28 Cal. App. 5th 1042
Cal. Ct. App. 5th2018Background
- Ramos, a highly qualified "Income Partner" at Winston & Strawn, signed the firm's preexisting Partnership Agreement containing an arbitration clause shortly after hiring and later sued for sex discrimination, retaliation, Equal Pay Act and wrongful termination claims after alleged adverse actions and compensation cuts.
- The Partnership Agreement required mediation then binding arbitration in Chicago before a three-arbitrator panel; it mandated each party bear its own fees, imposed confidentiality, and limited arbitrators from "overrid[ing]" partnership decisions.
- Winston moved to compel arbitration under the Partnership Agreement; the trial court found Ramos was in a partnership relationship, severed venue and cost-sharing provisions, and granted the motion.
- Ramos petitioned for a writ of mandate; the Court of Appeal granted review to decide arbitrability and enforceability under California law (Armendariz framework).
- The appellate court held Ramos’s statutory claims "relate to" the Partnership Agreement and therefore fall within the arbitration clause, but the arbitration agreement was procedurally and substantively unconscionable under Armendariz and could not be salvaged by severance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope: Whether Ramos's statutory and wrongful termination claims fall within the arbitration clause | Ramos: clause limited to disputes about the Partnership Agreement; her FEHA/Labor Code claims are separate | Winston: clause is broad ("arising under or related to") and covers all disputes arising from the partnership relationship | Court: claims "relate to" the Partnership Agreement and are within the arbitration clause because they touch matters created by that agreement |
| Applicability of Armendariz: Whether Armendariz standards govern enforcement | Ramos: Armendariz applies because claims vindicate unwaivable statutory rights and agreement was non‑negotiated like an employment contract | Winston: Armendariz inapplicable because Ramos was a partner, not an employee; Armendariz is outdated post‑Concepcion | Court: Armendariz remains controlling; even if Ramos is technically a partner, the power imbalance and adhesive nature of the agreement bring it within Armendariz review |
| Minimum protections: Whether the arbitration clause satisfied Armendariz minimums (neutral arbitrator, remedies, discovery, written award, employer pays arbitration costs) | Ramos: clause fails Armendariz—limits remedies, imposes arbitration costs on her, requires confidentiality that impedes evidence, and limits arbitrator authority | Winston: clause provides neutral arbitrators and does not preclude adequate procedure; severance can cure defects | Court: clause fails minimums—particularly costs allocation, attorney fees, confidentiality, and clause restricting arbitrator remedies are invalid |
| Severance: Whether unconscionable provisions can be severed to enforce remainder | Ramos: severance cannot cure core defects (multiple unlawful provisions and a clause that alters arbitrators' remedial power) | Winston: trial court already severed some provisions; further severance (or Partnership provision allowing severance) can rehabilitate agreement | Court: multiple unlawful provisions and a foundational limitation on arbitrator authority cannot be cured by severance; entire arbitration agreement is void as applied to Ramos's statutory and wrongful termination claims |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (sets Armendariz minimum requirements for arbitration of unwaivable statutory employment claims)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA preempts state rule invalidating class‑action waivers but preserves unconscionability defense)
- Clackamas Gastroenterology Assocs. v. Wells, 538 U.S. 440 (U.S. 2003) (control‑based factors for distinguishing employees from owner‑physicians)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (U.S. 1985) (arbitration of statutory claims does not forgo substantive rights but submits their resolution to arbitration)
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (Cal. 1992) (arbitrator may decide contested issues of law and fact and award remedies submitted to arbitration)