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Capili v. Finish Line, Inc. - 116 F. Supp. 3d 1000 (N.D. Cal. 2015)

Rule:

A court has discretion to either sever an unconscionable provision from an agreement or refuse to enforce the agreement in its entirety. California law allows the court to sever any unconscionable provisions so long as they are merely collateral to the main purpose of the arbitration agreement. In exercising this discretion, courts look to whether the central purpose of the contract is tainted with illegality or the illegality is collateral to its main purpose.

Facts:

In Aug. 2013, plaintiff Ritarose Capili submitted an application for employment with defendant The Finish Line, Inc. ("Finish Line"), an athletic shoe and apparel retailer. The application included an Arbitration Agreement ("Agreement") as to any future employment-related disputes; the arbitration agreement incorporated an Employee Dispute Resolution Plan ("Plan"). Capili used Finish Line's website to log in and complete the paperwork, which included her agreement to abide by the Plan. Her agreement to that Plan was a condition of her employment. In July 2014, Cappelli's employment was terminated. Thereafter, she filed a discrimination lawsuit against Finish Line in federal district court, alleging she was terminated in response to her need for a leave of absence related to her pregnancy and other medical and health conditions. Finish Line filed a motion to compel binding arbitration. In opposition, Capili argued that the Agreement was an unenforceable contract of adhesion that was both procedurally and substantively unconscionable.

Issue:

Was the Arbitration Agreement in question procedurally and substantively unconscionable and therefore unenforceable?

Answer:

Yes.

Conclusion:

The court denied Finish Line's motion to compel arbitration. The court held that Capili was not required to arbitrate discrimination claims against Finish Line because the Agreement was unconscionable. The court fist ruled that the circumstances of the parties' Agreement—that the Agreement was presented to Capili on a "take-it-or-leave-it" basis, the automated process in which it was completed, and Capili's consent to be bound by the Agreement was a condition for employment—demonstrated at least some level of procedural unconscionability. The court then ruled that the Agreement was substantively unconscionable based upon: (1) a choice of forum clause that unreasonably favored Finish Line; (2) the Agreement's requirement for arbitration only for claims assertable by Capili, while providing Finish Line with a choice of forums for the claims assertable by it, and; (3) the Agreement's provision requiring that the parties share the costs of arbitration. Finally, the court ruled, the unconscionable terms of the Agreement were not severable so as to permit enforcement of the remaining terms because the unconscionable provisions were not merely collateral and were too numerous and significant to the Agreement. Thus, the entire Agreement was unenforceable.

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