California Mediation and Arbitration

Discovery: Sixth District Holds Arbitration Agreement Is Enforceable Where Discovery Rules Are Lenient Enough

The Court Of Appeal Distinguished Between The More Lenient Discovery Provisions In Vo And The Tougher Discovery Restrictions In Aixtron.

        In Vo v. Technology Credit Union, H051619 (6th Dist.  2/4/25) (Greenwood, Grover, Danner), the California Court of Appeal reviewed an arbitration agreement signed by Thomas Vo, an employee of Technology Credit Union (TCU). After Vo was terminated, he filed a lawsuit against TCU, alleging various violations under the Fair Employment and Housing Act. TCU moved to compel arbitration based on the arbitration agreement, but the trial court found the agreement to be unconscionable, particularly due to its lack of provisions for third-party discovery, relying on Aixtron to justify the decision.

        The Court of Appeal reversed the trial court's order, determining that the arbitration agreement was not unconscionable. The court held that the agreement provided adequate discovery, including the authority for the arbitrator to allow additional discovery if necessary. Despite concerns about third-party discovery, the court clarified that the arbitration agreement's incorporation of the JAMS Rules permitted the arbitrator to make decisions regarding the scope of discovery, thus ensuring Vo had sufficient access to necessary information for his claims.

        COMMENT. Aixtron and Vo both addressed the availability of third-party discovery in arbitration. In Aixtron, the court emphasized that the arbitration agreement failed to incorporate California Arbitration Act provisions or any rules that would grant the arbitrator authority to compel discovery from nonparties. Specifically, the court found that the arbitrator did not have the power to issue subpoenas to third parties for prehearing discovery, and thus, the agreement could not support such a discovery request.

Unconscionability: Fourth District Div. 3 Finds Arbitration Provision Presented In English To Spanish Speaking Legal Client Was Not Enforceable

Presenting An English Contract To A Spanish Speaking Legal Client Illiterate In English Was Problematic

        Justo Malo Sanchez filed a legal malpractice lawsuit against Consumer Defense Legal Group and its representatives, alleging issues with the firm's handling of his case. The retainer agreement he signed contained an arbitration clause, but Sanchez argued that the agreement was unconscionable. He contended it was procedurally unconscionable because he was illiterate in English, had a limited education, and was presented with the contract in a "take it or leave it" manner without translation or explanation. It was also substantively unconscionable due to high arbitration fees, which Sanchez could not afford.

        The trial court initially denied the motion to compel arbitration, citing concerns about the lack of proof of a valid agreement and the significant procedural unconscionability. After reconsideration, the court reversed its decision, granting the motion, convinced by defense arguments that Sanchez was not truly indigent and could afford arbitration fees. Sanchez then sought writ relief from the Court of Appeal, which granted the petition, ruling that the arbitration clause was both procedurally and substantively unconscionable. 

        The Court of Appeal agreed the contract was a standard, adhesive one and the arbitration provision was hidden, written only in English, and not adequately explained. Furthermore, the arbitration costs were prohibitively high, effectively denying Sanchez access to a forum to litigate his claims, rendering the arbitration clause unenforceable​. Sanchez v. Superior Court of Orange County, G064490 (4/3   2/3/25) (Delaney, Sanchez, Motoike).

        COMMENT: In the past, we have blogged about many cases in which a contract written in English presented some degree of unconscionability for a person who did not speak English. Here, the contract at issue was an attorney-client agreement, and a California statutory provision applies. California Civil Code section 1632(b)(6) requires a person in a trade or business who negotiates a contract in Spanish (and other specified languages) to provide a translation in Spanish of the contract. And this applies to: "A contract or agreement, containing a statement of fees or charges, entered into for the purpose of obtaining legal services, when the person who is engaged in business is currently licensed to practice law pursuant to Chapter 4 (commencing with Section 6000) of Division 3 of the Business and Professions Code."

Preemption, Choice Of Law: Effort To Compel Arbitration With CAL Choice Of Law Provision Is Preempted

Can An Employer Avoid The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 With A California Choice Of Law Provision?

        No. The EFAA preempts California law, rendering the arbitration agreement unenforceable in cases of sexual harassment disputes. That's the holding of  Casey v. Sup. Ct.,  D.R. Horton, Inc., et al (Real Parties In Interest),  A170650 (1/1  2/3/2025) (Humes, Banke, Langhorne Wilson).

        Why? "The EFAA’s purpose is plainly obstructed by an attempt to use state law to force a person who is alleging sexual harassment to arbitrate their dispute."