Wednesday, June 7, 2017

Important California Case on Arbitration

2016 saw a couple of important cases come out of the California Supreme Court, including one on arbitration clauses.

In Baltazar v. Forever 21, Inc. (2016) 62 Cal. 4th 1237, the California Supreme Court addressed and resolved some procedural issues frequently faced in the enforcement of arbitration clauses. 

In that case, the Plaintiff, Maribel Baltazar, had submitted a job application that included a mandatory arbitration agreement that required the parties to arbitrate all claims arising from her employment. She later sued Forever 21 alleging constructive discharge and that she was subject to discrimination and harassment based on race and sex. Forever 21 moved to compel arbitration under the agreement signed when she submitted her job application. Baltazar sought to invalidate the arbitration provision as "unconscionable" because: (1) it did not include copy of the arbitration rules that applied to the arbitration proceedings; (2) the injunctive relief provision favored the employer; (3) it only pertained to employee claims; and (4) required her to do anything the employer demanded to protect its proprietary and confidential information. 

The trial court agreed with Baltazar, finding that the agreement was procedurally and substantively unconscionable, and denied Forever 21’s motion to compel arbitration. The Court of Appeal reversed, rejecting Baltazar’s argument (and the trial court's rationale) that the clause permitting the parties to seek provisional relief in superior court was “substantively unconscionable because such relief serves the interests of employers than employees.”

The Supreme Court, in a decision authored by Justice Kruger, noted that Baltazar's argument of procedural unconscionability failed because she merely attacked the fact that she was not provided with the arbitration rules rather than challenging the rules themselves. More importantly, the Court held that that even if employers would be more likely to seek injunctive relief, the clause “merely confirms, rather than expands” rights already provided under Code of Civil Procedure § 1281.8(b), which expressly permits parties to an arbitration to seek preliminary injunctive relief during the pendency of an arbitration. The Supreme Court explained that it is not substantively unconscionable to simply confirm a statutory right.

The Baltazar decision is an important one for employers seeking to enforce mandatory arbitration clauses.

No comments:

Post a Comment