Court Distinguishes Baltazar.
Plaintiff Sabid Ali sued Daylight Transport, LLC, claiming he had been misclassified as an independent contractor, and alleging various California labor violations. Daylight move to compel arbitration, failed, and appealed. Sabid Ali v. Daylight Transport, LLC, No. A157104 (1/2 12/31/20) (Kline, Richman, Miller) (partial pub.).
In the trial court, Daylight had claimed Federal Arbitration Act preemption. Under the FAA, parties engaged in interstate commerce are subject to the FAA, unless they are interstate transport workers. Daylight argued in the trial court that Sabid Ali was a trucker engaged in intrastate commerce within California, delivering goods after other truckers had move the goods in interstate commerce. This argument had no traction after cases holding that a truck driver who drove the intrastate portion of interstate trips for a transportation company was engaged in interstate commerce and therefore exempt from FAA preemption. Daylight abandoned the preemption argument on appeal, because its fallback argument was that the arbitration clause was binding under state or federal law.
However, Sabid Ali argued the arbitration provision was unconscionable, a defense he could have asserted whether or not the FAA applied, since under the FAA, state law defenses to the enforcement of a contract still exist.
The Court of Appeal, performing an unconscionability analysis under California law, explained that both procedural and substantive unconscionability existed. Therefore, the arbitration clause was not enforceable.
The most consequential part of the opinion explains why it mattered in this case that the contract did not include the AAA rules that it had incorporated by reference, distinguishing the case from Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (2016). In Baltazar, the party challenging the arbitration provision on the grounds that it did not include a copy of the AAA rules was not actually objecting to any specific element in the AAA rules. Here, however, Sabid Ali did object to the fact that the AAA rules provided for a sharing of expenses, as set forth in AAA Rule 54, and that this was "artfully hidden" by the incorporation of the rules. Thus, the court found this case to be distinguishable from Baltazar. That the AAA rule being challenged as unfair was "artfully hidden" weighed in the unconscionability analysis.
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