Articles from January 2012

The California Court of Appeal has issued a ruling confirming the continuing viability of the doctrine of unconscionability in California, notwithstanding the U.S. Supreme Court’s ruling in AT&T v. Concepcion.  See Wisdom v. Accentcare, No. C065744 (Cal. Ct. App. Jan. 3, 2012) (available here).  In Wisdom, a unanimous Third Appellate District panel held that an arbitration agreement contained in an employment application was both procedurally and substantively unconscionable.  Id.

Relying on the California Supreme Court’s decision in Armendariz v. Foundation Health Psychcare Services, 24 Cal 4th 83 (2000), the Wisdom panel held that the pre-hire agreement at issue was procedurally unconscionable “because its language implied there was no opportunity to negotiate, because the rules of any arbitration were not spelled out in the agreement . . . and because plaintiffs did not understand they were waiving their right to a trial.”  Slip op. at 2.  

Further, the panel concluded that the agreement was substantively unconscionable because it lacked mutuality of obligation.  See Slip op. at 16.  While the job application required the applicant to promise to arbitrate any claims against the defendant, there was no corresponding pledge by the defendant to arbitrate potential claims against the applicant.  Slip op. at 13-14.  To underscore this point, the panel noted the language of another arbitration agreement used by the defendant, which expressly provided that both the company and employee would arbitrate any disputes.  Slip op. at 14.

The panel rejected defendants’ argument that the pre-hire agreement was merely “ambiguous” as to mutuality and therefore enforceable because of public policy favoring arbitration.  Slip op. at 16.

The stage has been set for the California Supreme Court’s first major ruling interpreting AT&T v. Concepcion.  The U.S. Supreme Court recently vacated a judgment invalidating arbitration provisions in Sonic-Calabasas v. Moreno, and remanded the case back to the California high court for further consideration in light of Concepcion.  Sonic-Calabasas v. Moreno, 80 U.S.L.W. 3260 (U.S. Oct. 31, 2011), reversing and remanding 51 Cal. 4th 659 (2011). 

In its now-vacated ruling, the California Supreme Court held that provisions in an arbitration agreement that purportedly waived an employee’s right to seek an administrative “Berman” hearing before the Labor Commissioner are substantively and procedurally unconscionable.  Sonic-Calabasas v. Moreno, 51 Cal. 4th 659, 686 (2011) (available here).  The court also found that the Berman hearing waiver violated public policy by infringing upon the employee’s statutory rights to the hearing and “the possible protections that follow from it.”  Id. at 678.  Lastly, the court concluded that the Federal Arbitration Act does not preempt either holding.  Id. at 695. 

Now that Sonic-Calabasas has been remanded with the directive to apply Concepcion, the California Supreme Court seems poised to issue a ruling that limits Concepcion to its factual circumstances.  The court previously denied the petition for review in Brown v. Ralphs, 197 Cal. App. 4th 489 (2011), thereby sustaining the Court of Appeal’s holding that that Concepcion is inapplicable to claims brought pursuant to PAGA, the California Labor Code’s Private Attorneys General Act.