Rizwan Ali v. Jp Morgan Chase Bank Na

FILED
NOT FOR PUBLICATION
APR 07 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
RIZWAN ALI, No. 14-15076
Plaintiff - Appellee, D.C. No. 3:13-cv-01184-JSW
v.
MEMORANDUM*
J.P. MORGAN CHASE BANK, N.A.,
Defendant - Appellant.
Appeal from the United States District Court
for the Northern District of California
Jeffrey S. White, District Judge, Presiding
Argued and Submitted February 11, 2016
San Francisco, California
Before: SILVERMAN, FISHER and TALLMAN, Circuit Judges.
J.P. Morgan Chase Bank (JPMC) appeals the district court’s order denying
its motion to compel arbitration. We have jurisdiction under 9 U.S.C.
§ 16(a)(1)(B). Reviewing de novo, see Kilgore v. KeyBank, Nat’l Ass’n, 718 F.3d
1052, 1057 (9th Cir. 2013) (en banc), we affirm in part, reverse in part and remand
with instruction to compel arbitration.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
1. The district court properly concluded the arbitration agreement was
adhesive, and thus at least minimally procedurally unconscionable. The agreement
governing various aspects of Ali’s employment with JPMC, of which the “Binding
Arbitration Agreement” (“BAA”) was part, was adhesive because it was offered
“on essentially a ‘take it or leave it’ basis.” Sanchez v. Valencia Holding Co., LLC,
353 P.3d 741, 762 (Cal. 2015). Adhesive contracts are at least minimally
procedurally unconscionable under California law. See Baltazar v. Forever 21,
Inc., No. S208345, 2016 WL 1176599, at *3 (Cal. Mar. 28, 2016) (citing Gentry v.
Superior Court, 165 P.3d 556, 573 (Cal. 2007)).
2. The district court erred in concluding it is substantively unconscionable
for the BAA to exclude from its coverage certain actions seeking only provisional
injunctive relief. This carve-out “does no more than recite the procedural
protections already secured by [California Code of Civil Procedure] section
1281.8(b), which expressly permits parties to an arbitration to seek preliminary
injunctive relief during the pendency of the arbitration.” Id. at *5. A provision
“which does no more than restate existing law does not render the agreement
unconscionable.” Id. at *1 (citation omitted).1
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The district court did not have the benefit of the California Supreme
Court’s recent decision in Baltazar.
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3. The district court also erred in concluding the BAA’s initiation provision
is substantively unconscionable. Although this provision lacks mutuality,
substantive unconscionability “turns not only on a one-sided result, but also on an
absence of justification for it.” Armendariz v. Found. Health Psychcare Servs., 6
P.3d 669, 692 (Cal. 2000) (quoting A & M Produce Co. v. FMC Corp., 186 Cal.
Rptr. 114, 122 (Ct. App. 1982)) (internal quotation marks omitted). The initiation
provision is narrowly designed to accommodate JPMC’s legal obligation to pay all
costs unique to arbitration, and thus has a “reasonable justification . . . based on
‘business realities.’” See Armendariz, 6 P.3d at 687-89, 691.
4. The district court properly concluded the BAA’s confidentiality provision
is not substantively unconscionable. Ali suggests, in a brief and conclusory
argument and without citing any authority, that the confidentiality provision is
unfairly one-sided because “having the hearing closed benefits Chase, not the
Plaintiff as it prevents others from observing and learning of Chase’s illegal
policies and practices.” Ali does not argue he would be unfairly disadvantaged in
resolving his own dispute with JPMC; rather, his concern appears to be solely for
other, potential plaintiffs. This “concern[] ha[s] nothing to say about the fairness
or desirability of a secrecy provision with respect to the parties themselves.”
Woodside Homes of Cal., Inc. v. Superior Court, 132 Cal. Rptr. 2d 35, 42 (Ct. App.
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2003). “[A] provision which favors one side is not substantively unconscionable
if the advantage is completely collateral to the issues surrounding a fair resolution
of the dispute.” Id. at 42 n.11.2
5. None of the other provisions in the BAA are substantively
unconscionable. The BAA’s discovery “guidelines” may be expanded or restricted
in the arbitrator’s “reasonable discretion” and the BAA expressly requires
discovery “consistent with . . . general standards of due process [and] the Rules of
AAA.” See Dotson v. Amgen, Inc., 104 Cal. Rptr. 3d 341, 349 (Ct. App. 2010)
(enforcing an arbitration discovery limitation because “the agreement gives the
2
We have recognized that confidentiality provisions in an arbitration
agreement are not per se unconscionable under California law. See Davis v.
O’Melveny & Myers, 485 F.3d 1066, 1079 (9th Cir. 2007) (citing Mercuro v.
Superior Court, 116 Cal. Rptr. 2d 671, 679 (Ct. App. 2002); see also Baltazar,
2016 WL 1176599, at *7 (“Agreements to protect sensitive information are a
regular feature of modern litigation, and they carry with them no inherent
unfairness.”). But we have also held that a confidentiality provision is “written too
broadly,” and thus substantively unconscionable, when, for example, it “precludes
even mention to anyone ‘not directly involved in the mediation or arbitration’ of
. . . even ‘the existence of a controversy and the fact that there is a mediation or an
arbitration proceeding’” because “[s]uch restriction[] would prevent an employee
from contacting other employees to assist in litigating (or arbitrating) an
employee’s case.” Davis, 485 F.3d at 1078. Ali has not, however, contended the
confidentiality provision here “would handicap [or] stifle [his] ability to investigate
and engage in discovery.” Id. Ali remains free to argue to the arbitrator that the
confidentiality provision is unenforceable as applied in his case. See Kilgore, 718
F.3d at 1059 n.9 (“[T]he enforceability of the confidentiality clause is a matter
distinct from the enforceability of the arbitration clause in general. Plaintiffs are
free to argue during arbitration that the confidentiality clause is not enforceable.”).
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arbitrator the broad discretion contemplated by the AAA rules to order the
discovery needed to sufficiently litigate the parties’ claims”). The BAA’s
unilateral modification clause is subject to “the fundamental limit . . . imposed by
the covenant of good faith and fair dealing implied in every contract.” Serpa v.
Cal. Sur. Investigations, Inc., 155 Cal. Rptr. 3d 506, 514 (Ct. App. 2013). It is not
inherently unfair for the BAA to authorize an arbitrator to rule on summary
judgment motions. See Little v. Auto Stiegler, Inc., 63 P.3d 979, 986 n.1 (Cal.
2003) (“To the extent that the availability of dispositive pre-arbitration motions
favor [sic] [the employer] as defendant, they confer no more of an advantage than
would be the case had the action been brought in court.”).
6. In sum, because the BAA is not substantively unconscionable, the district
court erred in failing to enforce it. See Chavarria v. Ralphs Grocery Co., 733 F.3d
916, 922 (9th Cir. 2013) (“Under California law, a contract must be both
procedurally and substantively unconscionable to be rendered invalid.” (citing
Armendariz, 6 P.3d at 690)). Accordingly, we reverse the district court’s order,
and remand with the instruction to compel arbitration.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
The parties shall bear their own costs on appeal.
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