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Armendariz v. Foundation Health Psychcare Services8/24/2000
tient lost the arbitration but not binding if the patient won a significant money judgment. (Saika, supra, 49 Cal.App.4th at pp. 1079-1080.) Stirlen concluded that the Supercuts agreement lacked even the "modicum of bilaterality" that was present in Saika. (Stirlen, supra, 51 Cal.App.4th at p. 1541.) The employee pursuing claims against the employer had to bear not only with the inherent shortcomings of arbitration - limited discovery, limited judicial review, limited procedural protections - but also significant damage limitations imposed by the arbitration agreement. (Id. at pp. 1537-1540.) The employer, on the other hand, in pursuing its claims, was not subject to these disadvantageous limitations and had written into the agreement special advantages, such as a waiver of jurisdictional objections by the employee if sued by the employer. (Id. at pp. 1541-1542.)
The Stirlen court did not hold that all lack of mutuality in a contract of adhesion was invalid. "We agree a contract can provide a `margin of safety' that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable. [Citation.] However, unless the `business realities' that create the special need for such an advantage are explained in the contract itself, which is not the case here, it must be factually established." (Stirlen, supra, 51 Cal.App.4th at p. 1536.) The Stirlen court found no "business reality" to justify the lack of mutuality, concluding that the terms of the arbitration clause were " ` "so extreme as to appear unconscionable according to the mores and business practices of the time and place." ' " (Id. at p. 1542.)
The court in Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322 (Kinney), came to the same conclusion with respect to an arbitration agreement to compel the employee, but not the employer, to submit claims to arbitration. As the Kinney court stated: "Faced with the issue of whether a unilateral obligation to arbitrate is unconscionable, we conclude that it is. The party who is required to submit his or her claims to arbitration [forgoes] the right, otherwise guaranteed by the federal and state Constitutions, to have those claims tried before a jury. (U.S. Const., Amend. VII; Cal. Const., art. I, ยง 16.) Further, except in extraordinary circumstances, that party has no avenue of review for an adverse decision, even if that decision is based on an error of fact or law that appears on the face of the ruling and results in substantial injustice to that party. [Citation.] By contrast, the party requiring the other to waive these rights retains all of the benefits and protections the right to a judicial forum provides. Given the basic and substantial nature of the rights at issue, we find that the unilateral obligation to arbitrate is itself so one-sided as to be substantively unconscionable." (Kinney, supra, 70 Cal.App.4th at p. 1332.) The court also found that certain terms of the arbitration agreement - limits to discovery and caps on compensatory and punitive damages - "heightened" its unconscionability. (Ibid.)
We conclude that Stirlen and Kinney are correct in requiring this "modicum of bilaterality" in an arbitration agreement. Given the disadvantages that may exist for plaintiffs arbitrating disputes, it is unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee, without at least some reasonable justification for such one-sidedness based on "business realities." As has been recognized " `unconscionability turns not only on a "one-sided" res
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