Failure To Attach AAA Rules And Employer’s Unilateral Ability to Modify the Arbitration Agreement Were the Issues Here
Plaintiff Peng sued her employer for employment discrimination and related claims. After the trial court denied defendant’s motion to compel arbitration, the employer appealed. On appeal, the issues were whether the employer’s failure to attach AAA rules resulted in procedural unconscionability and whether the employer’s ability to unilaterally modify the arbitration agreement resulted in substantive unconscionability. Peng v. First Republic Bank, Case No. A135503 (1st Dist. Div. 1 October 2, 2013) (Dondero, J. author 3:0) (unpublished).
No, and no were the Court’s conclusions.
The failure to attach the AAA rules, “standing alone” was insufficient to support a finding of procedural unconscionability. Interestingly, the Court distinguished a case in which an arbitration agreement referenced the Better Business Bureau arbitration rules but failed to attach them. The distinction is that the Better Business Bureau rules are not just procedural, but also limit the scope of arbitral claims, thereby “substantively limiting the defendant’s exposure.” Harper v. Ultimo, 113 Cal.App.4th 1402, 1407 (2003).
As to the employer’s ability to unilaterally change the arbitration agreement, that does not necessarily lead to substantive unconscionability, because it is reined in by the implied covenant of good faith and fair dealing, which “saves that agreement from being illusory and thus unconscionable.” Serpa v. California Surety Investigations, Inc., 215 Cal.App.4th 695, 708 (2013).
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