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Circuit City stores are known for carrying the latest high-tech gadgets and gear. But the company’s employee arbitration contracts may be overshadowing electronics as its greatest distinction — at least among lawyers. On Tuesday, the 9th U.S. Circuit Court of Appeals ruled that a contract forcing Circuit City workers to litigate their disputes in private arbitration forums rather than in public courts was substantively and procedurally unconscionable. It was the third time the 9th Circuit has shot down a version of Circuit City’s mandatory arbitration contract in the past 18 months. With mandatory arbitration taking on increasing importance within the field of employment law, Circuit City appears to be single-handedly contributing a great share of the case law. And while the company has revised its arbitration contract several times, it has met little success in winning over the judges of the 9th Circuit. In Tuesday’s decision in Circuit City Stores v. Mantor, 03 C.D.O.S. 6431, Judge Harry Pregerson noted that the company’s 2001 version of the contract was little different from the 1998 version that the court struck down in May in Ingle v. Circuit City Stores, 03 C.D.O.S. 3986. “Circuit City has modified and improved its arbitration agreement to comport with our holding regarding limitations on available remedies,” wrote Pregerson. “But the substantively unconscionable provisions concerning the statute of limitations, class actions, cost-splitting and Circuit City’s unilateral power to modify or terminate the agreement remain in the version of the agreement we review in this case.” According to employment attorneys, Circuit City is an especially aggressive implementer of employee arbitration contracts. But the company’s strategy in pushing the envelope with its arbitration contracts, despite repeated admonishments by the courts, is unclear. Rex Berry, an attorney at Livingston & Mattesich in Sacramento, Calif., who represents Circuit City in many of its arbitration disputes, did not return calls for comment. “At some point you say stop; stop appealing, fix the agreement,” says Cliff Palefsky, a San Francisco plaintiffs’ attorney. Michael Loeb, an employment attorney at Bingham McCutchen, suggested that Circuit City is in the spotlight because it is taking the lead in implementing arbitration agreements. Ten years ago, he noted, brokerage firms were in the forefront of the litigation as they rolled out arbitration agreements for their customers. Of course, the 9th Circuit has twice upheld the company’s arbitration agreements, in a pair of cases cited in Mantor: Circuit City Stores v. Najd, 294 F.3d 1004, and Circuit City Stores v. Ahmed, 283 F.3d 1198. And Circuit City scored a huge victory in Circuit City Stores v. Adams, 532 U.S. 105, when the U.S. Supreme Court ruled that employment arbitration agreements are enforceable under the Federal Arbitration Act. But the arbitration contract in Adams was struck down on remand by the 9th Circuit, which said the agreement was unconscionable under California state law as it did not provide a “modicum of bilaterality.” In Tuesday’s decision in Mantor, the court deemed the agreement both substantively and procedurally unconscionable. In addition to the objectionable provisions in the contract, Circuit City managers had failed to provide Paul Mantor, an employee, with a real opportunity to opt out. “A meaningful opportunity to negotiate or reject the terms of a contract must mean something more than an empty choice,” wrote Pregerson, who was joined by Judge Sidney Thomas and Louis Oberdorfer, a Washington, D.C.-based district court judge sitting by assignment. “In light of Circuit City’s insistence that Mantor sign the arbitration agreement — under pain of forfeiting his future with the company — the fact that in 1995 Mantor was presented with an opt-out form does not save the agreement from being oppressive.”

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