Plaintiff argued both the delegation clause and the arbitration provision of the agreement at issue were unconscionable, requiring the trial court to resolve the merits of the challenge, which it did not. “If the party’s challenge is directed to the agreement as a whole – even if it applies equally to the delegation clause – the delegation clause is severed out and enforced; thus, the arbitrator, not the court, will determine whether the agreement is enforceable. By contrast, if the party is making a specific challenge to the delegation clause, the court must determine whether the delegation clause itself may be enforced (and can only delegate the general issue of enforceability to the arbitrator if it first determines the delegation clause is enforceable).”
Under California law, a delegation clause must be clear and unmistakable to be enforceable. The delegation clause at issue stated “[a]ll disputes arising with respect to any provision of this Agreement shall be fully subject to the terms of this arbitration clause” and incorporated the AAA procedures. Relying on this, the Court determined the language of the AAA rules was sufficiently clear and unmistakable, and thus the delegation clause was enforceable unless it was unconscionable. The trial court erred by not deciding the arbitrability of the delegation clause in light of the unconscionability concerns raised by the Plaintiff. The case was remanded.
Ramar Prod. Servs., Inc. v. Applied Underwriters, Inc., D071443 (Cal. Ct. App. Dec. 22, 2017).
