Penilla v. Westmont Corp.
207 Cal. Rptr. 3d 473
Cal. Ct. App.2016Background
- Westmont (mobilehome park owner) required mobilehome purchasers/tenants to sign a standardized Mobilehome Rental Agreement (2000–2013) containing a JAMS arbitration clause. 46 named plaintiffs (mostly low‑income, many Spanish‑speaking) sued Westmont for multiple contract, tort, and statutory claims including FEHA claims.
- Westmont moved to compel arbitration under CCP § 1281.2; trial court found a valid written arbitration agreement but denied the motion, ruling the clause unconscionable.
- The arbitration clause: required JAMS arbitration, allowed appointment/selection ambiguity, barred consolidation/class procedures, required each party to advance half the arbitrator fees (failure to pay = default), limited damages to one year prior to demand, excluded unlawful detainer and injunctive relief, and limited punitive damages.
- Plaintiffs presented declarations that many were non‑English speakers who received no Spanish translation or explanation, had made significant financial commitments to their homes before signing, and could not afford the likely JAMS fees (single arbitrator fees in evidence ranged $500–$800/hour; $400 filing fee).
- Trial court found both procedural and substantive unconscionability (adhesion, surprise, language barrier, oppressive fee‑advancement and shortened limitations/remedy caps) and denied the motion to compel; the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability (adhesion/surprise/language) | Clause was in adhesion contract; many plaintiffs lacked English proficiency and got no Spanish translation or explanation; signing occurred under economic pressure | Agreements were not adhesive; plaintiffs initialed the clause and had housing alternatives; no surprise | Court: Procedurally unconscionable—contract of adhesion, language barrier, inadequate notice of fee obligations and limited review time produced oppression and surprise |
| Substantive unconscionability — arbitration cost allocation | Requiring plaintiffs to advance half JAMS fees (with default for nonpayment), no waiver mechanism, and prohibition on consolidation made arbitration unaffordable/deterrent | Arbitration is generally cheaper; fee allocation mirrors §1284.2; fee waivers/statutes (§1284.3) can mitigate costs | Court: Substantively unconscionable — fees would be prohibitively high for low‑income plaintiffs and would substantially deter claims; statutory provisions don’t cure the clause here |
| Substantive unconscionability — limitations on remedies/time | Clause limited recoverable damages to one year before demand and restricted punitive/injunctive relief, cutting off statutory remedies like FEHA | Carve‑outs (e.g., unlawful detainer) and limits are reasonable contractual choices | Court: These shortened limitations and remedy caps are substantively unconscionable because they unreasonably restrict statutory claims and remedies |
| Severability/remedy (can clause or parts be reformed) | Even if parts are bad, court can sever or reform unconscionable terms and compel arbitration of rest | Clause governs; statutory framework and parties’ intent favor enforcement | Court: Clause has multiple unlawful provisions closely linked (fee advance, time bars, remedy limits); severance would require judicial re‑writing, so unenforceable in toto — motion to compel arbitration properly denied |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (arbitration terms cannot deny statutory remedies or shift unique arbitration costs to the employee/consumer)
- Pinnacle Museum Tower Assn. v. Pinnacle Market Dev., 55 Cal.4th 223 (Cal. 2012) (procedural and substantive unconscionability evaluated on a sliding scale)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (Cal. 2015) (endorses case‑by‑case affordability analysis for arbitration fees and recognizes unconscionability doctrine to protect access)
- Gutierrez v. Autowest, Inc., 114 Cal.App.4th 77 (Cal. Ct. App. 2003) (mandatory arbitration is unconscionable if it requires unaffordable fees to initiate arbitration)
- Parada v. Superior Court, 176 Cal.App.4th 1554 (Cal. Ct. App. 2009) (cost provisions can be substantively unconscionable where declarations show inability to pay arbitration costs)