Enforceability of Arbitration Agreements Continues to Flutter in the Wind: Arbitration Agreement Upheld in Peng v. First Republic, but Depending on Circumstances, Might Not be Upheld in Other Cases

Reading arbitration cases is like walking through a muddy field on a dark and rainy night. What is okay in the context of one case, is not in the context of another case. It just depends on how much you slip and slide through the mud and where exactly you fall.

Take the recent case of Peng v. First Republic (2013) 219 Ca.4th 1462. The Court held that failure to attach the arbitration rules didn’t make the arbitration agreement procedurally unconscionable. On the other hand, if the arbitration rules had changed any important substantive rights, the agreement might have been procedurally unconscionable. So, we are left guessing whether in any other situation, an employer has to provide the arbitration rules to an employee or not.

Second, Peng held that the right of the employer to change the employment contract terms at any time, whereas the employee cannot, did not make this agreement substantively unconscionable. Why? Because the employer is supposed to act with “good faith . . . and fair dealing.” So, if the employer doesn’t act in good faith and fair dealing, well, then, is the agreement invalid? Again, slip and slide. We’re left guessing.

This case just demonstrates that interpreting whether or not arbitration agreements are valid prove what I’ve said one hundred times: There is no valid and coherent way to justify involuntary arbitration agreements.

Jody LeWitter
November 13, 2013