Pinela v. Neiman Marcus Group, Inc.
238 Cal. App. 4th 227
| Cal. Ct. App. | 2015Background
- Plaintiffs Tanguilig and Pinela alleged wage-and-hour violations and PAGA claims against Neiman Marcus Group, Inc. (NMG) in California.
- NMG moved to compel arbitration under its Mandatory Arbitration Agreement, initially compelling arbitration for Pinela’s claims except PAGA.
- The trial court later reconsidered and denied arbitration, finding the agreement illusory; the court delegated questions of arbitrability to the arbitrator but reserved enforceability questions.
- NMG appealed, arguing lack of jurisdiction to reconsider, that arbitrability questions must be decided by an arbitrator, and that the agreement was enforceable and broad enough to cover all claims.
- The appellate court (Division Four) initially relied on California law to scrutinize unconscionability and determined the delegation clause was unconscionable, and the entire arbitration agreement was unenforceable under California law.
- The court held California law applies to unconscionability analysis and that the NMG Arbitration Agreement is unenforceable due to procedural and substantive unconscionability, including a Texas choice-of-law provision that undermined California statutory rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court had jurisdiction to reconsider its arbitration order | NMG sought reconsideration; parties supported reconsideration for clarity. | The trial court lacked jurisdiction after an order to arbitrate. | Yes; the court had jurisdiction to reconsider under 1008 and inherent authority. |
| Who decides enforceability and arbitrability questions | Arbitrator should decide enforceability per delegation clause. | Threshold questions of arbitrability are court questions absent clear delegation. | Courts decide delegation unless clause is clear and unmistakable; here, delegation was unconscionable and unenforceable. |
| Whether the delegation clause is substantively unconscionable | Delegation clause is part of an adhesion contract, creating unfair burden. | Delegation clause is valid and enforceable under Rent-A-Center/Tiri. | Delegation clause is both procedurally and substantively unconscionable and unenforceable. |
| Whether the NMG Arbitration Agreement as a whole is unconscionable/illusory | Multiple provisions undermine California statutory rights and stack against employees. | Agreement is valid and not unconscionable. | Agreement is unenforceable under California law due to substantive unconscionability and invalid delegation. |
| Choice of law and its effect on enforceability | Texas choice-of-law undermines California wage-and-hour protections. | Texas law governs; FAA preempts California concerns. | California law applies to unconscionability analysis; Texas choice-of-law provision renders the agreement unconscionable and unenforceable. |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (establishes unconscionability framework for arbitration agreements)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (delegation clause validity requires clear intent; court vs. arbitrator)
- Tiri v. Lucky Chances, Inc., 226 Cal.App.4th 231 (Cal.App.4th 2014) (delegation analysis and unconscionability considerations)
- Peleg v. Neiman Marcus Group, Inc., 204 Cal.App.4th 1425 (Cal.App.4th 2012) (identical arbitration agreement held illusory under Texas law)
- Samaniego v. Empire Today, LLC, 205 Cal.App.4th 1138 (Cal.App.4th 2012) (choice-of-law provisions and unconscionability under California law)
- Hall v. Superior Court, 150 Cal.App.3d 411 (Cal.App.3d 1984) (interaction of forum and choice-of-law provisions in enforceability)
- Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 (Cal. 1992) (conflict-of-laws framework for choosing law)
- Serafin v. Balco Properties, Ltd., LLC, 235 Cal.App.4th 165 (Cal.App.4th 2015) (unconscionability and fee-shifting in arbitration agreements)
- Ajamian v. CantorCO2e L.P., 203 Cal.App.4th 771 (Cal.App.4th 2012) (administrative/threshold issues and arbitration delegation analysis)