Jottings By An Employer's Lawyer

Monday, May 14, 2007

Arbitration in the 9th Circuit - Hard to Come By


Although the facts would fit the old adage — anyone who represents himself has a fool for a client — I don't think that anyone would say it was the legal representation that was the problem in today's decision holding an arbitration agreement unenforceable, Davis v. O'Melveny & Myers (9th Cir. 5/14/07) [pdf]. The fault as it were, lies squarely with the 9th Circuit's hostility to arbitration agreements mandated by employers.

O'Melveny's policy, challenged by one of its former paralegals, was found not only procedurally unconscionable, but also to contain four provisions which were substantively unconscionable. The panel's discussion holding that even a three month period between announcement of the plan and its enforcement was not enough to prevent it from being a take-it-or leave it proposition and thus procedurally unconscionable. In fact it is hard to see how any mandatory arbitration agreement can overcome this hurdle under the court's logic.

Still procedural unconscionability alone would not be enough to make it unenforceable, so the Court turned to an examination of four challenged provisions:
  1. a requirement that an employee must submit a claim within one year to binding mediation;
  2. a clause that ensures that the arbitration proceedings remain confidential unless necessary to enforce an award;
  3. the firm's reservation of the right to file injunctive actions in limited circumstances; and
  4. a limitation on filing administrative claims (although expressly permitting claims with the EEOC or comparable state agencies).

The court manages to construe each of them in such a manner that all are substantively unconscionable. The bottom line — this arbitration program doesn't pass muster, and if there were any doubt how the 9th Circuit viewed mandatory arbitration agreements (and there wasn't), this decision should certainly provide a clear answer.

Although it wouldn't be popular in the rest of the country where courts follow what seems to all but the 9th Circuit, to be a clear direction from the U.S. Supreme Court that such arbitration agreements should be enforceable, if I were a 9th Circuit employer I might be looking for a legislative solution. On second thought — maybe a moving van would be better.

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