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Tuesday, March 26, 2013

Compton v. Superior Court: Court Finds Arbitration Agreement Unconscionable

In Compton v. Superior Court (American Management Services, LLC) (3/19/13) --- Cal.App.4th ---, the plaintiff, Compton, filed a putative class action against her former employer, AMS. After the Supreme Court's decision in AT&T Mobility, LLC v. Concepcion, ___ U.S. ___ (2011), AMS sought to enforce its arbitration agreement, which included a class action waiver. The trial court granted the motion to compel individual arbitration. The Court of Appeal reversed, holding:
Although the order compelling arbitration was not appealable, the Court elected to treat the appeal as a petition for writ of mandate. The Court did not consider whether the death knell doctrine applied. Slip op. at 10-11.

The unconscionability defense to enforcement of the agreement survives Concepcion. Slip op. at 11-12.  
The arbitration agreement was substantively unconscionable because it was unfairly one-sided: it required employees to arbitrate all claims; it imposed a one-year statute of limitations on employee claims, but did not impose the same period on employer claims for unfair competition and trade secret violations; and it gave the arbitrator discretion on attorney fees that may be mandatory in certain claims. Slip op. at 12-17.

Concepcion does not abrogate the rule, which the Court imputed to Armendariz, that an may be found unconscionable where it is unfairly one-sided. Slip op. at 17-22.

Excluding claims for workers compensation, unemployment benefits, and disability insurance did not make the agreement bilateral. Slip op. at 22-23.

The broad equitable relief that the agreement allowed AMS to seek in court exceeded what would be allowed under the California Arbitration Act. Slip op. at 24-25.

AMS did not show that the "business realities" exception to unconscionability analysis applied. Slip op. at 26-27.

The agreement was presented on a take-it-or-leave-it basis and was procedurally unconscionable. Slip op. at 28-32.
The opinion is available here.  I assume that the employer will petition for review and that the Supreme Court will grant and hold pending Sanchez v. Valencia Holding Co., LLC (discussed here).  

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