In Baltazar v. Forever 21, Inc., No. B237173 (Cal. App. Dec. 20, 2012), California's Second District Court of Appeal enforced an employer's arbitration agreement with an employee that allowed either party to apply to a court to obtain provisional remedies, including temporary restraining orders and preliminary injunctions. Provisional remedies allow businesses to freeze assets pending a dispute or to take immediate emergency action against trade secret and intellectual property infringements, before a final decision is made in a case.
California's Arbitration Act permits parties to ask courts for provisional remedies even if they must submit the overall dispute to arbitration. However, an earlier decision by the First District Court of Appeal in San Francisco had concluded that arbitration clauses in employment agreements were not enforceable if they included a provision allowing the parties to apply to the courts for provisional remedies. In Trivedi v. Curexo Technology Corp., 189 Cal. App.4th 387 (2010), the First District had concluded that only an employer would be interested in provisional remedies in an employment dispute such that an provision allowing provisional remedies as an exception to the parties' duty to arbitrate was too one-sided to be an "agreement" to arbitrate.
In Baltazar, the Second District disagreed with the Trivedi decision and held that a provisional remedies clause in an arbitration agreement between an employer and employee did not render the arbitration agreement unenforceable. Although there is now technically a split among the appellate courts in California, the Baltazar court's reasoning is probably the correct one. First, since the California Arbitration Act permits the parties to obtain provisional remedies from the courts in tandem with arbitration, the California Legislature clearly believes that such provisions are not unconscionable. Second, as the Baltazar court pointed out, in the employment context, various California statutes actually permit employees to obtain injunctive relief against their employers so that actually both sides of an employment dispute may have reason to consider provisional remedies.
The Baltazar opinion also aligns California state courts with federal courts in the Ninth Circuit. Where an arbitration agreement is part of a contract relating to interstate commerce, the Federal Arbitration Act will usually apply, although, unlike the California Act, the federal statute does not mention whether provisional remedy applications are exempt from the duty to arbitrate. The San Francisco-based Ninth Circuit Court of Appeals has sided with the federal appellate courts that believe the federal statute permits courts to order provisional remedies in support of an arbitration. However, other federal courts, led by the Eighth Circuit Court of Appeals in St. Louis, Missouri, have taken the opposite view. The question of whether courts may order provisional remedies in support of pending arbitration proceedings will not be conclusively answered until both the California and United States Supreme Courts interpret their respective jurisdictions' statutes. Yet, for the time being, both state and federal courts in California will likely be permitted to do so.