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Friday, March 30, 2012

Wisdom v. AccentCare: Supreme Court Grants Review of Decision Holding That Arbitration Agreement Was Unconscionable

In Wisdom v. AccentCare, Inc. (2012) 202 Cal.App.4th 591 (blogged here) the Court of Appeal affirmed a trial court order denying a motion to compel arbitration where the plaintiffs (six individuals) sought monetary, injunctive, and declaratory relief based on allegations that their employer required them to work off the clock. The Court of Appeal held that the arbitration agreement was both procedurally and substantively unconscionable.

The California Supreme Court yesterday granted the employer's petition for review. The Court has stated the issue on review as follows:
Is an arbitration clause in an employment application that provides "I agree to submit to binding arbitration all disputes and claims arising out of the submission of this application" unenforceable as substantively unconscionable for lack of mutuality, or does the language create a mutual agreement to arbitrate all such disputes? (See Roman v. Superior Court (2009) 172 Cal.App.4th 1462.)
Interesting. In Roman, the trial court (Los Angeles Superior, Judge Soussan G. Bruguera) granted an employer's petition to compel arbitration of FEHA claims based on an arbitration clause similar to the one in Wisdom. The Court held: 
  1. Any procedural unconscionability that arose from the fact that the clause was in a job application was limited and, in any case, procedural unconscionability alone will not invalidate an agreement to arbitrate;
  2. The arbitration clause, which read, "I hereby agree to submit to binding arbitration all disputes and claims arising out of the submission of this application," created a bilateral, rather than a unilateral obligation to arbitrate and was not substantively unconscionable;
  3. The AAA's employment dispute rules authorized the arbitrator to order "such discovery ... as the arbitrator considers necessary to a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration," did not appear to be in conflict with the scope of discovery approved in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83; and
  4. Any requirement in the AAA rules that the plaintiff to pay one half of the arbitration fees should be severed and would not be cause to invalidate the arbitration clause. Again citing Armendariz.
Very interesting. Is Wisdom the vehicle that the California Supreme Court will use to overturn Armendariz in light of Concepcion? Or will the Court stand on unconscionability analysis as a "generally applicable contract defense" under which an arbitration agreement may be voided? Only time will tell.

I've added Wisdom to my watch list. The Supreme Court's page is here.

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