Thursday, July 14, 2011

California State Courts Can Still Invalidate Arbitration Agreements That Are Unconscionable Even After U.S. Supreme Court Case.

A recent decision California Court of Appeal case  {Brown v. Ralphs Grocery Co.} provides employee rights attorneys legal authority to argue that California Court protections against one-sided arbitration agreements are still in place to protect the little guy. 

The U.S. and the California Supreme Courts are legally "face to face" on the issue of enforceability of Arbitration Agreements.  In April, 2011, The U.S. Supreme Court decided in AT&T Mobility v. Concepcion ["Concepcion"] that the Federal Arbitration Act [FAA] preempted State law that prevented the use of Arbitration Agreements to obtain waivers of class action suits against companies.  However, the Court did not directly hold that a State cannot, under its own principles of contract law, find some types of Arbitration Agreements so overbearing and so unfair as to be unconscionable.  

The California Supreme Court decision requiring basic fairness in arbitration agreements is:  Gentry v. Superior Court (2007) 42 Cal.4th 443.  On July 12, 2011, a California Court of Appeal held that the Concepcion case did not invalidate the powers of California courts to find arbitration agreements unenforceable in particular circumstances.  Brown v. Ralphs Grocery Co. 2011 DJDAR 10523.  Specifically, the Court held that a civil action brought under California's Private Attorney General's Act [PAGA] was a species of "governmental action" for the general good, and that such an action was the legal equivalent of "governmental action."  A private arbitration agreement cannot restrict governmental action.  



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