699 F. App'x 620
9th Cir.2017Background
- Capili applied for a job at Finish Line; the application included The Finish Line, Inc. Employee Dispute Resolution Plan (the Arbitration Agreement).
- Finish Line moved to compel arbitration of Capili’s employment-related claims under that Agreement.
- The district court denied Finish Line’s motion to compel arbitration, finding the Agreement procedurally and substantively unconscionable and declining to sever unconscionable provisions.
- Key offending provisions identified: a cost-sharing clause requiring up to $10,000 advance payment by an employee, and a unilateral judicial-carve out allowing Finish Line (but not employees) to pursue certain claims in court.
- The district court initially found the forum-selection clause unconscionable, but on appeal the Ninth Circuit applied a refined standard from later precedent and upheld the forum clause as not substantively unconscionable.
- The Ninth Circuit reviewed the denial de novo and affirmed the district court’s refusal to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability | Capili: Agreement was adhesive, offered take-it-or-leave-it. | Finish Line: Standard form employment arbitration is permissible. | Court: Agreement was adhesive and at least minimally procedurally unconscionable. |
| Substantive unconscionability — cost-sharing | Capili: $10,000 up-front cost bars low-wage employees from arbitration. | Finish Line: Fees are reasonable and enforceable. | Court: Cost-sharing clause is substantively unconscionable; it effectively forecloses vindication. |
| Substantive unconscionability — unilateral judicial carve-out | Capili: Employer-only carve-out is one-sided and unconscionable. | Finish Line: Employer carve-outs okay for claims employer likely to bring. | Court: Unilateral carve-out is substantively unconscionable for lack of bilaterality. |
| Forum-selection clause | Capili: Selected forum imposes undue hardship, so unconscionable. | Finish Line: Forum selection is enforceable; inconvenience insufficient. | Court: Under Tompkins standard, forum not shown to be unavailable or deny substantial justice; clause not substantively unconscionable. |
Key Cases Cited
- Poublon v. C.H. Robinson Co., 846 F.3d 1251 (9th Cir. 2017) (standard for unconscionability and bilateral carve-outs in arbitration agreements)
- Sonic-Calabasas A, Inc. v. Moreno, 311 P.3d 184 (Cal. 2013) (unconscionability remains a defense after Concepcion)
- Sanchez v. Valencia Holding Co., LLC, 353 P.3d 741 (Cal. 2015) (same unconscionability standard for arbitration and nonarbitration contracts)
- Chavarria v. Ralphs Grocery Co., 733 F.3d 916 (9th Cir. 2013) (cost-sharing clauses can bar access to arbitration and be unconscionable)
- Baltazar v. Forever 21, Inc., 367 P.3d 6 (Cal. 2016) (adhesive contracts and unconscionability analysis)
- Tompkins v. 23andMe, Inc., 840 F.3d 1016 (9th Cir. 2016) (forum-selection clause unconscionability requires showing forum cannot provide substantial justice)
- Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996 (9th Cir. 2010) (severance of unconscionable arbitration provisions is discretionary)
- Ingle v. Circuit City Stores, Inc., 328 F.3d 1165 (9th Cir. 2003) (courts should not rewrite contracts to enforce arbitration agreements when employer stacked terms unfairly)