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Litigation Prevention Services
In this smackdown from the 9th Circuit, the appeals court made it clear that certain language of an Arbitration Agreement was not unconscionable, ambiguous or unenforceable. The Circuit went on to clearly show the trial court the error of its ways in radically interpreting a clear and concise arbitration agreement, which provided opt out opportunities for employees who wished to avoid arbitration.
The District Court in this case was bending itself into pretzels to justify a ridiculous interpretation of clear langague. This is a refreshing example of the 9th Circuit properly enforcing clear arbitration language that everyone agreed too.
TAGS:Arbitration, Adhesion, PAGA, Effective Vindication Doctrine,
We conclude that the district court erred at the first step and improperly assumed the authority to decide whether the arbitration agreements were enforceable. The question of arbitrability as to all but Gillettes PAGA claims was delegated to the arbitrator.
We review de novo an order denying a motion to compel
arbitration. Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d
1069, 1072 (9th Cir. 2013).
Both the 2013 and the 2014 Agreements contained
provisions that provided, using very similar language, that
disputes would be resolved by arbitration and, further, that
any dispute as to arbitrability (with one exception discussed
below) would be resolved by the arbitrator. These provisions
stated:
Except as it otherwise provides, this
Arbitration Provision is intended to apply to
the resolution of disputes that otherwise
would be resolved in a court of law or before
a forum other than arbitration. This
Arbitration Provision requires all such
disputes to be resolved only by an arbitrator
through final and binding arbitration and not
by way of court or jury trial.3
Such disputes include without limitation
disputes arising out of or relating to
interpretation or application of this Arbitration
Provision, including the enforceability,
revocability or validity of the Arbitration
Provision or any portion of the Arbitration
Provision.
The 2014 Agreement continued: All such matters shall be
decided by an Arbitrator and not by a court or judge.
The district court concluded that the delegation clauses in
both the 2013 and the 2014 Agreements were ineffective
because they were not clear and unmistakable. Mohamed,
109 F. Supp. 3d at 11981204. The court also concluded that
even if the delegation clauses were clear and unmistakable,
they were unenforceable because they were unconscionable.
Id. at 120416. We disagree. The 2013 Agreement clearly
and unmistakably delegated the question of arbitrability to the
arbitrator except as pertained to the arbitrability of class
action, collective action, and representative claims. The 2014
Agreement clearly and unmistakably delegated the question
of arbitrability to the arbitrator under all circumstances.
Neither delegation provision was unconscionable. Thus, all
of Plaintiffs challenges to the enforceability of the arbitration
agreement, save Gillettes challenge to the enforceability of
the PAGA waiver in the 2013 Agreement, should have been
adjudicated in the first instance by an arbitrator and not in
court.
Clear and
unmistakable evidence of an agreement to arbitrate
arbitrability might include . . . a course of conduct
demonstrating assent . . . or . . . an express agreement to do
so.
The district court determined that the delegation
provisions themselves were unambiguous, but it
nonetheless held that they conflicted with venue provisions
elsewhere in the 2013 and 2014 Agreements. Mohamed,
109 F. Supp. 3d at 1199. Both venue provisions stated that
any disputes, actions, claims, or causes of action arising out
of or in connection with this Agreement or the Uber Service
or Software shall be subject to the exclusive jurisdiction of
the state and federal courts located in the City and County of
San Francisco. The district court concluded that the
language in the venue provisions granting state or federal
courts in San Francisco exclusive jurisdiction over any
disputes, actions, claims or causes of action arising out of or
in connection with this Agreement was inconsistent and in
considerable tension with the language of the delegation
clauses, which provide[d] that without limitation
arbitrability will be decided by an arbitrator. Id. at 1201.
The court also identified an inconsistency between the
without limitation language and the carve-out provision in
the 2013 Agreement granting courts jurisdiction over
challenges to the PAGA waiver. Id. at 120102.
These conflicts are artificial. The clause describing the
scope of the arbitration provision was prefaced with [e]xcept
as it otherwise provides, which eliminated the inconsistency
between the general delegation provision and the specific
carve-out in the 2013 Agreement. As for the venue provision,
the California Court of Appeal has observed that [n]o matter
how broad the arbitration clause, it may be necessary to file
an action in court to enforce an arbitration agreement, or to
obtain a judgment enforcing an arbitration award, and the
parties may need to invoke the jurisdiction of a court to
obtain other remedies. Dream Theater, Inc. v. Dream
Theater, 21 Cal. Rptr. 3d 322, 328 (Cal. Ct. App. 2004), as
Both substantive and
procedural unconscionability must be present in order for a
court to find a contract unconscionable, but they need not be
present in the same degree. Id. Recently, the California
Supreme Court has emphasized that unconscionability
requires a substantial degree of unfairness beyond a simple
old-fashioned bad bargain. Baltazar v. Forever 21, Inc.,
367 P.3d 6, 12 (Cal. 2016) (quoting Sonic-Calabasas A, Inc.
v. Moreno, 311 P.3d 184, 291 (Cal. 2013)). Rather,
unconscionable contracts are those that are so one-sided as
to shock the conscience.
Uber argues that the delegation provisions could not have
been procedurally unconscionable because both agreements
gave drivers an opportunity to opt out of arbitration
altogether. The district court agreed with Uber that, under
Ninth Circuit precedent, the existence of a meaningful right
to opt-out of [arbitration] necessarily renders [the arbitration
clause] (and the delegation clause specifically) procedurally
conscionable as a matter of law. Id. at 1212. As to the 2013
Agreement, the court concluded that the right to opt out was
not meaningful because drivers were required to opt out
either in person at Ubers San Francisco offices or by
overnight delivery service, both of which were so
burdensome as to make the opt-out right illusory. Id. at
1206. As to the 2014 Agreement, which contained a much
less burdensome opt-out procedure, the court held that our
precedent failed to apply California law as announced by the
California Supreme Court, and as such, declined to apply it.5
Id. at 1212.
The district court does not have the authority to ignore
circuit court precedent, and neither do we. Binding
authority must be followed unless and until overruled by a
body competent to do so. Hart v. Massanari, 266 F.3d
1155, 1170 (9th Cir. 2001); see Miller v. Gammie, 335 F.3d
889, 899900 (9th Cir. 2003) (en banc) (identifying the
limited circumstances when a three-judge panel of this court
is not bound by our precedent). In Nagrampa, we determined
that [t]he threshold inquiry in Californias unconscionability
analysis is whether the arbitration agreement is adhesive.
469 F.3d at 1281 (quoting Armendariz, 6 P.3d at 690). In
Circuit City Stores, Inc. v. Ahmed, we held that an arbitration
agreement is not adhesive if there is an opportunity to opt out
of it. 283 F.3d 1198, 1199 (9th Cir. 2002); see also Kilgore
v. KeyBank, Nat. Assn, 718 F.3d 1052, 1059 (9th Cir. 2013)
(en banc). Taken together, these two principles compel us to
find that the 2014 Agreement, at least, is not adhesive, which
supports our holding that the delegation provision is not
unconscionable.
The district courts conclusion that the right to opt out of
the 2013 Agreement was illusory fares no better. An
illusory promise is one containing words in promissory form
that promise nothing and which do not purport to put any
limitation on the freedom of the alleged promisor. Flores
v. Am. Seafoods Co., 335 F.3d 904, 912 (9th Cir. 2003)
(quoting 2 Corbin on Contracts 142 (rev. ed. 1995)). While
we do not doubt that it was more burdensome to opt out of
the arbitration provision by overnight delivery service than it
would have been by e-mail, the contract bound Uber to accept
opt-outs from those drivers who followed the procedure it set
forth. There were some drivers who did opt out and whose
opt-outs Uber recognized. Thus, the promise was not
illusory. The fact that the opt-out provision was buried in
the agreement does not change this analysis. Mohamed,
109 F.Supp. 3d at 1205. As we noted in Ahmed, one who
signs a contract is bound by its provisions and cannot
complain of unfamiliarity with the language of the
instrument. 283 F.3d at 1200 (quoting Madden v. Kaiser
Found. Hosps., 552 P.2d 1178, 1185 (Cal. 1976)).
Plaintiffs also argue that even if the delegation provisions
are otherwise enforceable, they are invalid because both the
2013 and 2014 Agreements contain a fee term requiring
drivers to split the costs of arbitration equally with Uber and
thus preclude drivers from effectively vindicating their
federal statutory rights. Effective vindication provides courts
with a means to invalidate, on public policy grounds,
arbitration agreements that operat[e] . . . as a prospective
waiver of a partys right to pursue statutory remedies. Am.
Exp. Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2310 (2013)
(quoting Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 637 n. 19 (1985)). In Italian
Colors, the Supreme Court stated that effective vindication
may cover filing and administrative fees attached to
arbitration that are so high as to make access to the forum
impracticable. Id. at 231011; see also Chavarria v. Ralphs
Grocery Co., 733 F.3d 916, 927 (9th Cir. 2013) (finding that
the effective vindication doctrine was implicated when
administrative and filing costs, even disregarding the cost to
prove the merits, effectively foreclose pursuit of the claim).
Evidence submitted by the Plaintiffs suggests that the costs of
arbitration in this case may exceed $7,000 per day.
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Last Updated: Tuesday, May 9, 2023