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California Supreme Court Wins against Arbitration

Monday, June, 16, 2014

The California Supreme Court won a victory in its seeming war against arbitration clauses when the Supreme Court declined to review its latest decision regarding an employment contract dispute.


The case, Sonic-Calabasas A v. Moreno, was originally determined in favor of the employee by the California court based on the fact that the arbitration requirement forcibly waived the employee’s right to an administrative hearing known in California as a Berman hearing.  This decision was appealed and the Supreme Court ruled that California had to review its decision in light of AT&T Mobility v. Concepcion, which invalidated any state law that could be regarded as an “obstacle” to arbitration.


The California court dutifully reconsidered the decision, and admitted that it could no longer invalidate contracts based on the Berman hearing principle.  It then created a new rule that if Berman hearings were waived in arbitration clauses, the employer in question had to provide an affordable alternative.  For all practical purposes, this new rule accomplishes the same goal of preserving Berman hearings.  The Supreme Court recently declined to review this new decision, and so it stands in the state of California.


The California State Supreme Court has long exhibited hostility to arbitration clauses in contracts, and has gone several rounds with the United States Supreme Court over their attempts to invalidate such clauses when encountered in contracts.  While many expected these efforts to fall off or fail after AT&T Mobility v. Concepcion, it appears that the courts have found a new strategy.