LaChapelle v. Omni Hotels Management Corporation

Background

Evelyn LaChapelle alleged that, when she applied for employment with Omni Hotels Management Corporation, Omni gave her a disclosure and authorization form for a background investigation. She alleged that the form included unnecessary language and did not tell her that she could request a complete and accurate disclosure of the investigation’s nature and scope. She asserted two claims under the Fair Credit Reporting Act.

Omni moved under the Federal Arbitration Act to compel arbitration. Omni relied on two documents: an amended and restated alternative dispute resolution program for California and a mutual agreement to arbitrate claims on an individual basis. The mutual agreement stated that the company and the employee agreed to arbitrate claims involving or concerning the employee’s application, employment, or termination.

Court’s Analysis

The court applied California law to determine the scope and enforceability of the arbitration agreement. It found that the mutual agreement clearly and unequivocally incorporated the arbitration program. The agreement stated, in bold capital letters, that the program contained the terms governing dispute resolution, was incorporated by reference, and could be obtained from the hotel’s management office or the company’s intranet.

LaChapelle argued that the program’s terms were not known or easily available when she signed the mutual agreement because Omni had not given her a copy and she did not yet have an intranet password. The court rejected that argument because LaChapelle was at the hotel and presented no evidence that she could not have obtained a copy from the hotel’s management office. The court therefore held that the arbitration agreement consisted of both documents.

LaChapelle also argued that the agreement was invalid because it waived the right to bring claims under California’s Private Attorneys General Act. The court recognized that such a waiver is unenforceable, but held that the waiver did not invalidate the entire agreement because the agreement contained a severability provision. The court also noted that LaChapelle had not asserted a Private Attorneys General Act claim.

LaChapelle further argued that the arbitration agreement was unconscionable, meaning unfairly imposed or excessively one-sided. The court found procedural unconscionability because LaChapelle had to sign a large group of onboarding documents, including the mutual agreement, as a condition of employment. But the court addressed substantive unconscionability separately.

The court found substantively unconscionable the provision allowing Omni to modify or revoke the program with 14 days’ notice. The provision did not limit changes to future claims; it excluded protection only for claims already filed under the program or charges filed with government agencies to satisfy employment-claim requirements. The court held that the provision could not be saved by the implied duty of good faith because doing so would contradict the provision’s express language.

The court nevertheless held that the provision was severable. Removing the unilateral modification and revocation provision did not require rewriting the agreement and left an otherwise valid arbitration agreement in place. The court stated that the existing terms of the program would apply.

Disposition

The court held that the arbitration agreement was enforceable after severing the unconscionable modification and revocation provision. It granted Omni’s motion to compel arbitration and stayed the action pending arbitration. The opinion did not decide the merits of LaChapelle’s Fair Credit Reporting Act claims.