In Which the Dream of A Bed and Breakfast Becomes A Dog’s Breakfast
“A partnership to run a bed and breakfast in Nicaragua soured.” Not an auspicious beginning. Plaintiff Lawler sued his partners, the Caseys, and their former corporation (collectively Casey) in California for fraud and related causes of action. Casey moved to compel arbitration. The trial court concluded it had “discretion to toss the whole arbitration agreement” because the arbitration provision appointed defendant Casey’s lawyer as the arbitrator. Lawler v. Casey, Case No. A132620 (Dist. 1, Div. 1 July 27, 2012) (Banke, J., author) (unpublished). Casey appealed.
Steamboat landing on beautiful Lake Nicaragua. 1902. Library of Congress.
The Court of Appeal reversed and remanded, “because the trial court should have severed the biased appointment from the remainder of the arbitration clause, instead of voiding the clause in its entirety.”
The unfair provision did not result in an agreement “permeated” by unconscionability. While the trial court had some discretion, it did not exercise its discretion, providing no findings or statement of reasons on the question of severance versus invalidation.
Of relevance is the fact that Cal. Code of Civ. Proc. section 1281.6 provides that, where an arbitration agreement does not provide a method for appointing an arbitrator, the parties may agree on a method, and if they can’t agree, or if the agreed method fails, the court, on petition, appoints the arbitrator. The situation here is analogous to one in which the parties agreed to a method, but the agreed upon method failed, allowing the court to appoint an arbitrator.
Also noteworthy is the fact that the contract between business parties, though flawed, was not a contract of adhesion, and therefore not unconscionable.
On remand, the trial court will still need to consider arguments concerning choice of law, illegality, and waiver. But at least the severance issue is resolved.
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