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In dismissing a lawsuit alleging employment discrimination, a federal district court in California rejected an unconscionability challenge to the employee’s arbitration agreement. Specifically, the Court found that the exemption for some of the employer’s claims did not render the agreement substantively unconscionable.
In Dwyer v. Dynetech Corp., No. C 07-02309 JSW, 2007 WL 2726699 (N.D. Cal. Sept. 17, 2007), Dwyer applied for an instructor position with Dynetech. Later, as an independent contractor for Dynetech, Dwyer executed a letter agreement that included an arbitration clause. Accordingly, when Dwyer sued for discrimination, Dynetech moved for dismissal pursuant to the arbitration agreement. In opposing the motion, Dwyer argued that the arbitration agreement was unconscionable and therefore unenforceable.
The Court found that Dwyer met his burden of demonstrating procedural unconscionability. According to the Court, even though Dwyer had an opportunity to read and ask questions about the arbitration agreement, the agreement was procedurally unconscionable simply because it was presented to Dwyer on a “take it or leave it” basis.
However, the Court found that Dwyer failed to meet his burden of proving that the arbitration agreement was substantively unconscionable. On this issue, Dwyer argued that the arbitration agreement was substantively unconscionable because it lacked mutuality by exempting the claims most likely to be brought by Dynetech – specifically, enforcement of a non-compete agreement and trade secrets claims. The Court rejected this argument because there were other categories of employer claims that were subject to the arbitration agreement.
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