Unconscionability: Delegation Clause in Arbitration Agreement Does Not Render Entire Arbitration Agreement Unconscionable

Arbitration Agreement Wasn’t Permeated With Unconscionability

     Htay Htay Chin sued Advanced French Concepts Franchise Corp. (AFC) over a sushi franchise. AFC then moved to compel arbitration. Chin argued that the arbitration agreement, which included a “delegation provision”, was unconscionable – and the trial court agreed, denying the motion to compel arbitration. This resulted in an appealable order, and Chin duly appealed. Chin v. Advanced Fresh Concepts Franchise Corp., 194 Cal.App.4^th 704, 123 Cal.Rptr.3d 547 (2011).

 

     Above:  Bowl of sushi by Hiroshige.  Wikipedia.

     A delegation provision allows the arbitrator to determine the scope and validity of the arbitration (i.e., the decision is expressly delegated to the arbitrator to make). Such provisions are not boilerplate, because participants expect the court to rule on the scope and validity of an arbitration agreement – thus, the delegation clause may not be within a party’s expectations. Some courts have held that a delegation provision creates a conflict for the arbitrator – if the arbitrator rules against jurisdiction, then the arbitration comes to an end, and the arbitrator may expect to lose business in the future. And some courts have also found delegation clauses to be unconscionable in a contract of adhesion.

     Here, however, the Court of Appeal found nothing that would make the arbitration agreement “permeated with unconscionability”, even if the delegation clause were found to be unconscionable. Hence, the Court of Appeal concluded, “even if the delegation clause of the arbitration provision, by itself, were unenforceable, the trial court nevertheless erred in refusing to compel arbitration.”

     The opinion of the 2^nd District, Div. 4 was authored by Justice Epstein.