Opinion ID: 178602
Heading Depth: 4
Heading Rank: 1

Heading: Arbitration Costs

Text: Kepas asserts that the Arbitration Agreement violates Armendariz because arbitrator fees and American Arbitration Association (“AAA”) costs could be 7 imposed on employees pursuant to the arbitrator’s award. We agree. The Arbitration Agreement expressly allows an arbitrator to award “any type of legal or equitable relief that would be available in a court of competent jurisdiction, including but not limited to, the costs of arbitration.” App. at 59-60 (emphasis added). As the term “costs of arbitration” is undefined in the Arbitration Agreement, we look to the AAA Rules and Procedures for its meaning. See id. at 59 (requiring that, “wherever this Agreement is silent on the arbitration procedure,” the rules issued by the AAA control). The AAA Rules and Procedures define the term “costs of arbitration” as “[a]ll expenses of the arbitrator . . . and any AAA expenses.” Id. at 63. Thus, we conclude that the Arbitration Agreement impermissibly imposes a significant risk of these costs on employees. eBay’s arguments to the contrary are unavailing. First, eBay points to a provision in the Arbitration Agreement specifying that “the Employer will pay the arbitrator’s fee for the proceeding, as well as any room or other charges by AAA.” Id. at 59. However, this provision merely suggests that eBay will cover these costs initially. The employee nonetheless faces the risk that the arbitrator could shift the costs to him or her in the arbitration award. As a cost-shifting “system . . . poses a significant risk that employees will have to bear large costs to vindicate their statutory right against workplace discrimination,” this provision contravenes public policy pursuant to Armendariz. Mercuro v. Superior Court, 8 116 Cal. Rptr. 2d 671, 681-82 (Cal. Ct. App. 2002) (internal quotation marks omitted). Second, eBay asserts that the arbitrator has no ability to require the employee to pay arbitrator fees and other AAA expenses, as such relief would be unavailable “in a court of competent jurisdiction.” App. at 59-60. This argument ignores the language set forth in the Arbitration Agreement. The arbitrator is explicitly authorized by the Arbitration Agreement to impose the “costs of arbitration” on an employee. Id. at 60. Further, adopting eBay’s explanation would render the term “costs of arbitration” in the award provision inoperative and, pursuant to the California rules of contract interpretation, such result should be avoided. See Cal. Civ. Code § 1641 (specifying that, when interpreting the language of a contract, the court should give effect to every provision). As we have concluded that the award provision contravenes public policy, we must also evaluate whether the defect renders the Arbitration Agreement unenforceable in its entirety or whether this provision is severable. After addressing other alleged defects in the Arbitration Agreement, we will turn to the issue of severability.