Arbitration Agreement Not Unconscionable Where Both Parties Can Seek Injunctive Relief in Court

Maribel Baltazar worked at Forever 21, a clothing store, since 2007. She was asked to sign an arbitration agreement as part of the application process, but she refused to sign it until she was told she would not be hired without signing it. The agreement provided that either party could seek a preliminary injunction or temporary restraining order in court as provisional relief. The agreement also had a confidentiality provision. Baltazar resigned in 2011.

Baltazar brought a claim against Forever 21 the same year, alleging harassment, discrimination, and retaliation. Forever 21 filed a motion to compel arbitration and Baltazar opposed it, saying the agreement was unconscionable. The trial court agreed with Baltazar, but the court of appeal reversed that decision and Baltazar appealed to the state supreme court.

The court explained how the doctrine of unconscionability has both a substantive and procedural aspect, and both must be present in order to find the agreement unconscionable. However, they need not be present to the same degree. A high level of one combined with a low level of the other could render the entire agreement unconscionable. The simple fact the agreement was a contract of adhesion, meaning Baltazar had no choice about signing, did not mean it was inherently unconscionable, it just means the court needed to be attuned to other aspects of unconscionability and look at the contract as a whole. Baltazar argued an additional factor that should be considered was that Forever 21 did not provide Baltazar with a copy of the applicable rules that would govern the arbitration. The court disagreed, however, because the rules, or lack of them, had no impact on Baltazar's claim.

In terms of substantive unconscionability, the court reviewed each of Baltazar's three arguments. The first was that it allows injunctive relief in court. Baltazar argued that Forever 21's interest in protecting confidential information and trade secrets reinforces the notion that the injunctive relief is only to benefit the types of claims brought by the employee, not the employer. The court disagreed. The term of the agreement allows both parties the same rights, which are already granted to parties under California law. It is not unconscionable to have an agreement that merely confirms those rights.

Baltazar also argued the agreement was unconscionable because it lists only employee claims as examples of the type that are subject to arbitration. The court did not find this persuasive, explaining that the purpose of the agreement was to put the employee on notice, so it made sense to list claims an employee might bring. The language was clear that it was not an exhaustive list, and that all claims must be arbitrated.

Finally, Baltazar argued that the agreement was one-sided because it stated that during the course of the arbitration, all steps will be taken to protect Forever 21's trade secrets and confidential information. However, the court pointed out that the agreement did not limit the use of that information during the proceedings, nor did it preemptively determine what information was protected. The term was based on a legitimate commercial need and did not disadvantage Baltazar. The court upheld the court of appeal and determined the arbitration agreement was not unconscionable.

Baltazar v. Forever 21, Inc., (2016) 62 Cal.4th 1237.