In Sanchez v. CarMax Auto Superstores California, LLC, ___ Cal.App.4th ___ (March 4, 2014), the California Court of Appeal (Second Appellate District, Division One) reversed the order of the Los Angeles County Superior Court (Judge Miller) denying defendant’s motion to compel arbitration.
Plaintiff sued his former employer for a multitude of claims stemming from his allegation that his employment had been terminated because he had raised safety issues about the cars defendant sold.
Defendant moved to compel arbitration based on a “dispute resolution agreement” (the arbitration agreement) that plaintiff had signed six years earlier as part of his application for employment. The trial court denied the motion, finding that the arbitration agreement was unconscionable.
The appellate court disagreed and reversed the ruling. First, the court addressed procedural unconscionability. Because the arbitration agreement was presented to plaintiff “on a take-it-or-leave-it basis and his signature was a precondition for employment” with defendant, it was a standard contract of adhesion imposed and drafted by defendant, who had superior bargaining power. Therefore, because plaintiff “had no real choice whether to sign, the agreement was procedurally unconscionable.” This, in and of itself, however, did not make the agreement unenforceable because there was no “oppression or surprise” associated with the presentation of the agreement to plaintiff. Indeed, “the stand-alone arbitration agreement was not hidden, but prominently featured as part of the employment application.”
The appellate court also determined the arbitration agreement was not substantively unconscionable because it was not “unduly harsh, oppressive, or one-sided.” Although the agreement did contain limitations on discovery in arbitration, the limitations were applicable to both parties, and plaintiff failed to show that the limitations would prevent him from obtaining necessary evidence. The court further found the following requirements of the arbitration agreement did not render it substantively unconscionable: requiring plaintiff to submit a two-page arbitration demand identifying the nature of the dispute and identifying witnesses; requiring a court to stay litigation of any nonarbitrable claims and requiring any determinations by the arbitrator regarding disputed factual or legal issues to have “full force and effect [res judicata] in any later court lawsuit on any nonarbitrable claims;” leaving it “to the discretion of the arbitrator whether to make factual findings;” and requiring confidentiality.