here - FindLaw

34] [deciding, as a matter of state law, that arbitration agreement was not illusory because
employer ―[gave] up its right to change or terminate its agreement to arbitrate disputes
upon accrual of an employee‘s claim‖].)
The similarity between decisions under the FAA and Texas law is not surprising
for two reasons. First, courts applying the FAA rely on state-law contract principles in
determining whether an arbitration agreement exists. (See First Options of Chicago, Inc.
v. Kaplan, supra, 514 U.S. at p. 944; see, e.g., Hardin v. First Cash Financial Services,
supra, 465 F.3d at pp. 478–479 [circuit court relying on Oklahoma contract law];
Seawright v. American General Financial Services, supra, 507 F.3d at pp. 974–975
[circuit court relying on Tennessee contract law].) Second, principles of contract law do
not vary significantly from state to state. (See Phox v. Atriums Management Co., Inc.,
supra, 230 F.Supp.2d at p. 1282.)
Last, the FAA — unlike Texas law — does not require a savings clause that
expressly exempts all claims, accrued or known, from contract changes. An implied
exemption is also permitted. (See, e.g., O’Neil v. Hilton Head Hosp. (4th Cir. 1997)
115 F.3d 272, 274; Morrow v. Hallmark Cards, Inc., supra, 273 S.W.3d at p. 31, fn. 1
(conc. opn. of Ahuja, J.).) ―[I]t is well-settled that ‗an implied obligation to use good
faith is enough to avoid finding a contract null and void due to an illusory promise.‘‖
(Cordry v. Vanderbilt Mortg. & Finance, Inc. (8th Cir. 2006) 445 F.3d 1106, 1110.) ―If
there is a restriction, express or implied, on the promisor‘s ability to terminate or to
refuse to perform, the promise is not illusory.‖ (2 Corbin on Contracts (rev. ed. 1995)
§ 5.28, p. 149, italics added.)
3. California Law
We discuss California law on illusory arbitration contracts to decide whether the
law chosen by the parties is in conflict with a fundamental policy of California.
In 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199 (24 Hour
Fitness), a female employee of 24 Hour Fitness, Inc., doing business as 24 Hour Nautilus
(Nautilus), filed suit against her employer and several male employees, alleging sexual
40