SAN FRANCISCO (CN) - A federal judge granted NASDAQ OMX Group's motion to compel arbitration in a former employee's civil rights complaint, but severed provisions of an arbitration clause that unfairly restrict her ability to make her case.
Cynthia Colvin, who began working for NASDAQ as a client support specialist in November 2012, sued the company in May this year under California's Fair Employment and Housing Act. She claims the company discriminated against her based on her race and fired her to retaliate for her whistle-blowing.
NASDAQ bought the European OMX Group in 2007. It filed a motion to compel arbitration in August this year, and U.S. District Judge Edward Chen granted the motion, based in part on an arbitration clause in a confidentiality agreement Colvin signed when she was hired.
Colvin claimed the arbitration agreement is unenforceable because it is buried in the language of the confidentiality agreement and the company made no effort to point it out to her.
Chen said that's not NASDAQ's problem.
"Plaintiff signed a contract containing an arbitration clause; the fact that she did not actually read it or know about [it] does not negate mutual consent," Chen wrote in the Nov. 4 order. "The court therefore finds that a valid agreement to arbitrate was formed."
Colvin also argued that the contract is invalid because under California law a contract can be invalidated by "generally applicable contract defenses such as fraud, duress or unconscionability."
Addressing the unconscionable prong of her argument, Chen said that he can sever any contractual clause that is deemed unconscionable.
"Here, there are two unconscionable provisions - the carve-out and the confidentiality clause," Chen wrote. He severed the carve-out clause because it "creates a lack of mutuality wherein the defendant can force employee claims to arbitration while reserving the judicial forum for claims that defendant is more likely to bring against its employees."
He severed the confidentiality provision because it would limit Colvin's opportunity for discovery.
"Defendant claimed that the confidentiality provision would not affect discovery because the confidentiality provision is trumped by the AAA (American Arbitration Association) rules, which provide for discovery," Chen wrote. "The court is not persuaded, as the confidentiality agreement states that the arbitration shall be conducted according to the AAA rule 'as modified herein.' Such modifications could include the confidentiality provision, which in turn restricts plaintiff's ability to gather information in support of her case."
He granted the motion to compel arbitration "subject to severance of the carve-out and confidentiality provisions and with the understanding that plaintiff will be afforded discovery rights."