A U.S. Supreme Court order and California appellate court decision highlight the continued attention to, and evolving area of the law on, enforceability of arbitration agreements.
The U.S. Supreme Court denied an employer’s certiorari petition to review the California Supreme Court’s decision inSonic-Calabasas A, Inc. v. Moreno (reported in the March 2011 FEB). California employers were hopeful that the Court would take the opportunity to confirm that the Federal Arbitration Act preempts limitations California courts have imposed on mandatory, pre-dispute arbitration agreements. Absent such intervention, employers should anticipate that courts will continue to scrutinize — and employers should ensure compliance with court-imposed restrictions on — such agreements.
In Tiri v. Lucky Chances, Inc., a California appellate court required the plaintiff to submit to arbitration her challenges about the enforceability of the arbitration agreement. The plaintiff claimed that the arbitration agreement, including the clause delegating to the arbitrator disputes about enforceability of the agreement, was unconscionable and unenforceable. On appeal, the court found that the delegation clause, requiring arbitration of all disputes about the interpretation, applicability, enforceability or formation of the agreement “including, but not limited to, any claim that all or part of this [agreement] is void or voidable,” to be clear and unmistakable. It further determined that the delegation clause was neither “overly harsh” nor did it “sanction one-sided results” and any per se rule to the contrary would violate AT&T Mobility (Fenwick’s April 28, 2011 Litigation Alert). This case serves as a good reminder to employers to periodically revisit arbitration provisions to ensure they take full advantage of the ever-evolving law in this area.