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Court of Appeal:
Broad Reading of JAMS Rules Allows Third-Party Discovery
Opinion Says Arbitration Agreement Not Unconscionable for Failing to Allow Plaintiff to Substantiate Claims, Saying Recent S.C. Jurisprudence Favors Wide Interpretation of Arbitrator’s Authority to Order Discovery
By Kimber Cooley, associate editor
The Sixth District Court of Appeal has held that an employment arbitration agreement providing that the proceedings would be administered under the rules established by JAMS—the world’s largest private arbitration service—was not unconscionable for failing to allow for necessary prehearing third-party discovery, saying the applicable guidelines must be interpreted broadly to allow the arbitrator to order the depositions the plaintiff seeks.
Thomas Vo, a former employee of Technology Credit Union (“TCU”), challenged the agreement at issue, saying that the contract’s terms and the JAMS rules in effect at the time failed to give the arbitrator authority to compel the prehearing third-party discovery necessary to prove his discrimination and other claims under the Fair Employment and Housing Act.
Vo cited the 2020 Sixth District case of Aixtron Inc. v. Veeco Instruments Inc., which established that an arbitrator lacks authority to compel third parties to cooperate with discovery orders under the JAMS rules, effective July 1, 2014, the same guidelines in effect in 2020 when Vo signed the agreement.
At issue is JAMS Rule 17(b), which in 2020 provided that each party may take one deposition of an opposing party, or a person under its control, and “[t]he necessity of additional depositions shall be determined by the Arbitrator based upon the reasonable need for the requested information, the availability of other discovery options and the burdensomeness of the request on the opposing Parties and the witness.”
Complaint Filed
The plaintiff was hired by TCU in 2020 and signed the agreement as part of his onboarding process. He filed a complaint against the company in 2023, alleging that he was fired after developing long-term health problems related to COVID-19 and asserting claims for harassment, discrimination, and failure to accommodate, among other causes of action.
TCU filed a motion to compel arbitration.
Santa Clara Superior Court Judge Frederick S. Chung denied the motion, citing Aixtron and finding that the contract was unconscionable for failing to allow the arbitrator to compel prehearing discovery against non-parties to the agreement. Chung said the decision was “a close factual and legal call” but the agreement’s failure to incorporate provisions allowing for the discovery prevented Vo from obtaining evidence necessary to his case.
In an opinion, filed Tuesday and authored by Presiding Justice Mary J. Greenwood, the court reversed and directed the trial court to enter a new order granting the motion to compel. Justices Adrienne Grover and Allison M. Danner joined in the opinion.
Greenwood acknowledged the Aixtron decision but said that the 2024 California Supreme Court opinion in Ramirez v. Charter Communications clarifies that courts should not construe discovery provisions defining the scope of an arbitrator’s authority in a limited way and should opt for an interpretation that favors the validity of the contract. She wrote: “We thus disapprove of Aixtron to the extent it interpreted the scope of an arbitrator’s authority narrowly. In accordance with Ramirez, we construe the rule to provide the arbitrator the authority to make available additional nonparty discovery if necessary to allow fair arbitration of the claim.”
Ramirez Decision
Greenwood said that “[w]hile the law favors the enforcement of arbitration agreements, a finding of unconscionability can render the agreement unenforceable” and that “[t]he California Supreme Court clarified the standard for assessing unconscionability of arbitration agreements in its recent Ramirez opinion” which endorsed a “sliding scale” approach to the analysis where courts are to balance the procedural and substantive unconscionability.
Signed in the onboarding process, the arbitration agreement in Ramirez allowed each party to take up to four depositions, 20 interrogatories, and 15 requests for documents, and granted the arbitrator authority to decide all discovery disputes. The plaintiff challenged the agreement as substantively unconscionable because she claimed that she required at least seven depositions to substantiate her claims.
In that opinion, Justice Carol Corrigan said that the unconscionability assessment of discovery provisions must focus on certain general factors—including the amount of discovery allowed, how that scope differs from that which is permitted in conventional litigation, and the arbitrator’s authority to order additional materials—that can be examined without regard to subsequent requests by the parties.
She explained that, where a contract is susceptible to two interpretations, a court should select the one that renders the agreement valid and, taking that view, the discovery provision at issue permitted the arbitrator to order expanded discovery.
Substantive Unconscionability
Applying Ramirez, Greenwood determined that the agreement between Vo and TCU evinced a “minimal degree of procedural unconscionability” and turned to the question of substantive unconscionability. She wrote:
“We conclude the agreement allows Vo access to third party discovery that may be necessary to adequately arbitrate his FEHA claims. While the parties disagree on Vo’s evidentiary burden to establish the necessity to subpoena and depose six former employees of TCU, the amount of discovery required by Vo does not impact our analysis because we review the validity of the agreement at the moment of contract formation….”
She opined:
“Aixtron established that an arbitrator could not compel third parties to cooperate with discovery orders under the…same JAMS Rules in effect here. But Aixtron did not consider the issue of whether the arbitration agreement was unconscionable. Rather, the court considered the authority of the arbitrator to order and compel discovery from a nonparty where that party objected to the arbitrator’s order. The Ramirez Court, which did not disapprove of Aixtron or discuss it, made clear that the review of an arbitration agreement for unconscionability turns on whether a party has access to adequate discovery to vindicate its claims.”
The jurist continued:
“Here, the parties agreed when the agreement was executed that the incorporated JAMS Rules would control the arbitration procedures. Examining those rules…, we observe that Rule 17(b) allows both parties to take one deposition of the opposing party or individual under the control of the opposing party without the arbitrator’s approval. It then gives the arbitrator the authority to expand discovery, permitting Vo the opportunity to obtain the third party discovery required to adequately arbitrate his claims….
“This language could have been more precise but does not limit expanded discovery to parties to the arbitration agreement or those under their control and does not preclude an arbitrator from making nonparty discovery available to the parties.”
Procedural Posture
Noting that “the procedural posture of the case before us differs from that in Aixtron” in which “a third party appealed the trial court orders enforcing compliance with an arbitrator’s subpoena to produce records,” Greenwood pointed out that “both Vo and TCU are parties to the agreement, and no third party is refusing to comply with a subpoena.”
She remarked:
“To the extent there may be a recalcitrant third party in the course of the arbitration process, an arbitrator would not have the authority to enforce compliance with its discovery order under the July 1, 2014 JAMS Rules applicable to the agreement here and in Aixtron. But the Supreme Court has clarified that we review an arbitration agreement for unconscionability at the time of formation….Consistent with the direction of Ramirez,….[t]he possibility of a recalcitrant third party witness does not preclude a holding that the discovery available under the provision is adequate and the agreement valid.”
The presiding justice added:
“We note that the trial court did not have the benefit of the Supreme Court’s opinion in Ramirez when it issued its order….Ramirez clarifies how the high court defines the scope of an arbitrator’s authority when assessing an arbitration agreement for unconscionability….Post-Ramirez, we conclude the JAMS Rules incorporated into the arbitration agreement here provide an arbitrator the authority to permit nonparty discovery to allow fair arbitration of Vo’s statutory claims. Applying the sliding scale rubric established in the Supreme Court’s opinion, and considering all the relevant circumstances, we conclude the agreement is not unconscionable.”
The case is Vo v. Technology Credit Union, 2025 S.O.S. 364.
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