A California appeals court decision sinking Winston & Strawn LLP's arbitration agreement with a former attorney suing the firm for discrimination will encourage "for hire" lawyers and others outside firms' power structures to fight contracts that seek to block legal disputes from reaching the courtroom, experts say.
The First Appellate District holding in favor of former Winston patent lawyer Constance Ramos, who opposed having her gender bias case transferred to an arbiter, should also encourage law firms to rein in overly aggressive arbitration provisions, both for legal and business reasons.
Cara Greene of Outten & Golden LLP said the decision is particularly notable amid a rash of partner-led gender bias suits against major partnerships and a debate in the profession about the propriety of firms requiring partners, staff lawyers and even summer associates to take claims to arbitration.
"To the extent that law firms have operated believing that their actions would be shielded by arbitration, they should think twice in light of this," said Greene, who specializes in representing lawyers in employment and contract disputes. "There is more public scrutiny, and firms should think carefully about whether their own reputations are going to be impacted by having these confidentiality or arbitration provisions."
In a Friday decision, the three-judge panel reversed a San Francisco trial court order for Ramos' suit to go to arbitration, as required by her partnership agreement with the firm. Backing down arguments from Winston for the severance of any provisions found unenforceable, the court said a handful of serious flaws rendered the entire arbitration obligation "unconscionable."
Among them was a clause restricting arbitrators' authority "to override or substitute its judgment for that" of the firm's executive committee, a "unique" provision the panel said could apply to employment decisions at issue in Ramos' case as well as "any other claim that might be brought against the firm."
The court also took issue with a broad confidentiality clause it said supported a decision to void the arbitration provision altogether because it would not only cover Ramos' allegations, but all aspects of the discovery process itself.
"It is hard to see how [Ramos] could engage in informal discovery or contact witnesses without violating the prohibition against revealing an ‘aspect of the arbitration,'" the panel said, concluding that the provision also supported a blanket voiding of the arbitration requirement.
Ramos accused the Chicago-based firm last summer of tying her to a male equity partner with whom she joined the firm, and slashing her pay and cutting her out of big matters after she declined to resign upon his departure. Over Ramos' objections that she was better viewed as a employee of the firm rather than a partner as contemplated by her "income" partner contract, a San Francisco judge ordered the dispute to arbitration last year.
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The case is Ramos v. The Superior Court of the State of California for the County of San Francisco, case number A153390, in the Court of Appeal of the State of California, First Appellate District.