Arbitration, Employment, Confidentiality, Construction, Unconscionability: First District, Division 1: Armendariz Is Good Law, Making Law Firm's Arbitration Agreement Unconscionable

Under Armendariz Framework, Court Finds Parties' Arbitration Agreement Is Unconscionable.

     Constance Ramos, "an experienced litigator and patent practitioner with a doctorate in biophysics" petitioned the Court of Appeal to vacate superior court Judge John Stewart's order granting the motion of her erstwhile employer, Winston & Strawn, to compel arbitration of her employment/FEHA dispute. Ramos v. Superior Court, A153390 (1/1  11/2/18) (Margulies, Humes, Banke). 

     Ramos had filed a complaint against Winston asserting causes of action for sex discrimination, retaliation, violation of California's Equal Pay Act, and wrongful termination. Relying on the arbitration agreement between Ramos and Winston, the superior court had granted Winston's motion to compel arbitration, while severing portions of the arbitration agreement deemed unconscionable, prompting Ramos's petition to the Court of Appeal.

    The Court of Appeal vacated the superior court's order, finding that the arbitration agreement contained four unconscionable terms: "The provisions requiring Ramos to pay half the costs of arbitration, pay her own attorney fees, restricting the ability of the panel of arbitrators to "override" or "substitute its judgment" for that of the partnership, and the confidentiality clause, are unconscionable and significantly inhibit Ramos's ability to pursue her unwaivable statutory claims." The agreement was too flawed to allow for severance -- in effect, the court would have had to rewrite the agreement between the parties to make it enforceable.

    This case has a number of interesting aspects:

• The opinion clearly states that Armendariz is still good law, notwithstanding AT&T Mobility v. Concepcion  and the  FAA -- probably dictum, since Winston failed to show that the  FAA applied in the case.
• The reason the confidentiality provision was substantively unconscionable was because it required all aspects of the arbitration to be secret, hindering the ability of Ramos to develop a case.
• An issue in the case, given Ramos's status as an "Income Partner" was whether she was to be considered as an employee or as a partner, for purposes of applying the law firm's partnership agreement, and the procedural protections of Armendariz. The Court explained that it did not need to decide whether Ramos was an employee or a partner, because the critical points, requiring that the Armendariz protections apply, were that Ramos asserted statutory rights Armendariz held to be unwaivable, and Winston was in a superior bargaining position vis-a-vis Ramos.
• In construing the scope of the arbitration clause, the Court reminds us that "arise under" or "relate to" is broader than "arising from" or "arising out of" an agreement.

    COMMENT. Why not include a provision in an employee/employer arbitration agreement to the effect that, if any provisions are determined by a judge or an arbitrator to be inconsistent with the five minimum requirements for the lawful arbitration of unwaivable statutory rights, as set forth in Armendariz, then the five requirements in Armendariz shall take precedence and govern the application of the agreement. Would this make it easier for employers to enforce arbitration agreements precisely because it would protect employees with Armendariz minimum requirements?