Chavarria v. Ralphs: Central District Finds Arbitration Agreement Unconscionable

In yet another decision limiting the applicability of the U.S. Supreme Court’s AT&T Mobility v. Concepcion opinion, a California Central District judge has denied the defendant’s motion to compel arbitration and held the at-issue arbitration clause to be unenforceable, without expressly referencing Concepcion.  See Chavarria v. Ralphs Grocer Co., No. CV 11-02109, 2011 U.S. Dist. LEXIS 104694 (C.D. Cal. Sept. 15, 2011) (order denying motion to compel arbitration) (available here).

The court’s unconscionability analysis was extensive, starkly distinguishing the at-issue arbitration clause from the notably consumer-friendly contract that had been adjudicated in Concepcion.  As to procedural unconscionability, the Chavarria court sharply observed that “Ralphs required Plaintiff to accept the ‘available’ Arbitration Policy not only as a condition of employment, but as a condition of Plaintiff’s application for employment” and concluded that “Ralphs does not have merely superior or stronger bargaining power, it has all of the bargaining power.”  Order at *14-15.  Substantively, the court found that “the method devised by Ralphs to select a ‘qualified arbitrator’ [is] a sham.”  Order at *16.  Moreover, the fee structure built into the at-issue arbitration clause vividly demonstrates the circumstances whereby arbitration of individual claims would result in plaintiffs effectively having no remedy for workplace violations:

Plaintiff worked at a Ralphs service deli for five months. She claims she was not paid for rest and meal breaks during which she worked. Her monetary claims likely total well under ten thousand dollars. Assuming a two day arbitration, Plaintiff would be required to pay somewhere between $7,000 and $14,000 in arbitrator’s fees alone.

Order at *22.  The restrained opinion leaves it to the reader to infer that only class treatment, in court, is likely to hold the prospect of meaningful enforcement of California’s meal and rest break laws.

Along with Brown v. Ralphs, 197 Cal. App. 4th 489 (2011), Chavarria suggests an emerging post-Concepcion jurisprudence that is far less draconian than some had projected.  In Brown, the first of The Ralphs Cases, the California Court of Appeal held Concepcion inapplicable to representative claims under PAGA, the California Labor Code’s Private Attorneys General Act.  Now, Chavarria provides a model for both federal and state courts’ evaluation of arbitration clauses to determine whether they foreclose “legitimate process and the real possibility for redress” and thus rise to the level of unconscionability.  Order at *24.