60 Cal.App.5th 317
Cal. Ct. App.2020Background
- Daniel and Indiana Cabatit signed a Sunnova solar lease after an in-home salesperson scrolled a standardized electronic agreement and indicated where to sign/initial. Indiana had limited ability to understand technical terms and the salesperson did not explain arbitration.
- The Cabatits did not receive a copy of the agreement at signing and later sued Sunnova for roof damage, alleging violations of the Home Improvement Law, Home Solicitation Law, Unfair Competition Law, and CLRA.
- Sunnova moved to compel arbitration under the agreement’s arbitration clause.
- The trial court denied the motion, finding the arbitration clause both procedurally and substantively unconscionable and also concluding McGill applied.
- Sunnova appealed; the Court of Appeal affirmed the denial of the motion to compel arbitration, holding the clause was unconscionable and declining to reach McGill’s applicability as necessary to the disposition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitrability (enforceability of the arbitration clause) was delegated to an arbitrator | Cabatits argued Sunnova forfeited any delegation claim because it never raised it below | Sunnova contended the clause contains a clear and unmistakable delegation provision | Forfeited by Sunnova; appellate court declined to consider delegation because Sunnova did not press it in the trial court |
| Whether the arbitration clause is procedurally unconscionable | Clause was a contract of adhesion: standardized form, no bargaining, salesperson rushed and did not explain terms, no copy provided | Sunnova pointed to signatures/initials, conspicuous text, ability to cancel within seven days, and ability to choose other providers | Court found high degree of procedural unconscionability based on context (adhesive presentation, lack of meaningful choice, surprise/oppression) |
| Whether the arbitration clause is substantively unconscionable | Clause was one-sided: Cabatits required to arbitrate while Sunnova retained court remedies for customer defaults; limits on discovery and appeals | Sunnova argued limited carveouts (injunctive relief, confirmation, small claims) and asserted business need for asymmetric remedies | Court found the clause substantively one-sided and unjustified; combination of procedural and substantive unconscionability made the clause unenforceable |
| Whether McGill precludes enforcement of the arbitration clause by itself | Cabatits relied on McGill to show waiver of statutory remedies is unenforceable | Sunnova argued McGill did not apply here | Court did not decide McGill’s applicability because unconscionability alone supported denial of arbitration |
Key Cases Cited
- McGill v. Citibank, N.A., 2 Cal.5th 945 (Cal. 2017) (arbitration agreement cannot waive statutory remedies under CLRA, UCL, and false advertising law)
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (doctrine of procedural and substantive unconscionability; sliding scale)
- Ajamian v. CantorCO2e, L.P., 203 Cal.App.4th 771 (Cal. Ct. App. 2012) (delegation of arbitrability to arbitrator must be clear and unmistakable)
- Hartley v. Superior Court, 196 Cal.App.4th 1249 (Cal. Ct. App. 2011) (party seeking to assign arbitrability to arbitrator must clearly demonstrate intent)
- Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109 (Cal. 2013) (unconscionability is a defense to a motion to compel arbitration)
- De La Torre v. CashCall, Inc., 5 Cal.5th 966 (Cal. 2018) (procedural unconscionability is context-dependent)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (Cal. 2015) (substantive unconscionability: overly harsh or one-sided terms)
- Stirlen v. Supercuts, Inc., 51 Cal.App.4th 1519 (Cal. Ct. App. 1997) (business need for one-sided terms must be shown to justify imbalance)