Palmer v. Infosys Technologies Ltd.
832 F. Supp. 2d 1341
M.D. Ala.2011Background
- Palmer sues Infosys for breach of contract, intentional infliction of emotional distress, negligent hiring/training/monitoring/supervising, and misrepresentation arising from alleged H-1B visa fraud.
- Palmer claims Infosys improperly asked employees to write “welcome letters” for unskilled workers and retaliated after his whistleblowing to Supervisors and the Whistleblower Team.
- Palmer reported alleged fraud to supervisors; he alleges harassment including threats, denial of bonuses, derogatory comments, and increased hours without compensation.
- Palmer initially filed in Alabama state court; Infosys removed to federal court invoking diversity jurisdiction and moves to compel arbitration under Palmer’s employment agreement.
- The court must decide whether the arbitration agreement includes a valid delegation for arbitrability and whether the agreement is unconscionable under California law.
- The court denies Infosys’s motion to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the delegation clause clearly confer arbitrability to the arbitrator? | Palmer argues the clause is silent on gateway arbitrability. | Infosys contends AAA rules and California law permit arbitrator to decide arbitrability. | Court finds no clear delegation to arbitral arbitrator. |
| Is the arbitration agreement unconscionable under California law? | Palmer asserts procedural and substantive unconscionability due to adhesion, take-it-or-leave-it language, and lack of mutuality. | Infosys argues there is no unconscionability; contract allows consented arbitration with applicable law. | Court holds the agreement is procedurally and substantively unconscionable, denying arbitration. |
Key Cases Cited
- Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (FAA presumes validity of arbitration agreements; policy favoring arbitration)
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (U.S. 2011) (FAA preempts state unconscionability where it targets class action waivers)
- Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (U.S. 2010) (delegation and gateway questions framework; arbitration as contract-based)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (courts decide if parties clearly and unmistakably agreed to arbitrate gateway issues)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 85 (Cal. 2000) (tests for procedural and substantive unconscionability; adhesion and lack of mutuality)
- Davis v. O’Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007) (unconscionability; confidentiality alone not sufficient justification)
- Nagrampa v. Mail-Coups, Inc., 469 F.3d 1257 (9th Cir. 2006) (unconscionability and lack of mutuality in arbitration agreements)
- O’Hare v. Municipal Resource Consultants, 107 Cal.App.4th 267 (Cal. Ct. App. 2003) (unconscionability; trade secrets/relief distinctions in arbitration)