“In particular, we do not find unconscionable a provision in the arbitration agreement allowing either party to seek provisional remedies . . . “
For the practitioner, Baltazar v. Forever 21, Inc., Case No. B237173 (2nd Dist. Div. 1 Dec. 20, 2012) (Mallano, J.) (published), is worth reading because it provides employers and employees with an example of a “final and binding” arbitration provision that survives various challenges and passes muster with the Court of Appeal.
Maribel Baltazar sued her former employer, Forever 21, Inc., for racial and sexual harassment and other employment-related wrongs. Employer and two employees filed a motion to compel arbitration, which motion the employee opposed, arguing the arbitration agreement was unconscionable. The trial court denied defendants’ motion, and defendants appealed.
Agreeing that the “take it or leave it” employment contract was one of adhesion, the Court of Appeal nevertheless held that it was not substantively unconscionable.
Preliminarily, the Court of Appeal concluded that the agreement was governed by the California Arbitration Act, not the Federal Arbitration Act, because no evidence was offered that the employment or any pertinent transaction involved interstate commerce. This preliminary conclusion supported the Court’s analysis that carving out provisional equitable relief from the arbitration agreement was entirely permissible.
Because California Arbitration Act applied, Cal. Code of Civ. Proc. section 1281.8 necessarily applied to the agreement. And section 1281.8 allows either party to the arbitration provision to apply to the court for a provisional remedy in connection with an arbitrable controversy. (We note in passing that sometimes other contractual arbitration provisions include carve-outs for provisional relief. Seeking provisional relief from an arbitrator may be unwieldy, because it must be enforced quickly and through a court. For example, the standard California Association of Realtors contracts for the purchase and sale of real estate typically have ADR provisions requiring mediation and arbitration with a carve-out for provisional remedies, allowing recourse to the court).
The Court also rejected the employee’s argument that the carve-out for provisional remedies did not result in a lack of mutuality. Here, the carve-out did not exempt claims more likely to be brought only by the employer. For example, of the employee’s nine claims, virtually all could be a source of injunctive relief. Thus, while ‘[a]n arbitration agreement is substantively unconscionable if employees are required to submit their disputes to arbitration while the employer remains free to pursue its claims in any forum,” such was not the case here.
The employee also argued that a provision allowing for all necessary steps to be taken to protect trade secrets and proprietary and confidential information from public disclosure was unduly harsh and one-sided. One-sided, perhaps, but not unreasonable. After all, the provision was limited to protecting trade secret or similar provision, “consistent with the duties imposed by the Uniform Trade Secrets Act (Civ. Code, sections 3426-3426.11)”. Besides, “courts have upheld confidentiality and nondisclosure agreements of general application,” allowing the Court to invoke the maxim that “the greater contains the less.”
Concluding that the agreement to arbitrate was not unconscionable, the Court of appeal reversed the order denying arbitration, ordering the trial court on remand to enter a new order granting the motion to compel arbitration.
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