ENDING FORCED ARBITRATION OF SEXUAL ASSAULT AND SEXUAL HARASSMENT ACT

Casey v. Superior Court, 108 Cal. App. 5th 575

Plaintiff sued D.R. Horton, her former employer, for sexual harassment. D.R. Horton moved to compel arbitration, citing an arbitration agreement that clearly stated that only the CAA applied. Plaintiff argued that the EFAA preempted the CAA and that the FAA applied because D.R. Horton was engaged in interstate commerce. The motion was granted. Plaintiff filed a writ, which was granted.

Conflict preemption was present here because the EFAA states a blanket rule of unenforceability of arbitration agreements in cases related to a sexual harassment dispute while the CAA provides for the general enforceability of arbitration agreements in all cases—including those related to a sexual harassment dispute. Conflict preemption is present when it is impossible for a private party to comply with both state and federal requirements or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. The EFAA's purpose is plainly obstructed by an attempt to use state law to force a person who is alleging sexual harassment to arbitrate their dispute. The court noted that the EFAA's text explicitly states that “a person alleging conduct constituting a sexual harassment dispute” may elect that “no predispute arbitration agreement … shall be valid or enforceable with respect to a case which … relates to the … sexual harassment dispute.” This language is clear, and it differs from the portion of section 2 that governs all other cases—i.e., cases not relating to a sexual harassment dispute—in at least two key respects that bear on the preemption analysis. First, the EFAA rejects the policy of favoring enforceability of arbitration agreements and replaces it with a rule of unenforceability of arbitration agreements in cases relating to a sexual harassment dispute. Second, the EFAA has no exceptions to its rule of unenforceability, while the portion of section 2 governing other cases has exceptions to its policy of enforceability.

D.R. Horton maintained that preemption did not apply because the parties' agreement specified that its construction and interpretation was to be governed by state law. D.R. Horton's argument was essentially that parties who select state law in their arbitration agreements effectively opt out of the FAA even if their contracts involve interstate commerce. It relied on a series of cases that discuss whether a California statute such as section 1281.2(c) is consistent with the FAA by allowing courts to stay or deny arbitration proceedings pending litigation of a third-party dispute where conflicting results could arise. But these cases were unenlightening since they all involved the question of whether a state law was consistent with the FAA's goal of enforceability of arbitration agreements, not the EFAA's rule of unenforceability. D.R. Horton ignored the distinctions between the two parts of section 2, and its cases interpret the part of section 2 that governs cases not related to a sexual harassment dispute. In contrast, the EFAA states a categorical rule of unenforceability, and therefore differed from the part of section 2 that governs non-EFAA cases, which can accommodate state and other alternative arbitration mechanisms so long as they do not conflict with the policy of enforceability.