Build Group, Inc. v. Indian Harbor Insurance Company
3:24-cv-03426
N.D. Cal.Jul 3, 2025Background
- Build Group, Inc. filed suit against Indian Harbor Insurance Company in the Northern District of California.
- Indian Harbor moved to compel arbitration, citing an agreement incorporating the AAA Commercial Arbitration Rules and a New York forum.
- The arbitration agreement includes a delegation clause, assigning arbitrability decisions to the arbitrator.
- Build Group argued the delegation clause and certain arbitration terms were unconscionable.
- The parties are both sophisticated businesses, and the contract was negotiated at arm’s length.
- Court was asked to decide the enforceability of the delegation clause and appropriate venue for compelling arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of delegation provision | Unconscionable due to procedural and substantive unfairness | Presumed valid; not unconscionable between sophisticated parties | Held not unconscionable |
| Application of California vs. NY law | NY law provision unenforceable; CA law should apply | Delegation provision unaffected by choice of law argument | Delegation provision enforceable |
| Forum selection (arbitration in NY) | Arbitration in NY is unfairly burdensome | Forum clause reasonable for both parties | NY forum not unconscionable |
| Fee-splitting and damages limitation | Fee arrangement and limits on damages/appeal are unconscionable | Unconscionability rules for consumers/employees don’t apply | Not unconscionable; not relevant to delegation provision |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (Cal. 2000) (defining procedural and substantive unconscionability standards under California law)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899 (Cal. 2015) (consumer arbitration cost limitations do not apply to business contracts)