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A federal district court in Arizona denied an employer’s motion to compel arbitration because the arbitration agreement applied only to employee claims and not to claims brought by the employer.
In Batory v. Sears, Roebuck and Co., No. CV 02-2026-PHX-EHC, 2006 WL 2946506 (D. Ariz. Oct. 12, 2006), Batory sued Sears, her former employer, for wrongful termination. Sears filed a motion to compel arbitration based on its dispute resolution program (DRP).
The district court granted the motion. Batory appealed that ruling, and the Ninth Circuit remanded the case to the district court (the Court) to determine whether certain provisions of the DRP were unconscionable.
On remand, the Court examined three provisions of the DRP. First, applying Arizona law, the Court held that the scope of the DRP was unconscionable because it applied only to claims brought by Batory and not to claims brought by Sears. The Court described the lack of mutuality as “an overall imbalance of rights.”
The Court again referred to “an overall imbalance of rights” in holding that a provision giving Sears a unilateral right to modify or terminate the DRP upon sixty days notice was unconscionable. In reaching this holding, the Court rejected Sears’ argument that giving employees a right of modification “would result in inconsistent agreements that would be impossible to implement.”
The fee provision was the only one to survive scrutiny. Specifically, the Court rejected Batory’s argument that the fee provision was unconscionable because Batory did not “set forth specific facts proving that the $150 filing fee was prohibitively expensive.”
Finally, the Court held that the DRP was unenforceable because the lack of mutuality tainted the whole agreement. Accordingly, the Court denied Sears’ motion to compel arbitration.
As this case illustrates, expressly unilateral arbitration agreements are routinely invalidated in accordance with that familiar aphorism: “What’s good for the goose is good for the gander.” Parties can avoid litigation like this and gain all the benefits of arbitration by having a mutual arbitration agreement govern all their disputes.
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