Court: Circuit City Arbitration Policy Still Invalid

July 23, 2003 ( - The US 9th Circuit Court of Appeals has shot down Circuit City's mandatory arbitration contract for the third time in 18 months.

>In the latest version of the ongoing saga, Circuit City Stores v. Mantor , Circuit Judge Harry Pregerson determined Circuit City’s mandatory arbitration contract – version 2001 – was only slightly different than the 1998 version that the court struck down in May (See  Appeals Court Again Throws Out Circuit City Arbitration ).   Thus, the court found the contract, which compels employees to litigate their disputes in private arbitration rather than in public courts, is substantively and procedurally unconscionable, according to a report in The Recorder.

“Circuit City has modified and improved its arbitration agreement to comport with our holding regarding limitations on available remedies,” wrote Pregerson. “But the substantively unconscionable provisions concerning the statute of limitations, class actions, cost-splitting and Circuit City’s unilateral power to modify or terminate the agreement remain in the version of the agreement we review in this case.”

In addition to the objectionable provisions in the contract, the court found Circuit City managers had failed to provide plaintiff Paul Mantor, an employee, with a real opportunity to opt out. “A meaningful opportunity to negotiate or reject the terms of a contract must mean something more than an empty choice,” said Pregerson. “In light of Circuit City’s insistence that Mantor sign the arbitration agreement – under pain of forfeiting his future with the company – the fact that in 1995 Mantor was presented with an opt-out form does not save the agreement from being oppressive.”

>Circuit City has been resilient in its attempts to push its arbitration contract through the judicial system, with a mixed bag of success and failure.   Aside from numerous attempts to scale the 9th Circuit wall, t he company managed a victory in Circuit City Stores v. Adams, 532 U.S. 105, when the US Supreme Court ruled that employment arbitration agreements are enforceable under the Federal Arbitration Act.

However, the 9th Circuit later said the agreement was unconscionable under California state law as it did not provide a “modicum of bilaterality.”