Santana v. Studebaker Health Care Center, LLC
The Second District reverses an order denying arbitration, holding that minor ambiguities among three onboarding arbitration documents must be reconciled by contract interpretation to give effect to a clear intent to arbitrate, that the agreement was not unconscionable, and that an inconsistent wholesale PAGA waiver should have been severed rather than used to void the whole agreement.
Santana v. Studebaker Health Care Center, LLC (2026) 120 Cal.App.5th 1
Arbitration
PAGA
Severance
Reversed
In brief. Studebaker required J. Asencion Santana to sign three arbitration-related documents at onboarding; he later brought a wage-and-hour class action with a PAGA claim, and the trial court denied arbitration, finding the documents’ “conflicts” showed no valid agreement and, alternatively, unconscionability. The Court of Appeal reversed and ordered arbitration compelled. The few ambiguities did not undermine the parties’ “clear agreement to arbitrate employment-related disputes”; they had to be reconciled by ordinary interpretation (Civ. Code, §§ 1643, 1652) to give effect to that intent, with any arbitrator-selection gap fillable under Code of Civil Procedure section 1281.6. The agreement was not unconscionable — procedural unconscionability was low and no term was substantively one-sided — and the agreement’s own severance clause should have been used to sever the single unenforceable wholesale PAGA waiver. (Santana v. Studebaker Health Care Center, LLC (2026) 120 Cal.App.5th 1, 6–7, 16–18.)
By Jonathan J. Delshad
Draft for review · source-verification pending
Facts
Santana began working at a skilled nursing facility in December 2020; Studebaker bought the facility and became his employer in January 2023. (120 Cal.App.5th at pp. 7–8.) As part of onboarding, Studebaker had him sign three arbitration-related agreements, which the court construed together because they were signed at the same time and concerned the same subject. (Id. at p. 8 & fn. 2, citing Civ. Code, § 1642.) The first, a “California Mutual Dispute Resolution Agreement,” bound both sides to arbitrate employment claims — “wrongful termination, discrimination, harassment, retaliation, breach of contract, and wage and hour violations” and related torts — while the package excepted nonindividual PAGA claims from mandatory arbitration. (Id. at pp. 7–8.) After his employment ended, Santana filed a wage-and-hour class action including a PAGA cause of action, and Studebaker moved to compel arbitration. (Id. at p. 7.)
Procedural history
The trial court denied the motion. Construing the arbitration agreement together with a confidentiality agreement (Civ. Code, § 1642), it ruled the agreement to arbitrate was invalid for lack of mutual consent because of “various ‘conflicts’ among the three arbitration-related documents,” and alternatively that it was unconscionable. (120 Cal.App.5th at pp. 6–7.) Studebaker appealed. Reviewing the legal questions de novo, the Court of Appeal “agree[d] with Studebaker on both counts” and reversed, directing the trial court to enter a new order granting the motion to compel arbitration. (Id. at pp. 6–7, 24.)
Issue
Where onboarding arbitration documents contain internal ambiguities — including an arbitrator-selection gap and an inconsistent PAGA-waiver provision — must a court invalidate the agreement for lack of mutual consent, or must it instead reconcile the conflicts through contract interpretation to effectuate the parties’ intent to arbitrate and sever any single unenforceable term? And did pairing the arbitration agreement with a confidentiality agreement render it unconscionably one-sided? (120 Cal.App.5th at pp. 6–7.)
Holding
Reversed; arbitration compelled. The agreement “was not so vague or uncertain as to be unenforceable,” and the trial court “should have resolved any ambiguity using principles of contract interpretation to reconcile conflicting provisions and give effect to the parties’ intent to arbitrate” (Civ. Code, §§ 1643, 1652), with authority to resolve arbitrator-selection disputes under Code of Civil Procedure section 1281.6 “as necessary.” (120 Cal.App.5th at pp. 6, 16.) The agreement “was not unconscionable because it was not deceptive or misleading, so the degree of procedural unconscionability was low,” and the confidentiality agreement “did not render the agreement to arbitrate unfairly one sided” because it neither exempted the employer from arbitrating employment claims nor diminished the proof required to obtain an injunction in court. (Id. at pp. 7, 18.) Finally, because the agreement contained a severance clause, the court “should have severed the sole unenforceable (and inconsistent) wholesale PAGA waiver provision, rather than concluding the entire agreement to arbitrate was unenforceable.” (Id. at p. 18.)
Reasoning
1. Ambiguity is an interpretation problem, not a consent problem. The court’s central move was to treat the documents’ “conflicts” as ordinary contract ambiguities to be reconciled, not as proof that the minds never met. Civil Code section 1652 requires that “[r]epugnancy in a contract … be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses, subordinate to the general intent and purpose of the whole contract.” (120 Cal.App.5th at p. 16, quoting § 1652; see Gilkyson v. Disney Enterprises, Inc. (2021) 66 Cal.App.5th 900, 922.) The “sole conflicting provision in the ADR agreement did not, standing alone, undermine the parties’ intent to arbitrate employment-related disputes” — and, the court added, “it is severable.” (Id. at p. 16.)
2. An arbitrator-selection gap does not void the agreement. The court rejected the notion that uncertainty about how an arbitrator would be chosen defeated consent. Because the clause “evidenced the parties’ intent to submit their disputes to binding arbitration,” the absence of a specified forum or rules did not invalidate it; the parties could agree, or the court could decide, and if they could not agree, Code of Civil Procedure section 1281.6 “provides a solution to ensure a party’s contractual right to arbitrate is enforced” by allowing the court to appoint the arbitrator. (120 Cal.App.5th at p. 16.) Any selection ambiguity “does not undermine the parties’ unmistakable intent to arbitrate.” (Ibid.)
3. Sever the bad PAGA waiver; don’t torch the agreement. The package contained a provision purporting to waive PAGA claims “the courts of this jurisdiction have expressly held are not subject to mandatory arbitration” — an unenforceable, inconsistent wholesale PAGA waiver. (120 Cal.App.5th at p. 18.) But because the agreement “included a severance provision, the court should have severed the sole unenforceable (and inconsistent) wholesale PAGA waiver provision, rather than concluding the entire agreement to arbitrate was unenforceable.” (Ibid., citing Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 662, and Gregg v. Uber Technologies, Inc. (2023) 89 Cal.App.5th 786, 797.) The presence of valid PAGA-waiver provisions alongside the invalid one made severance the correct remedy.
4. Low procedural unconscionability and no substantive one-sidedness. The court acknowledged that, like contracts of adhesion generally, the agreement reflected “some procedural unconscionability,” but found that degree “low” because the agreement was not “deceptive or misleading.” (120 Cal.App.5th at pp. 6–7.) On the substantive side, reading the confidentiality agreement together with the arbitration agreement (Civ. Code, § 1642), the court found no unfair one-sidedness: the confidentiality agreement neither “exempted the employer from the requirement to arbitrate employment-related claims nor diminished the proof required to obtain an injunction in court.” (Id. at pp. 7, 18, citing Fuentes v. Empire Nissan, Inc. (2026) 19 Cal.5th 93, 107–108, and Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 117.) Because the requisite substantive unconscionability was absent, the sliding scale could not render the agreement unenforceable. (Id. at p. 7.)
Significance
Santana is a useful counterpoint to the Supreme Court’s contemporaneous decision in Fuentes v. Empire Nissan: both read employment arbitration and confidentiality agreements together under Civil Code section 1642, but they reach opposite results because the procedural-unconscionability showings differ. Where Fuentes involved a “nearly unreadable” form pressed on an applicant in five minutes — high procedural unconscionability triggering close scrutiny and contra proferentem — Santana found only “low” procedural unconscionability, leaving the ordinary rule that ambiguities are reconciled to give effect to the intent to arbitrate. The decision is also a clear statement that internal “conflicts” in a multi-document onboarding package — and an over-broad PAGA waiver in particular — should be addressed by interpretation and severance, not by voiding the agreement wholesale, when a severance clause is present and the parties’ intent to arbitrate is evident.
Key quotes
“Though the agreement to arbitrate contains a few ambiguities, those ambiguities do not undermine the parties’ clear agreement to arbitrate employment-related disputes. And though the agreement to arbitrate reflects some procedural unconscionability—as contracts of adhesion generally do—the agreement does not contain any substantively unconscionable terms and is not unenforceable. Therefore, we reverse.” (Santana, supra, 120 Cal.App.5th at p. 6.)
“[B]ecause the agreement to arbitrate included a severance provision, the court should have severed the sole unenforceable (and inconsistent) wholesale PAGA waiver provision, rather than concluding the entire agreement to arbitrate was unenforceable.” (Santana, supra, 120 Cal.App.5th at p. 18.)
Practice pointer
For employees opposing arbitration, Santana shows that internal inconsistencies in an onboarding package will rarely defeat a motion to compel by themselves: if the documents reflect a clear intent to arbitrate and contain a severance clause, expect the court to reconcile the conflicts and sever a single bad provision (such as an over-broad PAGA waiver) rather than void the whole agreement. The stronger ground remains procedural unconscionability — develop the manner of presentation, time pressure, legibility, and any deception — because, as the Fuentes/Santana contrast shows, a high procedural showing forces close substantive scrutiny, while a “low” one leaves the agreement intact. For employers, the case is a drafting endorsement of robust severance clauses and a caution that a wholesale PAGA waiver remains unenforceable and must be paired with a valid individual-PAGA-arbitration structure under Viking River. (120 Cal.App.5th at pp. 6–7, 16–18.)
Open questions
The court resolved only enforceability and ordered arbitration of the individual claims; it did not decide how Santana’s nonindividual PAGA claims proceed once the individual claims are compelled — the question of representative-PAGA standing left in flux after Viking River and its California progeny — leaving that for the trial court and the arbitration. (120 Cal.App.5th at pp. 7, 18, 24.) The opinion also does not catalogue which specific “conflicting” provisions beyond the PAGA waiver required reconciliation, holding only that the “sole conflicting provision” did not undermine the intent to arbitrate and was severable. (Id. at p. 16.) And while it harmonizes with Fuentes on method, it leaves to future cases where, on the procedural-unconscionability spectrum, “low” gives way to the searching scrutiny Fuentes requires. (Id. at pp. 6–7.)