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An arbitration agreement will not be considered unconscionable merely because it imposes costs on parties without regard to the party's individual financial resources, or because one of the parties has appeared repeatedly before members of the arbitration administrator's pool of neutrals, according to the California Court of Appeal.
In Hogan v. Nordstrom, Inc., No. A113160, 2007 WL 1666815 (Cal. Ct. App. June 11, 2007), Nordstrom appealed the denial of its motion to compel arbitration of Hogan's Fair Employment and Housing Act (FEHA) employment discrimination claim. Nordstrom maintained that Hogan's FEHA claim was subject to a subsequent agreement between the parties to arbitrate "covered claims," including employment discrimination claims. The motion had been rejected on grounds that the arbitration agreement was unconscionable, and that the proposed arbitration proceedings would not comply with requirements for arbitration of FEHA claims.
The Court found the agreement was not substantively unconscionable, in that it did not "encompass[] overly harsh or one-sided results." Hogan alleged that the later arbitration agreement extended to pre-existing claims against Nordstrom, and maintained it was "not truly bilateral." The Court was unable to find any evidence that Nordstrom "impose[d] the obligation to arbitrate in order to obtain a tactical advantage," that it "singled out [Hogan] for special treatment… out of concern for her particular case," or that it made the agreement "immediately effective."
The Court also refused to find substantive unconscionability in the discovery provisions of the agreement. Hogan claimed that the agreement's failure to specify which party would pay for Nordstrom's discovery costs made the agreement not truly bilateral, but the Court refused to interpret the absence of such a provision in the agreement to mean that the aggrieved party would, in fact, have to bear Nordstrom's discovery costs.
Hogan's claim that requiring each party to bear its own attorney's fees for methods outside of arbitration constituted substantive unconscionability was similarly rejected by the Court. Hogan claimed that such "potential fee liability will be much more daunting to an employee than it would [be] to a national retailer." The Court simply answered, "[n]o authority suggests that a neutral fee provision can be deemed unconscionable merely because it is of relatively greater consequence to the party with lesser financial resources."
As to the requirements for arbitration of unwaivable statutory rights under the FEHA, the Court held that the arbitration proposed here was fully compliant. The Court found no evidence that the arbitration here would "require employees to pay unreasonable costs," or "allow for only minimal discovery."
Finally, Hogan's claim that the agreement failed to "provide for neutral arbitrators" was dismissed by the Court, which observed that, even if Nordstrom had appeared before members of a particular arbitration administrator's pool of neutrals on repeat occasions, "courts are not prepared to say without more evidence the 'repeat player effect' is enough to render an arbitration agreement unconscionable."
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