Mayers v. Volt: California Supreme Court to Address Arbitration Clause Issue

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This past February, California’s Fourth Appellate District issued an opinion where it declined to broadly interpret the U.S. Supreme Court’s AT&T Mobility v. Concepcion decision in the employment context. See Mayers v. Volt Management, No. G045036, ___ Cal. App. 4th ____ (available here). In June, the California Supreme Court agreed to take up the case, but further action is deferred pending disposition in a case from the Second Appellate District, Sanchez v. Valencia Holding Co. (201 Cal. App. 4th 74 (2011)), which addresses a related issue in the consumer context.

The question presented in Sanchez is: “Does the Federal Arbitration Act, as interpreted in AT&T Mobility LLC v. Concepcion, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?” (citations omitted). Sanchez is now fully briefed, but oral argument has not been scheduled.

In the underlying Mayers suit, the plaintiff alleged California Fair Employment and Housing Act (FEHA) violations against his former employer. The defendant responded by attempting to compel arbitration, relying on its standard arbitration clause which was included in its employment application, employment agreement, employee handbook, and ADR policy, all of which were ostensibly received by and consented to by Plaintiff in the course of his job application and orientation process. See slip op. at 3-7. The trial court denied the defendant’s motion to compel arbitration, and a unanimous panel of the Fourth Appellate District’s Division Three upheld the ruling. See id. at 12-19.

The Mayers panel rejected the defendant’s argument that even if the contested clauses were unconscionable, as the plaintiff had argued and the trial court had ruled, such terms could be severed while preserving the overall arbitration provision. See id. at 2-4. The Court of Appeal detailed the ways in which the asymmetric, unconscionable terms and procedures so pervaded the at-issue terms as to render them fatal to any enforcement of the arbitration clause: (1) the plaintiff was not provided a copy of the arbitration rules governing the process, nor told how to find them; (2) the arbitration provisions failed to identify the specific American Arbitration Association (AAA) rules that applied; and (3) the provisions included a prevailing party attorney fees term which would expose Plaintiff to greater liability for fees than if he pursued the claims in court. Thus, the court found the arbitration provisions to be unconscionable and therefore unenforceable, and stated that “[b]ecause the unconscionable terms cannot be severed from the rest of the arbitration provisions, plaintiff cannot be compelled to arbitrate his claims against defendant.” Id. at 3.

Though many have questioned whether California’s unconscionability doctrine would continue to have vitality in the wake of Concepcion, Mayers and Sanchez represent key decisions in the increasingly formidable post-Concepcion bulwark against the enforcement of arbitration clauses or terms deemed unconscionable. In Sparks v. Vista Del Mar Child and Family Servs. (available here), California’s Second Appellate District reached a substantially similar conclusion, holding that the plaintiff was not bound by an arbitration clause buried within a lengthy employee handbook.

The California Supreme Court’s decisions in Mayers and Sanchez are expected to bring much-needed clarity to California’s post-Concepcion landscape.