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Keywords

contractlawsuitarbitrationmotionclass actionarbitration clausearbitrator
lawsuitarbitrationappealmotiontrustclass actionantitrust

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Beltran v. Aupaircare, Inc.

Facts

Au pairs and former au pairs filed a class action lawsuit against AuPairCare, Inc. and other sponsoring companies alleging violations of various laws. The district court found the arbitration provision unconscionable and denied a motion to compel arbitration. The court concluded that the agreements were contracts of adhesion and that the au pairs, being young foreigners with limited English proficiency, did not fully understand the arbitration clause, which was buried in the contract.

Au pairs and former au pairs filed a class action lawsuit against AuPairCare, Inc. ('APC') and other au pair sponsoring companies in federal district court alleging violations of antitrust laws, the Racketeer Influenced and Corrupt Organizations Act ('RICO'), the Fair Labor Standards Act ('FLSA'), federal and state minimum wage laws, and other state laws.

Issue

Whether the arbitration provision in the au pair agreements was unconscionable and whether the district court erred in denying the motion to compel arbitration.

Whether the arbitration provision in the au pair agreements was unconscionable and whether the district court erred in denying the motion to compel arbitration.

Rule

The Federal Arbitration Act (FAA) favors the enforcement of arbitration agreements unless they are found to be unconscionable under state law.

The Federal Arbitration Act (FAA) favors the enforcement of arbitration agreements unless they are found to be unconscionable under state law.

Analysis

The court determined that the arbitration provision contained only one substantively unconscionable clause, which allowed the company to select an arbitrator, thus lacking mutuality. The court held that the district court abused its discretion by invalidating the entire arbitration provision instead of severing the offending clause, as the remaining terms were enforceable under the FAA.

Because the arbitration provision contains only one substantively unconscionable clause, the district court abused its discretion by refusing to sever the offending clause and otherwise enforce the agreement to arbitrate.

Conclusion

The court reversed the district court's ruling and remanded the case for further proceedings, compelling arbitration.

We therefore reverse the district court's ruling and remand for proceedings consistent with this decision.

Who won?

AuPairCare, Inc. prevailed because the appellate court found that the arbitration provision was not permeated by unconscionability and should have been enforced with the offending clause severed.

APC now appeals that denial. The district court found the arbitration provision between the parties both procedurally and substantively unconscionable and declined to enforce it.

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