Poublon v. CH Robinson, 2/3/17, 9th Cir.
Another in a seemingly unending, mind-numbing stream of opinions concerning the enforceability of arbitration agreements in the employment class-action context. Here, every year plaintiff was made to sign an agreement in order to get her bonus; every year the document had an arbitration agreement. The agreement had provisions waiving PAGA representative claims, allowing the employer (but not employee) to go to court for certain claims (aka a “judicial carve-out”); putting venue in a different state, limiting discovery; making the arbitration confidential, and authorizing attorney’s fees for frivolous claims and bad faith litigation tactics. The trial court denied employer’s motion to enforce the arbitration agreement, citing unconscionability. Held: Reversed
Every couple of days we are told by another appellate court that the Federal Arbitration Act puts arbitration contracts on the same footing as other contracts, that inferences must be drawn in favor of enforceability and the party opposing the agreement carries the burden of proving the agreement is not enforceable. Sounds and feels like lip-service — Parties and courts continue to put arbitration agreements under an electron microscope, and no other type of contract receives the same degree of scrutiny.
The court said that adhesion contracts are not necessarily procedurally unconscionable. That should go without saying. Today most contracts are form contracts drafted by lawyers and offered on a “take-it-or-leave-it” basis. Attorneys draft and revise contracts because of the unending, often confusing and at times oppressive legal and regulatory requirements and pitfalls, not to mention the need to comply with federal and state laws. It is way more consistent and way more efficient for companies to use form contracts that has been vetted by the legal department. And it would be impossible for big employers or companies to have a bunch of different contracts for the same product or class of employee — Who is going to draft, review, negotiate and keep track of all the changes? And if companies can offer their contracts on a take-it-or-leave-it basis then, per the FAA, they can do the same exact thing with arbitration contracts. Don’t like it, tell Congress.
In reviewing each of the the terms of the agreement that were allegedly substantively unconscionable, the court explained why none of them should prevent enforcement of the arbitration agreement:
- The employer apparently conceded that the judicial carve-out was unconscionable. But why concede that!? The fact that there is not 100% mutuality in the arbitration agreement doesn’t “shock the conscience,” and there is no general rule that other contractual terms have to be 100% mutual. War, murder, torture, lying, fraud etc. “shock the conscience,” and the fact tht a company may have to rush to court to save its IP doesn’t fall in the same category. In any case, 9C simply said this term could be excised from the agreement.
- The waiver of representative PAGA claims was unenforceable; but that also didn’t make the waiver unconscionable. It’s a simple solution: The PAGA claim stays in court, and the remaining claims go to arbitration.
- Per 9C precedent, a forum selection clause also does not render the arbitration agreement unconscionable; in fact, venue selection clauses are, subject to certain limits, enforceable. Moreover, the agreement here allows the arbitrator to order a different venue if it makes sense to do so. (This is the one part of the opinion that causes concern — California employees should not be made to travel to a different state to protect to their rights!)
- The fact that the arbitrator was given the authority to award attorney’s fees for frivolous claims, counterclaims and bad faith litigation tactics merely echoes Cal. Code Civ. Pro. 128.7, our counterpart to Rule 11. That term does not rewrite the attorney’s fees statutes related to wage and hour claims, all of which are probably one-way fee shifting statutes.
- On the issue of limited discovery, the California Supreme Court has already said that limited discovery in arbitration is okay. Limited discovery helps preserve the simplicity, informality and expedition of arbitration. Moreover, the agreement allows the arbitrator to order more discovery upon a showing of good cause.
- The term making the arbitration confidential was also not unconscionable, a conclusion supported by a California Court of Appeal opinion. And the provision would not prevent the employee from conducting discovery.
Even though this opinion makes one hope there is light at the end of the tunnel, right now it feels that this winter is never going to end!