Craig Stoker, a former senior director at the space exploration company Blue Origin, sued for retaliation, sexual and gender discrimination, harassment, breach of contract, negligent hiring, wrongful termination, and intentional infliction of emotional distress after his October 2022 termination.
Blue Origin moved to compel arbitration under a contract Stoker signed upon hiring. The employer argued that the agreement was enforceable and that Stoker’s allegations were too vague to constitute sexual harassment under the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA).
The trial court agreed with Stoker that the EFAA applied, noting his complaint alleged he was ignored because Blue Origin employees believed he should “man up” due to his gender. The trial court denied the motion without addressing whether the agreement was unconscionable.
The Court of Appeal affirmed the denial but reached its conclusion on different grounds, finding it unnecessary to decide whether the EFAA applied. The appellate court held that the arbitration agreement was unenforceable due to multiple substantive and procedural defects.
The court held the agreement procedurally unconscionable because it was a contract of adhesion. Blue Origin’s recruiter told Stoker the terms were “standard” and that “everyone has to sign to these terms,” presenting no evidence that Stoker had any opportunity to modify the agreement.
Substantively, the court held four major flaws rendered the agreement unconscionable. First, it was overbroad, requiring arbitration of any claim between Stoker and Blue Origin or its affiliates, regardless of whether the dispute arose from his employment.
Second, the agreement lacked mutuality by compelling arbitration for claims typically brought by employees while excluding from arbitration those most likely to be initiated by the employer, such as trade secret violations and breach of fiduciary duty.
Third, the agreement contained an invalid waiver of Stoker’s right to a jury trial in any court action. Under California law, predispute waivers of the right to a jury trial are contrary to public policy and unenforceable.
Fourth, the agreement included a blanket waiver of Stoker’s right to bring representative claims under the Private Attorneys General Act (PAGA). The court noted that such categorical waivers are unenforceable under state law.
The trial court had included a severability clause in the agreement, but the Court of Appeal declined to strike only the unconscionable provisions. The court reasoned that curing the defects would require rewriting the agreement to limit its scope and make it mutual, which courts cannot do.
The appellate court concluded that the multiple defects indicated a systematic effort by Blue Origin to impose arbitration as a forum advantageous only to the employer. Enforcing the remainder of the agreement would not serve the interests of justice.
The Court of Appeal affirmed the order denying the motion to compel arbitration and awarded Stoker his appellate costs.