DON’T NEGOTIATE AGAINST YOURSELF
May 16, 2023
Parties with superior bargaining power often seek to utilize agreements that increase their rights, or limit their potential exposure, with reference to claims against another party. However, using too heavy a hand in drafting these agreements may in fact result in precisely the opposite effect and may result in harm.
In the matter of Bernell Gregory Baco v. Fast Auto Loans, Inc., (2022) 86 Cal.App.5th 292, Baco filed a complaint in Orange County Superior Court alleging 14 causes of action relating to the termination of his employment with Fast Auto Loans, Inc. Fast Auto moved to compel arbitration, arguing that Baco had signed a valid arbitration agreement when hired. The trial court denied the motion, concluding that the arbitration agreement was permeated by unconscionability which could not be remedied by severance. The court’s ruling that the arbitration agreement contained terms creating substantive unconscionability was based upon the following findings: (1) the agreement removed statutory fee-shifting provisions making it more difficult for Baco to find an attorney; (2) the agreement waived recovery of costs, including expert costs, making any case more difficult and expensive for Baco; (3) arbitration discovery was limited; and (4) the agreement gave only a 3-month limitations period.
Further, the appeals court held the arbitration agreement had too many substantively unconscionable provisions to be severed (even through the arbitration agreement contained a severability clause) and therefore affirmed the trail court’s denial of Fast Auto’s motion to compel arbitration, thereby opening the door for Baco to continue to litigate this complaint for damages in civil court.
The takeaway from this matter is that while there is value in preparing agreements that contain terms to increase a party’s rights, as well as to limit its potential exposure, there is a limit as to how far these terms, in the cumulative, can go before the court will find them to be unenforceable and to potentially destroy the broader purpose of the agreement.
At Lerner & Weiss, we listen to our clients’ purpose and goals when seeking our assistance in negotiating and drafting legal agreements, and know how to balance these interests so as to create a binding and enforceable agreement that best serves our clients’ interests. The lawyers at Lerner & Weiss have extensive experience in making sure that its clients obtain the utmost benefits and protections when negotiating and drafting legal agreement, and making sure that such agreements will be enforceable if and when the need arises.