Wright vs. Direct Capital Securities, Inc., 2010 Cal App. Unpub. LEXIS 1335 (Feb. 24, 2010). ESIGN Take-aways:

• Under California law, contract principles such as unconscionability and waiver can serve to invalidate an arbitration agreement that has been electronically signed.

The plaintiff, Scott Wright, filed a wrongful termination suit against Direct Capital, which then sought to compel arbitration based on the plaintiff’s alleged agreement to arbitrate included in a "Form U-4 Uniform Application for Securities Industry Registration or Transfer" document. The court declined to compel arbitration after it found (a) the scope of the arbitration agreement to be unclear because Direct Capital failed to provide any evidence establishing what claims Mr. Wright agreed to arbitrate; (b) the arbitration agreement raised the specter of unconscionability because it was mandatory and only bound the employee; and (c) Direct Capital may have waived its right to compel arbitration.

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