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Monday, April 4, 2016

Baltazar v. Forever 21: Clause Allowing Parties to Seek Preliminary Injunctive Relief in Court Does Not Render Arbitration Agreement Unconscionable

In Baltazar v. Forever 21, Inc. (12/20/12) 212 Cal.App.4th 221 (discussed here), an individual discrimination, harassment, and constructive discharge action, the trial court denied the defendants' motion to compel arbitration, and the Court of Appeal reversed, holding:
  • Unconscionability analysis survives Concepcion
  • The defendant did not show that the agreement evidenced "a transaction involving commerce," so the California Arbitration Act (CAA) applied, rather than the Federal Arbitration Act (FAA). 
  • Because the CAA allows parties to seek provisional remedies in court, an arbitration agreement allowing parties to do so was not substantively unconscionable. 
The California Supreme Court granted review and issued its opinion on Monday. In a unanimous opinion written by Justice Leondra Kruger, the Court 
affirmed, holding as follows: 

The arbitration agreement was contained within a contract of adhesion, but there was no element of surprise or duress, and the fact that Forever 21 did not give Baltazar a copy of the AAA arbitration rules did not lead to heightened scrutiny of the agreement's substantive terms.

The clause in the arbitration agreement allowing parties to seek preliminary injunctive relief in court is not unconscionable. Even if employers are more likely to seek such relief, the clause merely reiterates a provision of the CAA. Cal. Code Civ. Proc. section 1281.8(b). The Court disapproved Trivedi v. Curexo Technology Corp., 189 Cal.App.4th 387 (discussed here) to the extent it suggests otherwise.

The agreement required both parties to arbitrate all employment-related claims. The fact that it listed as examples the types claims typically brought by employees did not create confusion as to whether the clause required Forever 21 to arbitrate any employment-related claims that it may have against an employee.

The agreement's provision that "all necessary steps will be taken to protect from public disclosure [Forever 21's] trade secrets and proprietary and confidential information" did not render the agreement unconscionable. 

The opinion is available here

I believe that this is the first majority opinion written by Justice Kruger in an employment law case. I am very interested to see the impact that she and the Court's other newest member, Justice Mariano-Florentino CuĂ©llar, will have on the Court's employment law rulings. Both began serving in January, 2015. 

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