Given the growing antipathy in some segments toward arbitration, it is not surprising that 2008 was a challenging year for those who sought to enforce arbitration agreements. This was especially true in California, which continued to take the lead in finding new ways to strike down arbitration agreements.
By Joel D. Siegel and Norman M. Leon – IFA:
In Bencharsky v. Cottman Transmission Systems, LLC,1 the court determined that an arbitration agreement was substantively unconscionable because it lacked mutuality.
This lack of mutuality arose from the fact that the arbitration agreement specifically granted the franchisor the right to seek injunctive relief in court in certain circumstances (such as when its trademarks were being infringed), while the franchisee’s only option was arbitration.
Decisions such as these remain puzzling, as they apply a standard of enforceability that applies only to arbitration agreements, which is the very thing the Federal Arbitration Act has said courts may not do. Nonetheless, this principle seems firmly entrenched in California jurisprudence, and has gained some traction in a few other jurisdictions.
While enforcing arbitration agreements in California will remain a difficult proposition, losing the battle over a non-mutual injunctive relief provision seems unnecessary. It is generally well-settled that a court has the inherent authority to grant injunctive relief to preserve the status quo pending arbitration even if the arbitration agreement does not specifically grant the court that power. It would therefore seem advisable to draft an arbitration agreement to make clear that both parties have the right to seek injunctive relief in the appropriate case.