DISCOVERY LIMITATIONS

Jenkins v. Dermatology Management LLC, 107 Cal. App. 633

Ramirez v. Charter Communications, Inc., 16 Cal. 5th 478



Jenkins v. Dermatology Management LLC, 107 Cal. App. 633

After she was terminated by the defendant, the plaintiff filed a class action against it, asserting unfair competition. Defendant’s motion to compel arbitration, which was executed by defendant’s Chief People Officer several months before plaintiff was hired, was denied on the ground that the arbitration agreement was substantively unconscionable, inter alia, because it restricted discovery. The defendant appealed.

The agreement contained the following discovery provision: “Each party shall have the right to take the deposition of one individual and any expert witness designated by another party. Upon mutual consent or upon a showing of substantial need, each party also shall have the right to propound requests for production of documents to any party.” The defendant argued that, given that the agreement was also subject to the broader AAA rules, the provision at issue did not limit discovery rights, but merely served as the floor of permissible discovery. If the AAA rules governed and the agreement's discovery provision merely established a “floor” for discovery, then the discovery provision violated fundamental principles of contract interpretation because it was superfluous. The defendant deliberately replaced the AAA's discovery provision with a more restrictive one, and in so doing failed to ensure that employees were entitled to discovery sufficient to adequately arbitrate their claims. Appellant should not be relieved of the effect of an unlawful provision it inserted in the agreement due to the serendipity that the AAA rules provided otherwise.

Ramirez v. Charter Communications, Inc., 16 Cal. 5th 478

The trial court rejected a claim by Ramirez that she needed at least seven depositions and therefore a clause that limited depositions to four was unconscionable. The Court of Appeal reversed. Charter appealed to the Supreme Court, and it reversed the Court of Appeal. The Court of Appeal had reasoned that while Ramirez had estimated, without dispute from Charter, that she needed to take at least seven depositions, the discovery provision limited her to four and the arbitrator had no authority to expand that number. As a result, it concluded the authorized discovery was inadequate to permit a fair pursuit of her claims. One difficulty with that analysis is that the Court of Appeal looked to specific circumstances that only arose after the contract was executed. An unconscionability assessment focuses on circumstances known at the time the agreement was made. The assessment of whether a discovery clause is unconscionable should focus on general factors that can be examined without relying on subsequent developments. Those factors include the types of claims covered by the agreement, the amount of discovery allowed, the degree to which that amount may differ from the amount available in conventional litigation, any asymmetries between the parties with regard to discovery, and the arbitrator's authority to order additional discovery. Allowing the arbitrator to deviate from agreed-upon default discovery limits ensures that neither party will be unfairly hampered in pursuing a statutory claim based on circumstances that arise post formation.

Another difficulty with the Court of Appeal's analysis was that it misinterpreted the scope of the arbitrator‘s authority. The arbitration agreement stated the “arbitrator will decide all discovery disputes related to the arbitration” and provided that “any disagreements regarding the exchange of information or depositions will be resolved by the arbitrator to allow a full and equal opportunity to all parties to present evidence that the arbitrator deems material and relevant to the resolution of the dispute.” Thus, the agreement gave the arbitrator the authority to resolve all discovery disputes in a manner that allowed a full and equal opportunity to discover and present relevant and material evidence. Normally, it is assumed the arbitrator will act reasonably and in conformity with the law.