of covered claims. The district court read that phrase to mean that the MAA’s scope is completely unlimited (other than claims explicitly excepted). We reject that reading.”
Limiting Language
Pointing to the “interpretive principle of ejusdem generis,” under which specific words that follow general language are construed to limit the scope of contractual terms, the jurist opined:
“The general terms in the MAA––‘all disputes’ and ‘any claim’ are narrowed by the subsequent list of specific terms: ‘my hiring, my employment, my compensation, and/or the end of my employment, with the Company,’ as well as ‘any claim for breach of contract, for any provision of federal or state labor code or a Wage Order,…’ and the like. The employment-related nature of the enumerated terms restricts the meaning of the more general terms to encompass only employment-related disputes.”
Adding that “[i]t was the prospect of [other] sorts of claims––tort suits unrelated to employment––that loomed large in the Cook court’s analysis,” he remarked:
“Nothing in the MAA’s enumeration of covered claims requires that the MAA covers tort claims—or any other claims––unrelated to employment. Applying the principle of ejusdem generis therefore distinguishes this case from Cook….”
Not Automatic
Citing this year’s decision by the Fifth District Court of Appeal in Ayala-Ventura v. Superior Court, he commented: “Even if the district court had correctly interpreted the MAA’s scope, it still would have erred in assuming that the definition of covered claims automatically rose to the level of substantive unconscionability. The…decision in Ayala-Ventura…noted that ‘the Cook court did not conclude an arbitration agreement covering all claims including those unrelated to employment is per se unconscionable.’…The Cook court did not need to address the issue categorically because the employer there ‘appear[ed] to concede’ that an agreement covering claims unrelated to employment would have been ‘unconscionably broad,’ a concession ABM has not made….”
Rejecting Hsu’s characterization of the MAA as indefinite in duration, VanDyke said that “[t]he fact that the MAA is limited to employment-related disputes imposes an inherent limitation on the agreement’s duration.”
He also did not agree that there was a “lack of mutuality” between the parties arising from the requirement that Cocom arbitrate claims against affiliated third parties, noting that “employment-related claims have an inherent asymmetry: an employee is far more likely to sue the employer and third parties––often many at a time, as Cocom has done here—rather than the other way around.”
Addressing severability, he wrote:
“Even if the MAA’s waivers of representative…actions or of public injunctive relief were substantively unconscionable, those provisions would be severable, so we do not need to address whether either waiver rises to the level of substantive unconscionability.”
The case is Cocom v. ABM Aviation Inc., 25-3246.
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