January 28, 2020

January 28, 2020

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January 27, 2020

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Tenth Circuit Strikes Offending Arbitration Provision Clause in Au Pair Agreements

Plaintiffs had entered into various au pair agreements which contained arbitration provisions, which defendants sought to enforce when a class action was filed. The District Court of Colorado denied the defendants’ motion to compel arbitration, finding the au pair agreements “were contracts of adhesion and procedurally unconscionable because the au pairs were relatively young at the time they signed the contracts, were foreigners, spoke English as a second language, and had no experience with contracts or contract law.”

The Circuit Court agreed that the arbitration provision was unconscionable, but reached “that conclusion for reasons more limited than those found by the district court.” The Court found the agreements were procedurally unconscionable “to a moderate degree,” as contracts of adhesion. As to substantive unconscionability, the Court analyzed three clauses: (1) allowing AuPairCar, Inc. to select unilaterally the arbitration provider has a high degree of substantive unconscionability; (2) a California forum selection clause was not unconscionable; and (3) bilateral fee shifting was not unconscionable. “Because the au pair agreements have moderate procedural unconscionability and significant substantive unconscionability due to the arbitration provider selection clause, the au pair agree is unconscionable and unenforceable as written.”

The Circuit Court ordered the District Court to sever the provision allowing AuPairCar, Inc. to unilaterally select the arbitration provider, as both California and federal law provide a default method for appointing an arbitrator, and, consistent with its opinion, to further compel the parties to arbitrate.

Beltran v. Interexchange, Inc., No. 17-1359 (USCA 10th Cir. Oct. 30, 2018)

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About this Author

Nora A. Valenza-Frost, Carlton Fields, Insurance lawyer

Nora Valenza-Frost represents U.S. and international insurers and reinsurers in arbitration and litigation involving complex claims, coverage and regulatory issues across all lines of business.

Nora provides coverage opinions for claims involving several lines of business, including commercial general liability (CGL), professional liability, directors and officers liability (D&O), contractor’s protective professional indemnity (CPPI), errors and omissions (E&O), excess and surplus lines, property, workers’ compensation, business interruption, life and health, pollution,...