Monday, June 23, 2014

Armendariz Survives Concepcion

Sabia v. Orange Cnty. Metro Realty, Inc., No. B243141 (D2d8 May 18, 2014)

In this putative class action, the trial court granted an order compelling arbitration on an individual basis because the arbitration agreement contained a class action waiver. The court here reverses. It first finds that, although orders granting motions to compel arbitration are generally not appealable, under the “death knell” doctrine, it could hear the appeal in this case. The nature of plaintiffs’ claims were such that there was no way they could practically be arbitrated on an individual basis. So the order compelling arbitration was, for all practical purposes, a dismissal of the case.

The court proceeds to reverse because the arbitration clause at issue applied only to claims brought by plaintiffs. It did not require arbitration of defendants’ claims. That made it unconscionable under Armendariz v. Foundation Health Psychcare Services, 24 Cal. 4th 83 (2000), which generally prohibits non-bilateral arbitration agreements. The court goes on to explain that the Armendariz rule survives AT&T v. Concepcion’s ruling that California’s judicially made rule deeming class action waivers unconscionable was preempted by the FAA because it discriminated against arbitration. According to the court, the Armendariz rule does not discriminate against arbitration. Indeed, it just prevents a more powerful party from cynically foisting arbitration on the weaker party, while reserving a judicial forum for itself. One-sided arbitration clauses—particularly when contained in contracts of adhesion—reflect the very mistrust of arbitration that the U.S. Supremes have repeatedly repudiated.


**Note: Review granted September 21, 2014.

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