Ninth Circuit Partially Upholds AB-51’s Attack on Mandatory Arbitration Written by Stephen Rossi and Teresa Greider California’s “AB-51” is a controversial law that limits employers’ ability to enter into arbitration agreements with employees, and provides possible civil and criminal penalties for employers that make arbitration agreements a mandatory condition of employment. In February 2020, a District Court in California issued a preliminary injunction barring the … Continue reading Mandatory Arbitration Is On the Ropes Again In California
Last week, in Rockefeller Technology Investments (Asia) VII v. Changzhou Sinotype Technology Co., Case No. S249923 (Cal. April 2, 2020), the California Supreme Court held that the Hague Service Convention does not apply to the state’s arbitration enforcement proceedings where transnational parties agree to informal notice of suit methods. The Court concluded that when these parties agree to submit to California arbitration, the California Arbitration Act ultimately governs service of process. And because the Act allows parties to enter into informal service arrangements, formal service of process procedures – including the Convention’s service mechanisms – are waived. This result should prompt foreign parties to re-evaluate the pros and cons of submitting to arbitration in California and agreeing to include informal notice of suit provisions in their underlying contracts.
The outcome presents a notable exception to the norms that foreign entities typically rely on in the Hague Convention. Generally, the Convention requires parties to serve notice of suit through each signatory’s Central Authority, which in turn carries out service consistent with their respective country’s domestic laws. As the U.S. Supreme Court held in Water Splash v. Menon, 137 S. Ct. 1504 (2017), additional methods of service are also allowable if the receiving country does not expressly prohibit it and if the domestic law of the forum country provides for it. One benefit of the Convention is that it protects international litigants from being hauled into a foreign court based on application of inconsistent and unfamiliar rules for providing them with notice of suit.
Written by Alfredo Ortega Last week, the U.S. District Court for the Eastern District of California granted a request for a preliminary injunction to prohibit the State of California from enforcing Assembly Bill 51 (AB 51) as to arbitration agreements governed by the Federal Arbitration Act (FAA). AB 51 generally bars conditioning employment or employment-related benefits on the signing of an arbitration agreement covering claims … Continue reading California’s Mandatory Arbitration Agreement Ban Stopped In Its Tracks
The following was written collectively by our Labor & Employment Department.
1. Excluding claims arising from Confidentiality provision from the arbitration clause was substantively unconscionable
In Farrar v. Direct Commerce, Inc., 9 Cal. App. 5th 1257, review filed 4/28/17, a successful entrepreneur, Farrar, negotiated with Direct Commerce (“Direct”) a contract to become its VP of Business Development. The contract excluded claims arising from the confidentiality provision from the arbitration clause. The Court of Appeal agreed with the trial court that the arbitration provision was substantively unconscionable, because it carved out more than provisional remedies and was therefore too “one-sided.” The Court of Appeal, however, found the offending provision could be severed so that the arbitration provision could be enforced. Continue reading “Arbitration”