Tuesday, March 29, 2016
State Supreme Court Rules:
Injunction Clause Did Not Render Arbitration Pact Invalid
By KENNETH OFGANG, Staff Writer
A contract clause allowing either party to an employment agreement to seek injunctive relief from the superior court in the event of a dispute, while otherwise requiring that all such disputes be submitted to binding arbitration, was not unconscionable, the state Supreme Court ruled yesterday.
Justice Leondra Kruger, writing for a unanimous court, said the challenged provision merely restated a provision of the state’s arbitration statute and was not one-sided in favor of the employer.
The high court agreed with this district’s Court of Appeal that Los Angeles Superior Court Judge Raul Sahagun erred in declaring the arbitration agreement between Maribel Baltazar and Forever 21, Inc. unenforceable.
The clothing retailer hired Baltazar in November 2007, following an interview, in the course of which, she later testified, she was presented with an application that included the arbitration clause. After initially balking, she said, she signed because she was told “sign it or no job.”
The agreement included the following language:
“Pursuant to California Code of Civil Procedure [section] 1281.8 either party hereto may apply to a California court for any provisional remedy, including a temporary restraining order or preliminary injunction.”
Baltazar left the company in 2011 and sued for harassment, racial and sexual discrimination, and retaliation. In denying the company’s motion to compel arbitration, the judge found that the agreement was procedurally unconscionable because it was offered on a take-it-or-leave-it basis by a party with unequal bargaining power, and that it was substantively unconscionable because it included illustrations of the types of claims to which it would apply, all of which would be brought only by employees; it included a one-sided trade secrets/confidentiality provision; and it incorporated American Arbitration Association rules that require arbitration even if the agreement is found unconscionable by a court.
No Substantive Unconscionability
In reversing, the Court of Appeal accepted the finding of procedural unconscionability, but said the agreement was not substantively unconscionable. It noted that the substance of the agreement bound both parties, regardless of which side brought a claim, and held that the fact that an employer is more likely to seek injunctive relief does not make the provision allowing either party to do so unconscionable.
As for the AAA rules, the court noted that the agreement provided an alternative remedy—if the AAA rules were held inapplicable for any reason, the California Arbitration Act would govern instead.
Kruger, writing for the Supreme Court, agreed with the Court of Appeal.
Even if the plaintiff was correct about employers being more likely to seek injunctive relief than employees—she “supplied us with no empirical data to support her claim,” the justice noted—this would not render the agreement unenforceable, Kruger said.
“[T]he the provisional relief clause does no more than recite the procedural protections already secured by section 1281.8(b), which expressly permits parties to an arbitration to seek preliminary injunctive relief during the pendency of the arbitration,” she wrote. “Indeed, the wording of the provisional relief clause, which explicitly refers to the parties’ right to seek preliminary injunctive relief ‘[p]ursuant to California Code of Civil Procedure [section] 1281.8,’ makes clear that the clause merely confirms, rather than expands, rights available to the parties under that code section.”
The plaintiff, Kruger pointed out, did not challenge §1281.8. The mere incorporation of the statute into the arbitration agreement did not unfairly disadvantage the employee, she said.
Neither the listing of certain types of employee claims as illustrative of the types of disputes subject to arbitration, nor the confidentiality clause, supported the trial judge’s conclusion that the agreement was unfairly one-sided, Kruger went on to say. The contract gave both parties the right to insist on arbitration and to protect information they considered confidential, she said.
The case was argued in the high court by Paul W. Cane Jr. of Paul Hastings in San Francisco and by Mark J. Valencia of Valencia & Cywinska in Los Angeles. Debra La Fetra of the Pacific Legal Foundation authored an amicus brief supporting the employer.
The case is Baltazar v. Forever 21, Inc., 16 S.O.S. 1573.
Copyright 2016, Metropolitan News Company