California court actually finds an arbitration cla…
California court actually finds an arbitration clause it can live with
McManus v. CIBC World Markets (Ca. App 2nd Dist 5/23/03) upholds mandatory arbitration under securities dealer agreement of various California statutory and common law claims arising out of termination of employment , but holds plaintiff cannot be required to pay certain costs of arbitration. Discusses substantive and procedural unconscionability defenses to arbitration, both of which must be present if agreement to arbitrate is to be held unenforceable.
Court found procedural unconscionability was established because employee was required to sign agreement on “take it or leave basis.”
Court rejected substantive unconscionability arguments based on: unfairness of arbitrator selection process, lack of requirement that arbitrator be a lawyer or a retired judge, inadequacy of discovery procedures, lack of requirement of a written opinion, and lack of mutuality of the obligation to arbitrate.
While finding cost-shifting provision substantively unconscionable, court found such substantive unconscionability did not so permeate agreement as to render it completely unenforceable, but simply severed that provision, and otherwise enforced arbitration agreement.
I may have been somewhat premature in my conclusion on 5/19/03, commenting on Ingle v. Circuit City Stores, Inc. (9th Cir. 05/13/03), that California law of unconscionability will virtually terminate mandatory arbitration of employment disputes in California. Nonetheless, it is clear that California courts, and those in many other states as well, are taking a very hard look before requiring such arbitration. Additionally, the securities arbitration agreements have been around a long time, and are better than many of more recent vintage which were created just to avoid litigating employment disputes.
