## Facts

- Margaret Mitchell accepted employment with HCL America and relocated from Colorado to North Carolina for a position in HCL’s Cary, North Carolina office.
- Mitchell’s written employment agreement contained a mandatory arbitration clause covering all claims arising out of the agreement or her employment.
- Mitchell objected to arbitration before accepting the offer; HCL responded that the provision was “standard” and nonnegotiable, and Mitchell signed the agreement.
- The arbitration clause required arbitration in Sunnyvale, California, and required the parties to split arbitration costs.
- A separate “Undertaking” agreement related to intellectual property and proprietary obligations reserved to HCL the ability to litigate certain IP-related claims, while employee claims remained subject to arbitration.
- Mitchell sued in federal court asserting Title VII disparate-treatment and retaliation claims, ADEA claims, and related North Carolina claims (including wage-and-hour, fraud, and negligent misrepresentation).
- HCL moved under the Federal Arbitration Act (FAA) to compel arbitration and stay the case; Mitchell argued the arbitration arrangement was unenforceable as unconscionable.

## Issues

1. Whether an arbitration arrangement is unenforceable for lack of mutuality where an employer can litigate the claims it is most likely to bring (IP/proprietary claims) while the employee must arbitrate all employment-related claims.
2. Whether a cost-splitting term contributes to substantive unconscionability by imposing prohibitive expenses that could deter vindication of statutory rights.
3. Whether requiring arbitration in a distant forum selected for the employer’s convenience contributes to substantive unconscionability.
4. Whether, applying FAA policy favoring arbitration and ordinary state contract defenses, the arbitration agreement should be enforced, severed, or invalidated.

## Decision

- The court denied HCL’s motion to compel arbitration and to stay the action.
- The court treated the dispute as within the clause’s scope and focused on enforceability.
- The court held the arbitration arrangement substantively unconscionable and insufficiently mutual based on the one-sided IP carve-out, the cost-splitting requirement, and the California forum requirement.
- The court declined to sever or rewrite the offending provisions and left Mitchell’s claims to proceed in federal court.

## Legal Principles

- Under the FAA, arbitration agreements are generally enforceable, but may be invalidated by generally applicable contract defenses such as unconscionability.
- Substantive unconscionability may be found where an arbitration scheme is materially one-sided, including provisions that preserve for an employer the right to litigate selected employer-favored claims while requiring the employee to arbitrate all employment claims.
- Cost-allocation and forum-selection terms may render an arbitration agreement substantively unconscionable where, in combination and in context, they impose burdens likely to deter an employee from pursuing statutory rights.
- Where unconscionable terms are integral to the arbitration scheme, a court may refuse to sever and may declare the entire arbitration agreement unenforceable.

## Conclusion

The court refused to compel arbitration because the employment arbitration arrangement, viewed as a whole, was substantively unconscionable: it required the employee to arbitrate all claims in a distant forum while splitting costs, yet preserved the employer’s ability to litigate certain IP-related disputes.


Mitchell v. HCL Am., Inc., 190 F. Supp. 3d 477 (E.D.N.C. 2016)