In Lopez v. Kmart Corporation, No. 15-cv-01089 (N.D. Cal. May 4, 2015), a federal court in California ruled that a minor’s pre-employment arbitration agreement was valid under California law, but upheld the minor’s right to disaffirm the arbitration agreement by commencing a lawsuit after reaching majority.
Within one month after his eighteenth birthday, Plaintiff brought a putative class action in California state court complaining that Kmart Corporation, where Plaintiff had been employed since he was sixteen, violated California wage and hour laws. Kmart removed the case to federal court and sought to compel arbitration on the strength of a pre-employment arbitration agreement acknowledged by Plaintiff as part of his on-line training and orientation. Plaintiff contended that no valid arbitration agreement existed because he was a minor when he acknowledged the agreement and, alternatively, that if a valid arbitration agreement was formed, Plaintiff was entitled to disaffirm it.
Because the California Family Code provides that a minor has the capacity to contract and arbitration agreements are not among the contracts a minor is specifically prohibited from entering into, the court found that a valid arbitration agreement existed. The court also found, however, that by filing the lawsuit Plaintiff had disaffirmed the arbitration agreement within a reasonable time after reaching his majority, as permitted by the Code.
The court discussed but dismissed Kmart’s arguments against disaffirmance based upon statutory interpretation and equity. If Kmart argued that disaffirmance was an issue for the arbitrator once, as here, the court found a valid arbitration agreement existed, the court did not acknowledge or discuss that argument.
A version of this post originally appeared in the July 2015 edition of Baker & McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.
