Another unconscionable arbitrator-selection method

Employer-favored arbitrator will always be selected when employee initiates arbitration. The 9th Circuit, applying California law, holds that Ralphs Grocery’s arbitration process is unconscionable and therefore unenforceable. Chavarria v. Ralphs Grocery Co (9th Circuit 10/28/2013).

At first glance, the arbitrator-selection method in this case appears to be balanced. On closer inspection, the 9th Circuit concludes that it is designed to ensure that the arbitrator who is selected is always an arbitrator who has been proposed by the employer.

Here is the selection method:

(1)  Each party proposes a list of three arbitrators;

(2) The parties alternate striking one name from the other party’s list of arbitrators until only one name remains;

(3) The party “who has not demanded arbitration” makes the first strike from the respective lists; and

(4) The lone remaining arbitrator decides the claims

There were other factors in this case. The parties were precluded from selecting AAA or JAMS arbitrators. The employee would have to pay half the arbitrator’s $7,000 to $14,000 per day fee. As the court put it, “This cost likely dwarfs the amount of [the employee’s] claims.”