Forever 21 Arbitration Agreement Not 'Unconscionable'

A contract of adhesion isn't necessarily unconscionable.

Maribel Baltazar is a "married woman of Mexican ancestry." She began working for Forever 21 as an associate in the company's downtown Los Angeles distribution center in November 2007.

Baltazar claims that her co-workers subjected her to racial and sexual harassment starting in early 2008. She reportedly complained to human resources, but the company failed to act. In January 2011, she quit and sued, alleging she was constructively discharged and subjected to discrimination and harassment based on race and sex.

The fast fashion chain and two of the employees filed a motion to compel arbitration pursuant to an arbitration agreement that Baltazar signed in 2007. Baltazar, however, argued that the agreement was unconscionable, noting that she had signed it as part of her employment application.

The trial court sided with Baltazar, finding that the agreement was substantively unconscionable because (1) it required the arbitration of employee -- but not employer -- claims, (2) it gave Forever 21 the right to take "all necessary steps" to protect its trade secrets or other confidential information, and (3) it mandated arbitration even if the agreement was unenforceable.

Whether an arbitration provision is unconscionable is ultimately a question of law. After concluding that the agreement was governed by the California Arbitration Act (CAA), the Sixth Appellate District Court concluded that the Forever 21 arbitration agreement was a contract of adhesion, but it was not substantively unconscionable.

In particular, the appellate court noted that a provision allowing either party to seek provisional remedies -- such as a temporary restraining order or an injunction -- in court wasn't barred. Nor was any other provision substantively unconscionable.

As a result, Baltazar will be stuck making her claims before an arbitrator.

Related Resources:

• Maribel Baltazar v. Forever 21 (California Courts)
• Cal. App. Court Strikes Down Mandatory Arbitration Clause (FindLaw's California Case Law Blog)
• Cal. Supreme Court Rejects Teachers Union Arbitration Request (FindLaw's California Case Law Blog)