California Appellate Decision Clarifies Standard for Injunctive Relief Carve-Outs Within California Arbitration Agreements

Arbitration agreements with carve-outs for provisional remedies are again the topic du jour, particularly in California courts which apply a stringent unconscionability analysis to employee arbitration agreements.

As we previously discussed on this blog, in October 2012, a federal district court for the Eastern District of California upheld an arbitration agreement even though it excluded suits seeking injunctive relief for unfair competition and/or disclosure of trade secrets (Steele, et. al v. American Mortgage Solutions d/b/a Pinnacle, 2012 WL 5349511 (E.D. Cal., Oct. 26, 2012)). In doing so, the district court made clear that such carve-outs for trade secret protection do not necessarily inspire the same level of suspicion that other types of exclusions do. As the district court saw it, Pinnacle had “valid reasons, entirely independent from any intent to place the employees at a relative disadvantage or to generate one sided results, for excluding claims of unfair competition or trade secret violations from the mandatory arbitration agreement provisions of the Agreement.”

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