Lewis Brisbois California Team Secures Reversal of Order Denying Arbitration in FEHA Suit
Los Angeles, Calif. (August 28, 2020) - Los Angeles Labor & Employment Partners John L. Barber and Rachel Lee, along with San Diego Appellate Partner Jeffry A. Miller and Indian Wells Appellate Partner Wendy S. Dowse, recently prevailed in an appeal from an order denying a motion to compel arbitration in a lawsuit involving claims by our client’s former employee under California’s Fair Employment and Housing Act (FEHA). The appellate court’s holding reaffirmed the long-standing rule in the Golden State that a party to a contract is bound by its provision even if that party did not read said contract.
Facts of the Case
Although the plaintiff signed a receipt and acknowledgment for a revised employee handbook containing an arbitration agreement 10 months into his employment, he claimed he did not agree to arbitration because the employer did not call the arbitration agreement to his attention and he never received a copy of the revised employee handbook. The plaintiff also claimed that the arbitration agreement was procedurally and substantively unconscionable, and so permeated with unconscionable fee and cost provisions that the unenforceable provisions could not be severed.
The Lower Court’s Ruling
The trial court recognized the general rule that a party’s failure to read a contract before signing it constitutes a lack of reasonable diligence, but found that it would be “fundamentally unfair” to presume that the plaintiff was aware of the arbitration clause because the employer did not inform him that an arbitration agreement had been added to the employee handbook, either orally or in the receipt and acknowledgment for the handbook. Accordingly, the trial court found a lack of mutual assent and denied arbitration without reaching the plaintiff’s unconscionability defense. We appealed.
Following briefs and oral argument, the California Court of Appeal reversed the order and directed the trial court to sever the unenforceable fee and cost provisions from the arbitration agreement. The court held that the employer “had no obligation to point out to plaintiff that an arbitration clause had been added to the [revised] employee handbook. It has long been the rule in California that a party is bound by a contract even if he did not read the contract before signing it. That rule applies to all contracts, including arbitration agreements.”
Even though the trial court did not reach the issue of unconscionability, the Court of Appeal agreed with our position that it could decide the issue in the first instance, and found that the arbitration agreement was not so permeated with unconscionability that the unenforceable provisions could not be severed. You can read the court’s opinion here.
Mr. Barber is chair of Lewis Brisbois’ Labor & Employment Practice, and a member of the firm’s Management Committee.
Ms. Lee is a vice-chair of the firm’s Labor & Employment Practice, focusing on litigation and employer counseling.
Mr. Miller is chair of the firm’s Appellate Practice, specializing in civil appeals and writs.
Ms. Dowse is a member of the firm’s Appellate Practice and its Complex Business & Commercial Litigation Practice. She wrote the winning brief in this matter and presented the successful oral argument before the court.