Arbitration

Chavarria v. Ralphs Grocery Store (9thCir. 11-56673 10/28/13)Arbitration

The panel affirmed the district court's denial of defendant grocery company's motion to compel arbitration in an action asserting claims under California labor law on behalf of the plaintiff and a proposed class of other grocery employees.

The grocery company sought to compel arbitration of the plaintiff's individual claim pursuant to its arbitration policy, to which all employees acceded upon submitting applications for employment. The panel affirmed the district court's holding that the arbitration policy was unconscionable under California contract law and therefore unenforceable.

The panel held that the policy was procedurally unconscionable because it was a condition of applying for employment and was presented on a "take it or leave it" basis.In addition, its terms were not provided to the plaintiff until three weeks after she had agreed to be bound by it.

The panel held that the arbitration policy was substantively unconscionable because it was unjustifiably one-sided to such an extent that it "shocked the conscience." Specifically, the policy's arbitrator selection process would always produce an arbitrator proposed by the defendant in employee-initiated arbitration proceedings; the policy precluded institutional arbitration administrators, which have established rules and procedures to select a neutral arbitrator; and the policy's arbitrator-fee-apportionment provision would have the effect of pricing employees out of the dispute resolution process.

The panel distinguishedKilgore v.KeyBank National Ass'n, 718 F.3d 1052 (9th Cir. 2013) (en banc) (holding that mere risk that plaintiff will face prohibitive costs is too speculative to justify invalidating arbitration agreement), on the basis that the defendant's policy's fee provision stood by other unconscionable terms and was not speculative.

The panel held that the state law supporting the unconsionability holding was not preempted by the Federal Arbitration Act because it applied to contracts generally and did not in practice impact arbitration agreements disproportionately. The panel held that the Supreme Court's decision in American Exress Corp. v. Italian Colors Restaurant,133 S. Ct. 2304 (2013) (upholding arbitration policy with class waiver provision on basis that expense of proving statutory remedy did not eliminate right to pursue that remedy), did not preclude it from considering the cost that the defendant's arbitration agreement imposed on employees in order for them to bring a claim.

The panel affirmed the decision of the district court denying the defendant's motion to compel arbitration and remanded the case for further proceedings.

http://cdn.ca9.uscourts.gov/datastore/opinions/2013/10/28/11-56673.pdf