57 Cal.App.5th 59
Cal. Ct. App.2020Background
- Swain received laser hair removal from LaserAway in 2017 and alleges burns, an open wound, tattoo mutilation, hyperpigmentation, pain, and other injuries; she sued for negligence, fraud, battery, breach of contract, consumer-protection statutes, and sought damages and injunctive relief.
- LaserAway produced an electronic arbitration agreement (signed via its online portal/tablet) that covered patient claims about allegedly negligent medical services; the agreement allowed LaserAway to sue in court to collect unpaid fees, required a three-arbitrator panel, and allocated neutral-arbitrator fees pro rata.
- Swain said she either did not recall signing or had no meaningful opportunity to review the forms; she also asserted the agreement was adhesive, one-sided, barred public injunctive relief, and imposed arbitration fees she could not afford (her monthly income ≈ $2,000).
- The trial court denied LaserAway’s petition to compel arbitration, finding the agreement procedurally unconscionable (adhesive, surprise, pressured signing) and highly substantively unconscionable (lack of mutuality and prohibitive fee allocation); the injunctive-relief bar was conceded unconscionable but severable.
- LaserAway appealed; the Court of Appeal affirmed, concluding minimal procedural unconscionability combined with a high degree of substantive unconscionability made the arbitration agreement unenforceable; LaserAway also forfeited several arguments on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration agreement (unconscionability) | Agreement is adhesive, signed under pressure with surprise terms; one-sided (LaserAway can sue in court for fees); fee-splitting and three-arbitrator structure make arbitration unaffordable | Agreement was a standalone form with opt-out language and followed CCP §1284.2 cost language; not unconscionable | Court: Minimal procedural unconscionability (adhesive, pressure, surprise) + high substantive unconscionability (lack of mutuality; prohibitive arbitrator fees) = agreement unenforceable. |
| Applicability of special healthcare-arbitration statute (Cal. Code Civ. Proc. §1295) | N/A (plaintiff argued unconscionability) | LaserAway: §1295 authorizes patient/provider arbitration if statutory formalities met | Held: LaserAway forfeited the §1295 defense and failed to show it met statutory licensing/formalities; §1295 does not save the agreement. |
Key Cases Cited
- OTO, L.L.C. v. Kho, 8 Cal.5th 111 (Cal. 2019) (explains sliding-scale unconscionability and scrutiny of adhesive arbitration clauses)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (limits on imposing arbitration forum in adhesion contracts; mutuality requirement)
- Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC, 55 Cal.4th 223 (Cal. 2012) (party seeking arbitration bears burden to prove agreement; opponent bears defenses)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (Cal. 2015) (adhesive contracts carry some procedural unconscionability; review of arbitration clauses for fairness)
- Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (Cal. 2016) (adhesive contracts often contain procedural unconscionability even without surprises)
- Penilla v. Westmont Corp., 3 Cal.App.5th 205 (Cal. Ct. App. 2016) (arbitration fee allocations can be substantively unconscionable when they prevent access to forum)
- Parada v. Superior Court, 176 Cal.App.4th 1554 (Cal. Ct. App. 2009) (three-arbitrator panels and high arbitrator fees can render clauses unconscionable)
- Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951 (Cal. 1997) (trial court as factfinder on arbitration petition; resolve factual disputes on substantial-evidence standard)
- Gentry v. Superior Court, 42 Cal.4th 443 (Cal. 2007) (adhesive agreement may still be procedurally unconscionable despite opt-out provisions)