9th Circuit Upholds Arbitration Agreement Despite Waiver of Representative PAGA Claims
Published: June 25, 2026
Robert Cocom (“Plaintiff”) filed a putative wage and hour class action against his former employer ABM Aviation, Inc. (“ABM”). ABM removed the case to federal court and filed a motion to compel Plaintiff’s claims to arbitration. In reliance on a prior decision in Cook v. University of Southern California, the District Court concluded that the Mutual Arbitration Agreement (“MAA”) the parties signed when Plaintiff was first employed by ABM, was procedurally and substantively unconscionable and denied ABM’s motion to compel. AMB appealed the District Court’s decision, and on June 23, 2026, the Ninth Circuit Court of Appeals issued its decision reversing the District Court’s decision and remanding the case for further proceedings. The Ninth Circuit held that because the challenged provisions of the MAA were distinguishable in important ways from the provisions held unconscionable in the Cook case, the District Court erred in relying on that decision.
Background
ABM offers commercial janitorial services to airports. Plaintiff worked for ABM as an airport janitor between August 2020 and June 2024. When Plaintiff was hired, he signed the MAA which was a three-page agreement. The MAA establishes arbitration as “the exclusive remedy for any ‘Covered Claim.’” Covered claims were defined as “any claim that the Company has against me or that I have against the Company, its past, present, and future parent(s), subsidiaries, affiliates, and/or their respective past, present, and future officers, directors and/or employees, including but not limited to claims arising and/or relating in any way to my hiring, my employment or association with, my compensation, and/or the end of my employment with, the Company.”
The MAA goes on to enumerate specific claims covered: “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 unpaid fees, expenses, wages, or overtime, for unpaid compensation or penalties for missed meal or rest breaks, for wrongful termination, for unfair competition, for discrimination, harassment, or unlawful retaliation, for violation of the Uniformed Services Employment and Reemployment Rights Act, for violation of the Fair Labor Standards Act, or any federal, state, or local laws to the full extent permitted by applicable federal law after the application of Federal Arbitration Act … preemption principles.”
The MAA also contained a waiver of the right to bring “class, collective, or representative proceeding[s],” including those “under California’s Private Attorneys General Act of 2004” (“PAGA”), and a severability provision that stated: “If any provision of this Agreement is adjudged to be void or otherwise unenforceable by a court …, the parties agree that such provision may be severed ….”
The MAA also provided that claims “currently pending in litigation” were excluded from the definition of “Covered Claims.” Finally, the MAA designated the “Employment Arbitration Rules and Mediation Procedures” promulgated by the American Arbitration Association (“AAA”) as the rules to govern any resulting arbitration.
District Court’s Decision
The District Court denied ABM’s motion to compel arbitration after finding the MAA unconscionable. Pointing to the fact that the MAA was a contract of adhesion and crediting Plaintiff’s allegations that he was rushed through the signing process, the District court concluded that the MAA was procedurally unconscionable. The District Court also concluded that certain MAA provisions rendered the agreement substantively unconscionable as well. It found that (1) the language “including but not limited to” in the MAA’s definition of “covered claims” made the scope of potentially covered claims overbroad; (2) the duration of the agreement appeared to be indefinite; (3) there was a lack of mutuality because the agreement covered third parties, such as “parent(s), subsidiaries, affiliates, … officers, directors, and/or employees,” as well as “client(s) and/or vendor(s) of the Company” which could all compel Plaintiff to arbitrate, when he would have a harder time compelling them to arbitrate; and (4) the bar on public injunctive relief contravened California law.
Ninth Circuit’s Decision
The Ninth Circuit disagreed that the MAA was substantively unconscionable.
With respect to the concerns about the scope of covered claims, the Ninth Circuit found that the MAA was limited to employment-related disputes which made the case distinguishable from Cook and from a more recent California Court of Appeal’s decision in Stoker v. Blue Origin, LLC.
With respect to the concerns about the duration of the MAA, the Ninth Circuit found that the District Court only reached the conclusion that the duration was indefinite because it incorrectly held that the MAA broadly covered any dispute imaginable. However, the Court explained that fact that the MAA is limited to employment-related disputes imposes an inherent limitation on the MAA’s duration.
With respect to the concern about lack of mutuality because the MAA covered third-parties, the Ninth Circuit relied on the reasoning in an earlier case – Ayala-Ventura v. Superior Court. In that case, the court found that the inclusion of third parties in an arbitration agreement is not substantively unconscionable because the agreement at issue limited third parties’ ability to invoke the arbitration agreement “to claims against [the employer’s] employees or agents in their capacity as such,” meaning that “[a]ny claims Ayala-Ventura may have [had] against employees or agents unrelated to their role” were not covered by the agreement. Here the Ninth Circuit pointed out again that because of the MAA’s more limited scope, the lack-of-mutuality analysis is similar to the Ayala-Ventura analysis, and any lack of mutuality does not rise to the level of substantive unconscionability because claims Plaintiff may have against third parties “unrelated to their role” in ABM would not be covered by the MAA.
The Ninth Circuit pointed out that the District Court declined to address whether two other provisions in the MAA challenged by Plaintiff were also unconscionable: provisions barring (1) representative PAGA actions and (2) waiving employees’ ability to use an arbitration award for preclusive or precedential effect. However, the Ninth Circuit said that because most of the MAA’s challenged provisions were not substantively unconscionable, and any remaining unconscionable provisions could be properly severed from the agreement, Plaintiff’ unconscionability defense still fails. Further, the Court said that the lack of substantive unconscionability is dispositive, it did not need to address Plaintiff’s arguments about procedural unconscionability.
This is a good case for California employers who are already operating under legal and effective arbitration agreements with their employees. For those employers who are unsure if their arbitration agreement can withstand legal scrutiny, this case provides a useful analysis and roadmap for such employers – and their lawyers – when reviewing and updating their arbitration agreements.