Does trial court lack authority to rule on enforceability of arbitration agreement where delegation of this authority to arbitrator was clear and not revocable?
In Tiri v. Lucky Chances, Inc. (filed 5/15/14) A136675, Plaintiff Tiri had signed an arbitration agreement with defendant, her employer. Included in the agreement was a provision that the arbitrator, instead of the court, would determine all issues of enforceability of the agreement. Upon her termination, plaintiff sued for wrongful termination, and defendant filed a motion to compel arbitration. The trial court denied the petition on the ground the agreement was unenforceable as being unconscionable. On defendant's appeal, the Court of Appeal, First Appellate District, Division Four, reversed, holding the trial court lacked the authority to rule on unenforceability of the agreement because the parties had made a clear, non-revocable delegation of this authority to the arbitrator.
Principle reliance was placed on the United States Supreme opinion in Rent-A-Center, Inc. v. Jackson (2010) 561 U.S.63, 71, which held a party's challenge to the arbitration agreement does not invalidate the delegation clause; accordingly the arbitrator, and not the court, must consider any challenge to the arbitration agreement as a whole. If the enforceability challenge were specific to the delegation clause, the court may consider the challenge. (Id. at p. 73.)
It was not clear in the instant case whether there was a challenge specifically aimed at the delegation clause. In fact, the ruling of the trial court sounded as if the challenge was broader. The trial court found the agreement unconscionable, focusing on the fact that the agreement stated that the arbitration was governed by the AAA rules, but failed to attach those rules. Nonetheless, the appellate court set out to analyze the enforceability of the delegation clause itself. It concluded the delegation clause was procedurally unconscionable (it gave plaintiff no choice), but was not substantively unconscionable as the trial court impliedly found. (Some measure of each of procedural and substantive unconscionableness needed to be present.)
The Court of Appeal found the delegation clause enforceable because it was clear and not revocable. While the law presumes such delegation unenforceable, defendant here carried its burden to show clear and unmistakable evidence that the parties intended the delegation. The question of whether the clause was revocable turns on whether the agreement was unconscionable. Even though this was an adhesion agreement and thus procedurally unconscionable, there was nothing about the delegation clause that was substantively unconscionable: both parties were bound by it thus demonstrating mutuality, and there was nothing ambiguous or misleading about the clause. The court thus found the denial of the petition to compel was improper; it was the arbitrator's call to determine whether the agreement as a whole was unconscionable.