Daily Blast September 26, 2013

On September 26, 2013, the Court of Appeal, First Appellate District, Division One (SF) published its opinion in Peng v. First Republic Bank (Sept. 26, 2013, A135503) ___ Cal.App.4th ___ holding that an arbitration agreement attached to an employment offer was not unconscionable. (Slip opn., p. 12.) The trial court previously found that the agreement was unconscionable because it required plaintiff to abide by a set of arbitration rules that were not provided to her and because the agreement afforded the defendant the unilateral authority to modify or terminate the terms of the agreement. (Id. at p. 3.) The Court of Appeal reversed.

The appellate court first held that the defendant’s failure to attach the American Arbitration Association (AAA) rules, standing alone, was insufficient to support a finding of procedural unconscionability. (Slip opn., p. 9.) The court noted that the AAA rules are available on the Internet. (Id. at p. 6, fn. 5.) Further, the plaintiff did not identify any feature of the AAA rules that prevented fair and full arbitration. Thus, the failure to attach the rules did not render the agreement procedurally unconscionable. (Id. at p. 9.)

The court then held that the agreement’s unilateral modification provision was not substantively unconscionable. (Slip opn., p. 10.) According to the court, the provision stating that only the defendant could modify the agreement was not “so one-sided as to ‘shock the conscience.’” (Id. at p. 11.) Rather, the implied covenant of good faith and fair dealing prevents an employer from modifying an arbitration agreement once a claim has accrued or become known to it. Further, the plaintiff did not assert that defendant had modified the agreement in any way. Thus, the modification provision was not substantively unconscionable. As a result, the appellate court reversed the trial court’s order denying the defendant’s motion to compel arbitration. (Id. at pp. 11-12.)

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