Unconscionability/Employment: Fourth District, Div. 3 Reverses Order Denying Petition To Compel Arbitration, Concluding Arbitration Provisions Were Not Unconscionable

Limitations On Discovery Did Not Make Arbitration Unconscionable, Because The Limitations Applied Equally.

     A vintage downtown beauty parlor, part of the Ackley Heritage Center that also includes an old-time soda fountain as well as prairie houses and farm buildings on the outskirts of town in Ackley, Iowa.  2016.  Carol M. Highsmith, photographer.  Library of Congress.

     In Daye v. International School of Cosmetology, Inc., G051562 (4/3 12/13/16) (Bedsworth, O’Leary, Moore) (unpublished), the trial court denied employer’s petition to compel arbitration on unconscionability grounds.  The Court of Appeal reversed.

     True, the arbitration provision had some degree of procedural unconscionability, because it was a contract of adhesion.  However, the provision was not so “one-sided” or “overly harsh” as to be substantively unconscionable, and a couple of provisions that were problematic could be severed.

     The chief problem the Court had to address was the limitation on discovery:  relevant AAA Consumer Rules limited discovery to document productions and identification of witnesses, exchange of of exhibits, and such “further information exchange” as the Arbitrator deemed necessary “to provide a fundamentally fair process.” 

     “For substantive unconscionability purposes,” the Court explains, “the point is that the AAA rules regarding discovery apply equally” to both plaintiff and defendant.  In short, they are not unduly one-sided.  Furthermore, because limited discovery is a characteristic of arbitration – after all, that is what is supposed to make it more economical and efficient – a rule of unconscionability that particularly burdened arbitration does not survive AT&T Mobility v. Concepcion, if the Federal Arbitration Act, which has a preemptive sweep, applies.  And here, the arbitration provision provided that the arbitration was to be conducted under the FAA.

     COMMENT:  In the recent 9th Circuit case, Martin v. Yasuda [see our post dated July 27, 2016], the cosmetology school sought to enforce an arbitration provision, but unlike School of Cosmetology, was unsuccessful.  The difference is that the issue of waiver of the right to arbitrate was at play in Martin v. Yasuda.