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Armendariz v. Foundation Health Psychcare Services, Inc.

Supreme Court of California

August 24, 2000, Decided

No. S075942.

Opinion

 [*90]   [**674]   [***750]  MOSK, J. 

In this case, we consider a number of issues related to the validity of a mandatory employment arbitration agreement, i.e., an agreement by an employee to arbitrate wrongful termination or employment discrimination claims rather than filing suit in court, which an employer imposes [****3]  on a prospective or current employee as a condition of employment. The employees in this case claim that employees may not be compelled to arbitrate antidiscrimination claims brought under the California Fair Employment and Housing Act (FEHA) ( Gov. Code, § 12900 et seq.) We conclude that such claims are in fact arbitrable if the arbitration permits an employee to vindicate his or her statutory rights. As explained, in order for  [*91]  such vindication to occur, the arbitration must meet certain minimum requirements, including neutrality of the arbitrator, the provision of adequate discovery, a written decision that will permit a limited form of judicial review, and limitations on the costs of arbitration.

The employees further claim that several provisions of the arbitration agreement are unconscionable, both because they fail to meet these minimum requirements and because the arbitration agreement is not bilateral. We conclude that the agreement possesses a damages limitation that is contrary to public policy, and that it is unconscionably unilateral.

 [***751]  Finally, the employees contend that the presence of these unconscionable provisions [****4]  renders the entire arbitration agreement unenforceable. The employer argues that even if some of the provisions are unconscionable or contrary to public policy, the proper remedy is to strike or restrict those clauses pursuant to Civil Code section 1670.5, and to enforce the rest of the arbitration agreement. The trial court chose the employees' preferred solution of refusing to enforce the arbitration agreement, but the Court of Appeal sided with the employer and enforced the agreement minus the one provision it found unconscionable. We conclude, for reasons explained below, that the arbitration agreement is unenforceable and that therefore the Court of Appeal's judgment must be reversed.

I. STATEMENT OF FACTS AND PROCEDURAL ISSUES

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24 Cal. 4th 83 *; 6 P.3d 669 **; 99 Cal. Rptr. 2d 745 ***; 2000 Cal. LEXIS 6120 ****; 2000 Daily Journal DAR 9401; 83 Fair Empl. Prac. Cas. (BNA) 1172; 2000 Cal. Daily Op. Service 7127; 78 Empl. Prac. Dec. (CCH) P40,202

MARYBETH ARMENDARIZ et al., Plaintiffs and Respondents, v. FOUNDATION HEALTH PSYCHCARE SERVICES, INC., Defendant and Appellant.

Prior History:  [****1]  Superior Court of Marin County. Super. Ct. No. 170420. Lynn Duryee, Judge. 1

Court of Appeals of California, First Appellate District, Division One. No. A080224.

Disposition: The judgment of the Court of Appeal upholding the employer's petition to compel arbitration is reversed, and the cause is remanded to the Court of Appeal with directions to affirm the judgment of the trial court.

CORE TERMS

arbitration, arbitration agreement, unconscionable, employees, costs, rights, provisions, discovery, statutory right, severance, parties, courts, title vii, vindicate, damages, cases, statutory claim, judicial review, public policy, arbitration award, refuse to enforce, contracts, mandatory, trial court, covenants, terms, employment contract, termination, invalid, waive

Business & Corporate Compliance, Harassment, Sexual Harassment, Federal & State Interrelationships, Labor & Employment Law, Scope & Definitions, Same-Sex Harassment, Civil Procedure, Alternative Dispute Resolution, Arbitration, General Overview, Civil Rights Law, Contractual Relations & Housing, Equal Rights Under the Law (sec. 1981), Proof of Discrimination, Title VII Discrimination, Remedies, Alternative Dispute Resolution, Collective Bargaining & Labor Relations, Labor Arbitration, Discrimination, Amendments, Contracts Law, Contract Conditions & Provisions, Arbitration Clauses, Governments, Legislation, Statutory Remedies & Rights, Federal Arbitration Act, Arbitration Agreements, International Trade Law, Dispute Resolution, International Commercial Arbitration, Arbitration, Enforcement, Conditions & Terms, Arbitration Provisions, Employment Contracts, Interpretation, Contracts Law, Waivers, Waiver, Affirmative Defenses, Fraud & Misrepresentation, Gender & Sex Discrimination, Pretrial Matters, Mandatory ADR, Business & Corporate Law, Distributorships & Franchises, Energy & Utilities Law, Oil & Petroleum Products, Franchising & Marketing, Damages, Costs & Attorney Fees, Punitive Damages, Judicial Review, Administrative Proceedings, Torts, Punitive Damages, Measurement of Damages, Statutory Requirements, Appeals, Standards of Review, Arbitration Awards, Fair Housing Rights, Types of Contracts, Adhesion Contracts, Defenses, Unconscionability, Validity of ADR Methods, Coercion & Duress, Avoidable Consequences, Standards of Performance, Partial Performance, Reformation, Contract Formation, Acceptance