- Written by Carl Larson
“Read it before you sign it” is worthy advice for anyone. The concept applies to employers who should be sure to “read it before you draft it” as a California security company found out to its detriment this week. In Universal Protection Service, LP v. Superior Court the employer required its employees sign arbitration agreements which incorporated the American Arbitration Association’s (AAA) National rules by reference. What Universal Protection Service (“UPS”) discovered later is that those rules provide for class arbitration, which it was understandably not enthusiastic about.
Generally, arbitration is cheaper and faster than traditional litigation for resolving individual employment disputes. However, this intention may not be the reality when it comes to class arbitrations which require a much heavier lift for the arbitrator, who is paid a significant daily fee and may have little experience with class actions. Normally, the gateway issue of whether a dispute falls within the scope of an arbitration agreement is a question for a Court to decide unless the agreement grants that power to the arbitrator. Where the agreement is silent, a court will decide the scope of the agreement.
Feel the Breeze: California Supreme Court Decision Signals Shifting Wind in the State Court’s Enforcement of Arbitration Agreements
- Written by Glen Williams
In 2011, the United States Supreme Court held in its AT&T Mobility LLC v. Concepcion (Concepcion) decision that the Federal Arbitration Act (FAA) preempts California’s rule prohibiting class waivers in arbitration agreements on the grounds that they render such agreements unenforceable pursuant to the state contract law defense of unconscionability. Since then, the business and legal communities have carefully watched to see how California’s high court applies the Concepcion holding.
This week, the California Supreme Court issued its decision in the case of Sanchez v. Valencia Holding Co., overruling the lower courts’ decisions that an arbitration agreement was unconscionable and reversing the denial of the defendant’s motion to compel arbitration. The trial court in Sanchez, ruling before the Concepcion decision was issued, had found the arbitration agreement in a consumer contract for the sale of a vehicle was unconscionable based upon the class waiver, and thus denied the defendant’s motion to compel. Ruling after the Concepcion decision was issued, the appellate court in Sanchez declined to address the class waiver issue but affirmed the trial court’s denial of the motion to compel on the grounds that the arbitration agreement was both procedurally and substantively unconscionable with one-sided terms favoring the defendant to the detriment of the plaintiff.