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A United States District Court in California held that an arbitration agreement containing an unconscionable provision was enforceable because the unconscionable provision could be severed from the remainder of the agreement.
In Martin v. Teletech Holdings, Inc., No. 05-55342, 2006 WL 3794324 (9th Cir. Dec. 19, 2006), Robert Martin signed an arbitration agreement as a condition of his employment with Teletech. The arbitration agreement contained a cost-splitting provision, requiring Martin to pay half the costs of arbitration.
When Teletech brought a motion to compel arbitration, Martin argued that the cost-splitting provision was unconscionable.
Applying California law, this Court held that the arbitration agreement was procedurally unconscionable because it was a condition of employment and substantively unconscionable because it required the employee to pay half the arbitration costs before arbitration proceedings even commenced.
However, the Court further found the provision to be "easily severable" from the remainder of the arbitration agreement because the cost splitting "provision [was] not central to the purpose of the agreement." Therefore, the Court held that the arbitration agreement would be enforceable once the cost-splitting provision was severed.
Martin also argued that the arbitration agreement should be invalidated for lack of mutuality; however, the Court rejected this argument because Martin failed to raise it at the district court level.
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