Friday, May 16, 2014
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C.A. Upholds Clause Allowing Arbitrator to Determine Whether Agreement to Arbitrate Is Enforceable
By a MetNews Staff Writer
A clause in an arbitration agreement requiring that an arbitrator, rather than a judge, determine whether the agreement is enforceable was upheld yesterday by the First District Court of Appeal.
The panel reversed a San Mateo Superior Court judge’s ruling that such a clause is inherently unconscionable. The justices said the clause was enforceable because the plaintiff lacked specific grounds for challenging it and the clause’s intent was clear.
It remanded the case so that an arbitrator can decide whether the arbitration agreement between Lourdes Tiri and former employer Lucky Chances, Inc. is so unconscionable that Tiri should not be bound by it.
Tiri sued for wrongful discharge, claiming that the defendant—owner of a card casino and restaurant in Colma, just south of San Francisco—fired her from her job as a cook while she was recuperating from heart surgery.
In opposing the defendant’s motion to compel arbitration, Tiri said she was called into the manager’s office after she had already worked for the company for several years, handed an arbitration agreement, and told that it was non-negotiable and she had to sign it. She said she did so, without reading it, because she was under the impression she would be fired if she didn’t.
The company denied that Tiri was told the agreement was non-negotiable, but did not dispute that her signing it was a condition of continued employment.
At the hearing on the petition, Judge Joseph Scott questioned whether it was unconscionable to require an employee to sign an arbitration agreement as a condition of keeping a job the person was already performing. The defendant’s counsel replied that was an issue that the arbitrator would have to decide because the agreement clearly stated:
“The Arbitrator, and not any federal, state, or local court or agency, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement, including, but not limited to, any claim that all or any part of this Agreement is void or voidable.”
Scott called the argument “circular” and concluded the arbitration agreement was unenforceable, both because of the circumstances under which the plaintiff was compelled to sign it and because she was not provided with a copy of the AAA arbitration rules, which were incorporated by reference.
But Justice James Humes, writing for the Court of Appeal, said there was no reason the “exclusive authority” clause should not be enforced. He said the clause did not lack mutuality, and that the plaintiff’s unconscionability arguments with respect to the agreement as a whole did not undermine the clause because her arguments were not specific to that provision.
The case is Tiri v. Lucky Chances, Inc., A136675.
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