October 27, 2016 Practice Points

Ninth Circuit: Delegation Clauses Are Arbitrable

The appeals court did not deviate from established California law invalidating Private Attorney General Act waivers

by Adam E. Polk

Recently, in Mohamed v. Uber Technologies, Inc., Nos. 15-16178, 15-16181 & 15-16250, 2016 WL 4651409 (9th Cir. Sept. 7, 2016), the Ninth Circuit decided that contractual provisions delegating authority to determine the enforceability of an arbitration clause to an arbitrator—often called "delegation clauses"—are enforceable if clear and the contract is not unconscionable.  In reaching that conclusion, the appeals court did not deviate from established California law invalidating Private Attorney General Act (PAGA) waivers, explaining instead that PAGA waivers can be severed and do invalidate the entire contract in every case.

In Mohammed, the plaintiffs allege that Uber violated the Fair Credit Reporting Act and various state statutes and also misclassified employees as independent contractors.  Uber sought to enforce arbitration clauses from two separate, but similar, agreements.  Both agreements provided that any disputes would be resolved by arbitration, including “disputes arising out of or relating to interpretation or application of this Arbitration Provision, including the enforceability, revocability or validity of the Arbitration Provision or any portion of the Arbitration Provision.”  The district court found that those delegation clauses were ineffective because (1) they were not "clear and unmistakable,” (2) they were unconscionable, and (3) they contained PAGA waivers.  

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