Carlson v. Home Team Pest Defense: Court Affirms Order Denying Enforcement of Unconscionable Arbitration Agreement

A quick word on Carlson v. Home Team Pest Defense (8/17/15) --- Cal.App.4th ---, an individual action in which the Court of Appeal affirmed a trial court order denying the defendant's motion to compel arbitration, holding as follows:

The arbitration agreement was procedurally unconscionable because it was a contract of adhesion presented it on a take-it-or-leave it basis, and the defendant did not provide the plaintiff with its specific Dispute Resolution Policy or the AAA arbitration rules incorporated into it. If the plaintiff had refused to sign, she would have lost both the job offer and her unemployment insurance benefits.

The agreement was substantively unconscionable primarily because the agreement required the plaintiff to arbitrate all claims, but allowed the defendant to sue the plaintiff in court for violation of its competition and intellectual property claims. The trial court's finding that the agreement was "one-sided, objectively unreasonable, and lacked mutuality" was supported by other factors as well.

The Federal Arbitration Act (FAA) did not preempt California's unconscionability analysis, which is a "generally applicable contract defense" under the FAA.

Given all of the substantively unconscionable provisions of the arbitration agreement, the trial court did not abuse its discretion by invalidating the entire agreement, rather than severing a provision requiring the parties to share the costs of arbitration from the agreement. Severing all of the one-sided provisions from the agreement would have required the court to re-write it entirely.

The opinion is available here.