Disagreeing with a sister Court of Appeal, Wisdom v. Accentcare, Inc. wisely finds arbitration agreement unconscionable

The fact that equally learned Courts of Appeal reach fundamentally different results from similar circumstances either confirms that minute differences in fact are all that are needed to change the result on tough legal issues (the "aren't we important in the legal field" explanation) or confirms that we're all making this pseudo-science of law up as we go along (the "likely" explanation).  In Wisdom v. Accentcare, Inc. (July 3, 2012), a Court of Appeal (Third Appellate District) examined an arbitration clause included within an application for unemployment.  The trial court concluded that the application was unenforceable, given its substantial procedural and substantive unconscionability.  The Court of Appeal agreed.

Procedural unscionability was obvious to the Court:

In this case, the preemployment arbitration agreement is procedurally unconscionable. “[F]ew employees are in a position to refuse a job because of an arbitration requirement.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 115.)

Slip op., at 2.  The Court found additional evidence of procedural unconscionability in the agreement "because its language implied there was no opportunity to negotiate, because the rules of any arbitration were not spelled out in the agreement or attached thereto, and because plaintiffs did not understand they were waiving their right to a trial, nor was that fact explained to them."

The Court then found substantive unconscionability because of the lack of mutuality:

The lack of mutuality is made apparent by contrast to a different application form, also employed by AccentCare, which provided that “in exchange for my agreement to arbitrate, AccentCare, Inc. also agrees to submit all claims and disputes it may have with me to final and binding arbitration . . . .” “[I]n the context of an arbitration agreement imposed by the employer on the employee, such a one-sided term is unconscionable.” (Armendariz, supra, 24 Cal.4th at p. 118.)

Slip op., at 2-3.

Much of the discussion includes a more detailed discussion of the various deficiencies identified by the trial court.  Of particular note, though, was the Court's mention of an opinion from the Second Appellate District, Division Seven, which reached a different result in similar but not identical circumstances:

We are aware that Division 7 of the Second Appellate District examined a nearly identical arbitration agreement in Roman, supra, 172 Cal.App.4th at page 1470-1471, and held that the procedural unfairness was “limited[.]” Roman reasoned that there was little evidence of surprise since the arbitration provision was “contained on the last page of a seven-page employment application,” and “was set forth in a separate, succinct (four-sentence) paragraph that Roman initialed, affirming she had seen it.” (Id. at p. 1471.)

Here, however, even though plaintiffs undoubtedly saw the arbitration paragraph when they initialed it, their declarations state they did not know what “binding arbitration” meant, no one explained it to them, and they were unaware they were giving up their right to trial. There was no evidence any of the plaintiffs were sophisticated in legal matters. This, combined with the non-negotiable, take-it-or-leave-it circumstances surrounding the application for employment, result in a strong showing of procedural unconscionability.

Slip op., at 10-11.  Then, when discussing substantive unconscionability in the form of one-sidedness, the Court's criticism of Roman is more pointed:

Defendants rely on Roman, supra, which held that an agreement containing nearly identical language was bilateral. (172 Cal.App.4th at p. 1473.) But Roman, supra, did not explain its reasons for concluding that the agreement at issue in that case was bilateral. Instead, the court distinguished Higgins, supra, on the ground that the procedural unconscionability in Higgins had been “far greater[.]” (Id. at pp. 1472-1473.)

To the extent Roman implies that the agreement in Higgins was not substantively unconscionable due to its one-sidedness, it is wrong. Higgins, supra, discussed at some length the fact that the “I agree” language of the contract indicated that only the siblings had agreed to the arbitration clause, and stated only briefly that “[a]dditional elements of substantive unconscionability” were to be found in the provision barring only the siblings from seeking appellant review of some claims and the provision requiring arbitration in accordance with the rules of the American Arbitration Association. (Higgins, supra, 140 Cal.App.4th at p. 1254.)

Slip op., at 14-14.

While I may be biased from my own success before Division Seven, I generally like the analyses in that Division's opinions.  But it is hard to find fault with this Court's critique of Roman.