Make Sure Your Arbitration Agreement is Enforceable

red pen on arbitration agreement

From Lexology,  Alan M. Kaplan discusses a case in which a California Appellate Court found an arbitration agreement unconscionable and void. Alan writes:

First, the Appellate Court ruled that Ramos’s claims fall within the scope of arbitration. The Court relied upon the language of the arbitration agreement. In the agreement, Ramos agreed to arbitrate claims “arising under or related to” the Partnership Agreement she signed. Since the alleged employment law claims relate to her relationship with the law firm, the claims are arbitrable, but only if the agreement is enforceable.

However, the Court found that the agreement was void because it was unconscionable. The Court analyzed the following five minimum requirements – (a) the use of a neutral arbitrator; (b) no limitation regarding remedies provided under a law; (c) sufficient discovery; (d) a written arbitration decision and judicial review; and (e) the employer’s payment of all arbitration fees. Here, the arbitrators’ decision was limited, because they could not substitute their judgment for the judgment of the law firm. Second, another provision did not allow Ramos an award of attorneys’ fees, if she prevailed, although, under state discrimination laws, a prevailing party will be awarded attorneys’ fees. Third, the arbitrators’ fees would be shared equally by Ramos and the law firm. In addition to analyzing these five requirements, the Court ruled that the agreement required that Ramos maintain all aspects of the arbitration confidential, which would prevent her from gathering evidence for her case in arbitration. Finally, the Court also found the arbitration agreement procedurally unconscionable, because Ramos had no opportunity to negotiate or amend any term of the agreement. Instead, the law firm presented her with the agreement, and she was told that she needed to sign and return it within 30 days. Thus, she received the agreement on a take it or leave it basis.

Read the full story at Make Sure Your Arbitration Agreement is Enforceable – Lexology

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