Arbitration, Defenses To, Unconscionability, Attorney Fees to Prevailing Defendant, 1, 7
In this FEHA employment discrimination case, the court holds the employer’s arbitration clause was substantively unconscionable because (1) the clause lacked mutuality because it excluded most claims the employer would likely bring but required arbitration of most likely claims by an employee, (2) it required the employee to demand arbitration or complain to the employer within the time for filing an administrative complaint with the FEHA, thereby potentially depriving the employee of the benefits of a DFEH investigation before commencing arbitration, and (3) it provided that the employer could recover attorney fees if it prevailed on a motion to compel arbitration, whereas under the FEHA, the defendant may recover fees only if the suit is frivolous, unreasonable or groundless when brought. The arbitration clause was not substantively unconscionable in limiting discovery to four depositions because the arbitration clause also provided that the arbitrator would resolve all discovery disputes–language broad enough to empower the arbitrator to allow additional discovery if needed to vindicate the plaintiff’s claims. The opinion stresses that substantive unconscionability must be determined as of the time the contract is entered into so that the court cannot consider the fact that under the particular circumstances of the case the weaker party was not adversely affected by the unconscionable provision or that the particular claim the plaintiff pursues requires discovery beyond the contractual limit on discovery. Patterson v. Superior Court (2021) 70 Cal.App.5th 473, which had construed the same arbitration clause and reformed its attorney fee provision to make it compliant with FEHA’s limitation on attorney fee recovery by defendants is disapproved. An arbitration clause containing more than one unconscionable provision may, nevertheless, be saved by severing those provisions. Severance is permitted when the contract’s central purpose is lawful and the contract’s unconscionability can be cured purely through severance or restriction of its terms, rather than augmenting them. Severance is not permitted if the court finds that severance would condone an illegal practice or that the stronger party imposed the arbitration clause to secure a forum more favorable to that party rather than simply an alternative to litigation.