Unconscionability continues to be a hot topic in Los Angeles business litigation. The First District Court of Appeal recently clarified who must determine whether an arbitration agreement should be deemed unconscionable. It specifically held that a court, not an arbitrator, must address the issue unless the agreement reflects a “clear and unmistakable” intent to allow the arbitrator to render a decision.

The Facts of the Case

As reported by Metropolitan News, a former office manager and broker at the emissions trading firm CantorCO2e, L.P. filed a lawsuit against her employer for sexual discrimination, sexual harassment, breach of contract, and various employment statute violations. The company sought to compel arbitration. It contended that Lena Ajamian was bound by an “Arbitration Agreement and Policy” that she acknowledged receipt of in 2006 as well as a separate arbitration clause in an employment agreement executed in 2007.

Ajamian testified that she had consulted with an attorney before signing the 2007 employment agreement and had raised objections to several of the provisions. However, she ultimately signed the agreement without the changes after being warned that she would not receive the promotion unless she did so.

The lower court ruled that the court was the appropriate forum to determine the threshold issue. In considering the issue of unconscionability, it determined that the agreement was both substantively and procedurally unconscionable to the point that the objectionable provisions could not be severed.

The Court’s Decision

Court of Appeal acknowledged that the rules of the American Arbitration Association allow an arbitrator to decide the threshold issue. However, CantorCO2e did not provide clear and unmistakable evidence that Ajamian was aware of that provision because she was never provided with a copy of the rules.

Justice Harry Needham further noted that there were other provisions of the employment agreement that made it uncertain whether the parties intended to have the issue of unconscionability decided by an arbitrator. He specifically pointed to language in the agreement referring to powers of a “court of competent jurisdiction” to determine that a covenant in the agreement was impermissibly “broad in scope, duration or geographical area.”

The Court of Appeal further agreed that the agreement was unenforceable, citing unfair clauses with respect to recovery of damages and attorney fees.

As this case demonstrates, the stakes are often high when it comes to Los Angeles business litigation. The attorneys of Lurie & Park are experienced and knowledgeable in California business law matters. Our practice is devoted to business, commercial, and real estate litigation in Southern California.

Whether it’s prevailing at trial, negotiating a favorable settlement or carefully structuring deals, we constantly strive to deliver the best results for our clients.

If you are looking for the personalized service of a small firm along with attorneys with large firm experience, contact us and let’s talk about how we can help you.

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