47 Cal.App.5th 204
Cal. Ct. App.2020Background
- Plaintiff William Dennison, an 82‑year‑old retiree, responded to Rosland Capital TV ads and made four purchases of precious metals after phone contact with Rosland sales agent Matthew Smith.
- Dennison sent signed paperwork received by FedEx and paid nearly $50,000 on the first purchase; subsequent purchases followed after repeated solicitation.
- The coins were worth substantially less than what Dennison paid; he sued Rosland and Smith for misrepresentations and related claims.
- Defendants moved to compel arbitration based on a two‑page Customer Agreement printed in illegibly small font; the agreement contained an arbitration clause, a severability clause, fee‑shifting provision favoring Rosland, liability caps, and a one‑year limitations clause.
- The trial court denied the petition, finding the arbitration agreement procedurally and substantively unconscionable and not salvageable by severance; defendants appealed.
- The Court of Appeal affirmed, holding the delegation clause did not clearly delegate arbitrability to the arbitrator, the agreement was unconscionable (procedural and substantive), and the agreement was permeated by unconscionable terms so could not be saved by severance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration clause clearly and unmistakably delegates arbitrability to the arbitrator | Dennison: severability clause reserves determination of enforceability to courts; no clear delegation | Rosland: clause delegates questions of scope and enforceability to arbitrator | Court: No. Severability clause and language meant courts decide arbitrability, not arbitrator (judge decides). |
| Whether the arbitration agreement is procedurally unconscionable | Dennison: adhesive consumer contract, tiny unreadable print, no opportunity to negotiate | Rosland: Dennison is experienced and could have negotiated | Court: Procedural unconscionability established by adhesive form and surprise (tiny print, solicitous sales context). |
| Whether the arbitration agreement is substantively unconscionable | Dennison: terms are one‑sided (no mutuality), fee‑shifting, liability limits, short limitations period | Rosland: Agreement is commercially reasonable and severable | Court: Substantively unconscionable — lack of mutuality, damages cap, waiver of remedies, one‑year limitation on claims among other defects. |
| Whether severance can salvage the arbitration clause | Dennison: multiple, interrelated defects make severance impracticable | Rosland: Unconscionable provisions can be severed and remainder enforced | Court: Agreement is permeated by unconscionability; would require rewriting, so cannot be saved — arbitration unenforceable. |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Servs., 24 Cal.4th 83 (2000) (framework for procedural and substantive unconscionability in consumer arbitration).
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (2015) (adhesive consumer contracts establish procedural unconscionability without evidence of attempted negotiation).
- Baker v. Osborne Dev. Corp., 159 Cal.App.4th 884 (2008) (severability clause can defeat a clear‑and‑unmistakable delegation to the arbitrator).
- Parada v. Superior Court, 176 Cal.App.4th 1554 (2009) (conflicting provisions can show delegation to arbitrator not clear and unmistakable).
- Aanderud v. Superior Court, 13 Cal.App.5th 880 (2017) (presumption that courts decide arbitrability absent clear delegation).
- Fitz v. NCR Corp., 118 Cal.App.4th 702 (2004) (lack of mutuality supports substantive unconscionability).
- Magno v. The College Network, Inc., 1 Cal.App.5th 277 (2016) (agreement "permeated" by multiple unconscionable provisions cannot be salvaged by severance).
- Bakersfield College v. California Community College Athletic Assn., 41 Cal.App.5th 753 (2019) (preference to sever but void entire agreement when permeated by unconscionability).