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Arbitration Agreement Held Both Procedurally and Substantively Unconscionable, Multiple Unconscionable Terms Permeate the Agreement.

Carbajal v. CWPSC, Inc. (Feb. 26, 2016) 245 Cal.App.4th 227

Defendant appealed an order denying its motion to compel arbitration. The Fourth District Court of Appeal found the ruling was correct, as the agreement was sufficiently unconscionable, both procedurally (as a contract of adhesion, and because the employer failed to articulate which arbitration rules applied or provide a copy of the applicable rules) and substantively (the employer retained the right to obtain injunctive relief in court for breach of the arbitration agreement yet required arbitration to be the sole remedy for its employees’ relief, waived its statutory requirement to post a bond or undertaking to obtain injunctive relief, and waived its employees’ right to statutory attorney’s fees by requiring each party to bear its own fees). Each was held to present a moderate level of unconscionability.

The court of appeal further held that the trial court did not need to sever the offending contractual provisions before ruling as it did, nor did the trial court abuse its discretion in refusing to sever, as multiple unconscionable terms permeated the entire contract. The appellate court also rejected the employer’s argument that the injunctive relief carve-out was already provided for in the California Arbitration Act (CAA, Cal. Code Civ. Proc. § 1280, et seq.), finding that the carve-out provision (which could allow for a permanent injunction) was broader than the CAA, which only authorizes preliminary injunctive relief.[i]

The Fourth District also held that the employer failed to timely present any evidence that the employment contract and the arbitration provision contained therein had a substantial relationship to interstate commerce and therefore found that the Federal Arbitration Act did not govern the arbitration clause.

[i] Cal. Code Civ. Proc. § 1281.8(b).




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