California Court Upholds Arbitration Agreement...(Pinch Me)

Let's start the new year off with a rare bird - a California court upholding an arbitration agreement in an employment case. 

Maribel Baltazar sued her former employer, Forever 21 and three employees, for sexual harassment, wage hour violations, and a variety of other claims.  The defendants moved to compel arbitration.

The court first decided that the California Arbitration Act, rather than the Federal Arbitration Act, applied. The defendants apparently took for granted that Forever 21 was "in interstate commerce" to secure FAA coverage.  The court of appeal ruled that proof is required.   The court also noted that the agreement was silent regarding the FAA's applicability.   So, if you want the pro-arbitration Federal Arbitration Act to apply, it is better to say so in the Agreement.  And counsel must affirmatively establish interstate commerce in the motion to compel.

Anyway, the court of appeal moved to the enforceability of the agreement. The plaintiff argued that the agreement was "unconscionable" under California law.  But the court of appeal disagreed.

The plaintiff first claimed the agreement was not "mutual," meaning that the employer did not have to arbitrate, but the plaintiff did.  The key issue was whether the agreement's permitting either party to go to court to obtain "provisional" relief (such as temporary restraining orders and preliminary injunctions) rendered the agreement one-sided.  The court noted that the California Arbitration Act itself permits parties to an arbitration agreement to seek provisional relief in court.  So, it is permissible for an arbitration agreement to authorized either party to seek provisional remedies (such as injunctions) in court.

The court also held that a provision protecting the employer's confidential information contained in the arbitration agreement did not render the agreement unconscionable. 

Finally, the court held that it was lawful for the agreement to provide for the AAA employment dispute rules, but also to provide that the California Arbitration Act would apply if the rules were held invalid.  The Court did not mention whether the AAA rules were attached to the arbitration agreement.  (Other opinions have held that failure to attach a copy of the rules render the agreement unconscionable.  Silly, IMO). Why silly? As the court of appeal pointed out in this case, many courts have already held that the AAA rules are fair. How can it be "unconscionable" to not attach a copy.

The case is Baltazar v. Forever 21, Inc. et al. and the opinion is here.   Oh - what does an enforceable arbitration agreement look like?   Behold!



This Agreement to Arbitrate (hereinafter "Agreement‘) is entered into by and between Forever 21, Inc., and its subsidiary and affiliated companies, and each of their officers, directors, agents, benefit plans, insurers, successors, and assigns (hereinafter collectively "the Company‘) and [handwritten name of plaintiff], hereinafter "Employee" located at Warehouse . . . .

It is the desire of the parties to this Agreement that, whenever possible, "Disputes‘ relating to employment matters will be resolved in an expeditious manner. Each of the parties hereto is voluntarily entering into the Agreement in order to gain the benefits of a speedy, impartial dispute-resolution procedure. 

The Company and Employee mutually agree that any dispute or controversy arising out of or in any way related to any "Dispute,‘ as defined herein, shall be resolved exclusively by final and binding arbitration. Such arbitration shall be held in Los Angeles, California pursuant to the Model Rules for Arbitration of Employment Disputes of the American Arbitration Association then in effect. 

For purposes of this Agreement, the term "Disputes‘ means and includes any claim or action arising out of or in any way related to the hire, employment, remuneration, separation or termination of Employee. The potential Disputes which the parties agree to arbitrate, pursuant to this Agreement,
include but are not limited to: claims for wages or other compensation due; claims for breach of any employment contract or covenant (express or implied); claims for unlawful discrimination, retaliation or harassment (including, but not limited to, claims based on employment benefits (except where an Employee‘s benefit or pension plan contains a claims procedure which expressly provides for a final and binding arbitration procedure different from this one)), and Disputes arising out of or relating to the termination of the employment relationship between the parties, whether based on common law or statute, regulation, or ordinance.

Each of the parties voluntarily and irrevocably waives any and all rights to have any Dispute heard or resolved in any forum other than through arbitration as provided herein. This waiver specifically includes, but is not limited to, any right to trial by jury. 

This Agreement does not cover claims that Employee my have for worker‘s compensation benefits or unemployment compensation benefits. . . .

Pursuant to California Code of Civil Procedure 1281.8 either party hereto may apply to a California court for any provisional remedy, including a temporary restraining order or preliminary injunction. 

Both parties agree that the Company has valuable trade secrets and proprietary and confidential information. Both parties agree that in the course of any arbitration proceeding all necessary steps will be taken to protect from public disclosure such trade secrets and proprietary and confidential information. [¶] . . . [¶]

The provisions of this Agreement are severable, and if any one or more are determined to be void or otherwise unenforceable, the remaining provisions shall continue to be in full force and effect. If, in any action to enforce this Agreement, a Court of competent jurisdiction rules that the parties agreement to arbitrate under the Model Rules for Arbitration of Employment Disputes of the American Arbitration Association is not enforceable, then the parties agree that such Dispute shall be resolved by final and binding arbitration under the California Arbitration Act, California Code of Civil Procedure Section 1280, et seq.

The promises of the parties herein to arbitrate differences, rather than litigate them before courts or other bodies, provide consideration for each other.‖ (Capital letters, underscoring, and boldface in original.)