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An appellate court in California upheld a trial court’s determination that an arbitration agreement was unconscionable; rejecting an argument that the “voluntarily entered into” language in the arbitration agreement precluded a finding of procedural unconscionability and further finding a lack of mutuality based on ambiguous language in a separate intellectual property agreement.
In Colombo v. BNC Mortg., Inc., No. C052291, 2007 WL 2783328 (Cal. Ct. App.3d Sept. 26, 2007), Colleen Colombo, along with five other female employees of BNC (collectively “Colombo Plaintiffs”), filed suit for sexual harassment and retaliation.
The Colombo Plaintiffs had signed an arbitration agreement in addition to several other separate agreements including an intellectual property (IP) agreement. BNC moved to compel arbitration based on the agreement.
The trial court denied BNC’s motion, finding the agreement both procedurally and substantively unconscionable. BNC appealed.
This Court rejected BNC’s argument that the circumstances surrounding the signing of the arbitration agreements were inadmissible parol evidence.
First, though the agreement expressly stated that the agreement was voluntary, BNC’s argument would make it so that an employee could “never challenge the circumstances surrounding the execution of the agreement…[s]uch a result makes little sense.”
Second, the Court found that the declarations of the Colombo Plaintiffs provided evidence that each employee was forced to sign the arbitration agreements, which were included along with many other employment forms, in a hurried manner. There was no time given to negotiate its terms.
Third, though the employees did not present evidence that they were unable to locate other work, BNC provided no authority that such a showing was necessary. Accordingly, the Court found the agreement procedurally unconscionable.
Further, the Court found the separate IP agreement lacked mutuality because its ambiguous language “at law and equity” could be read to allow BNC a remedy in court or arbitration for intellectual property disputes.
The Court concluded that “[i]t is inherently unfair to give BNC such flexibility.” The arbitration agreement requires employee disputes, “most frequently brought by employees,” to go to arbitration, but would allow IP disputes, which are “most frequently brought by the employer” to be heard in court. Thus, the agreement lacks mutuality.
Rejecting BNC’s contention that the IP agreement was separate and irrelevant from the arbitration agreement, the Court held that the trial court did not err in its assessment that the agreement was substantively unconscionable. The trial court’s judgment was affirmed.
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