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Attorneys

Courts Lack Jurisdiction to Determine Whether an Arbitration Agreement is Enforceable?

May 20 2014

By Charles L. Post

A California Court of Appeal decision issued on May 15, 2014 (Tiri v. Lucky Chances, Inc., Case No. A136675) decided that the parties to an arbitration agreement may, by agreement, deprive a civil court of jurisdiction to determine whether an arbitration agreement is enforceable.

Several years after she was hired, Lourdes Tiri signed an agreement with her employer, Lucky Chances, Inc. requiring disputes between them to be resolved by arbitration. In one of the provisions to that agreement, the parties agreed to delegate questions about the enforcement of the agreement to the arbitrator, instead of to a court. Tiri was subsequently fired and she filed a complaint in the Superior Court alleging wrongful discharge. The employer petitioned to compel arbitration but the trial court denied the petition on the grounds that the arbitration agreement was unconscionable and therefore unenforceable. Lucky Chances appealed the court’s order denying arbitration. The court held that the trial court lacked the authority to rule on the enforceability of the agreement because the parties’ assignment of this authority to the arbitrator was clear and was not revocable under state law.

This is great news for employers and a further incentive to use arbitration agreements that contain provisions of this kind. The chances that an agreement will be found to be unenforceable if it contains such “arbitrator decides” language is fairly remote. A full copy of the decision can be viewed at this link: Tiri v. Luck Chances.