Reinsurance Focus

A state appellate court in California reversed a trial court’s decision to deny defendant Santa Lucia Preserve Company’s (“Santa Lucia”) motion to compel arbitration, holding that plaintiffs failed to prove that the underlying arbitration agreement was substantively unconscionable in order for that agreement to be invalidated.

Plaintiffs filed a putative class action complaint against Santa Lucia alleging the company failed to pay requisite overtime compensation in addition to other violations of California’s Business and Professions Code. Santa Lucia moved to compel arbitration under previously signed employment agreements with plaintiffs. Plaintiffs alleged that the arbitration agreements were substantively unconscionable as they lacked mutuality and that they did not provide for judicial review. The trial court denied Santa Lucia’s motion to compel arbitration finding the agreements unconscionable both procedurally and substantively.

The appellate court reversed, finding that the arbitration agreements were not substantively unconscionable for a number of reasons. First, the agreements bound both employee and employer to arbitration for “any dispute or claim.” Second, the agreements waived court and jury trials for both parties. The court noted that judicial review is allowed when “arbitrators exceed[] their power and the award cannot be corrected without affecting the merits of the decisions…” The court determined that plaintiffs’ claims for overtime pay are subject only to the review requirements in Armendariz, namely that an arbitration decision be written and be reviewed under limited circumstances. Valdez v. Santa Lucia Preserve Co., No. H040685 (Cal. App. 6th Dist., Mar. 23, 2015).

This post written by Matthew Burrows, a law clerk at Carlton Fields Jorden Burt in Washington, DC.

See our disclaimer.