Fifth Circuit Reverses Ruling That Procedural Unconscionability Is Decided by Arbitrator
The plaintiff challenged the formation of an arbitration clause contained in her employment contracts and acknowledgment of employee handbooks, arguing: (1) there was no “meeting of the minds” and therefore there was not the mutual assent necessary for contract formation; and (2) the agreement was procedurally unconscionable because the plaintiff’s “assent was obtained through misrepresentation, she never had a meaningful opportunity to bargain, and there was a gross disparity in the parties’ bargaining power.” A Mississippi federal court rejected the plaintiff’s first argument, finding that there was a meeting of the minds, but deferred the procedural unconscionability argument to the arbitrator under the agreement’s delegation clause.
The Fifth Circuit upheld the ruling on contract formation, as the district court “correctly found that the electronic communications transmitting the Arbitration Agreement clearly identified an arbitration agreement as the subject of the communications … [and the plaintiff] was given the opportunity to read the Agreement and certified” that she had done so. The plaintiff’s “unilateral lack of diligence” in failing to do so “does not preclude contract formation under Mississippi law.”
However, the Fifth Circuit reversed with respect to procedural unconscionability, as that “objection challenges the formation of the Arbitration Agreement itself, the district court had the duty to resolve this challenge.” Thus, the case was remanded to the district court to resolve the issue.
Bowles v. Onemain Fin. Grp., LLC, No. 18-60749 (5th Cir. June 19, 2019)