Wherry v. Award, Inc.
192 Cal. App. 4th 1242
| Cal. Ct. App. | 2011Background
- Plaintiffs Karena Wherry and Rocelyn Traieh filed a FEHA gender discrimination and sexual harassment complaint against Award, Inc., Award-Superstars, Century 21 Superstars, and Gregory Britton, after their relationships with defendants ended in 2007.
- Each plaintiff signed mid-2006 independent contractor agreements containing an arbitration clause directing disputes to the CAR, with fallback to California law if CAR declines or does not cover the dispute, and FAA governs.
- The agreements used CAR forms with limited, non-material blanks; plaintiffs received minimal time to review and allegedly were not given copies or explanations.
- Defendants petitioned to compel arbitration; the trial court granted, and plaintiffs sought a writ of mandate which was initially issued but later vacated and refiled proceedings ensued.
- The Court of Appeal ultimately held the arbitration provisions were procedurally and substantively unconscionable, and therefore unenforceable; severance of unconscionable terms was not permitted; the order compelling arbitration was affirmed.
- Respondents are entitled to costs on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the arbitration provisions procedurally unconscionable? | Wherry/Traieh argue lack of meaningful opportunity to review or negotiate. | Award argues provisions were preprinted form terms, not take-it-or-leave-it. | Yes; procedurally unconscionable. |
| Are the arbitration provisions substantively unconscionable? | FEHA rights could be waived; costs and limited discovery harmed plaintiffs; short statute. | Arbitration costs and discovery were permissible under Armendariz. | Yes; substantively unconscionable. |
| Can unconscionable terms be severed to save the agreement? | No; the agreement is permeated with unconscionability. | ||
| Does CAR/bylaws fallback or CA law govern as a rescue mechanism? | Rejected; the fallback provision is not a valid path to enforce FEHA arbitration. | ||
| Did Armendariz bar FEHA waiver and require protections for FEHA claims in arbitration? | Yes; arbitration terms violated Armendariz and FEHA rights. |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (mandatory arbitration must preserve FEHA rights; basic protections required)
- Little v. Auto Stiegler, Inc., 29 Cal.4th 1064 (Cal. 2003) (procedural/unconscionability tied to adhesion; oppression/surprise)
- Ontiveros v. DHL Express (USA), Inc., 164 Cal.App.4th 494 (Cal. Ct. App. 2008) (arbitration provision in FEHA action deemed procedurally unconscionable)
- Gatton v. T-Mobile USA, Inc., 152 Cal.App.4th 571 (Cal. Ct. App. 2007) (conscience of unconscionability; effect on severance analysis)
- Szetela v. Discover Bank, 97 Cal.App.4th 1094 (Cal. Ct. App. 2002) (substantive unconscionability; one-sided terms)
- Chavez v. City of Los Angeles, 47 Cal.4th 970 (Cal. 2010) (FEHA rights in arbitration; attorney fees considerations)
- Trivedi v. Curexo Technology Corp., 189 Cal.App.4th 387 (Cal. Ct. App. 2010) (fee-shifting provisions in arbitration violate Armendariz)
- Nyulassy v. Lockheed Martin Corp., 120 Cal.App.4th 1267 (Cal. Ct. App. 2004) (statutory limitations period impact on unconscionability)
- Martinez v. Master Protection Corp., 118 Cal.App.4th 107 (Cal. Ct. App. 2004) (severance and unconscionability considerations)