Walsworth Obtains Favorable Appellate Ruling: Arbitration Agreements Cannot Be Defeated by the ‘I Don’t Recall Signing’ Defense
Walsworth partners, Laurie Sherwood and Mary Watson Fisher recently obtained a favorable ruling in a published decision from Division Four of the First District Court of Appeal, on the enforceability of an arbitration agreement in the context of claims brought by three former employees of Walsworth’s client, a large automobile group with dealerships in California, Nevada, and Arizona.
Three of the client’s employees sued based on a number of theories arising from their employment including race, national origin, and disability discrimination and harassment, retaliation for seeking leave under the Family Medical Leave Act and the California Family Rights Act, and allegations of wage and hour violations.
Walsworth’s client moved to sever plaintiffs’ claims and compel arbitration. Plaintiffs opposed the motion with three, nearly identical declarations stating they did not recall signing the arbitration agreements. Plaintiffs also claimed that the arbitration agreements, which were included in a stack of documents that they were rushed to sign, were procedurally and substantively unconscionable.
The trial court sided with plaintiffs and denied the motion. The trial court also ordered Walsworth’s client to pay the attorneys’ fees plaintiffs incurred in opposing the motion. Walsworth, on behalf of the client, appealed the ruling.
On January 19, 2023, the Court of Appeal reversed the trial court’s ruling in its entirety. Significantly, the Court found that plaintiffs admitted they signed the arbitration agreements. Moreover, the fact that plaintiffs claimed they did not remember signing them was insufficient to dispute their signatures were not authentic. In reaching this decision, the Court distinguished handwritten signatures on arbitration agreements to electronic signatures. With electronic signatures, the Court noted that “the individual’s inability to recall signing electronically may reasonably be regarded as evidence that the person did not do so.” In contrast, the Court emphasized that “an individual is capable of recognizing his or her own personal signature.” Thus, the Court of Appeal concluded, “[i]f the individual does not deny that the handwritten personal signature is his or her own, that person’s failure to remember signing is of little or no consequence.”
The Court then turned to the issue of plaintiffs’ allegations that the arbitration agreements were unconscionable. The trial court held that the agreements were substantively unconscionable because they invoked the Federal Arbitration Act (“FAA”). However, the Court of Appeal disagreed, ruling that the FAA does not “displace the substantive law of California … that applies to the resolution of disputes subject to arbitration under an agreement governed by the FAA.”
One of the key takeaways from this decision is the importance of obtaining handwritten signatures, as opposed to electronic signatures, on arbitration agreements and other important documents that employers require their employees to sign. The Court clearly indicated in its decision that it will be an uphill battle for an employee to dispute the authenticity of their own handwritten signatures unless they claim it was forged. On the other hand, the Court suggests, in dicta, that an employee may satisfy their burden of disputing the authenticity of an electronic signature by simply saying they not remember signing it.
Walsworth would like to congratulate Ms. Sherwood, Ms. Watson Fisher, and members of its staff for their exceptional work on this case. For more information or specific guidance, please contact Laurie Sherwood or Mary Watson Fisher.