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Thursday, January 3, 2013

Baltazar v. Forever 21: Right to Pursue Provisional Remedies in Court Does Not Make Arbitration Agreement Substantively Unconscionable

Here's an interesting addition to the case law on unconscionability of arbitration agreements.

In Baltazar v. Forever 21, Inc. (12/20/12), the plaintiff sued her former employer and three other employees for discrimination, harassment, and constructive discharge. The employer and two of the employees moved to compel arbitration. The plaintiff opposed, arguing that the agreement was unconscionable. The trial denied the motion, and the defendants appealed.
The Court of Appeal reversed, assuming without much discussion that unconscionability analysis survives Concepcion.  See Sanchez v. Valencia Holding Co., LLC (11/23/11) 201 Cal.App.4th 74, review granted 3/21/12 (discussed here).  The Court held:  
  1. The defendant had not offered evidence to show that the agreement evidenced "a transaction involving commerce" so as to fall under the Federal Arbitration Act ("FAA"). Slip op. at 5-8. The agreement was covered by the California Arbitration Act ("CAA") instead. Slip op. at 8. This actually helped the defendant on the substantive unconscionability analysis, below. 
  2. The agreement was procedurally unconscionable as a condition of employment. Slip op. at 12. 
  3. The agreement was not substantively unconscionable. Slip op. at 12-21.  It imposed a bilateral obligation to arbitrate, which was not impacted by the fact that it allowed either party to seek "any provisional remedy, including a temporary restraining order or preliminary injunction." 
[B]ecause the Agreement is subject to the CAA, not the FAA, [CCP] section 1281.8 would apply even if it were not expressly mentioned in the Agreement.  Put another way, an arbitration agreement governed by the CAA permits a party to seek provisional remedies, such as injunctive relief, in court regardless of whether section 1281.8 is mentioned in the agreement.  
Slip op. at 19; distinguishing Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387 (discussed here). 

The opinion is available here.  

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