Santiago Lim v. Tforce Logistics , LLC; Tforce Final Mile West , LLC

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SANTIAGO L IM ,
Plaintiff-Appellee,
v.
TFORCE LOGISTICS , LLC; TFORCE
FINAL M ILE W EST , LLC,
Defendants-Appellants,
and
TRANSFORCE , I NC.; DOES , 1–10,
Defendants.
No. 20-55564
D.C. No.
2:19-cv-04390-
JAK-AGR
OPINION
Appeal from the United States District Court
for the Central District of California
John A. Kronstadt, District Judge, Presiding
Argued and Submitted July 26, 2021
Pasadena, California
Filed August 12, 2021

-- 1 of 25 --

2 LIM V . TFORCE LOGISTICS
Before: MILAN D. SMITH, JR. and JOHN B. OWENS,
Circuit Judges, and EDUARDO C. ROBRENO,*
District Judge.
Opinion by Judge Milan D. Smith, Jr.
SUMMARY**
Arbitration
The panel affirmed the district court’s denial of
defendants’ motion to compel arbitration of employment-
related claims on the grounds that the delegation clause and
arbitration provision in the plaintiff’s contract were
unenforceable as unconscionable under California law.
Plaintiff Santiago Lim alleged that he and other delivery
drivers signed agreements purporting to classify them as
independent contractors, but defendants treated and
managed them as employees in violation of California labor
laws. Lim’s Independent Contractor Operating Agreement
included an arbitration provision.
The panel held that a delegation clause, requiring the
arbitrator to determine the gateway issue of arbitrability, was
unenforceable as to Lim because it was procedurally and
substantively unconscionable. The panel held that the
* The Honorable Eduardo C. Robreno, United States District Judge
for the Eastern District of Pennsylvania, sitting by designation.
** This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.

-- 2 of 25 --

LIM V . TFORCE LOGISTICS 3
district court properly exercised its discretion by not
severing the unconscionable provisions and enforcing what
remained of the delegation clause.
The panel held that because the delegation clause was
unenforceable, the district court properly proceeded to
determine the gateway issue of arbitrability. The panel held
that the same bases for concluding that the delegation clause
was procedurally and substantively unconscionable—the
take-it-or-leave-it circumstances and cost-splitting, fee-
shifting, and Texas venue provisions—also rendered the
arbitration provision unconscionable. The district court did
not err by not severing those same terms and declining to
enforce the arbitration provision.
COUNSEL
Steven C. Rice (argued) and Paul Marron, Marron Lawyers
APC, Long Beach, California, for Defendants-Appellants.
Joshua Konecky (argued) and Nathan B. Piller, Schneider
Wallace Cottrell Konecky LLP, Emeryville, California, for
Plaintiff-Appellee.

-- 3 of 25 --

4 LIM V . TFORCE LOGISTICS
OPINION
M. SMITH, Circuit Judge:
Defendants-Appellants Transforce, TForce Logistics,
and TForce Final Mile (TForce) appeal the district court’s
denial of a motion to compel arbitration of employment-
related claims brought by Plaintiff-Appellee Santiago Lim
(Lim). Because the district court correctly determined that
the delegation clause and arbitration provision in Lim’s
contract were unenforceable as unconscionable, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
I.
Lim worked as a delivery driver for TForce in California.
Lim alleges that TForce employs delivery drivers as part of
its business and misclassifies them as independent
contractors rather than employees. While he and other
drivers signed agreements purporting to classify them as
independent contractors, Lim alleges that TForce treated and
managed them as employees. That employment, Lim
contends, violated California labor laws.
A.
The Independent Contractor Operating Agreement
between Dynamex Operations West, Inc.1 and Lim
(contract) provides that “[t]his agreement shall be governed
by the Laws of the State of Texas, as the principal place of
business of [TForce].” The contract also provides that “[t]he
parties agree that any legal proceedings between the parties
1 When Lim’s employment began, TForce was called “Dynamex
Operations West, Inc.”

-- 4 of 25 --

LIM V . TFORCE LOGISTICS 5
arising under, arising out of, or relating to the relationship
created by this Agreement, including arbitration proceedings
discussed below, shall be filed and/or maintained in Dallas,
Texas or the nearest location in Texas where such
proceedings can be maintained.”
As to “dispute resolution,” the contract provides:
All disputes and claims arising under, out of,
or relating to this Agreement, including an
allegation of breach thereof, and any disputes
arising out of or relating to the relationship
created by this Agreement or prior
agreements between us, including any claims
or disputes arising under any state or federal
laws, statutes or regulations, and any disputes
as to the rights and obligations of the parties,
including the arbitrability of disputes
between the parties, shall be fully resolved by
arbitration in accordance with Texas’s
Arbitration Act and/or the Federal
Arbitration Act.
The contract also states that “[a]ny arbitration between
the parties will be governed by the Commercial Arbitration
Rules of the American Arbitration Association,” and that
“[t]he parties specifically agree that no dispute may be
joined with the dispute of another and agree that class actions
under this arbitration provision are prohibited.” With respect
to arbitration costs, the contract states that “[t]he parties
agree that the arbitration fees shall be split between the
parties, unless [Lim] shows that the arbitration fees will
impose a substantial financial hardship on [Lim] as
determined by the Arbitrator, in which event [TForce] will
pay the arbitration fees.” With respect to attorney’s fees, the

-- 5 of 25 --

6 LIM V . TFORCE LOGISTICS
contract provides that “[i]f any action is necessary to enforce
or interpret the terms of this Agreement, the prevailing party
shall be entitled to recover its attorney’s fees, costs and
disbursements in pursuing such action.”
B.
The parties submitted several competing declarations in
the district court concerning contract formation and
execution in the motion to compel arbitration proceedings.
We discuss the relevant facts below.
1. Lim Declaration Opposing Motion to Compel
Lim began working for TForce in 2011. During his
employment, Lim delivered “blood and blood products” to
hospitals and facilities in Southern California for TForce’s
client, the Red Cross. Lim worked from the Red Cross hub
in Pomona, California. Before working for TForce, Lim
delivered blood for the Red Cross from Pomona through a
different company.
In May 2011, TForce held a meeting of drivers making
deliveries for the Red Cross. At that meeting, TForce
presented Lim with the contract that had his name and other
information “preprinted on it.” Lim states that he and other
employees were told to sign the contract “if [they] wanted to
continue making deliveries for the Red Cross.” Lim states
that he was “not given an opportunity to negotiate the terms
of the contract” and that the contract was “largely
preprinted.” Lim declares that the 54 percent figure for
compensation was “already pre-printed on” his contract and
it was his “understanding that this was the standard amount
that [TForce] pays for Red Cross deliveries and that [he]
could either take it or go work somewhere else.”

-- 6 of 25 --

LIM V . TFORCE LOGISTICS 7
Lim explains that the entire orientation and contract
process took place during a single meeting. Lim states he
was not taken into a separate room to review the contract,
was not given an opportunity to read through the contract,
that no one explained any terms or their meanings, that no
one informed him that he could take the contract with him,
and that no one explained that he was giving up rights or that
he could seek the advice of an attorney in reviewing the
contract. Lim declares that there was “no option to sign
another document or to negotiate different terms.” Lim states
that at that time he “did not even know what arbitration was,”
no one told him about the arbitration provision or delegation
clause, and that he did not know “what a delegation clause
look[ed] like, or what ‘arbitrability’ mean[t].”
2. David Brooks Declaration Supporting Motion to
Compel
David Brooks’ declaration generally describes the
typical “contracting process” for TForce in 2011. Brooks
states that prospective drivers were invited to an “initial
meeting” at TForce’s Fullerton office after a phone
screening. These prospective drivers then “would be
provided information enabling them to arrange to undergo a
background check and drug screening.” A “follow-up
meeting” would then be held after these “preliminary
onboarding steps” were completed. At the follow-up
meeting, the prospective drivers would review the contract.
Brooks states that “preliminary onboarding steps” would
take “from one to two weeks” before the review of the
contract. Either Brooks or one of his subordinates would
conduct the “follow-up meeting.” At that meeting, each
prospective driver “would be provided with a hard copy of
the Contract to review.” “Pre-negotiated commission rates”
for drivers would “typically be negotiated at this meeting.”

-- 7 of 25 --

8 LIM V . TFORCE LOGISTICS
A prospective driver “would be asked to go to a separate
room so that they could review the contract prior to signing.”
“If the terms of the Contract were acceptable” to the
prospective driver, then that prospective driver would sign
and execute the contract.
3. Elijah Naylor Declaration Supporting Motion to
Compel
Elijah Naylor began as an assistant in the compliance
department and has served as the compliance manager for
TForce since 2017. Naylor declares that, “[b]ased on [his]
review” of Lim’s contract, Lim “negotiated a commission
rate of 54%.” Naylor states that the onboarding process at
TForce includes a meeting between “a TForce
representative” and a prospective driver to “review the
Contract.” During this meeting, according to Naylor, the
prospective driver “is provided time to review the Contract
and ask any questions he or she may have prior to signing.”
4. Jesus Ramos Reply Declaration Supporting
Motion to Compel
Jesus Ramos was an operations manager with TForce
from 2010 through 2016 and worked out of the Pomona hub.
Ramos’ declaration generally describes the 2011 onboarding
process at the Pomona hub that Lim delivered from. Ramos
declares that, in early 2011, TForce contacted drivers who
were making Red Cross deliveries through a different
delivery broker. Those drivers were invited to the Fullerton
office “if they wished to begin the process of contracting
with TForce.” Ramos states that some of these drivers
contacted TForce’s Fullerton office, “completed the
onboarding process, and signed a contract with TForce.”
Ramos describes a 2011 “informational meeting” at
TForce’s Fullerton office, and states that no contracts were

-- 8 of 25 --

LIM V . TFORCE LOGISTICS 9
signed during or after that meeting, because all drivers had
“already completed the onboarding process” and signed
contracts. Ramos states that all drivers at this “informational
meeting” already “negotiated and signed contracts with
TForce.”
II.
A different class-action proceeding alleges similar
claims against the same defendants and reached the
California Supreme Court on the issue of class certification.
See Dynamex Operations W., Inc. v. Superior Ct., 4 Cal. 5th
903 (2018). In that case, the California Supreme Court
adopted the test for determining when independent
contractors qualify as employees. See id. at 964. The
Dynamex class includes only individuals who returned
timely and complete questionnaires as part of the discovery
process. See id. at 919. Lim is not a member of that class,
and this action excludes any individuals who are class
members in that case.
In this case, TForce filed a motion to compel arbitration
of Lim’s employment-related claims based on the arbitration
provision in Lim’s contract. The district court denied the
motion, holding that the delegation clause and arbitration
provision were procedurally and substantively
unconscionable, and therefore unenforceable as to Lim.2
2 In 2015, another district court denied a motion to compel
arbitration by TForce against another plaintiff based on the same
agreement at issue here. See Saravia v. Dynamex, Inc., 310 F.R.D. 412,
416 (N.D. Cal. 2015). The district court held that the delegation and
arbitration clauses were procedurally and substantively unconscionable.
Id. at 422. In light of multiple unconscionable terms that would have

-- 9 of 25 --

10 LIM V . TFORCE LOGISTICS
TForce appealed and the district court stayed class
proceedings pending resolution of this appeal.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction pursuant to 9 U.S.C. § 16. We
review denial of a motion to compel arbitration de novo,
Brown v. Dillard’s, Inc., 430 F.3d 1004, 1009 (9th Cir.
2005), and review findings of fact underlying the district
court’s decision for clear error. Bradley v. Harris Rsch., Inc.,
275 F.3d 884, 888 (9th Cir. 2001), abrogated in part on
other grounds by Sakkab v. Luxottica Retail N. Am., Inc.,
803 F.3d 425 (9th Cir. 2015). We review a district court’s
decision not to sever unconscionable portions of an
arbitration agreement for abuse of discretion. Bridge Fund
Cap. Corp. v. Fastbucks Franchise Corp., 622 F.3d 996,
1000 (9th Cir. 2010).
ANALYSIS
I.
Lim’s contract contains a delegation clause that requires
the arbitrator to determine the gateway issue of arbitrability.
The district court held that the delegation clause was
required redrafting to cure, the district court held that the delegation and
arbitration clauses were unenforceable as to Saravia. Id. at 421–22.
In addition, two years before Saravia, a Massachusetts state court
declined to enforce the same arbitration provision, in part on waiver
grounds, but described TForce’s Texas venue clause as “repugnant” for
“forcing [a worker] to travel over 2,000 miles and cross the nation to get
paid an arguably honest wage.” Okeke v. Dynamex Operations E., Inc.,
No. MICV201002017F, 2013 WL 2182863, at *3 (Mass. Super. Ct.
May 12, 2013).

-- 10 of 25 --

LIM V . TFORCE LOGISTICS 11
unenforceable as to Lim because it was procedurally and
substantively unconscionable. We agree.
A.
Section 2 of the Federal Arbitration Act (FAA) provides
that an arbitration agreement “shall be 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. “The
final clause of § 2, generally referred to as the savings
clause, permits agreements to arbitrate to be invalidated by
generally applicable contract defenses, such as fraud, duress,
or unconscionability, but not by defenses that apply only to
arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue.” Poublon v. C.H. Robinson
Co., 846 F.3d 1251, 1259 (9th Cir. 2017) (quoting AT&T
Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)
(internal quotation marks omitted)). “[T]he party opposing
arbitration bears the burden of proving any defense, such as
unconscionability.” Id. at 1260 (quoting Pinnacle Museum
Tower Ass’n v. Pinnacle Mkt. Dev. (US), LLC, 55 Cal. 4th
223, 236 (2012)).
In deciding whether to compel arbitration under the
FAA, a court’s inquiry is limited to two “gateway” issues:
“(1) whether a valid agreement to arbitrate exists and, if it
does, (2) whether the agreement encompasses the dispute at
issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d
1126, 1130 (9th Cir. 2000) (citations omitted). If both
conditions are met, “the [FAA] requires the court to enforce
the arbitration agreement in accordance with its terms.” Id.
“However, these gateway issues can be expressly
delegated to the arbitrator where ‘the parties clearly and
unmistakably provide [for it].’” Brennan v. Opus Bank,
796 F.3d 1125, 1130 (9th Cir. 2015) (quoting AT&T Techs.,

-- 11 of 25 --

12 LIM V . TFORCE LOGISTICS
Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649
(1986)). “Such ‘clear and unmistakable evidence of [an]
agreement to arbitrate arbitrability might include a course of
conduct demonstrating assent or an express agreement to do
so’”—i.e., a delegation clause. Momot v. Mastro, 652 F.3d
982, 988 (9th Cir. 2011) (citation and alterations omitted).
Importantly, “[a]n agreement to arbitrate a gateway issue
is simply an additional, antecedent agreement the party
seeking arbitration asks the federal court to enforce, and the
FAA operates on this additional arbitration agreement just as
it does on any other.” Rent-A-Ctr., W., Inc., v. Jackson,
561 U.S. 63, 70 (2010). But “[b]ecause a court must enforce
an agreement that, as here, clearly and unmistakably
delegates arbitrability questions to the arbitrator,” the court’s
initial inquiry focuses on whether the agreement to delegate
arbitrability—the delegation clause—is itself
unconscionable. See Brennan, 796 F.3d at 1132 (citing Rent-
A-Ctr., 561 U.S. at 74).
Under California law, a court may refuse to enforce a
provision of a contract if it determines that the provision was
“unconscionable at the time it was made.” Cal. Civ. Code
§ 1670.5(a).3 To establish this defense, the party opposing
arbitration must demonstrate procedural and substantive
unconscionability, but both “need not be present in the same
degree.” Poublon, 846 F.3d at 1260 (quoting Sanchez v.
Valencia Holding Co., 61 Cal. 4th 899, 910 (2015)). Instead,
a sliding scale exists such that “the more substantively
oppressive the contract term, the less evidence of procedural
unconscionability is required to come to the conclusion that
3 Even though the contract is governed by Texas law, the parties
agree that California law governs the unconscionability inquiry.

-- 12 of 25 --

LIM V . TFORCE LOGISTICS 13
the term is unenforceable, and vice versa.” Id. (quoting
Sanchez, 61 Cal. 4th at 910).
B.
“The procedural element of unconscionability focuses
on ‘oppression or surprise due to unequal bargaining
power.’” Id. (quoting Pinnacle, 55 Cal. 4th at 246). “The
oppression that creates procedural unconscionability arises
from an inequality of bargaining power that results in no real
negotiation and an absence of meaningful choice.” Id.
(quoting Grand Prospect Partners, L.P. v. Ross Dress for
Less, Inc., 232 Cal. App. 4th 1332, 1347–48, as modified on
denial of reh’g (Feb. 9, 2015)). Oppression can be
established “by showing the contract was one of adhesion or
by showing from the ‘totality of the circumstances
surrounding the negotiation and formation of the contract’
that it was oppressive.” Id. (quoting Grand Prospect
Partners, 232 Cal. App. 4th at 1348).
A contract of adhesion is one “imposed and drafted by
the party of superior bargaining strength[ that] relegates to
the subscribing party only the opportunity to adhere to the
contract or reject it.” Id. at 1261 (quoting Armendariz v.
Found. Health Psychcare Servs., Inc., 24 Cal. 4th 83, 113
(2000)). While these circumstances can establish “some
degree of procedural unconscionability,” a contract of
adhesion is not “per se unconscionable.” Id. (quoting
Sanchez, 61 Cal. 4th at 914–15). The party who drafts an
agreement is “under no obligation to highlight the arbitration
clause of its contract, nor [i]s it required to specifically call
that clause to [a counter-party]’s attention. Any state law
imposing such an obligation would be preempted by the
FAA.” Sanchez, 61 Cal. 4th at 914 (citations omitted).
However, where California procedural unconscionability
rules “focus on the parties and the circumstances of the

-- 13 of 25 --

14 LIM V . TFORCE LOGISTICS
agreement and apply equally to the formation of all
contracts,” they are permissible and “do not
disproportionately affect arbitration agreements.” Chavarria
v. Ralphs Grocery Co., 733 F.3d 916, 926 (9th Cir. 2013).
Viewing the evidence as a whole, the district court found
that Lim was presented with a contract of adhesion, i.e., a
take-it-or-leave-it offer. As the district court found, Lim
received the contract on the day it was to be executed,
material terms—including the delegation clause—were pre-
printed, and there were no negotiations as to any of the
contract terms. Importantly, the district court found that Lim
believed that, if he wanted to continue delivering for the Red
Cross, he needed to sign the contract. Despite the general
descriptions of the onboarding process provided in the
TForce declarations, Lim’s declaration establishes that the
only choice TForce provided to him was to agree to the
delegation clause and the rest of the contract or stop
delivering for the Red Cross. These circumstances,
especially in the employment context, indicate some degree
of procedural unconscionability. See, e.g., Saravia v.
Dynamex, Inc., 310 F.R.D. 412, 420 (N.D. Cal. 2015);
Pinela v. Neiman Marcus Grp., Inc., 238 Cal. App. 4th 227,
243 (2015); Tiri v. Lucky Chances, Inc., 226 Cal. App. 4th
231, 245 (2014).
With respect to unfair surprise, TForce presented the
delegation clause in the middle of 31 numbered paragraphs,
within more than nine pages of single-spaced, 10-point font.
Nothing in the text of the agreement called Lim’s attention
to the delegation clause, and Lim was not required to sign or
initial that specific provision. This further supports some
degree of procedural unconscionability. See, e.g., OTO,
L.L.C. v. Kho, 8 Cal. 5th 111, 128 (2019) (affirming finding
of unfair surprise where the arbitration agreement consisted

-- 14 of 25 --

LIM V . TFORCE LOGISTICS 15
of 8.5-point font that was “visually impenetrable” and
“challenge[d] the limits of legibility”).
As noted, another district court denied a motion to
compel arbitration by TForce against another plaintiff based
on similar unconscionability findings regarding the same
contract at issue here. See Saravia, 310 F.R.D. at 416. While
the district court in this case correctly noted the procedural
unconscionability was not as severe as that found in Saravia,
where a language barrier existed, the facts presented here
show a situation where TForce “had overwhelming
bargaining power . . . and presented [the delegation clause]
to [Lim] on a take-it-or-leave-it basis.” See Nagrampa v.
MailCoups, Inc., 469 F.3d 1257, 1284 (9th Cir. 2006).
Accordingly, the district court correctly determined
procedural unconscionability existed with respect to the
delegation clause because “the circumstances show a degree
of unfair surprise and oppression that left [Lim] without an
ability to negotiate and to make only a take-it-or-leave-it
decision.” See Saravia, 310 F.R.D. at 420.
C.
“Substantive unconscionability examines the fairness of
a contract’s terms.” OTO, 8 Cal. 5th at 129. The substantive
unconscionability doctrine is concerned with terms that are
“unreasonably favorable to the more powerful party,” not
just “a simple old-fashioned bad bargain.” Id. at 130.
California law seeks to ensure that contracts, particularly
contracts of adhesion, do not impose terms that are overly
harsh, unduly oppressive, or unfairly one-sided. Id. at 129–
30 (citations omitted).
The California Supreme Court held that “when an
employer imposes mandatory arbitration as a condition of
employment, the arbitration agreement or arbitration process

-- 15 of 25 --

16 LIM V . TFORCE LOGISTICS
cannot generally require the employee to bear any type of
expense that the employee would not be required to bear if
he or she were free to bring the action in court.” Armendariz,
24 Cal. 4th at 110–11. Applying this principle, district courts
have found cost-sharing provisions in employment
arbitration agreements substantively unconscionable
because the employer generally has far greater resources and
the employee should not be required to pay for the
opportunity to present claims—especially where employees
would not bear those costs in federal court. See, e.g.,
Ortolani v. Freedom Mortg. Corp., No. EDCV 17-
1462(KKx), 2017 WL 10518040, at *6 (C.D. Cal. Nov. 16,
2017); Antonelli v. Finish Line, Inc., No. 5:11-cv-03874,
2012 WL 525538, at *5 (N.D. Cal. Feb. 16, 2012);
Chavarria v. Ralphs Grocer[y] Co., 812 F. Supp. 2d 1079,
1088 (C.D. Cal. 2011), aff’d Chavarria v. Ralphs Grocery
Co., 733 F.3d 916 (9th Cir. 2013).
We have similarly held, applying California law, that
substantive unconscionability exists when a fee-shifting
clause creates for employees a “greater financial risk in
arbitrating claims than they would face if they were to
litigate those same claims in federal court.” See Pokorny v.
Quixtar, Inc., 601 F.3d 987, 1004 (9th Cir. 2010),
disapproved of on other grounds by Poublon, 846 F.3d
at 1265–66. In Pokorny, the arbitration clause allowed the
arbitrator to award arbitration fees, costs, expenses,
reasonable attorney’s fees, and compensation in favor of the
prevailing party. Id. We compared this impermissible “loser
pays” situation with the rules that would apply if the dispute
were litigated in court, where a plaintiff could recover
attorney’s fees from an employer if the plaintiff prevailed,
but was not at risk of paying the employer’s fees if the
employer prevailed. Id.; see also Tompkins v. 23andMe, Inc.,
840 F.3d 1016, 1026 (9th Cir. 2016) (distinguishing loser-

-- 16 of 25 --

LIM V . TFORCE LOGISTICS 17
pays scenario in employment context from consumer context
under California law).
With respect to forum selection, as a general rule,
“inconvenience and expense” of a forum alone is not enough
to treat a forum-selection clause as unenforceable. Poublon,
846 F.3d at 1264–65 (citations omitted). Instead, the clause
must be “unreasonable” in that “the forum selected would be
unavailable or unable to accomplish substantial justice.” Id.
at 1265 (quoting Tompkins, 840 F.3d at 1027). “To assess
the reasonableness of the ‘place and manner’ provisions in
[an] arbitration clause, [the court] must take into account the
‘respective circumstances of the parties.’” Nagrampa,
469 F.3d at 1288 (quoting Bolter v. Superior Ct., 87 Cal.
App. 4th 900, 909 (2001)).
Viewed collectively, the district court concluded that the
cost-splitting, fee-shifting, and Texas venue provisions
rendered the delegation clause substantively unconscionable
as to Lim. The district court evaluated Lim’s financial
circumstances and found that the delegation clause was so
“prohibitively costly” that it deprived Lim of any proceeding
to vindicate his rights. See Saravia, 310 F.R.D. at 421
(quoting Nagrampa, 469 F.3d at 1289). These findings are
supported by the record and demonstrate substantive
unconscionability.
The contract requires that Lim arbitrate his claims in
Dallas, Texas, and that the arbitration fees be “split between
the parties,” unless Lim “shows that the arbitration fees will
impose a substantial financial hardship” on him “as
determined by the Arbitrator.” As the district court found,
Lim resides in Southern California, “take[s] home about
$600 a week,” and has joint custody of his minor daughter
who spends half of her time with him. Lim argued that he
would not be able to arbitrate his claims in Dallas because

-- 17 of 25 --

18 LIM V . TFORCE LOGISTICS
he “cannot afford to travel to Dallas, Texas” and leave his
daughter and work for a significant period of time. Lim
explained that in the delivery driver field, drivers commonly
lose opportunities for work if they are not available for
several consecutive days. As the district court correctly
concluded, these financial circumstances were more than
mere inconvenience, and when viewed collectively with the
Texas venue provision, rendered the delegation clause so
“prohibitively costly” so as to deprive Lim of any
proceeding to vindicate his rights or accomplish substantial
justice. See Poublon, 846 F.3d at 1264–65.
In addition, the requirement that Lim pay half of the
arbitration fees, including with respect to the gateway issue
of arbitrability, impermissibly imposes a “type of expense
that [Lim] would not be required to bear if he [] were free to
bring the action in court.” Armendariz, 24 Cal. 4th at 110–
11. Lim submitted the applicable AAA Commercial
Arbitration Fee Schedule and the applicable AAA
Commercial Rules, which demonstrate that he would be
required to pay fees and costs unique to arbitration. While
the district court recognized the arbitrator could excuse Lim
from paying arbitration fees if he demonstrated the
“arbitration fees will impose a substantial financial
hardship,” it reasonably found that “[t]here is no assurance
that such relief would be granted.” Therefore, the district
court correctly concluded that the cost-splitting provision, as
applied to the delegation clause, was unconscionable under
California law.
The district court also correctly concluded that the
provision permitting an award of attorney’s fees to the
prevailing party was substantively unconscionable under
California law. While the district court recognized that
neither party would likely become the prevailing party based

-- 18 of 25 --

LIM V . TFORCE LOGISTICS 19
on an initial decision of arbitrability, the prevailing-party
provision does not preclude eventual recovery for attorney’s
fees arising from the arbitrator’s initial decision on
arbitrability.
As the district court recognized, if TForce prevailed on
arbitrability and later prevailed on the merits in the
arbitration, the contract would allow TForce to seek to
recover all of its reasonable attorney’s fees, including those
incurred in connection with determining arbitrability. This
creates a chilling effect on Lim enforcing his rights because
it exposes him to the possibility of paying attorney’s fees to
TForce if he lost at arbitration, including fees associated with
the threshold issue of arbitrability. Importantly, Lim would
not face that risk in federal court because California public
policy “unequivocally prohibits an employer from
recovering attorney fees for defending a wage and hour
claim.” Ling v. P.F. Chang’s China Bistro, Inc., 245 Cal.
App. 4th 1242, 1256 (2016). As we held in Pokorny, “the
fee-shifting clause puts [plaintiffs] who demand arbitration
at risk of incurring greater costs than they would bear if they
were to litigate their claims in federal court, [so] the district
court properly held that the clause is substantively
unconscionable.” 601 F.3d at 1004 (citations omitted).
TForce argues that the prevailing party fee award does
not render the delegation clause unconscionable because
Lim would likely not be required to pay attorney’s fees
unless and until TForce prevails on the merits of Lim’s
claims. But the timing of the payment does not eliminate the
unconscionable chilling effect of the fee-shifting provision
because it still exposes Lim to liability for his employer’s
attorney’s fees if his claims are unsuccessful—which
California law prohibits. See Ling, 245 Cal. App. 4th at
1256; see also Pokorny, 601 F.3d at 1004; D.C. v. Harvard-

-- 19 of 25 --

20 LIM V . TFORCE LOGISTICS
Westlake Sch., 176 Cal. App. 4th 836, 861 (2009)
(recognizing that “certain rights—unwaivable statutory
rights or fundamental rights delineated in constitutional or
statutory provisions—are so important in our society that
their enforcement should not be chilled by the threat of
expenses unique to arbitration”).
TForce also argues, for the first time on appeal, that the
district court erred by not requiring Lim to demonstrate his
financial condition at the time he signed the contract in 2011,
rather than when TForce filed its motion to compel
arbitration in 2019. TForce waived this argument by not
raising it in connection with its motion to compel arbitration
in the district court. See Club One Casino, Inc. v. Bernhardt,
959 F.3d 1142, 1153 (9th Cir. 2020).
And even if TForce had raised this issue in the district
court, imposing arbitration expenses on an employee that he
would not otherwise bear in federal court is unconscionable
regardless of his ability to pay. See Armendariz, 24 Cal. 4th
at 110–11. Nor does Lim’s ability to pay eliminate the
unconscionable chilling effect of the attorney’s fee-shifting
provision.4 See Pokorny, 601 F.3d at 1004.
4 To the extent Lim’s ability to pay is relevant to the Texas venue
provision, nothing suggests Lim experienced any change in income since
the time the contract was signed, and TForce offered no evidence or
argument to support a finding that Lim’s ability to afford arbitration in
Texas was materially different in 2011. Instead, Lim signed the contract
with TForce in 2011 to continue making deliveries from the Red Cross
facility. In this regard, the California Supreme Court has explained that:
Absent unforeseeable (and thus not reasonably
expected) circumstances, there is no reason to think
that what an employee can afford when a wage dispute
arises will materially differ from the parties’

-- 20 of 25 --

LIM V . TFORCE LOGISTICS 21
TForce also argues, as it did in the district court, that it
will waive the provisions at issue by paying all of the
administrative costs of arbitration, not enforcing the venue
clause, and arbitrating the claims in Southern California.
TForce states that it has already filed the arbitration demand
in Los Angeles and agreed to pay all arbitration fees. But, as
the district court correctly recognized, waiving
unconscionable elements of the delegation clause does not
change the analysis of whether the delegation clause, as
drafted, is unconscionable. TForce’s later willingness to
alter the arbitration provision “does not change the fact that
the arbitration agreement as written is unconscionable and
contrary to public policy.” Armendariz, 24 Cal. 4th at 125;
see also Parada, 176 Cal. App. 4th at 1584 (“[C]ourts should
not consider after-the-fact offers by employers to pay the
plaintiff’s share of the arbitration costs where the agreement
itself provides that the plaintiff is liable . . . . [T]he [drafter]
is saddled with the consequences of the provision as drafted.
If the provision, as drafted, would deter potential litigants,
then it is unenforceable, regardless of whether, in a particular
case, the employer agrees to pay a particular litigant’s share
of the fees and costs to avoid such a holding.” (citations
omitted)). To conclude otherwise would incentivize drafters
to overreach based on the assumption they could simply
waive unconscionable terms when faced with litigation.
understanding of what the employee could afford at
the time of entering the agreement.
Sonic-Calabasas A, Inc. v. Moreno, 57 Cal. 4th 1109, 1164 (2013). In
light of this principle, several California cases have considered evidence
of a present inability to afford arbitration in assessing unconscionability
at the time the contract was made. See id. (collecting cases); Parada v.
Superior Ct., 176 Cal. App. 4th 1554, 1583–84 (2009); Gutierrez v.
Autowest, Inc., 114 Cal. App. 4th 77, 90–91 (2003).

-- 21 of 25 --

22 LIM V . TFORCE LOGISTICS
Therefore, based on the cost-splitting, fee-shifting, and
Texas venue provisions, the district court correctly
concluded the delegation clause was substantively
unconscionable as to Lim.
D.
TForce contends that the district court abused its
discretion by not severing the unconscionable provisions and
enforcing what remained of the delegation clause. We
disagree.
California Civil Code § 1670.5(a) provides:
If the court as a matter of law 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.
In discussing § 1670.5 in Armendariz, the California
Supreme Court explained:
Courts are to look to the various purposes of
the contract. If the central purpose of the
contract is tainted with illegality, then the
contract as a whole cannot be enforced. If the
illegality is collateral to the main purpose of
the contract, and the illegal provision can be
extirpated from the contract by means of
severance or restriction, then such severance
and restriction are appropriate.

-- 22 of 25 --

LIM V . TFORCE LOGISTICS 23
24 Cal. 4th at 124.
With respect to arbitration, the California Supreme Court
recognized that “multiple defects indicate a systematic effort
to impose arbitration on an employee not simply as an
alternative to litigation, but as an inferior forum that works
to the employer’s advantage.” Id. Accordingly, the
California Supreme Court instructed that “an arbitration
agreement permeated by unconscionability, or one that
contains unconscionable aspects that cannot be cured by
severance, restriction, or duly authorized reformation,
should not be enforced.” Id. at 126.
Severance is not permitted if the court would be required
to augment the contract with additional terms because
§ 1670.5 does not authorize reformation by augmentation.
Id. at 125. The same is true for California’s arbitration
statute, Cal. Civ. Proc. Code § 1281.2, which “authorizes the
court to refuse arbitration if grounds for revocation exist, not
to reform the agreement to make it lawful.” Armendariz,
24 Cal. 4th at 125; see Ajamian v. CantorCO2e, L.P.,
203 Cal. App. 4th 771, 803 (2012) (recognizing that “the
entire provision is unenforceable if the only way to cure the
unconscionability is in effect to rewrite the agreement,
[because] courts cannot cure contracts by reformation or
augmentation” (citations and quotation marks omitted)).
As the district court correctly recognized, an
unconscionable arbitration term should also not be severed
if drafted in bad faith because severing such a term and
enforcing the arbitration provision would encourage drafters
to overreach. See Parada, 176 Cal. App. 4th at 1586 (citing
Armendariz, 24 Cal. 4th at 124–25). Armendariz explained
that “[a]n employer [would] not be deterred from routinely
inserting . . . a deliberately illegal clause into the arbitration
agreements it mandates for its employees if it knows that the

-- 23 of 25 --

24 LIM V . TFORCE LOGISTICS
worst penalty for such illegality is the severance of the clause
after the employee has litigated the matter.” 24 Cal. 4th
at 124 n.13. Saravia, which analyzed the same provision at
issue here, applied this principle and recognized that
“[s]evering the unenforceable provisions of an arbitration
clause (or as here, a delegation clause) would allow an
employer to draft one-sided agreements and then whittle
down to the least-offensive agreement if faced with
litigation, rather than drafting fair agreements in the first
instance.” 310 F.R.D. at 421.
Therefore, given the pervasive unconscionability of the
delegation clause based on multiple unconscionable
provisions—the cost-splitting, fee-shifting, and Texas venue
provisions—the district court did not abuse its discretion by
not severing those unconscionable terms. See Armendariz,
24 Cal. 4th at 124–25.
II.
Because the district court correctly held that the
delegation clause was unenforceable as procedurally and
substantively unconscionable, the district court properly
proceeded to determine the gateway issue of arbitrability. In
doing so, the district court correctly concluded that the same
bases for concluding that the delegation clause was
procedurally and substantively unconscionable—the take-it-
or-leave-it circumstances and the cost-splitting, fee-shifting,
and Texas venue provisions—also rendered the arbitration
provision unconscionable. And for the same reasons it did
not err by declining to sever the unconscionable terms with
respect to the delegation clause, the district court did not err
by not severing those same terms and declining to enforce
the arbitration provision.

-- 24 of 25 --

LIM V . TFORCE LOGISTICS 25
CONCLUSION
The district court correctly determined that the
delegation clause was unenforceable because it was
procedurally and substantively unconscionable. Because the
delegation clause was unenforceable, the district court
properly proceeded to determine the gateway issue of
arbitrability, and correctly concluded that the same bases for
concluding that the delegation clause was procedurally and
substantively unconscionable—the take-it-or-leave-it
circumstances and the cost-splitting, fee-shifting, and Texas
venue provisions—also applied to render the broader
arbitration clause unconscionable. In light of the multiple
unconscionable provisions and resulting pervasive
unconscionability, the district court did not abuse its
discretion by declining to sever the unconscionable
provisions from the delegation clause and arbitration
provision.
AFFIRMED.

-- 25 of 25 --