UNCONSCIONABILITY

Sanchez v. Superior Court, 108 Cal. App. 5th 615
Velarde v. Monroe Operations LLC., 111 Cal. App. 5th 1009
Silva v. Cross Country Healthcare, Inc., 111 Cal. App. 5th 1311


Sanchez v. Superior Court, 108 Cal. App. 5th 615
Mr. and Mrs. Sanchez hired attorney Cara to defend them in a suit to foreclose their home. Subsequently, they sued Cara and his firm for malpractice. The defendants’ motion to compel arbitration was granted and the plaintiffs filed a writ, arguing that the arbitration agreement was unconscionable. The writ was granted.

First, the court found substantial procedural unconscionability. The arbitration agreement was a contract of adhesion that was accompanied by oppression. Sanchez was presented with the preprinted retainer agreement containing the arbitration agreement on a “take it or leave it basis”; he was in danger of losing his home and had driven from Bakersfield to Costa Mesa to meet with an attorney for help; he had a 6th-grade education in Mexico, no education in the United States and very limited English language skills; and he was not advised to seek an attorney to review the agreement, nor provided the time to have an attorney review the document.

There was substantial substantive unconscionability. Tthe agreement stated that the parties agreed to the rules of “JAMS, Judicate West, or equivalent”. This language made it virtually impossible for Sanchez to knowingly agree to the rules, as he would not only have had to research the two named arbitration providers' respective rules, but he would have to guess which additional unnamed providers were deemed “equivalent” in the drafter's mind and research them as well. No reasonable consumer, much less a non-attorney, nonEnglish speaker, could have made this determination with any degree of certainty prior to signing the agreement, given the limited information provided.

In addition, Mr. and Mrs. Sanchez were Spanish speakers, and the agreement was only in English. The failure to provide a Spanish translation presumptively established a violation of Civil Code section 1632. Section 1632 generally provides that, when a contract for legal services is negotiated primarily in Spanish, a Spanish translation must be provided. Otherwise, the retainer agreement is subject to rescission. The statutory scheme thus creates an expectation that, when negotiating a retainer agreement with a prospective client in Spanish, the client would be provided with a Spanish translation of the negotiated agreement. Section 1632 contemplates a situation in which both parties are using the foreign language in negotiating the transaction. In that situation, the statute prevents the seller from suddenly springing on the buyer a contract written in English and expecting the buyer to sign it without reviewing its terms. That reasonable expectation was not met here because Mr. and Mrs. Sanchez were provided with only a contract written in English.


Velarde v. Monroe Operations LLC., 111 Cal. App. 5th 1009
Velarde sued Monroe, doing business as Newport Healthcare, for discrimination after she was terminated. On her first day of work, Newport’s HR manager gave Velarde 31 documents to sign. She was told that execution of the documents was a condition of employment and that the manager would wait in the room until the documents were signed. One of the documents was an arbitration agreement. Velarde told the manager that she could not sign the agreement because she did not understand it. The manager said that the document created an easy way to resolve disputes without needing a lawyer. And so Velarde signed it. Newport’s motion to compel arbitration of the dispute was denied on grounds of unconscionability and Newport appealed.

The Court of Appeal affirmed. Newport pressured Velarde into agreeing to arbitration by presenting her with the agreement, alongside 30 other documents, to review and sign while its HR manager stood and waited. Thus, Velarde had little to no time to review the terms of the agreement. And the terms she could review would not be readily meaningful to a lay person. For example, the agreement referenced the FAA, the Federal Rules of Evidence, the Federal Rules of Civil Procedure, and the American Arbitration Association Employment Arbitration Rules. It was unlikely a lay person would hear of the FAA or any of these rules, let alone have a working knowledge of their terms. This is not to say a party must consult with an attorney before executing an arbitration agreement containing references to the panoply of applicable laws. But Newport's conduct here deprived Velarde of having a meaningful opportunity to reflect and decide for herself if she wanted to speak to an attorney or conduct her own research prior to signing.

Newport also misrepresented the terms and nature of the agreement. Velarde explicitly told the HR manager she did not understand what the agreement meant. In response, the HR manager misinformed Velarde that the agreement would give Newport the power to resolve all disputes between it and Velarde without either party having to pay for lawyers. This was manifestly untrue, as the agreement required the parties to resolve all covered disputes in an adversarial arbitration before an arbitrator in which all parties would bear their own attorney fees. The misinformation may have been given out of negligence, ignorance, or inadvertence. But we focus on the effect, not the intent. The facts of this case demonstrate Velarde's execution of the document was not the product of a voluntary or informed agreement to its terms.


Silva v. Cross Country Healthcare, Inc., 111 Cal. App. 5th 1311
Plaintiffs sued Cross Country, a staffing agency, for Labor Code violations. Cross Country moved to compel arbitration. When they were hired, each plaintiff signed two agreements. One was a relatively straightforward arbitration agreement. The other was dubbed an “employment agreement”. The employment agreement contained several prohibitions, including a prohibition against the employee for using or disclosing confidential information. The agreement also permitted Cross Country to obtain an injunction, without filing a bond, for any violation of these prohibitions. The trial court, applying Civil Code Section 1642, ruled that the two agreements should be construed together and denied the motion, holding that the agreements were unconscionable because of lack of mutuality. Cross Country appealed.

The Court of Appeal affirmed. It is well settled that an arbitration agreement is unfairly one-sided if it compels arbitration of claims more likely to be brought by an employee, the weaker party, but exempts from arbitration the types of claims that are more likely to be brought by an employer, the stronger party. The arbitration agreement, when read in conjunction with the employment agreement, suffers from this flaw.

Cross Country. argued that its need to resort to a judicial forum for injunctive relief fell within the “margin of safety,” but Cross Country's ostensible need was already served by Code of Civil Procedure section 1281.8(b), which provides a party to an arbitration agreement access to seek a provisional remedy in the trial court. Cross Country accordingly had no justification for the injunctive relief provision in the employment agreement other than to further the unfairly one-sided framework imposed by the two agreements. What is more, even if one indulged Cross Country's ostensible need to access the judicial forum to seek injunctive relief, that need did not justify contractually requiring the employee to consent to the entry of an injunction, without a bond, once in that forum.