# Little v. Auto Stiegler, Inc. > California Supreme Court · February 27, 2003 · 130 Cal. Rptr. 2d 892 URL: https://www.frixlaw.com/law-library/cases/9796393 ## Case - **Full name:** ALEXANDER M. LITTLE, Plaintiff and Respondent, v. AUTO STIEGLER, INC., Defendant and Appellant - **Court:** California Supreme Court - **Decided:** February 27, 2003 - **Citations:** 130 Cal. Rptr. 2d 892; 29 Cal. 4th 1064; 2003 Daily Journal DAR 2145; 63 P.3d 979; 19 I.E.R. Cas. (BNA) 1239; 2003 Cal. Daily Op. Serv. 1684; 2003 Cal. LEXIS 1292 - **Precedential status:** Published - **Opinion:** Concurring in part by Baxter - **Judges:** Moreno, Baxter, Brown - **Cited by:** 229 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9796393 ## How later opinions describe it (automated extraction) - holding that the court 14 should infer that, when an arbitration agreement is silent as to costs, the employer must bear the 15 arbitration forum costs and that the absence of that term does not provide grounds for denying 16 enforcement of the agreement - holding "procedural element" established where employer 18 "impose[s] on [employee] an adhesive arbitration agreement"; observing "few employees 19 are in a position to refuse a job because of an arbitration requirement" - holding appeal rights limited to high‑value awards generally benefit defendants ## Opinion text BAXTER, J., Concurring and Dissenting. I agree with the majority that the “over $50,000” clause in the arbitration agreement was unconscionable, and therefore unenforceable, but was severable. On the other hand, I agree with Justice Brown that the special procedural rules for contractual arbitration of statutory claims, as set forth in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 [ 99 Cal.Rptr.2d 745 , 6 P.3d *1086 669 ] (Armendariz), should not be extended to so-called Tameny claims that an employee was wrongfully terminated in violation of public policy (see Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167 [ 164 Cal.Rptr. 839 , 610 P.2d 1330 , 9 A.L.R.4th 314 ]). 1 I also dissent from the majority’s decision to retain rules, first announced in Armendariz , for allocation of the costs of mandatory arbitration of statutory claims. 2 In my view, intervening United States Supreme Court authority sharply undermines the soundness of Armendariz’s approach, and should prompt us to alter our analysis of the cost issue. To recap briefly: Code of Civil Procedure section 1284.2 3 states that unless the arbitral parties agree otherwise, arbitration costs shall be shared pro rata. Though section 1284.2 is an implied term of every arbitration agreement silent on costs, Armendariz deemed it preempted in part by the need to ensure that financial considerations would not deter an employee who had agreed to mandatory arbitration from using that forum to pursue a statutory claim of discrimination under the Fair Employment and Housing Act (FEHA). To resolve this problem, Armendariz held that notwithstanding section 1284.2, and regardless of any particularized showing of hardship or need, FEHA impliedly requires an employer to pay all the employee’s “forum costs” of contractual arbitration of a FEHA claim. ( Armendariz, supra, 24 Cal.4th 83, 107-113 .) Thereafter, the United States Supreme Court decided Green Tree Financial Corp.-Ala. v. Randolph (2000) 531 U.S. 79 [ 121 S.Ct. 513 , 148 L.Ed.2d 373 ] (Green Tree). Green Tree held that where Congress has evinced no intent to limit the arbitrability of a particular federal statutory claim, a party seeking to avoid mandatory contractual arbitration of such a claim has the burden of showing that the costs of arbitration he is likely to incur will render that forum “prohibitively expensive.” (Id. at p. 92 [ 121 S.Ct. at p. 522 ].) To deny contractual arbitration on the mere risk of undue cost, said Green Tree, “would undermine the ‘liberal federal policy favoring arbitration agreements . . . .’ [citation] [and] would also conflict with our prior holdings that the party resisting arbitration bears the burden of proving that the *1087 claims at issue are unsuitable for arbitration. [Citations.]” (Id. at p. 91 [ 121 S.Ct. at p. 522 ].) Central to Green Tree's analysis, of course, was the rule of the Federal Arbitration Act (FAA; 9 U.S.C. § 2 ) that arbitration agreements involving interstate commerce may be invalidated only on grounds applicable to contracts generally. (Green Tree, supra, at p. 89 [ 121 S.Ct. at p. 521 ].) Despite Green Tree, the instant majority retain Armendariz's “employer always pays” cost formula. The majority say Green Tree does not strictly require us to alter Armendariz's application of California contract law to the issue of arbitration costs. On that technical point, the majority may or may not be correct. As Green Tree makes clear, however, the FAA, which governs both federal and state arbitration law, was adopted “ ‘to reverse the longstanding judicial hostility to arbitration agreements . . . and to place [such] agreements upon the same footing as other contracts.’ ” (Green Tree, supra, 531 U.S. 79, 89 [ 121 S.Ct. 513, 521 ], quoting Gilmer v. Interstate/ Johnson Lane Corp. (1991) 500 U.S. 20, 24 [ 111 S.Ct. 1647, 1651 , 114 L.Ed.2d 26 ] (Gilmer).) Green Tree holds in essence that even where the vindication of statutory rights is at stake, when courts interfere with an arbitration agreement by presuming undue cost to one party, they exhibit particular “hostility” and suspicion toward contractual arbitration, which the FAA was intended to prevent. At direct odds with this principle is the current California requirement that the employer must always pay the employee’s “forum costs” of arbitrating a statutory claim, regardless of actual need, and contrary to a California law that implies a cost-sharing term in every arbitration contract unless the parties expressly agree otherwise. I believe Green Tree warrants reconsideration of the Armendariz majority’s views on cost allocation. It should be noted that in articulating California’s minimum requirements for mandatory contractual arbitration of statutory claims, Armendariz placed primary reliance on a federal case, Cole v. Burns Intern. Security Services (D.C. Cir. 1997) 105 F.3d 1465 (Cole). Among other things, Cole concluded that an employee could not be forced by contract to arbitrate federal statutory rights if also required to pay any part of the arbitrator’s fee. (Id. at p. 1485.) Armendariz quoted with approval Cole's assertion that in Gilmer, supra, 500 U.S. 20 , the high court had “ ‘endorsed a system of [mandatory contractual] arbitration [of federal statutory claims] in which employees are not required to pay for the arbitrator [and] [t]here [was] no reason to think that the Court would have' approved arbitration in the absence of this arrangement.’ ” ( Armendariz, supra, 24 Cal.4th 83, 107-108 , quoting Cole, *1088 supra, at p. 1484.) 4 Green Tree has since destroyed that assumption. While the Green Tree majority did not expressly disapprove Cole , they essentially negated Cole’s conclusions about the cost-sharing requirements of a valid scheme for arbitration of federal statutory claims. Under the circumstances, I would overrule Armendariz’s arbitrary cost allocation formula. In its place, I would adopt Green Tree’s principle that if a party resists mandatory contractual arbitration of a statutory claim on grounds of undue cost, he must make a timely, particularized showing of the expected expense, and must also demonstrate that, in his particular case, this cost would make arbitration prohibitively expensive as compared to court litigation. Evidence on this issue could be presented to the court deciding a motion to compel arbitration. If the party opposing arbitration demonstrated prohibitive expense, the court could grant the motion to compel upon the condition that the proponent of arbitration accept, with the caveat discussed below, a more equitable allocation of costs. I close with one final point. In light of the strong policy favoring arbitration on the terms agreed by the parties, interference with the arbitration contract’s cost provisions, express or implied by statute, should be countenanced only to the degree actually necessary to assure that mandatory resort to the arbitral forum has not deterred vindication of a statutory claim. For this reason, whatever pre-arbitration reallocation of costs may be necessary to ensure that the claimant is not deterred in advance, this allocation should be tentative only, and should be subject to readjustment once the true expenses and rewards of the arbitral proceeding are known. In hindsight, it may become apparent that the actual costs of arbitration, with its faster, simpler, and more economical procedures, were less than the probable expenses of resolving the same claim in court. Even if they were greater, the difference may prove so minimal, given the claimant’s general financial ability or the magnitude of his final recovery, that forcing the other party to absorb all the claimant’s forum costs, contrary to their agreement, is an unfair interference with contractual arbitration. Under these circumstances, the party who “fronted” costs for the claimant should be reimbursed for the excess. *1089 I see no reason why the arbitrator cannot, subject to appropriate judicial review, reassess the cost allocation at the conclusion of the proceedings. 5 “When apportioning costs, the arbitrator should consider the magnitude of the costs unique to arbitration, the ability of the employee to pay a share of these costs, and the overall expense of the arbitration as compared to a court proceeding.” ( Armendariz, supra, 24 Cal.4th 83, 129 (conc. opn. of Brown, J.).) As indicated above, the amount actually recovered by the claimant in arbitration should also be a relevant consideration. “Ultimately, any apportionment should ensure that the costs imposed on the employee, if known at the onset of litigation, would not have deterred her from enforcing her statutory rights or stopped her from effectively vindicating these rights. [Citations.]” (Ibid.) Believing Armendariz was dispositive, the employee in this case (Little) never sought to make a showing of prohibitive expense. Believing Green Tree was dispositive, the Court of Appeal simply held that the arbitration agreement’s silence on costs was no bar to its unconditional enforcement. As I have indicated, I would overrule Armendariz to the extent it is inconsistent with Green Tree . Thus, if I believed Little’s Tameny claim were entitled to Armendariz protections, I would support a remand to allow Little to make the requisite showing. I would reverse the judgment of the Court of Appeal insofar as it permits enforcement of a clause allowing arbitral review only of awards greater than $50,000, and would affirm the Court of Appeal’s judgment in all other respects. If I agreed with the majority that Armendariz protections applied to Tameny claims—which I do not—I would additionally reverse the Court of Appeal’s judgment insofar as it requires Little to arbitrate this claim without allowing him to demonstrate that pro rata sharing of forum costs would make arbitration prohibitively expensive for him, and I would remand to the Court of Appeal with directions to instruct the trial court to conduct further proceedings consistent with the views expressed in this opinion. Chin, J., and Brown, J., concurred. throughout this opinion, I use the terms “contractual arbitration,” “arbitration contract,” and “arbitration clause” to refer to agreements for mandatory arbitration of disputes that may arise in the future. As the majority indicate, different considerations apply to parties’ agreements to arbitrate disputes that have already arisen. I use the term “statutory claims” throughout the following discussion because, like Justice Brown, I would not extend the cost protections of Armendariz beyond rights arising directly from statute to other causes of action, such as Tameny claims, which the majority may consider “nonwaivable.” All further unlabeled statutory references are to the Code of Civil Procedure. Cole conceded that cost allocation was not an issue in Gilmer, supra, 500 U.S. 20 . This, Cole explained, was because the arbitration in Gilmer , between a brokerage firm and its employee, was subject to a standard securities industry practice that the employer pays the arbitrator’s fees. ( Cole, supra, 105 F.3d 1465, 1483 .) I assume that when granting a motion to compel contractual arbitration (§ 1281.2), the superior court could condition its order both on a tentative reallocation of costs, and on the parties’ agreement that the court would retain power to review any readjustment later ordered by the arbitrator. Moreover, a power to review cost readjustments should also be within the court’s jurisdiction in the event either party moves to vacate the arbitration award. (§ 1285 et seq.) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9796393. Public record. Not legal advice.