Source: https://www.priorilegal.com/blog/californias-struggle-against-the-federal-arbitration-act-implications-for-arbitration-provisions-in-corporate-contracts
Timestamp: 2019-04-23 16:53:22+00:00

Document:
The last few decades have seen companies turning to arbitration agreements and class action waivers to curb the continued rise and monumental expenses of both litigation and class actions. However, with the continuous upheaval in California’s interpretation of arbitration provisions, and the ongoing friction between California and federal courts, companies subject to the jurisdiction of California courts should be strategic in how to get the most out of their arbitration provisions.
California Courts have traditionally disfavored class action waivers and broad arbitration agreements, often holding such agreements unconscionable and therefore unenforceable. In 2005, the California Supreme Court held that a class action and arbitration waiver is unconscionable in a consumer-facing contract of adhesion (i.e., a boilerplate contract where the consumer has no opportunity to negotiate).i For the next six years, California companies with class action waivers were left completely exposed.
Undeterred, in April 2017, the California Supreme Court extended its exception to all California statutes that were “established for a public reason” and included California’s Consumers Legal Remedy Act, California unfair competition laws, and California’s false advertising laws as those that cannot be waived in arbitration.v Given the issues at stake, it is likely the U.S. Supreme Court will review California’s most recent decision, leaving California companies unsure of the continued viability of their arbitration and class action waiver provisions.
Avoid unilateral modifications. While having the flexibility to modify a contract is highly attractive, California courts have found that allowing a company to modify or revoke an arbitration agreement without the customer’s affirmative consent may be substantively unconscionable.vi A best practice would be to make sure that all rights of modification and revocation be bilateral.
Avoid reducing the statute of limitations. Although California courts have enforced agreements that limit the time-period for when a claim can be brought, they have also held that an arbitration agreement cannot be made to serve as a vehicle for the waiver of statutory rights.vii Since most written contracts have a 4-year statute of limitations, contractually reducing that limitation could cause problems for your arbitration provisions. A best practice would be to leave the statute of limitations alone.
Avoid overly costly arbitration fees for indigent consumers. Aware of the potentially high-cost of arbitration, California courts employ a case-by-case analysis to ensure that indigent or low-income consumers are not improperly excluded from vindicating their rights.ix Requiring multiple arbitrators or costly arbitration appeal procedures could affect the court’s analysis as to the arbitration’s affordability. A best practice would be to include a provision allowing for a reduced arbitration cost structure for indigent or low-income consumers.
During this period of uncertainty, any company subject to the jurisdiction of California courts should consider these best practices when drafting their contracts to prevent problems down the road.
[i] Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005).
[ii] AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).
[iii] Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014).
[iv] DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015).
[v] McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017).
[vi] Ingle v. Circuit City Stores, Inc., 328 F.3d 1165 (9th Cir. 2003).
[vii] Martinez v. Master Prot. Corp., 118 Cal. App. 4th 107 (2004).
[viii] Ulbrich v. Overstock.Com, Inc., 887 F. Supp. 2d 924 (N.D. Cal. 2012).
[ix] Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899 (2015).
[x] McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017).
[xi] Young v. Remx, Inc., 2 Cal. App. 5th 630 (2016), as modified (Aug. 17, 2016), review denied (Nov. 22, 2016).
Denis' practice focuses on representation of emerging to mid-sized companies, helping them recognize, avoid and mitigate risk - whether through informal dispute resolution, mediation, arbitration or litigation. Denis is a generalist with considerable experience in contract disputes, partnership disputes, employment disputes, employee mobility, antitrust litigation and investigations, class actions, trademark infringement and shareholder litigations.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.