AAA Delegation Rule Did Not Preclude Trial Court From Ruling On Unconscionability, But Trial Court Is Reversed, Because The Arbitration Agreement Is Not Unconscionable.
After her criminal law professor allegedly said, “"Many women in the field look like dykes, just like you, Anna," Anna Eakins sued Corinthian Colleges, its college president, and her professor.
Corinthian Colleges moved to compel arbitration, and the trial court denied its motion, ruling that the arbitration provision was unconscionable.
Based on the wording of an AAA Rule, Corinthian Colleges argued on appeal that the trial court erred by reaching the issue of unconscionability. The AAA Rule in question, Commercial Rule R-7, provides: “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration.” The Court of Appeal, however, concluded that the Rule is at best “ambiguous” because it gives the power to rule to the arbitrator, without saying that a trial judge lacks the same power. Eakins v. Corinthian Colleges, Inc., E058330 (4/2 Feb. 23, 2015) (Ramirez, Hollenhorst, Miller) (unpublished).
However, the Court of Appeal reversed the trial court’s order denying the petition to compel arbitration, finding that the arbitration clause was not substantively unconscionable, and to the extent that it did have defects, it was saved by a severability clause.
DRAFTING TIPS: (1) A delegation clause that provides that the power to rule on the arbitrator’s jurisdiction, and the existence, scope or validity of the arbitration, is the sole and exclusive power of the arbitrator would not contain the ambiguity identified by the Court of Appeal. (2) Severability clauses have saved many an arbitration agreement from being consigned to the scrap heap of unconscionability.