Two California Appellate Decisions “Delegate” Authority From Courts to Arbitrators

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Two divisions of the California Court of Appeal recently issued two significant decisions on arbitration agreements. Both courts held that a trial court lacks authority to determine the enforceability of an arbitration agreement if the agreement has a provision delegating that authority to an arbitrator.

Tiri v. Lucky Chances, No. A136675 (May 15, 2014): In the first case, the employee, Lourdes Tiri was hired as a cook by Lucky Chances, Inc., a card-club casino and restaurant. Three years later, she was asked and agreed to sign an arbitration agreement. The agreement included a provision, referred to as the “delegation clause.” The delegation clause stated that an arbitrator, not the courts, “shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement, including, but not limited to, any claim that all or any part of this Agreement is void or voidable.”

Five years later, Tiri was discharged from her job. She sued her former employer for wrongful termination. Lucky Chances filed a petition to compel arbitration. Tiri argued that the arbitration agreement was unconscionable and unenforceable. Lucky Chances asked the trial court to rule on the threshold issue of the enforceability of the delegation clause and to delegate the decision regarding the enforceability of the agreement to the arbitrator. The trial court denied the petition to compel and found the agreement to be unconscionable. Lucky Chances appealed.

The Court of Appeal in the First Appellate District disagreed with the trial court and held that, in light of the delegation clause, the trial court did not have the authority to decide the enforceability of the agreement. The court noted that for a delegation clause to be effective it must meet two requirements: 1) the language of the delegation clause must be clear and unmistakable, and 2) the delegation must not be revocable under state-law grounds of fraud, duress, or unconscionability. The court held that the language of the clause was clear and that the clause was not substantively unconscionable. Therefore, the court concluded that the delegation clause was effective, and an arbitrator would need to decide whether the arbitration agreement was enforceable.

Malone v. Superior Court (California Bank & Trust), No. B253891 (June 17, 2014): Keeya Malone was hired by California Bank & Trust (CB&T) in 2007. At the time she was hired, she allegedly accepted the company handbook, which contained an arbitration agreement. The agreement contained a delegation clause stating, “[t] he arbitrator has exclusive authority to resolve any dispute relating to the interpretation, applicability, or enforceability of this binding arbitration agreement.”

Her employment with CB&T ended in 2010. In 2013, she filed a wage and hour lawsuit and sought to pursue a class action lawsuit against CB&T. CB&T asked the court to compel arbitration. Since the arbitration agreement did not allow for class arbitration, CB&T asked that Malone arbitrate her claim on an individual basis. Malone challenged the arbitration agreement on the basis that it was unconscionable and, therefore, unenforceable.

The trial court found that the delegation clause itself was not unconscionable and noted that the arbitrator can address whether the arbitration agreement as a whole is unconscionable. Malone appealed.

The Court of Appeal agreed with the trial court. The court clarified that some of the prior case law, that found delegation clauses unconscionable, relied on the notion that the arbitrator may have a self-interest in finding the agreement enforceable. The court noted that the Federal Arbitration Act (FAA) preempts such reasoning and stated, “This analysis is nothing more than an expression of a judicial hostility to arbitration, based on the assumption that a paid decision-maker cannot be unbiased, and it, therefore, is wholly barred by the FAA.”

According to Jack Sholkoff, a shareholder in the Los Angeles office of Ogletree Deakins: “The courts’ decisions in Tiri and Malone present a double-edged sword for employers. On the one hand, these appellate court decisions that enforce an agreement’s delegation clause and send the question of the agreement’s enforceability to the arbitrator will likely mean that more cases will go to arbitration. Indeed, inserting a delegation clause like that in Tiri or Malone would mean that virtually every case would go to arbitration at least with regard to enforceability. This will be a powerful tool for employers, since it may be that arbitrators are more likely than courts to enforce arbitration agreements.” 

Sholkoff continued, “On the other hand, one of the most compelling reasons to use arbitration agreements at all is to take advantage of a class action waiver. The danger of using a delegation clause like the one in Tiri or Malone is that the arbitrator would, in addition to reviewing the enforceability of the arbitration agreement, also review the enforceability of any class action waiver contained in the arbitration agreement. The unintended result could be that an employer gets the worst result of all: class action arbitration. Employers should, in view of these cases, carefully examine their arbitration agreements to determine that the agreements meet their ultimate goals.”

Note: This article was published in the June 27, 2014 issue of the California eAuthority.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | Attorney Advertising

Written by:

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Ogletree, Deakins, Nash, Smoak & Stewart, P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.