Court of Appeal Only Found Fee-Shifting Provision To Be Substantively Unconscionable.
The trial judge, the Hon. Mary Ann Murphy, found the employer-employee arbitration Agreements to be unconscionable and unenforceable because JAMS rules were not referenced, a fee-shifting provision permitted an award of fees to the prevailing defendant on employee’s FEHA claims without factual findings required under FEHA, and the discovery provisions in the JAMS arbitration rules provided inadequate discovery. The court declined to reform the agreements, finding they were permeated by unconscionability. Employer appealed. Sandoval v. Medway Plastics Corporation, B252412 (2/4 Dec. 17, 2014) (Manella, Willhite, Collins) (unpublished).
Reversed. The only provision the Court of Appeal found to be substantively unconscionable was the fee-shifting provision. “After severing that provision,” wrote Justice Manella, “we conclude the Agreements are enforceable.”
COMMENTS: Regarding procedural unconscionability, which the Court of Appeal found to be “more than minimal” due to “the high disparity in bargaining power”, the employer did a smart thing: both respondents had signed a Spanish version of the Agreement, and both respondents were Spanish speaking. If the Spanish speaking employees had only been presented with English language arbitration clauses, the procedural unconscionability would have been higher, perhaps tipping the balance. Drip, drip, drip. Just how much unconscionability must there be to permeate an agreement?
The severability provision, which saved the Agreements from substantively unconscionable fee-shifting, provided: “If any court of competent jurisdiction finds any part of this Arbitration Agreement is illegal, invalid or unenforceable, such a finding will not affect the legality, validity or enforceability of the remaining parts of the Agreement, and the illegal, invalid or unenforceable part will be stricken from the agreement.” A very useful provision here!