Unconscionability; Venue Selection; Conspicuousness

Anyone whose practice involves consumer representation needs to keep Munoz v. Earthgrains Distribution, LLC, 2023 U.S. Dist. LEXIS 162846 (S.D. Cal. September 13, 2023)(Battaglia, J.), and Aguila v. Becton & Dickinson, 2023 U.S. Dist. LEXIS 162585 (N.D. Cal. September 13, 2023)(Davila, J.), very close at hand. Both courts find the arbitration provisions contained in the subject form contracts to be procedurally and substantively unconscionable. While each decision hinges, in part, on a specific provision of California law limiting the ability to compel out-of-state arbitration, they have a broader application, as the cases address potential conflicts among various terms; conspicuousness of the arbitration provision; “surprise;” and adhesion.  Aguila even goes so far as to address whether the drafter of the agreement needs to attach a set of the arbitration forum’s rules.  Franchise counsel, who in drafting around varying state regulations often use jurisdiction-specific addenda, should take a close look at Munoz, as it addresses potential ambiguities between an underlying contract and such supplements.

Sealing of Awards in Connection with a Confirmation Hearing

Eletson Holdings, Inc. v. Levone Holdings, Ltd., 2023 U.S. Dist. LEXIS 162413 (S.D.N.Y. September 13, 2023)(Liman, J), joins the sea of cases which hold that the public interest in accessing court records overrides a party’s desire to keep the actual award or parts thereof confidential during the confirmation or vacatur process. The opinion is a good starting point for anyone considering the issue as it fully addresses the relevant issues and is citation rich.

Discovery Stays Pending Resolution of a Motion to Compel Arbitration

In Powell v. UHG 1 LLC, 2023 U.S. Dist. LEXIS 162289 (S.D. Cal. September 12, 2023)(Crawford, M.J), the court denies a stay of discovery pending the resolution of defendant’s motion to compel arbitration.  The court opines that discovery may be appropriate to resolve the threshold issue of whether the defendant was properly assigned the contract and, therefore, can rely upon its arbitration clause.  Accordingly, Magistrate Judge Crawford denies the discovery stay.  The case, also, stands as another warning that a defendant should assert the right to arbitrate early in the litigation. The court holds that, because the defendant filed an answer, rather than moving to compel arbitration, it “consum[ed] the plaintiff’s resources (and the Court’s resources).”  Accordingly, she finds, as a second ground for denying the stay, that the “potential for unfair prejudice to plaintiff outweighs the convenience of a stay here. . . .”

Voluntary Dismissal after the Granting of a Motion to Compel

The Eagles (who, by the way, are on a farewell tour), sing in “Hotel California,” “you can check in any time you want, but you can never leave.”  Anderson v. Hansen, 2023 U.S. Dist. LEXIS 162277 (E.D. Mo. September 13, 2023)(Ross, J.), and Ditucci v. Ashby, 2023 U.S. Dist. LEXIS 162811 (D. Utah September 12, 2023)(Campbell, J) reach opposite results on whether a party may voluntarily dismiss a complaint without prejudice after a court orders that all or part of the case be sent to arbitration. The court in Anderson dismisses with prejudice; the court in Ditucci allows dismissal without prejudice.  Both cases are fact specific, but are a good way to start thinking about the issue.

Have a good weekend.

David A. Reif, FCIArb
Reif ADR
Dreif@reifadr.com
Reifadr.com