August 26, 2021

Court Applies FAA Default Rule to Resolve Conflicting Arbitration Provisions

By: Teresa McQueen

A recent decision by the California Court of Appeal (2nd App. Dist.) relied on the Federal Arbitration Act (FAA) to settle a question of ambiguity created by a typographical error in a third-party translation of an employer’s arbitration agreement.

In the case Western Bagel Co. Inc. v. Superior Court of Los Angeles County and Jose Calderon,[i] former employee Jose Calderon (Calderon) alleged in a punitive class action that his employer had failed to provide meal and rest periods in accordance with California law. Calderon is a Spanish-speaker with only a basic English vocabulary. While employed by Western Bagel, Calderon was provided with two versions of the company’s arbitration agreement: an original in English and a copy in Spanish. One clause in the Spanish version of the agreement provided for “non-binding” arbitration while all other clauses referred to “binding” arbitration.

Western Bagel argued that the difference in language was due to a typographical error made by the third-party translation service that created the Spanish version of the document. Calderon argued the error muddied the waters and made the intent of the parties unclear as to whether arbitration was to be binding or non-binding. The lower court resolved the issue by applying the contra proferentem doctrine; used when the intent of the parties cannot be discerned, the doctrine is applied to resolve the ambiguity against the drafter of the document.

In reversing the lower Court’s decision, the Appellate Court determined that in matters involving arbitration the FAA preempts the use of contra proferentem. The FAA default is “that any ambiguities about the scope of an arbitration agreement must be resolved in favor of arbitration, a fundamental attribute of which is a binding arbitral proceeding.”  

The Calderon case illustrates two important points of contract construction:

  • In contract matters not involving arbitration, where the intent of the parties is unclear, ambiguities will be resolved against the party who drafted the document.  
  • In contract matters involving arbitration, where the intent of the parties is unclear, the FAA default rule will be applied to resolve ambiguities in favor of arbitration.

This case also emphasizes how important it is that translated documents mirror the terms used in the original document. Employers utilizing translation services should carefully review translated documents and consider including a disclaimer that makes clear any ambiguities in translation are to be resolved in favor of the original document.

[i] Western Bagel Co. Inc. v. Superior Court of Los Angeles County and Jose Calderon, Case No. B305625 California Court of Appeal, Second Appellate Dist. (filed June 24, 2021, certified for publication July 16, 2021)