Citation. 22 Ill.298 F.3d 778, 89 FEP Cases 706 (9th Cir. 2002)
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Brief Fact Summary.
The Plaintiff, Ferguson (Plaintiff), filed a complaint against Defendant, Countrywide Credit Industries, Inc. (Defendant), her employer, and her supervisor alleging sexual harassment, retaliation and hostile work environment.
Synopsis of Rule of Law.
In determining whether a contract is unconscionable one must consider whether it is both procedurally and substantively unconscionable and whether the agreement can stand without the unconscionable terms, or whether it must be stuck down in toto.
Plaintiff filed suit in District Court, alleging sexual harassment, retaliation and hostile work environment, under Title VII of the Civil Rights Act of 1964. Defendant countered by filing a Petition to remove the action to Arbitration, based on an arbitration that was signed upon Plaintiff’s employment with its firm. The District Court denied the Petition to Compel Arbitration, ruling that the agreement was unconscionable. Defendant appealed.
The issue is whether an arbitration agreement as a condition to employment is enforceable.
The court focused on the concept of unconscionability and how the arbitration agreement aligned with this concept.
First, the court found the agreement was procedurally unconscionable because, considering the manner in which it was negotiated (as a prerequisite to Plaintiff’s employment) and Plaintiff’s position (her need for employment), the agreement was procedurally advantageous to the Defendant.
Next, the Court considered the terms of the agreement, in accord with the concept of substantive unconscionability. If contractual terms are so one-sided that they will “shock the conscience”, then a contract is substantively unconscionable. In this case, Defendant’s agreement was obviously one-sided. First, it called for some arbitration fees to be borne by Plaintiff (while she would not be subject to such fees if she prevailed in a typical personal injury suit). Second, the discovery provision of the agreement allowed for more depositions of employees than of directors/supervisors. Finally, the agreement provided Defendant with undue advantages in that it was Plaintiff’s only option.
Defendant also argued that, if the above-mentioned terms of the agreement were considered unconscionable, the agreement on its face might still stand. The Court was not persuaded by this argument and it maintained that the types of claims to be arbitrated, along with the fee and discovery provisions permeated the agreement as a whole and thus it was per se unconscionable.
All of the above-listed factors must be taken into consideration when making a determination of unconsionability. If an agreement is only procedurally unconscionable, it can be modified. However, if the unconscionability goes to the substance of the agreement, it will be stricken.