Tuesday, February 21, 2012
Court of Appeal Throws Out ‘Unconscionable’ Employee Arbitration Agreement
By a MetNews Staff Writer
A court, not an arbitrator, must determine whether to throw out an arbitration agreement as unconscionable unless the agreement reflects a “clear and unmistakable” intent to have the arbitrator decide the issue, the First District Court of Appeal ruled Friday.
Div. Five affirmed a San Francisco Superior Court judge’s order allowing a former office manager and broker at the emissions trading firm CantorCO2e, L.P. to sue for sexual discrimination, sexual harassment, breach of contract, and various employment statute violations.
CantorCO2e argued that Lena Ajamian was bound by an “Arbitration Agreement and Policy” that she acknowledged receipt of in 2006, and by a separate and similar arbitration clause in an employment agreement she signed when she was promoted to broker in 2007. and which required arbitration under American Arbitration Association rules,
Ajamian testified that she had the 2007 agreement reviewed by an attorney, and that she objected to several of the provisions, including New York choice-of-law and forum-selection clauses. CantorCO2e is a former affiliate of New York-based Cantor Fitzgerald, L.P.
She claimed she was told that if she did not sign the agreement as-is by the end of 2007, she would not get the promotion., so she signed.
CantorCO2e gave her six months’ notice of termination, effective March 1, 2010, pursuant to the agreement. She filed suit in September of that year, and the company filed a petition to compel arbitration.
Judge Peter J. Busch denied the petition, finding that the court was the appropriate forum to determine the threshold issue, that the agreement was substantively and procedurally unconscionable, and that the unconscionability was so pervasive that the objectionable provisions could not be severed.
Justice Harry Needham, writing Friday for the Court of Appeal, acknowledged that under AAA rules, the arbitrator may decide the threshold issue. But CantorCO2e did not provide clear and unmistakable evidence that Ajamian was aware of that provision, the justice said, since she apparently was never given a copy of the AAA rules, or the rules of the National Association of Securities Dealers, which could have been selected as an alternative.
In addition, Needham explained, there were other provisions of the employment agreement that made it uncertain whether the parties intended to have the issue of unconscionability decided by an arbitrator, including language referencing the powers of a “court of competent jurisdiction” to determine that a covenant in the agreement was impermissibly “broad in scope, duration or geographical area.”
Turning to the merits, the justice said Busch did not abuse his discretion in declaring the agreement unenforceable, based upon one-sided clauses with respect to recovery of damages and attorney fees, as well as provisions requiring the employee to pay what the court said were “excessive” costs in order to arbitrate in New York
The case is Ajamian v. CantorCO2e, L.P., 12 S.O.S. 787.
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