Peng v. First Republic Bank CA1/1
219 Cal. App. 4th 1462
| Cal. Ct. App. | 2013Background
- Peng began employment as an assistant manager in Sept. 2005; defendant became a Merrill Lynch subsidiary, then independent bank by July 2010.
- On Mar. 26, 2010, defendant offered employment with conditions including arbitration; the offer was valid for 25 days.
- The arbitration agreement stated that any claims would be resolved by final and binding arbitration, with exceptions for workers’ comp and unemployment benefits.
- Peng signed the agreement on Mar. 30, 2010 after four days to consider it, with no objections or concerns at signing or during employment.
- Peng was terminated on May 23, 2011. She filed a FEHA discrimination and related claims on Dec. 28, 2011.
- Defendant moved to compel arbitration on Feb. 2, 2012; trial court denied, finding procedural and substantive unconscionability that could not be severed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration clause is procedurally unconscionable. | Peng argues lack of meaningful opportunity to review or negotiate AAA rules. | First Republic argues lack of attachment of AAA rules is minor and not dispositive. | Procedural unconscionability not established; failure to attach AAA rules alone is insufficient. |
| Whether the arbitration clause is substantively unconscionable due to unilateral modification. | Agreement allows unilateral modification by defendant, creating illusory obligations. | Modification rights exist but are not inherently one-sided or shocking to conscience; supported by case law. | Not substantively unconscionable; unilateral modification provision not enough to render it illusory. |
| What standard governs review of the motion to compel arbitration in this context? | Depends on disputed facts; may be de novo when undisputed. | Standard aligns with California arbitration doctrine; review for unconscionability under de novo when facts undisputed. | De novo review applies where facts are undisputed; otherwise substantial evidence standard applies. |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (establishes FEHA arbitration framework and unconscionability test)
- 24 Hour Fitness, Inc. v. Superior Court, 66 Cal.App.4th 1199 (Cal. App. 1998) (unilateral modification and mutuality considerations in arbitration agreements)
- Serpa v. California Surety Investigations, Inc., 215 Cal.App.4th 695 (Cal. App. 2013) (implied covenant limits unilateral modification of arbitration terms)
- Mayers v. Volt Management Corp., 203 Cal.App.4th 1194 (Cal. App. 2012) (unconscionability considerations in 2012 (depublished))
- Peleg v. Neiman Marcus Group, Inc., 204 Cal.App.4th 1425 (Cal. App. 2012) (modification provisions and good faith in arbitration agreements)
- Trivedi v. Curexo Technology Corp., 189 Cal.App.4th 387 (Cal. App. 2010) (arbitration rules disclosure and FEHA compliance concerns)
- Gutierrez v. Autowest, Inc., 114 Cal.App.4th 77 (Cal. App. 2003) (adhesion contract analysis in unconscionability)
- Little v. Auto Stiegler, Inc., 29 Cal.4th 1064 (Cal. 2003) (procedural unconscionability in adhesion contracts)
- Patterson v. ITT Consumer Financial Corp., 14 Cal.App.4th 1659 (Cal. App. 1993) (policy on rules and ambiguity in arbitration agreements)
- Fitz v. NCR Corp., 118 Cal.App.4th 702 (Cal. App. 2004) (discovery provisions in arbitration agreements and non-attached rules)
- Zullo v. Superior Court, 197 Cal.App.4th 477 (Cal. App. 2011) (context on arbitration rules absence and procedural unconscionability)