California Court of Appeal declares Circuit City’s Arbitration Agreement Unenforceable

A good example of an unfair arbitration agreement is discussed in the decision of Gonlugar v. Circuit City Stores, Inc. Harris & Kaufman represents the plaintiff against Circuit City in an overtime pay class action. In September 2004, a court of appeal said that Circuit City’s arbitration agreement could not be enforced. The court of appeal found that the terms of Circuit City’s arbitration agreement were so one-side that it “shocked the conscience”. Among the things, Circuit City’s arbitration agreement bound only the employee to arbitration, required the employee to pay fees to Circuit City just for initiating the arbitration (Circuit City pays no such fees), imposes a shortened statute of limitation on the employee (and not on Circuit City), and prohibits class actions. The court concluded that the “central purpose of the agreement” was “tainted with illegality”.