*1 Aug. 2015.] S199119. [No. SANCHEZ,
GIL Plaintiff Respondent, COMPANY, LLC, Defendant and HOLDING Appellant. VALENCIA *5 Counsel Howell, &
Tharpe Maile, S. Christopher Soojin Kang; Callahan Thompson Sherman Caudill, & Robert W. Thompson, Russell; Charles S. Atkinson, Andelson Loya, Romo, Ruud & Kellie Christianson; S. Greines, Martin, Stein & *6 Richland, Olson, Robert A. Xanders, L. Edward Meehan R. Rasch and David E. Hackett for Defendant and Appellant. Mullin, Sheppard, Richter & and Anna Hampton S. McLean for Toyota Motor
Credit Corporation and General Motors Inc., Financial Company, as Amici Curiae on behalf of Defendant and Appellant. Pillsbury Pittman, Shaw Winthrop Richard M. Segal and Nathaniel R. Smith for Nissan Motor Acceptance Corporation as Amicus Curiae on behalf of Defendant and Appellant. Woerner, Lederman, Anthony Ly; L. Alexa Mendelson, D. Henry
Littler Volt Medina for Nemirovsky and Erin Cameron, Autrey & Medina Simpson, Inc., on Sciences, Curiae Amici as and Volt Information Corp. Management and Appellant. of Defendant behalf F. and John Shafir, H. Perrochet, Wright Robert Felix Lisa Levy, &
Horvitz on Curiae Amicus as Association Dealers Car New for California Querio and Appellant. of Defendant behalf for American Querio J. Donald Werson, and T. Chilton Jan & Severson and Association Association, Services Financial California Services
Financial and Defendant of on behalf Curiae as Amici Association Bankers California Appellant. of Commerce Chamber The California for Hiestand and Fred J. C. Frank
Erika behalf on Amici Curiae as of California Justice Association Civil The and Appellant. Defendant and A. Pincus, Archis Tager, Evan Falk, M. J. Brown, Andrew Donald M.
Mayer the United of Commerce The Chamber for Wong J. and Brian Parasharami Inc., Automakers, The and America, of Global Association States of Defend- behalf Curiae on as Amici Manufacturers of Automobile Alliance Appellant. and ant behalf Curiae on as Amicus Foundation Legal for Pacific Fetra J. La
Deborah and Appellant. Defendant Crowell; Sidran, M. Thomas R Sidran, David & Toschi, Doyle, Collins S. and Berberich, Crystal D. Daniels Robert & Bruder Leaver Manning Amicus Curiae as Company Insurance Mutual Federated for Yagoobian and Appellant. of Defendant behalf J. Angela Rosner, P. Barry Babbitt, Christopher D. Hallen
Rosner, & Barry and Respondent. for Plaintiff Smith Mensch H. and Jacob Kreindler, Nelson M. Gretchen &
Kreindler Plaintiff on behalf Amicus Curiae as of California Attorneys Consumer Respondent. as Arthur Lovett F. Becker for Nance Gertler, A. Chavez Mark &
Chavez and Respondent. of Plaintiff on behalf Curiae Amicus Amicus *7 Safety Reliability Auto for for Consumers Feinberg Aimee and Respondent. of Plaintiff on behalf Curiae
Arbogast Law and David M. Arbogast Consumer Attorneys California as Amicus Curiae on behalf Plaintiff and Respondent.
McKenna & Long Aldridge and J. Alan Warfield for Association of Southern California Defense Counsel as Amicus Curiae on behalf of Plaintiff and Respondent.
Opinion LIU, automobile sales J. The contract in the present case has an arbitration agreement that provides, among other things, that arbitral $0 awards of $100,000 over as grants well as but not denials injunctive relief may be to a appealed panel of arbitrators. The arbitration agreement also has provi- sions that require appealing award to front the costs of the appeal, preserve of the right parties go to small claims court and to remedies, pursue self-help waive right to class action litigation or arbitration. The agreement further that if the provides class waiver is deemed unenforceable, then the entire arbitration agreement shall be unenforceable.
In this car, over the dispute sale of a Gil plaintiff Sanchez filed a class action lawsuit against defendant Valencia Holding Company, (Valencia), LLC and Valencia moved to arbitration. compel motion, trial court denied the finding and, turn, class waiver the entire arbitration agreement unen- forceable. Subsequently, United States Court held in Supreme AT&T Mobility LLC v. (2011) 563 Concepcion U.S. L.Ed.2d [179 S.Ct. (Concepcion) 1740] Federal Act (9 Arbitration (FAA) U.S.C. 1§ et seq.) preempts California’s unconscionability rule prohibiting class waivers in consumer arbitration agreements. In deciding Valencia’s from the appeal trial court’s denial of the motion arbitration, to compel the Court of Appeal declined to address whether the class waiver was enforceable and instead held that the arbitration appeal provision and the arbitration agreement as a whole were unconscionably one-sided. Valencia review, our sought relying Concepcion.
While
circumscribing
ability
states to regulate the fairness of
arbitration agreements, Concepcion reaffirmed that the FAA does not preempt
“ ‘generally
defenses,
applicable
fraud,
contract
duress,
such or unconscio-
nability.’
(Concepcion, supra,
the more the waiver but does not limit enforcement of the class Concepcion requires of the arbitration to other rules applicable rules, Valencia that the Court of we agree those agreement. Applying unconscio- law in finding a matter of state erred as Appeal below. judgment we reverse Accordingly, nable.
I. Two months action in March 2010. filed this class Plaintiff Gil Sanchez arises from later, The complaint filed a first amended complaint. Sanchez S500V in 2008 for Mercedes-Benz of a 2006 “preowned” Sanchez’s purchase the Consumers $53,498.60. Legal that Valencia violated Sanchez alleged Code, 1750-1784) false (Civ. making (CLRA) by represen- Act Remedies §§ also alleged of the automobile. Sanchez the condition tations about (1) to failing other California laws by separately violated several Valencia deferred to a date after the down that is the amount of payment itemize transfer, contract, (2) distinguish registration, to failing execution of the sale fees, (3) license charging optional Department fees from titling if he it or discussing asking fee without filing Vehicles electronic Motor tires, (5) it, requiring new tire fees for used charging wanted pay $3,700 he could the vehicle certified so qualify to have him pay rate, for an actually optional when that was interest payment percent 4.99 violations of alleged to the interest rate. Sanchez unrelated warranty extended Code, 2981-2984.6), the unfair (Civ. Finance Act Automobile Sales §§ Code, 17200-17210), the Song- (UCL) (Bus. & Prof. law §§ competition Code, 1790-1795.8), and Public (Civ. Act Warranty Consumer Beverly §§ 42885. Resources Code section based on was that a class action appropriate further alleged
The complaint similar who have suffered class members number of large putative fact, law and violations, of common questions the predominance He claims, of class litigation. and benefits and the superiority typicality of violations different types based on the four distinct classes proposed Valencia committed. allegedly to an arbitration arbitration pursuant filed a motion compel
Valencia have any dispute either that authorized- in the sales contract clause a class clause had The arbitration decided arbitration. between parties arbitrated, your right will give up you “If dispute action waiver: claim you class any member on or class as a class representative participate consolida- to class arbitration including any right have us may against arbitrations.” tion of individual
The arbitration clause further “Arbitrators shall be or attorneys provided: retired and shall be selected to the rules. The judges pursuant applicable arbitrator shall substantive law in an award. The governing maiding apply arbitration shall be conducted in the federal district in which hearing you administration, reside .... We will advance service or case your filing, fee and arbitrator or fee all to a maximum of management your hearing up $2500, which be reimbursed decision of the arbitrator at may by arbitrator’s discretion. Each shall be for its own party responsible attorney, fees, and other unless awarded the arbitrator under expert by applicable law. . . . Arbitrator’s award shall be final and on all binding parties, except $0 that in the event the arbitrator’s award a is a is in against party $100,000, excess of or includes an award of relief a injunctive against party, a new arbitration under the rules of the party may request a organization three-arbitrator new by panel. appealing party requesting be arbitration shall for the fee and other arbitration responsible filing costs to a final determination the arbitrators of a fair subject by apportionment costs. arbitration under this Arbitration Clause shall be Any governed by (9 Federal Arbitration Act U.S.C. 1 et and not state law seq.) by any § arbitration. concerning remedies,
“You and we retain such as any rights self-help repossession. You and we retain the to seek in right remedies small claims court for or claims within that court’s disputes jurisdiction, unless such action is transferred, removed or to a different court. Neither nor we appealed you waive the to arbitrate right by using remedies or suit. self-help filing Any court having enter on the arbitrator’s award. jurisdiction may judgment This termination, Arbitration Clause shall survive or transfer of this any payoff Clause, If contract. of this Arbitration other than any part waivers of class reason, action is deemed or found to be unenforceable for rights, any remainder shall remain enforceable. If a waiver of class action rights deemed or found to be unenforceable for in a reason case which class any made, action have been the remainder of this allegations Arbitration Clause shall be unenforceable.”
As the Court of summarized: “The Sale Contract is a Appeal preprinted of one document page, 8 1/2 inches wide and consisting 26 inches long. document, both There are on sides that entire occupy leaving little in the Sanchez or initialed the way margins. signed eight front initials, each related to a different places, No or other provision. signatures, on the back. The arbitration handwriting appears entitled ‘ARBI- provision, CLAUSE,’ is on the back at the bottom of the TRATION outlined page, by is the last black box. It of the Sale Contract provision concerning transaction; a purchase related to the of the contract assignment below it. The appears buyer’s near the bottom on the signature appears final side.” front arbitration,
In Sanchez submitted declaration that said: “When I opposing Vehicle, the documents related to signed of the I my purchase Subject was documents, with a stack was told presented simply Dealership’s where to and/or initial each one. All of the employee sign documents contracts) (including were form documents. When purchase pre-printed I documents, I was signed an to read of the given opportunity documents, nor was I given of the opportunity negotiate any pre-printed basis, terms. The documents were me take-it-or-leave-it presented either them or not the car. . . . There sign buy was no of choice on question or of able to my being And I had no reason to part my ‘negotiate’ anything. *10 that hidden on the back the contracts . . . was a section that suspect me from able to the being sue in court if I had a prohibited Dealership problem. documents,
“. . . When I the contract and related signed purchase it, did me if not ask I was to arbitrate Dealership willing any disputes did not tell me that there was an ‘arbitration clause’ on the back side contract, and I did not see such clause before I purchase any signed documents. The did not to me what an Dealership explain arbitration clause was. I was not given any time transaction with opportunity any during my to whether I negotiate or not would to arbitrate Dealership agree any [the] I was not an whether potential given a contract with disputes. option sign an arbitration clause or one without.”
The trial court denied the motion to arbitration. It held the class compel waiver unenforceable on the that the CLRA for ground expressly provides class action and a litigation declares class action to be un- right Code, (See waivable. Civ. Because arbitration clause §§ a waiver of class action is deemed or found to be provided rights “[i]f unenforceable for reason in a case in which class action have allegations made, unenforceable,” been the remainder of Arbitration this Clause shall be the court denied the motion to arbitration. compel
After the trial court’s decision but before the Court of
opinion
Appeal’s
filed,
this case was
the United States
Court in Concepcion, supra,
Supreme
II. case, we discuss begin by of the issues in this understanding To aid “ ‘One common formulation of of unconscionability. ing general principles “ choice on it refers to ‘an absence of meaningful is that unconscionability terms which are one of the with contract together part parties As that formulation favorable to other unreasonably party.’ [Citation.] the doctrine of has both a procedural recognizes, implicitly element, due the former focusing oppression surprise and substantive the latter on harsh or one-sided re overly bargaining power, unequal *11 II, (Sonic 1133.) 57 Cal.4th at supra, sults.’ p. “ and substantive unconscionabil- ‘The view is that [procedural prevailing in order for a court to exercise its discretion to must both be ity] present unconscionability.’ a contract or clause under the doctrine of refuse to enforce in the same degree. ‘Essentially But need not be they present [Citation.] which of the disregards regularity procedural scale is invoked sliding formation, terms, in to the of the contract that creates proportion process of the substantive terms themselves.’ harshness or unreasonableness greater words, the contract In other the more substantively oppressive [Citations.] term, is to come to unconscionability the less evidence of procedural required unenforceable, (Armendariz vice v. the conclusion that the term is versa.” Services, 83, (2000) Inc. 24 Cal.4th 114 Psychare Foundation Health [99 745, (Armendariz).) P.3d Courts find a contract as may 6 Cal.Rptr.2d 669] Code, (Civ. of the contract” to be unconscionable. whole “or clause 1670.5, (a).) subd. § doctrine ensures that unconscionability
As we stated in Sonic II: “The adhesion, contracts, have do not terms that contracts particularly impose “ ’ ‘ ” (Stirlen Inc. described as harsh’ variously ‘overly Supercuts, been ‘ 1519, 138]), (1997) “unduly 51 1532 Cal.Rptr.2d oppres Cal.App.4th [60 ’ 913, (Perdue (1985) Bank 38 Cal.3d sive” v. Crocker National [216 ‘ 345, (Perdue)), P.2d “so one-sided as to ‘shock Cal.Rptr. 503] ’” Pinnacle Market (Pinnacle Museum Tower Assn. v. conscience’ 514, 223, (US), LLC 55 Cal.4th Cal.Rptr.3d Development (Pinnacle)), 282 P.3d or ‘unfairly (Little one-sided’ Auto Inc. Stiegler, [v. (2003)] [1064,] Cal.4th 979]). 63 P.3d ofAll these formulations to the central point idea that unconscionability doctrine is concerned not with ‘a old-fashioned bad simple (Schnuerle bargain’ v. Insight Communications Co. (Ky. 2012) 376 S.W.3d 575 (Schnuerle)), but with terms that are favorable ‘unreasonably to the more (8 powerful party’ (4th 18.10, Williston on 2010) Contracts ed. 91). These include § ‘terms p. of the impair integrity or bargaining otherwise process contravene the interest or public public policy; terms of an (usually adhesion or boilerplate nature) that in an attempt alter impermissible manner fundamental duties law, terms, otherwise imposed by or fine-print seek to the reasonable negate of the expectations nondrafting party, unreasonably harsh unexpectedly terms having do with or other central price aspects II, (Ibid.)” transaction.’ (Sonic 57 Cal.4th at supra, 1145.) Because defense, is a contract unconscionability the defense party asserting bears (Id. the burden of proof. II,
We further observed Sonic and reaffirm today, that “an examina tion of the law case does indicate that ‘shock conscience’ is a different standard in other practice true, than formulations or that it is the one authoritative standard for substantive unconscionability, exclusive all II, (Sonic others.” 57 Cal.4th Nor do we see any Rather, “courts, difference conceptual among these formulations. including ours, have used various nonexclusive formulations notion that capture substantial requires unfairness degree beyond ‘a simple ” (Id. bad bargain.’ added.) italics This latter old-fashioned qualification Commerce important. depends on enforceability, most instances, of a executed duly written A contract. cannot avoid a *12 contractual deal, obligation merely by that complaining was retrospect, unfair or a bad all bargain. Not one-sided contract are unconscio nable; hence the harsh,” various intensifiers in our formulations: “overly “unduly oppressive,” “unreasonably (See favorable.” Pinnacle Museum Tower Assn. LLC, v. Pinnacle (US), Market Development 55 Cal.4th supra, at 246 p. contract term is not substantively [“A unconscionable when it merely gives one side a greater .”].) formulations, . . . benefit We clarify today that these law, used our throughout case all mean the thing. same An evaluation of is unconscionability on highly context. dependent (See Williams v. (D.C. 1965) Walker-Thomas Furniture Co. Cir. 121 U.S. 445, 315 F.2d App.D.C. test [350 nor can be simple, it [“The mechanically The doctrine applied.”].) often into the inquiry “com requires mercial and effect” setting, purpose, of the or contract (Civ. contract provision. Code, 1670.5, accord, II, (b); subd. Sonic § 57 at supra, Cal.4th 1147-1148; Furniture, pp. Walker-Thomas at 450 p. [unconscionability must “be considered ‘in the of the light general commercial background and 912 ”].) trade case’ As we have recognized, of the or particular
commercial needs “ of “margin safety” provides contract can ‘a provide of extra for which it has strength type protection superior bargaining ” (Armendariz, unconscionable.’ need without being commercial legitimate Furniture, 117; at 450 24 at see Walker-Thomas p. Cal.4th supra, [“where contract,” the test is entering choice was exercised meaningful upon no according are ‘so extreme as unconscionable terms appear “whether And, noted, ”].) of the as and business time practices place’ the mores considered in light any of the terms must be of substantive unfairness The ultimate issue in case is whether every unconscionability. procedural unfair, in view of all relevant circum- sufficiently of the terms contract stances, that a court should withhold enforcement. is, be,
Moreover, it must the same unconscionability our standard as 563 at nonarbitration U.S. agreements. (Concepcion, supra, for arbitration and course, 1747].) can 341 Of manifest unconscionability S.Ct. [131 (See, at issue. e.g., in different the contract term ways, itself depending 906, (2001) Bank Mutual v. Court Cal.4th 916-917 Washington Superior 320, clause]; of law Santa City P.3d Cal.Rptr.2d 1071] [choice [103 747, 527, (2007) Court Cal.Rptr.3d Barbara v. Cal.4th Superior [62 (2003) Moreno liability 161 P.3d provision]; Sanchez 1095] [waivers of limitation provi Cal.App.4th [131 684] [statutes Smith, Smith, sion]; & Inc. v. Court 17 Cal.3d Valentino Superior clause].) But 551 P.2d selection 495-496 Cal.Rptr. 1206] [forum must unconscionability doctrine to arbitration clause application In contract clause. any from general principles apply particu proceed lar, unconscionability—the the standard for substantive requisite degree as and demanding unfairness a bad be merely bargain—must rigorous beyond contract clause. for arbitration clauses “absent Concepcion,
Valencia contends under broadly exceptional not, circumstances, under the legislatively—may states—either judicially fairness of guise unconscionability, parties’ agreed judge supposed assertion, In of that Valencia cites “the process.” examples support evaluations from (ranging discovery of arbitration-process (See Concepcion, that the FAA evidentiary requirements) precludes.” 1747].) 563 U.S. 341-342 S.Ct.
We the effect on state law uncon Concepcion considered recently that Concepcion, unconscionability doctrine and observed “after scionability II, (Sonic to arbitration.” supra, remains valid defense a petition compel 1142; 1142-1143, 51 Cal.4th at citing Concepcion, supra, at id. pp. p. new,” said, 1746].) U.S. at is we “is that 563 S.Ct. at “What p. p. on state unconscionability clarifies limits FAA Concepcion places rules as they agreements. to arbitration It is well pertain established that such rules must not discriminate arbitration and facially against must be enforced rules, further make clear evenhandedly. Concepcion goes that such even when must not disfavor facially nondiscriminatory, arbitration as applied by imposing procedural fundamental requirements attributes ‘interfere[] ‘ arbitration,’ costs, its “lower especially greater and efficiency and speed, the ability to choose expert adjudicators resolve specialized disputes.” 1748, at (Concepcion, supra, U.S. S.Ct. [p. [Citation.]’ at pp. 348] [131 II, 1751].)” (Sonic 1143.) at p. We of “state proceeded give law rules that do not examples ‘interfere[] ”
with fundamental attributes of arbitration’ and thus “do not implicate II, limits on state Concepcion’s (Sonic rules.” unconscionability supra, 51 Little, 1143.) Cal.4th at “In for p. we found example, unconscionable $50,000 threshold for an arbitration favored appeal decidedly defendants (Little Inc.], contract employment disputes. Auto Stiegler, supra, 29 [v. 1071-1074.)” (Id. at 1144.) Cal.4th at As our reference to pp. p. Little does not immunize suggests, Concepcion adhesive arbitration from processes state law unconscionability as Valencia principles broadly contends.
Justice Chin says allowing formulations to multiple notion capture substantive will undermine unconscionability and predictability will subject and nonarbitration of a contract to different standards. (Cone. 936.) & dis. at But we opn., post, just have made clear that all the formulations “mean the same thing” “must be as rigorous demanding for arbitration (Ante, clauses as contract clause.” It “ seems main reason Justice Chin favors ‘shock conscience’ as the .the sole he formulation is that believes it a higher standard than the alterna- (See tives. cone. & dis. opn., post, his Adopting approach, however, would call into a number of cases where we have question found substantive (See, under other formulations. Little e.g., Inc., Auto Stiegler, one-sided”]; Cal.4th at supra, 29 1071 ‘ [“unfairly ‘ ’ Armendariz, Cal.4th “overly harsh” “one- [“ ’ Scissor-Tail, ”]; sided” Graham v. Inc. 28 Cal.3d 820 [171 (Scissor-Tail) P.2d [“unduly We see Cal.Rptr. no oppressive”].) reason to disturb our we view that “shock the precedents, reject conscience” ais standard. higher
We turn now Valencia’s alternative argument the arbitration agree- ment in this case was not unconscionable under state law.
III. adhesive; Valencia does not that the contract was at oral dispute argument, Valencia said the contract “meets the definition adhesive in *14 914 se not per are contracts that “adhesion Instead, argues Valencia
California.” that and item luxury awas car unconscionable,” that the noting procedurally has Sanchez says Valencia Although the price. to negotiate able was Sanchez & dis. (cone. the arbitration to negotiate unable he was shown not Sanchez this that court in not contend does 932), Valencia at p. post, opn., could have he or that agreement arbitration of out opted have could Indeed, Valencia agreement. arbitration an without contract a sales negotiated not legally who “[m]any people that argument oral acknowledged and contract” this is in what of majority vast not understand do trained terms negotiable than the other everything about that dealer asked you “if that . . .” . either that understand don’t interest, they probably of price as a contracts, have never required, we of consumer Moreover, context in the complaining that unconscionability, finding procedural to prerequisite (See, e.g., provisions. contract standardized negotiate to it tried show 148, 160 36 Cal.4th (2005) [30 Court Superior Bank v. Discover supra, Concepcion, grounds other of on 1100], 76, disapproved 113 P.3d an had stuffer” in “bill agreement S.Ct. [cardholder 1740] U.S. Bank, National v. Crocker Perdue unconscionability]; of procedural element customer to the “offered card [signature 924-925 38 Cal.3d supra, adhesion”].) And of of the contract example a classic negotiation, without was contract the standardized 90 percent argues Valencia although sowas arbitration statute, contend does it by mandated mandated. contracts, form standard involving transactions consumer many As in contract, including of his entirety not read did apparently
Sanchez Bur., Arbitration Protection Financial (See Consumer clause. arbitration Reform Wall Street Dodd-Frank to Pursuant Congress, to Rep. Study: 3, than 2015) [fewer 1028(a) (Mar. § Act Protection § Consumer clauses arbitration predispute subject card consumers of credit percent Foundation v. Kaiser Madden court]; cf. not sue could they knew 882, P.2d 1178] 699, Cal.Rptr. 710 [131 17 Cal.3d Hospitals its by is bound contract to a assents one who rale that “the general [applying language” unfamiliarity [its] complain cannot of Administration Board by negotiated contract care health nonadhesive behalf].) the plaintiff’s on System Retirement Employees the State highlight obligation no hand, under was Valencia other On the call that contract, specifically it required nor was its clause arbitration obligation such imposing law state Any attention. Sanchez’s clause to Associates, Inc. Casarotto Doctor’s (See the FAA. be preempted would 902, 116 S.Ct. L.Ed.2d 687-688 [134 U.S. (1996) 517 capital underlined be in clause to requiring statute state [holding Concepcion, see but preempted]; a contract is first page letters free remain 1750, fn. 6] [“States S.Ct. at p. fn. 6 U.S.
915 take the concerns that attend contracts steps addressing of adhesion—for class-action-waiver example, requiring adhesive arbitration Furthermore, to be agreements highlighted.”].) we have held that even when a customer is it is not necessary assured to read a standard form contract with clause, unreasonable, an arbitration “it is generally in reliance on such assurances, to neglect read a written agreement before signing it.” (Rosenthal v. Great Fin. (1996) Western Securities 14 Corp. Cal.4th 424 1061].) P.2d Cal.Rptr.2d 926 [58
Here the nature adhesive of the contract is sufficient to establish some degree of “a procedural unconscionability. Yet finding of uncon procedural scionability enforced, does not mean that a contract be will not but rather that courts will scrutinize the substantive terms the contract to ensure they not unfair or manifestly (Gentry one-sided.” v. Superior (2007) Court 42 443, 469.) Cal.4th We now address each of Sanchez’s claims of substantive unconscionability.
A. The arbitration case agreement this that an arbitrator’s award provides “shall be final on all binding parties, that in the except event the $0 arbitrator’s $100,000, award for a is a party against is in party excess or includes an award of relief a injunctive against that party, party may a new request arbitration under the rules of the arbitration a organization by three-arbitrator Valencia Court of panel.” challenges that Appeal’s holding this was one-sided and provision unreasonably unenforceable. Little,
In we found an unanimously unconscionable contract employment that provision to a second permitted appeal arbitrator if the arbitral only $50,000. Inc., award was greater (Little than v.Auto Stiegler, supra, 29 Cal.4th (Little); Baxter, (cone. 1073 id. at & J.); dis. id. at opn. p. 1089 Brown, (cone. J.). & dis. In so we opn. discussed with concluding, approval two Court pertinent Beynon cases. In v. Garden Grove Medical Appeal (1980) Group (Beynon), the Cal.App.3d Cal.Rptr. 146] court found unconscionable a provision of a arbitration mandatory between a medical and a that authorized the medical group patient but group, patient, reject first arbitration award submit the to a dispute second In Saika v. Gold panel. Cal.App.4th (Saika), the court found unconscionable a in a provision doctor-patient agreement allowed trial de novo in party request $25,000, court when the award was over “The superior rejected court [Saika] doctor’s the case was from argument distinguished Beynon because the challenged arbitration either a trial de permitted request ‘ novo if the award exceeded the stated amount. the vernacular of late [I]n matter, benefit practical As a real.” America, “get us let century 20th than more nothing on patients confers clause novo de trial which $25,000 but threshold (a) clear the both will an award odds chimera. *16 so are de novo trial a have want to would the patient that low (b) still be so in medical arbitrators that assume are to we Unless negligible. be as to small below substantially awards make capriciously regularly cases malpractice indulge— will not we which assumption is an that requires justice what —and are the patient benefit could possibly clause de novo trial the where the cases Saika, 1072-1073, quoting (Little, pp. indeed.’ rare to be going the ground cases these distinguish to Little attempted in employer arbitration, inas a second than objectionable less is appeal “an arbitration that wholly a Saika, not permitting it is novo, in because as de a trial Beynon, only permitting but illusory, first arbitration the making new proceeding, Cal.4th (Little, supra, award.” of arbitral the review appellate limited a to perceive fail “We said: we argument, this 1073-1074.) Rejecting the giving toward geared is these provisions Each difference. significant a sizable to overturn opportunity a substantial defendant arbitral (Id. at p. award.” Little in from distinguishable is that the present argues Valencia may nothing awarded is who a party First, that it provides respects. three $100,000 instead is an appeal for Second, threshold the upper appeal. contract. not an employment agreement, sales Third, an auto is $50,000. this averages automobile anof price Valencia, the purchase because to According $100,000, in contrast below are of awards $30,000, vast majority around Coldwell (See, e.g., Roitz cases. employment in awards greater to typically 716, 721, 726 [73 Cal.App.4th Co. Brokerage Residential Banker termina- wrongful award $260,000 arbitral a [upholding greater an award $0 contends, award both an Thus, Valencia tion].) sellers, buyers automobile between disputes $100,000 outliers are than seller, beneficial more significantly not are thresholds so the appeal to be likely is who defendant, buyer, than to be the is likely who plaintiff. not, on its does threshold the appeal that Valencia agree We do, the parties as the Assuming, party. drafting favor
face, obviously defendant, as seller and the pláintiff the buyer scenario likely $0 but not than greater that award an from unavailability appeal non-$0 a from appeal may buyer that $100,000 means than greater from appeal the seller small, may nor too to be believes she he or that award It big. too to be it believes $100,000) (up award substantial a quite favor will $0 award a appeal ability to assume be reasonable may the buyer, while the ability to $100,000 appeal or greater award will favor the seller. But nothing the record indicates that the latter provision is more substantially likely be invoked than the former. We cannot say the risks on the imposed parties one-sided, much less unreasonably so. As to the contract term providing that only arbitral grants of injunctive relief are subject to a arbitration, second Valencia notes that car sellers sometimes must seek an injunction in order to repossess car from the buyer. But Valencia acknowledged at oral argument that overall the car buyer is more likely than the seller to seek injunctive relief. Nevertheless, we find significant Valencia’s concern that the of an scope injunction can extend well beyond the transaction at issue and can compel car seller to its change *17 business practices. Because of the broad impact that injunctive relief may have on the car business, seller’s the additional arbitral review when such “ relief is granted furnishes ‘a “margin of that safety” the provides party with superior bargaining strength a of type extra protection for which it has a ” legitimate commercial need.’ (Armendariz, supra, Cal.4th at p. 117.) The potentially far-reaching nature of an injunctive relief remedy, which Sanchez does not dispute, is sufficiently apparent here to justify the extra protection of additional arbitral review. Of course, apart from the parties’ particular interests, the public has a
strong interest in ensuring that fraudulent business practices are enjoined. In Broughton v. Cigna Healthplans (1999) 21 1066, Cal.4th 1082-1084 [90 334, 67], P.2d and Cruz Health Systems, Inc. PacifiCare (2003) 30 Cal.4th [133 Cal.Rptr.2d 1157], 66 P.3d we held that claims seeking injunctive relief designed to protect the public by stopping ongoing practices unlawful under UCL, CLRA and the respectively, were inarbitrable. Valencia argues that Broughton and are no longer good Cruz law in light of Concepcion. (See Ferguson v. Corinthian Colleges, Inc. (9th Cir. 2013) 733 F.3d 932-937.) The of Court below Appeal did not address whether Broughton has been Cruz abrogated, and Sanchez takes no on position the issue in this appeal, focusing instead on the asymmetry of affording arbitral appeals to grants but not denials of injunctive relief. We likewise do not address the continued viability of Broughton in this Cruz case.
B. The Court of Appeal also held that the provision concerning appellate arbitration filing fees and costs contributed to the unconscionability of arbitration agreement. noted, As the arbitration clause provides that Valencia will advance the car buyer’s administration, filing, service, and case manage- ment fees and arbitrator or fees hearing to “up $2500, maximum of which provides clause also The discretion. arbitrator’s at the reimbursed” be may “shall party the appealing panel, a three-arbitrator an appeal case in that final to a subject costs arbitration and other fee filing responsible be Court of costs.” apportionment a fair arbitrators by determination “ ‘who for consumers is inadequate latter this held of Appeal large given first place’ in the process the [appeal] initiate afford cannot advance in made payment an appeal covered “Items costs. arbitration arbitration other fee Contract, filing ‘the Sale in include, stated [Cita- hour. $450 per around average Angeles Los in fees Arbitrator costs.’ Asso- Arbitration the American arbitral scheme this Contrasting tion.]” fees, the arbitration front consumers require do not rules, which ciation the appealing requirement that “[t]he concluded of Appeal Court advance puts of both parties costs arbitration filing fee pay buyer.” burden harsh unduly statu of unwaivable mandatory employment the context In generally “cannot agreements that arbitration held have we rights,
tory would employee expense type bear employee require court.” action bring free she were he or if to bear not be required consumer the area 110-111.) In Cal.4th (Armendariz, *18 In way. a different in costs addressed has arbitration, Legislature the Civil of enacted Code decided, Legislature the was after Armendariz shortly arbitration. consumer in costs fees and address to 1284.3 section Procedure or arbitrator neutral that “[n]o provides 1284.3 of section (a) Subdivision under arbitration a consumer administer shall company arbitration private arbitration to the ais party who a consumer that rule requiring or not does consumer if the party an by opposing incurred costs and fees the pay of costs to, the fees limited not but arbitration, including, the in prevail Most pertinently, or witnesses.” attorney, arbitrator, organization, provider the charged costs fees and that “[a]ll (b)(1) provides 1284.3, subdivision section in a company arbitration aby private party consumer a upon assessed to or an for fees, waived be shall arbitrator arbitration, exclusive consumer consumer’ section, ‘indigent of this purposes For consumer. indigent 300 percent than is less that income monthly a having gross a person means affect shall this section in Nothing guidelines. poverty federal of the be otherwise would to shift fees company arbitration a private ability party.” nonconsumer a to a consumer upon assessed or charged fee of the notice give to provider arbitration (b)(2) requires Subdivision consumer “[a]ny (b)(3) provides subdivision provision, waiver by eligibility or her his establish may costs or of fees a waiver requesting by consumer form provided aon oath under declaration making income monthly her his or stating signature for company arbitration private No private her household. or in his living of persons the number may consumer to company require further provide any statement Proc., 1284.3, (Code or evidence of indigence.” Civ. (b)(2) subd. & (3).) § The legislative history shows that the statute’s specific were part general concern about the affordability arbitration: “One of the advanced primary arguments in consumer support mandatory arbitration is However, that it is less than civil costly litigation. this argument is cast into significant fact, doubt available by evidence. In arbitration costs are so high their many because people drop complaints can’t afford they them, a recent pursue study by (Assem. Public Citizen found.” Floor Analysis Amends, of Sen. to Assem. Bill No. 2915 Sess. (Reg. 2001-2002) as 26, 2002, amended Aug. court, observed that analysis “unlike civil result, arbitration is no private subject to fee limitations. As a access system may be greatly affected the wealth of the consumer. The author states that this bill addresses these inequities by prohibiting large private from judging companies conducting consumer mandatory arbitrations where a consumer who loses the case must pay winning fees and costs. company’s This bill also a fee implements waiver policy indigent consumers akin the long-standing practice courts. This bill public does affect commer cial (Ibid.) arbitrations between businesses.” Autowest,
As noted in Inc. Gutierrez Cal.App.4th (Gutierrez), relied, on which the Court of below Appeal Legislature enacting Code of Civil Procedure section 1284.3 “did not adopt categorical and direct that all administrative approach Armendariz fees be paid by nonconsumer without to the size of the parties regard costs the wealth of the consumer. . . . did Legislature adopt [T]he ability-to-pay which, limited in approach, though this statute to indigents, direction provides for a rule applicable all consumers faced with arbitral forum that are fees In prohibitively high. the court signaled its deference to the Armendariz *19 in Legislature selecting (Armendariz, a rule. categorical supra, Cal.4th 112-113.) case, In this pp. consumer that same deference leads us to a adopt case-by-case determination of affordability: suing under the plaintiffs [con sumer protection] statutes resist enforcement of an may arbitration agreement that (Gutierrez, unaffordable imposes 97-98.) fees.” at pp.
We with agree As said in approach. distinguishing Gutierrez’s Gutierrez context, rule in categorical the employment “jobseekers Armendariz’s more to face acute’ likely economic an ‘particularly pressure sign employ ment contract with a arbitration ‘for the arbitration predispute provision, agreement stands between the necessary employee employment, few are in a to refuse a employees position because of an arbitration job (Armendariz, requirement.’ 24 Cal.4th at A in supra, family search of a job confronts different set very of burdens than one a new seeking would Consumers, less economic pressure[,] face significantly who vehicle. (Gutierrez, supra, less measurably protection.” seem require 1284.3, section Procedure Code of Civil In enacting at p. Cal.App.4th is appropriate that an ability-to-pay approach concluded Legislature the statute Although specifically agreements. consumer arbitration context of who are for people of consumer arbitration affordability addresses as well nonindigent be unaffordable for fees can arbitration high indigent, history or consumers, legislative text in the statute’s nothing indigent case-by-case doctrine on a unconscionability using courts from precludes limit unreasonably against fees consumers nonindigent basis protect II, [endorsing 57 Cal.4th (See Sonic supra, arbitration. access to “ blocks ‘effectively costs that unaffordable arbitration view that Gutierrez’s agree- render an arbitration may of disputes’ forum for the redress every unconscionable].) ment case, did not have to provide the arbitration agreement
In the present so, not structure may done having agreement an But appeal. as the just agreement favors one unreasonably party, so that it appeal process (Little, an to take appeal. one and not the other only not authorize may the Court of 1073-1074.) We agree Appeal Cal.4th supra, pp. fees filing a consumer front appellate below that requirement not one but three here requires costs—recall that appeal other arbitration from using appeal to deter consumer the potential arbitrators—has of consumer to the affordability Legislature’s But given approach process. a showing absent arbitration, unconscionable cannot be held the provision have or would in fact would be unaffordable and costs fees appellate Gutierrez, (See Sanchez’s case. deterrent effect in substantial 90-91.) at Cal.App.4th
Moreover, courts are determine required Code, this 1670.5.) In (Civ. light “at the time it was made.” § the contract II Sonic affordability inquiry clarified the we recently proper requirement, “Because a predispute arbitration: in the context employment arbitration, the proper future disputes by is an to settle agreement reasonably expected mechanism the parties resolution is what dispute inquiry (and thus unforeseeable to be able to afford. Absent the employee circumstances, what an no reason think that there is reasonably expected) differ from materially arises will a wage dispute can afford when employee time of could afford at the of what understanding employee the parties’ *20 II, 1164.) The same at (Sonic 57 Cal.4th supra, p. entering agreement.” consumer arbitration. applies principle Restaurant Co. v. Italian Colors American says Express Justice Chin -___ U.S._,_ S.Ct. 2310-2311] L.Ed.2d
(Italian Colors) entails that a“if cost does not fees provision impose [citation], ‘make access to the forum then impracticable’ the FAA a precludes court from it as invalidating unconscionable because of a subjective determi- will, case, nation that it ain particular ‘have a substantial deterrent effect’ on a the right exercise of party’s (Cone. a second arbitration.” request & dis. at it post, 942.) But is not clear opn., p. that the notion of “impracticab[ility]” Colors, mentioned in in (Italian Italian Colors passing S.Ct. at p._[133 2311]) differs “a (ante, from substantial deterrent effect” 920). In event, we in Sonic II that explained Italian Colors reaffirmed principle stated in a state Concepcion law rule interferes with fundamen- “[w]here arbitration, tal attributes of the FAA the state law preempts rule even if the rule is designed II, facilitate of certain kinds prosecution (Sonic of claims.” 57 Cal.4th at Neither nor Italian Concepcion Colors pre- cludes states from ensuring, that do through rules not interfere with arbitra- attributes, tion’s fundamental that the arbitral scheme set forth in contract is accessible, “an affordable practice for . process resolving . . disputes.” II, (Sonic in this case dispute high-end concerns luxury item. Sanchez claim,
does and no evidence in the record that the suggests, cost of him, arbitration appellate fees were filing unaffordable for such that it would thwart ability his to take an in the limited appeal circumstances where such We available. appeal therefore conclude on the record before us that the arbitral fee is not appeal unconscionable.
C. The arbitration further “You and we provides: retain any rights remedies, to self-help such as repossession.” The Court of held that Appeal this provision also contributed to the of the arbitration agreement. We disagree.
The Court of Appeal explained its conclusion as follows: “By exempting arbitration, which repossession—to only the car dealer would resort—from while subjecting for request injunctive relief—the buyer’s comparable arbitration, remedy—to the Sale Contract creates an unduly oppressive distinction in remedies. This is especially so that the given California Proc., (Code Arbitration Act Civ. 1280-1294.2) exempts preliminary §§ arbitration, injunctions from allowing rem- application ‘provisional’ 1281.8, (id., Nevertheless, edies be filed directly (b)). court subd. § held, Sale Contract dictates otherwise. As several courts have unconscionable if they for the arbitration of claims provide most to be likely brought by the weaker but from arbitration exempt claims be likely most filed stronger party.” *21 to matter, does not appear the arbitration agreement
As an initial of Civil statute. Code by relief authorized injunctive provisional preclude 1281.8, a court to issue (a) (b) and authorize subdivisions section Procedure award that the ground . . . the remedy upon “a provisional before arbitration without be rendered ineffectual entitled may may be to the applicant which 1281.8, Proc., the (b).) Although subd. (Code Civ. § relief.” provisional be the arbitration is to in the case provides agreement present law, California generally and not California the FAA governed by (See courts. in California brought arbitral governs Act procedures Arbitration Investments, (2005) 35 Cal.4th Concierge Inc. v. Services Cronus FAA 217].) apply, P.3d Even if procedures 389-390 [25 relief a “issue interim may injunctive have concluded that court courts federal to the status necessary quo if interim relief is preserve claims on arbitrable Holdings Tire (Toyo of the arbitration meaningfulness process.” and 975, 981, 2010) and cases 609 F.3d (9th America Cir. Tire North Continental a could agreement deprive an arbitration therein.) of whether cited Regardless relief, agree to injunctive present grant preliminary court of power with the relief in connection It addresses injunctive not do so. ment does arbitrator, a remedy by panel such a to review by subjecting granted relief a to limit court’s power does not agreement purport three arbitrators. The the status final pending to preserve quo relief injunctive issue preliminary judgment.
Moreover, self-help about unconscionable nothing exempting we see First, remedy this although from arbitration. remedy repossession ability the contract provision preserves to the drafting party, favorable Second, buyer. favors car likely claims court of the small go parties and the to litigation, intended as an alternative arbitration is the context of the rights is viewed in an arbitration II, (See Sonic been available to the parties. would have remedies that otherwise definition, are, 1146-1148.) by remedies Self-help 57 Cal.4th statute. authorized they expressly of litigation, outside sought authorize (a)(1) (b)(2) section subdivisions Code Commercial of the collateral” “[ajfter creditor default” possession secured “[t]ake Civil breach of peace.” it without “[wjithout if judicial proceeds process, post- requirements set forth and 2983.3 Code sections 2983.2 automobile in the case of to cure default notice and opportunity repossession of collateral Moreover, that the remedy repossession it is undisputed loans. credit and fulfills automobiles on of selling is an of the business integral part “ 24 Cal.4th at (Armendariz, supra, need.’ commercial ‘legitimate an arbitration from remedy of such a that the exclusion We thus conclude Valencia, is not unconscionable. while favorable agreement,
923 IV. held,
The trial court to the prior that class Concepcion, waiver was unconscionable and invalidated the entire arbitration agreement based on a that said: “If a poison pill waiver of class action provision rights is deemed or found be unenforceable for reason a case in which class action made, have been allegations remainder of this Arbitration Clause be shall unenforceable.” The Court of deciding the case after Appeal, Concepcion, took no on of the position enforceability class waiver. Sanchez now advances correct, several arguments trial court’s decision why was but none is persuasive. Court,
In Discover Bank Superior 36 we supra, Cal.4th announced a rule that class arbitration waivers in consumer contracts are unconscionable when are found “in a they in which setting between disputes and, the contracting small parties predictably involve amounts of damages it when is alleged with the superior bargaining has power carried out a scheme cheat deliberately large numbers of consumers of out (Id. individually 162-163.) small sums of at money.” rule pp. This was abrogated 1753]; 563 U.S. at by Concepcion, supra, 352 S.Ct. at p. p. [131 II, noted, see supra, 1137-1139.) Sonic 57 Cal.4th at As of imposition class action arbitration or litigation interferes “with fundamental attributes arbitration and thus creates a scheme inconsistent with the FAA.” (Concepcion, 1748].) U.S. S.Ct. at To find the [131 class waiver here unconscionable would run afoul Concepcion.
Sanchez notes that the CLRA sets correctly forth number of unwaivable rights, including right to class action. The antiwaiver provision is found in Civil Code section by 1751: waiver a consumer of “Any title provisions this is and shall be contrary public policy unenforce able and void.” Code Civil section 1780 damaged by consumer permits certain enumerated to seek various remedies practices including damages and injunctive relief. Civil Code (a) section subdivision provides: “Any consumer entitled to an action bring under Section 1780 if the may, unlawful method, act, or has caused to other practice similarly consumers damage situated, an action on bring behalf himself and such other consumers damages recover other obtain relief as for in provided Section 1780.” Thus, class actions are the CLRA among not may (See be waived. Fisher v. DCH Temecula LLC Imports 24].) Cal.App.4th
Nonetheless, rule that states Concepcion’s may require proce arbitration, dure that interferes with fundamental attributes of if it is “even desirable for unrelated reasons” 563 U.S. (Concepcion, supra, statute or by 1753]), imposed equally requirements applies S.Ct. antiwaiver provision preempted conclude that the CLRA’s rule. We judicial FAA. covered in arbitration agreements it class waivers insofar as bars merely the CLRA’s antiwaiver enforcing argument Sanchez’s contracts is with other footing agreements equal puts *23 only be held that state rule can Concepcion preempted unavailing. when it disfavors arbitration but also facially against it discriminates when S.Ct. U.S. at 341-342 (Concepcion, supra, pp. [131 applied. a state rule class invalidating further held that 1747].) Concepcion at pp. attributes of speed with arbitration’s fundamental interferes waivers (Id. at matter. disfavors arbitration as practical and thus efficiency, 1750-1753].) S.Ct. pp. 346-352 agreement— of the arbitration contends that language Sanchez Finally, to unenforceable is deemed or found be rights class action “If waiver of for , shall be unenforce- of this Arbitration Clause ... the remainder any reason unenforceable, as the is deemed that once a class action waiver able”—means here, is likewise unenforce- then the rest of the agreement ruled trial court a trial was not meant to when apply But the quoted provision able. plainly and the error is holds the class waiver unenforceable erroneously court Rather, reasonably interpreted is most provision corrected appeal. in the event litigation choose class over class arbitration parties permit conclude in out be invalid. Because we legally waiver turns that the class invalidation of the FAA the trial court’s that the Concepcion preempts light pill unconscionability grounds, agreement’s poison waiver on class is inoperable.
Conclusion reversed, and the cause is the Court of judgment Appeal with this opinion. not inconsistent
remanded proceedings Cuéllar, J., J., J., J., J., and Kruger, Corrigan, C. Cantil-Sakauye, Werdegar, concurred. J., that, under Dissenting. majority with CHIN, agree Concurring —I Mobility LLC v. Concepcion court’s decision in AT&T
the high the Federal (Concepcion), L.Ed.2d 131 S.Ct. U.S. 333 of the class (9 1 et enforcement (FAA) Act U.S.C. seq.) requires Arbitration § and defendant Gil Sanchez the contract between plaintiff arbitration waiver in (Valencia). majority I agree LLC also Holding Valencia Company, that the arbitration establishing has his burden of carry that Sanchez failed to However, below, as explained that contract is unconscionable. of these my issues differs from the analysis in several majority’s respects, Therefore, I do not endorse all of the majority’s reasoning. I concur only the judgment. Background
Factual and Procedural 8, 2008, On August Sanchez went Valencia’s Mercedes-Benz dealership for a certified car. In shop preowned response to his a sales inquiry, showed him a representative 2006 Mercedes-Benz S500V with an advertised $48,000. price approximately After negotiations regarding various terms of Sanchez a contract purchase, signed entitled “RETAIL INSTALLMENT CHARGE,” SALE CONTRACT—SIMPLE FINANCE which specified $47,032.99. total amount financed as This amount included a for the car price $39,800, $3,330, sales approximately tax a service approximately *24 $3,700, $15,000, contract of a cash price down of and net payment a trade-in -$14,800 amount for Sanchez’s 2004 Cadillac of the (reflecting amount Sanchez still owed on the ($20,800) car by ($6,000)). offset its value
Sanchez later filed a class action Valencia against of asserting violations Code, Legal Consumers Remedies (CLRA) (Civ. Act 1750-1784), the §§ Code, (Civ. Automobile Sales Finance Act 2981-2984.6), the unfair §§ (UCL) Code, (Bus. law & competition 17200-17210), Prof. the Song- §§ Code, Consumer Beverly Warranty (Civ. Act 1790-1795.8), and Public §§ Resources Code section 42885. He had alleged (1) Valencia made false condition, about the car’s representations (2) itemize failed to separately deferred, amount the down that was failed payment (3) to distinguish transfer, fees, registration, and fees titling (4) from license an charged him, optional electronic fee without it filing (5) new discussing charged tires, $3,700 tire for fees used and to have the required payment car so rate, certified he could for a 4.99 interest when qualify percent was payment actually for extended unrelated to the optional warranty interest rate.
Valencia moved arbitration a compel in the pursuant contract that in relevant claim provided or whether part: “Any dispute, contract, tort, statute or . otherwise . . between and us . . . which you arises out of to your or relates credit or purchase condition of this application, vehicle, shall, this contract or transaction or . . . any resulting relationship election, neutral, your or our be resolved arbitration and not a by binding court action. . . . Any claim is to be arbitrated aby arbitrator dispute single on an basis individual and as a class waive any action. You expressly have to right you may arbitrate a action.” class motion,
Sanchez that the opposed arbitration principally asserting provision was illegal unenforceable insofar as it him “to waive required bis The unenforce- file class action under CLRA.” right unwaivable waiver, the entire arbitration he rendered argued, of this ability class is “If waiver of action rights under a clause stating, unenforceable a case class for reason in in which be unenforceable deemed or found to made, this Arbitration Clause been the remainder of have action allegations motion, for ground opposing As an alternative shall be unenforceable.” it was unenforceable because the arbitration agreement argued Sanchez unconscionable.” substantively was “both procedurally waiver, class the trial court of the arbitration invalidity Based on the solely right “As CLRA contains the motion to compel, explaining; denied actions, and is contrary is to- right public policy class a waiver of such bring Thus, the class action waiver herein is unenforce- unenforceable. [Citation.] unenforceable, such, is specifically provided able. As entire clause did not address Sanchez’s in that clause.” The trial court claim. i.e., affirmed, it but took opposite approach,
The Court Appeal arbitration waiver was unenforceable consider whether class declined to It a whole is “the clause as unconscionable.” and held instead that unconscionable,” reasoned, the court “because it adhesive is “procedurally it is substantively oppression surprise; and satisfies elements that are one-sided favor because it contains harsh terms unconscionable *25 “First, of the who loses before buyer.” the car dealer to the detriment party three if the award to a of arbitrators may the arbitrator single panel appeal $100,000. Second, the award includes an if permitted exceeds appeal advance, Third, filing ‘the pay, must relief. injunctive appealing to a final determination subject by fee and other arbitration costs Fourth, the of costs.’ provision exempts arbitrators of fair apportionment injunctive that a from arbitration while requiring request repossession may these Although appear relief be to arbitration. provisions submitted face, an unduly the effect of they placing oppressive neutral on their have on the buyer.” burden
Discussion Class I. The Arbitration Waiver. FAARequires of Enforcement (2005) 36 Cal.4th 161 In Discover Bank v. Court Superior [30 of (Discover Bank), a four-to-three majority P.3d 113 are arbitration procedures this court held that certain waivers of classwide effectively they “may operate unconscionable and unenforceable because rule, are This contrary that public policy.” contract clauses exculpatory concluded, (1) the FAA because by is not majority preempted Discover Bank arbitration enforcement of under FAA “is limited certain ‘ contract “at law or in for the general principles equity revocation ’ ” (36 163), contract” Cal.4th at “the that p. principle class action are, circumstances, under certain waivers unconscionable as unlawfully ex is a California law does not culpatory principle specifically apply i.e., arbitration but to contracts “it agreements, generally,” applies equally action waivers in litigation class contracts without arbitration it agreements as (id. does to class arbitration waivers in contracts with such at agreements” 165-166). The Discover Bank found in” the majority “[njothing high court’s decisions “suggesting] state courts are enforce obliged to contractual terms even if those terms found to be unconscionable or (Id. under contract contrary policy general law at public principles.” the Discover words, Bank declared, In other p. “the majority FAA does not federalize the law of or related contract defenses except it to the extent that forbids the use of such defenses to against discriminate (Id. arbitration clauses.” at p. Concepcion, Discover Bank majority’s
In court high rejected does, fact, Discover that the held FAA preemption analysis preempt Bank’s rule enforcement, against grounds class unconscionability, (Concepcion, supra, arbitration waivers. U.S. 352-353 S.Ct. at at pp. [131 that, 1753].) circumstances, The court under certain p. the FAA’s explained effect even to preemptive to be grounds” “normally thought “extend[s] . such as . . generally (563 U.S. at applicable, unconscionability.” p. [131 1747].) S.Ct. at The FAA such p. contract preempts “generally applicable defenses” if “stand as an obstacle they of the FAA’s accomplishment Discover Bank (563 U.S. objectives.” 1748].) S.Ct. at p. p. [131 First, rule stands as such obstacle for two reasons. it contravenes “ FAA’s which “is to ‘principal purpose,’ private ‘ensur[e] according to their terms.’ agreements (563 are enforced U.S. at [Citations.]” 1748], added.) Second, S.Ct. italics it frustrates the FAA’s “efficient, streamlined,” goal encouraging (563 U.S. at speedy procedures. Because, Discover Bank 1749].) S.Ct. in these respects, *26 “ rule ‘stands as an obstacle to the and execution of full accomplishment of FAA Congress,’ (563 it. U.S. at purposes objectives preempts Concepcion, 352 at As 1753].) S.Ct. under p. p. majority explains, [131 the FAA of enforcement” the class arbitration waiver at “requires issue this ante, 907.) case. at (Maj. opn., p. that, Concepcion, I
Although agree also with the under majority unconscio- valid to nability remains a defense to arbitration petition (maj. compel opn., ante, at 912), I do not p. subscribe to the broad dictum that majority’s Concepcion “does not limit the to rules other unconscionability applicable ante, Indeed, 907). of the arbitration at provisions (maj. agreement” opn., p. Concepcion, as the under majority later in order to avoid FAA explains, 928 be . the for “must . . same unconscionability standard our
preemption, ante, at In (Maj. opn., p. nonarbitration agreements.” arbitration and words, doctrine to an arbitration of unconscionability “the application other that contract clause. any general must from proceed principles apply clause . . . must be unconscionability standard for substantive In particular, clause.” clauses as for contract for arbitration demanding rigorous that, “[sjtates Moreover, remain free {Ibid.) declares Concepcion although adhesion,” those that attend contracts of the concerns addressing take steps with the FAA or frustrate its ensure “cannot. . . conflict purpose steps terms.” according are enforced to their arbitration agreements private 347, 1750, 6].) fn. U.S. fn. 6 S.Ct. at (Concepcion, [131 “[wjhen state law outright declares Concepcion prohibits also claim,” the state law displaced by of a of “is type arbitration particular (Id. 1747].) The court has high S.Ct. at p. subsequently FAA.” [131 this courts from basing finding clear that precludes made principle rule that as a matter state precludes, public a state Center, (Marmet Care Health of certain of claims. types policy, 1201, _,_ 42, Inc. Brown U.S. L.Ed.2d 132 S.Ct. (2012) [182 do, fact, Concepcion “limit 1204].) These from general principles to” agreements of arbitration unconscionability rules applicable ante, (Maj. opn., other than class arbitration waivers. Unconscionability. Has Not Established
II.
Sanchez
element, and the
both a
and substantive
Unconscionability has
procedural
both
aby
the defense bears the burden
proving
preponder
party asserting
Tower Assn. v. Pinnacle Market
(Pinnacle
Museum
ance
the evidence.
223,
(US),
LLC
246-247
Development
(2012)
Cal.Rptr.3d
Cal.4th
Inc.
(Pinnacle);
v. Permanente Medical
Engalla
Group,
Initially, unnecessary law decide that was procedurally under our case improper conclusion, with which It is unnecessary given majority’s unconscionable. unconscionable. I the arbitration agree, substantively *27 above, ante, Because, both 906.) as a of showing at p. explained (Maj. opn., is to render a contract unconscionability and substantive required procedural unenforceable, is fully a not unconscionable substantively contract is
929 enforceable regardless procedural Given our unani- unconscionability. mous conclusion substantive regarding “adherence unconscionability, restraint and counsels an judicial economy detour against unnecessary into v. (People Mosley analysis” (2015) procedural unconscionability. 60 1044, 1055, 251, Cal.4th fn. 7 788]; 344 P.3d see Cal.Rptr.3d [185 Bank, Brown v. Wells N.A. Fargo (2008) 938, 168 956 Cal.App.4th [85 to consider Cal.Rptr.3d [declining procedural unconscionability given 817] of no v. Central finding substantive unconscionability]; Crippen Valley RV Outlet (2004) (Crippen) Cal.App.4th Cal.Rptr.3d [declining consider substantive of no given finding procedural unconscionability].) because,
It
earlier,
is
to decide the issue
improper
trial
explained
made
court
no findings
and denied
regarding unconscionability
Valencia’s
motion to
based
on its conclusion that the
compel
solely
class arbitration
waiver constituted an
illegal
unenforceable waiver of Sanchez’s “un-
Thus,
waivable
to file a
right
class action under the CLRA.”
the trial court
has never resolved factual conflicts that must be resolved in Sanchez’s favor
in order to warrant a
(discussed
post).
finding
procedural unconscionability
Our decisions establish that where a trial court
fails to resolve factual
conflicts
must be resolved in
favor of
who
that an
alleges
unenforceable,
arbitration
is
course for an
proper
court
appellate
issues,
is to remand the case to the trial court to determine those factual
to determine them itself in the first instance. (Engalla,
On the dicta is majority’s summary incomplete unpersua- sive. The basis the offers for “some only majority finding degree proce- dural is the “adhesive nature of the contract.”1 unconscionability” (Maj. opn., ante, 915.) at But the offers no majority analysis independent legal adhesive, that the contract establishing was instead that “Valencia asserting (Id. does not that the contract was adhesive . . . .” It is true dispute that Valencia’s counsel stated at oral that the contract was “adhe- argument sive in the sense that it ... a form contract.” But the circumstance that a contract, majority apparently entirety states that “Sanchez did not read the of his ante, including 914), (maj. opn., the arbitration clause” but it does not conclude that this finding unconscionability. circumstance procedural agree. majority contributes to I As the explains, necessary “even when customer is assured it is not to read a standard form contract clause, unreasonable, assurances, with an generally ‘it is in reliance such (Id. neglect signing to read a written contract before it.’ *28 930 in does not alone establish adhesiveness. form”
contract is “standardized 1309, (Izzi 1318 Country (1986) Club 186 v. Mesquite Cal.App.3d [231 872, (1970) (Izzi); Frick 875 see Federico v. Cal.App.3d [84 Cal.Rptr. 315] in the record [“nothing provides] evidentiary support Cal.Rptr. 74] th[e] standard union contract before us” “a that employment conclusion” “[t]he adhesion”].) characteristics are additional of adhesiveness contract of “ drafted and ‘by bargaining contract was imposed superior Scissor-Tail, 807, (Graham v. Inc. 28 Cal.3d strength’ “ leave it” 165]) 623 P.2d ‘on “take it or basis essentially Cal.Rptr. the consumer a realistic under affording opportunity bargain without such that the cannot obtain the desired conditions consumer or product ” (Victoria in the form contract’ by Superior services except acquiescing (Victoria)). Court Cal.3d P.2d (1985) 40 Cal.Rptr. clearly At levels of this Valencia has whether litigation, disputed all his burden of the evidence Sanchez has met prove preponderance these characteristics of adhesiveness In the Court of additional present. contract, “a Valencia that the form Appeal, argued although pre-printed that, issue, contract,” “not a contract of adhesion” and as to this was relevant choice,” to show “had no that he Sanchez had failed that he realistic could so, he not a contract term” had to do that “he “negotiate^] have attempted at was under to finalize of a vehicle any compulsion purchase time,” that in the car “was or that he could have particular unique,” point it without to arbitration from either a individual or purchased agreeing private from five dealers 25 miles of’ one of the other Mercedes-Benz “[w]ithin made the in the and asserted Valencia. Valencia same trial court arguments its in this court that Sanchez had failed his “burden of satisfy brief opening “made that he because he no could not proof’ showing negotiate alternatives, or that other as going he lacked such Thus, does, fact, dealer.” reflects that “dispute another record Valencia that, the contract was adhesive” and of its has part argument, in the courts and “in this court” Sanchez’s failure emphasized both lower “negoti- show he could not “have out of the arbitration opted agreement” ante, ated without agreement.”2 a sales contract an arbitration (Maj. opn., Indeed, discussion overlooks majority’s legal significance fact that the burden of was on to establish proof procedural Sanchez failure to Valencia’s asserted contract’s unconscionability. “dispute” stating argument was that it is ... After oral that the contract “adhesive in the sense contract,” form Valencia’s counsel “I think that meets the definition of adhesive in added: get. unconscionability.” . . California. But I think adhesive without more does not one Unlike ante, record, not, (see 913), the majority maj. opn., I do in the context of the entire view analysis dispensing complete these as a with a proper additional statements basis for adhesiveness. *29 in that
adhesive nature or to “contend this court” Sanchez could have ante, obtained the car without the arbitration agreement (maj. accepting opn., record, 914), at even if consistent with the does not substitute for evidence that burden to establish satisfies This procedural unconscionability. Sanchez’s case, i.e., true the of this the trial is court given procedural posture especially and the findings regarding unconscionability, made no is majority deciding the issue on in the first instance. appeal overlooks the fact that case also law majority strongly supports
Valencia’s In arguments. Crippen, supra, Cal.App.4th page in of an arbitration be- ordering agreement Court enforcement Appeal, home, tween a dealer and the of a motor that rejected argument purchaser was “a contract of adhesion and therefore uncon- agreement procedurally scionable” “because was a form contract used with simply [it] [the dealer] customers.” The court is no rule that a many general explained: “[T]here form contract for transactions is uncon- many used by party procedurally Rather, in scionable. focuses on manner ‘[procedural which the to the in the weaker bargaining clause disputed presented . . .’ There is no reason in this case to conclude that position. [Citation.] lacked In bargain. general, nothing plaintiff power prevents purchasers dealers, of . . . vehicles from even dealers use form bargaining though contracts, and in the record shows that could not nothing bargain plaintiff (Id. 1165-1166.) this case.” “There is in this nothing buyer-seller from which we can infer a great bargaining relationship disparity power.” 1166; Izzi, (Id. at cf. supra, [although Cal.App.3d standardized, contract “no is warranted that had no was presumption plaintiffs or as to the of their or choice terms power negotiate purchase terms on a suitable could not obtain they comparable superior condominium nearby”].)
Indeed, the record here is consistent with the analysis Crippen It that Sanchez had significant Valencia’s indicates supports arguments. contract, financial means when he which is the relevant time for signed Code, 1670.5, (Civ. (a)). subd. He contracted judging unconscionability § $50,000 use, traded in a for a automobile for nearly luxury personal pay and, new automobile as relatively (four-year-old) luxury part purchase contract, $10,000 check the down at the time he wrote a signed more within 30 if agreed money days necessary. down payment put week, and increased his Over the course of the next he returned to Valencia $5,000, $15,000. down for a total of The record also shows by payment in the car’s Sanchez for a substantial reduction actually bargained purchase that, the record contains evidence—submitted Finally, price. Sanchez— contract, without an the time when he executed the contracts during period Valencia had were available to Valencia’s buyers; arbitration provision 29, 2008, a few August not used contracts with arbitration clauses since contract; longer and that Valencia no uses signed weeks after Sanchez Thus, fails to show that Sanchez arbitration clauses. the record contracts with car, either or that he could not have obtained bargaining power lacked “ elsewhere, in the form contract.’ ‘except by acquiescing from Valencia or (Victoria, 40 Cal.3d at “in the context of consumer to my analysis The majority’s response —that
contracts, unconsciona- asserting have never required’ party procedural we (maj. standardized contract negotiate provisions” to “show it tried to bility *30 ante, 914, added) we never Although may at italics unpersuasive. p. opn., —is that “freedom to choose such we have stated expressly have required proof, a weighing against to enter a contract of adhesion is factor whether or not (2007) 42 Court unconscionability.” (Gentry Superior finding procedural 773, 443, 556].) the decision Notably, 165 P.3d Cal.4th Cal.Rptr.3d [64 Inc. Reynolds, of this statement —Dean Witter v. Superior we cited in support “the context (1989) 211 Court Cal.App.3d Cal.Rptr. 789]—involved ante, 914), a we contracts” at circumstance (maj. opn., p. of consumer in our of that decision: “agreement acknowledged explanation expressly financial services house and consumer of brokerage sophisticated between an IRA account was not unconscio- $50 that included a termination fee on IRA’s without the fee were avail- challenged freely nable where competing 470, added). at italics (Gentry, supra, able” p. Bank,
Indeed, which the cites in of its majority support response, Discover “in the context of consumer confirms the of this validity principle actually There, ante, 914.) at of this court stated majority contracts.” (Maj. opn., p. is an amendment to its cardholder given “when a consumer if he did not the form of a ‘bill staffer’ that he would be deemed to accept account, unconscionability close his an element of present.” procedural statement, Bank, 160.) at In this we (Discover making 36 Cal.4th supra, (2002) Bank relied on v. Discover 97 Cal.App.4th Szetela There, 862], consistent with our the Court of Appeal precedents, or services elsewhere bemay stated that of similar availability goods “[t]he (Id. 1100.) The the contract is one of adhesion . . . .” at p. relevant to whether case,” that, in the this was “not court then on “the facts explained [particular] of the manner in which factor” because deciding “oppressive” that the defendant had the arbitration the record showed provision; “imposed” defendant, consumer, with the who had a “Cardholder already Agreement” the arbitration provision “received” an “amendment” imposing subsequently if he and “was told to ‘take it or leave it.’ His only option, “in bill staffer” amendment, (Ibid.) to close his account.” did not wish to was accept Bank, at (Discover identical. supra, facts in Discover Bank were virtually Thus, although different. 153-154.) The facts in this case pp. completely that Sanchez’s Bank is it factually distinguishable, legally, Discover confirms the car from Valencia or elsewhere he was unable to obtain failure to show factor in determining to arbitration is an important proce- without agreeing dural unconscionability. this conclusion is the other decision majority more
Even supportive Perdue v. Crocker National Bank of its response: cites support ante, 503], at 702 P.2d (Maj. opn., Cal.3d Cal.Rptr. 913 [216 There, that the of the claim fee sufficiency we considered the legal plaintiff’s customers for returned checks was unconscionable. the defendant bank charged (Pe rdue, 920-921.) In this addressing question, 38 Cal.3d uncon that the determination of procedural first reaffirmed principle we (Id. choice.” turn on the absence of meaningful scionability “may relief, claim for we then had stated a sufficiently In holding plaintiff . . . that similar arrangements would be had “alleged imposed stressed that he (Id. added.) we fn. italics This “allegation[];” other banks.” in which a court had a decision rendered “distinguish[able]” explained, claim because of plaintiffs’ a similar “reject[edj” “ banks of a choice of meaningful to show that were they deprived ‘fail[ure] *31 ” Bank, Thus, (Ibid.) like Discover with which could do business.’ they (or Perdue confirms the failure to show even Sanchez’s significance not have with Valencia or could negotiate that he either tried to allege) car without to arbitration. agreeing obtained a similar elsewhere have, in rejecting our Courts of Appeal Consistent with these precedents, adhesiveness, of evidence that the relied in on the absence part claims of were to invalidate. seeking tried to the terms negotiate they complaining parties (Sp v. Amblin Entertainment (1994) 1397 29 Cal.App.4th [34 inello Union Bank v. Ross 695]; (1976) Cal.App.3d law, Thus, (Union Bank).) case under California existing Cal.Rptr. 646] the arbitration that he “tried to negotiate” provi Sanchez’s failure to show ante, factor 914) determining at is an important sions (maj. opn., p. view, contrary he adhesivenesss. The majority’s whether has established these our effectively disapproves which is not by precedents, supported decisions. of Valencia’s counsel that the statements majority
I also
with
disagree
relevant. (Maj.
of the contract are
clarity
opn.,
at oral argument regarding
ante,
who are not
legally
stated: “I think many people
at
Counsel
p.
in this contract. My
the vast
of what
is
majority
trained don’t understand
other
than
everything
that
if
asked that dealer about
you
is
guess
don’t understand
they
terms of
and interest
negotiable
probably
price
either,
the majority,
is
statute.” Unlike
by
even
though
language
required
matters, which lacks any
about these
“guess”
I would not
on counsel’s
rely
Indeed,
clearly
the contract here
provided
in the record.
evidentiary support
Valencia,
claim or
. . . between” Sanchez and
of “[a]ny
dispute
have been unable to understand this
and there is no reason Sanchez would
Moreover,
if,
asserts,
had he read the contract.
as the
Sanchez “did
majority
ante,
914),
read” the contract
then under
case
(maj. opn.,
existing
adhesiveness,
law,
not,”
that he
asserting
he
did not
“may
“properly argue
Bank,
(Union
supra,
consent’
‘understanding
give
Cal.App.3d
California,
rule” in
now for over
296).
general
established
Finally,
“[t]he
a
“is that when
and under
years,
person
capacity
reading
it,
is,
an instrument
he
in the absence of fraud and
standing
signs
imposition,
contents, and
bound
its
is
from
its
by
estopped
saying
(Smith
etc.
v. Occidental
to his intentions
contrary
understanding.”
reasons,
Co.
84].)
Steamship
Cal.
470-471
P.
For these
reliance on counsel’s
oral
“guess” during
argument
majority’s
misplaced.
event,
In
our
decisions establish that
not alone
any
adhesiveness does
prior
Pinnacle,
court,
In
establish
trial
necessarily
procedural unconscionability.
on
refused to enforce
a condominium
grounds
unconscionability,
against
homeowners association an arbitration
in the condominium’s cov
(CC&R’s). (Pinnacle,
enants, conditions,
and restrictions
California has a in favor of “strong enforcing public policy 1066, v. agreements.” (Broughton Cigna Healthplans (1999) 21 Cal.4th 1073
935 334, 67].) strong “In public P.2d keeping [this] Cal.Rptr.2d [90 , of an arbitration validity regarding . . doubts any . policy LLC (Samaniego Empire Today, of arbitration.” in favor resolved [must be] 492]; Lhotka v. 1138, Cal.Rptr.3d (2012) 205 Cal.App.4th [140 816, 821 Inc. (2010) 181 Cal.App.4th Geographic Expeditions, were it either or necessary with these 844].) Consistent principles, Cal.Rptr.3d above, issue, would, find set forth I for the reasons to decide the appropriate of finding adhesiveness supports has failed to prove that Sanchez unconscionability. procedural unconscionability. established substantive has not
2. Sanchez court, 1670.5, (a), upon authorizes subdivision “Civil Code section of the contract’ was a ‘contract or clause any a matter of law’ that ‘as finding contract,’ made,’ to enforce the to ‘refiise at the time it was ‘unconscionable clause,’ without the unconscionable of the contract to ‘enforce the remainder any clause as to avoid of unconscionable to ‘so limit the application this comment accompanying The official Assembly result.’ unconscionable whether, the light unconscionability] test ‘The basic section explains: [of case, the clauses and the needs of particular the general background of under the circumstances as to be unconscionable involved are so one-sided is one of . . . The principle contract. making at the time of existing and not of disturbance and unfair surprise oppression [citation] prevention on Assem. bargaining power.’ (Rep. allocation of risks because superior Sess.) (1979-1980 Reg. J. (1979-1980 Sess.) 5 Assem. Reg. Bill No. 510 com., ed.) (2011 9231, Ann. Civ. Code Com. 9 West’s Legis. reprinted A, v. Moreno Inc. Comment).)” (Sonic-Calabasas 1670.5, (Official foil. § (cone. & 311 P.3d 57 Cal.4th II).) known as Sonic Chin, J.) (commonly dis. opn. Pinnacle, we recently legislative
Consistent with these pronouncements, term,” “is an arbitration including provision, contract explained “[a] benefit; side a greater it one merely gives when unconscionable substantively ’ ” the conscience.” rather, as to “shock the term must be ‘so one-sided ’ ” “ ‘ “shock the conscience” (Pinnacle, supra, 55 Cal.4th court has been in Pinnacle is the standard this (ibid.) standard we applied Lankershim (1937) Cal.2d Herbert v. (E.g., for well over 100 years. applying “ as to gross must be ‘so of consideration P.2d [inadequacy *33 [71 220] v. Fisk ”]; (1895) Boyce of all men’ and common sense shock the conscience “ con- 107, against must be ‘grossly P. Cal. 116 110 473] [contract [42 “ ” hard or unreasonable science,’ the is a bargain very mere fact that and ‘the Bar Cal.3d Tarver v. State (1984) 37 ”]; . .’ see is not sufficient. generally one fee 302, 122, attorney’s for whether 688 P.2d 134 Cal.Rptr. 911] [test [207 “ ‘ “ wholly exorbitant and dispropor- it is ‘so is whether is unconscionable ” ’ ”].) It is the conscience’ as to shock tionate to services performed 936 ” of the term ‘unconscionable.’ (California
“derivative Grocers Assn. v. Bank 205, (1994) 396].) America 22 215 It is the Cal.App.4th Cal.Rptr.2d [27 standard we should continue to I thus with the agree apply. majority’s it discussion insofar as reaffirms the of the shock the validity conscience ante, standard. at (Maj. opn., p.
However, I with the insofar as it continues to part company majority several endorse alternative formulations for substantive unconscionability, i.e., harsh, ante, overly one-sided. at unduly oppressive, unfairly (Maj. opn., observes, 913.) As the majority this court has sometimes used p. these formulations (Ibid.) instead of shock the conscience standard. This generated has confusion and because practice uncertainty, our lower courts have understood these different formulations as lower standard for stating II, (Sonic substantive than “shock the conscience.” Chin, 57 Cal.4th at (cone. J.) & dis. p. Courts of opn. Appeal [“our have ‘shock the consistently recognized conscience’ is not . . . [that] ’ ”]; ‘synonymous with “unreasonable” see v. First Peng (2013) Bank Republic 1462, Cal.App.4th Cal.Rptr.3d conscience is [162 545] [shock “ harsh]; Autowest, ‘a higher standard’ than one-sided or v. overly Gutierrez (2003) Inc. (Gutierrez) [same].) Cal.App.4th declares that Today, majority these alternative formulations “all mean the ante, same thing” as “shock the conscience.” (Maj. at If that is opn., true, then why settle on traditional “shock the conscience” test as the single formulation? Why that arises from perpetuate uncertainty having formulations? multiple
The majority’s only answer—that “shock the adopting conscience” as sole formulation somehow “would call into decisions in which we question” ante, have used “other 913) formulations” (maj. opn., unpersuasive. —is If, states, majority those other formulations are not conceptually from, as, different practically mean the same thing “shock the con- (id. 911), science” then would why single standard call adopting of our decisions into prior We could make clear that we are question? simply law, clarifying without that our earlier suggesting cases were wrongly decided.
Moreover, formulations is maintaining multiple for several problematic First, reasons. as the although, majority on recognizes, depends “[c]ommerce instances, enforceability, most of a executed duly written contract” ante, (maj. 911), it also opn., depends “certainty predictability” of enforcement Industries 43 Cal.3d (Phillippe Shapell 1279].) 743 P.2d Cal.Rptr. As we have enter explained, “[p]arties order, into contracts to allocate risks and to bring certainty, predictability to their mutual relations. One of the aims of contract law is to assist principal *34 in this the outcome of achieving by making legal
contracting parties objective Lines B.V. v. Court (Nedlloyd Superior (1992) clear and predictable.” disputes 330, 459, 1148].) 834 P.2d Having Cal.Rptr.2d multiple Cal.4th 494 [11 a contract is unconscio- substantively whether determining formulations unenforceable, nable, and certainty predictabil- and therefore undermines are vital to commerce. that ity
Second, is in of the FAA. As the need for uniform standard crucial light our for unconscionability requires the FAA standard already explained, i.e., that and it be “as be “the same for arbitration nonarbitration agreements,” and as for contract clause.” demanding for arbitration clauses rigorous ante, However, are argues, as Valencia there (Maj. opn., “[i]f standards, be may then arbitration well unconscionability multiple in to a different standard than other contract provisions.” subjected, practice, Indeed, this first articulated the one-sided” formulation “unfairly spe- court to an challenge in the context of an unconscionability cifically Services, (Armendariz Inc. Psychcare Foundation Health v. (Armendariz)), 6 P.3d and the Cal.4th used in that context. exclusively Notably, formulation has since been almost court, Concepcion, high immediately “judicial after explaining in ‘a great variety’ towards arbitration has “manifested itself hostility” ” formulas,’ have been more observed “that California’s courts ‘devices contracts to arbitrate unconscionable than other contracts. to hold likely 1747].) U.S. at S.Ct. (Concepcion, supra, [Citations.]” the “loud chorus formulations lends substantial credence to Having multiple that, who to the court’s contrary high and commentators” assert courts decisions, ‘new we a ruse for a using unconscionability judicial are “as Mobility Concepcion toward arbitration.” AT&T hostility’ (Aragaki, Theory Preemption (Apr. 2012) 4 Arb. Antidiscrimination FAA Y.B. 39, 60.) & Med. is endorsement of formulations problem-
Although majority’s multiple reasons, of note. worthy these several of its related comments atic for statement, above, that noted all of majority’s First foremost as “shock the conscience.” formulations “mean same thing” alternative “ ” Second, ante, ‘central’ the majority emphasizes (Maj. opn., than is more its is that substantive all of formulations ’ ” “ ‘ Thus, (Ibid.) bargain.” party “a old-fashioned bad just simple “[a] deal, that the obligation merely complaining cannot avoid a contractual Instead, (Ibid.) resisting was unfair or a bad bargain.” retrospect, “ find, ‘a substantial and a court must contract enforcement must prove, ’ ” (Ibid.) “a bad beyond simple bargain.” of unfairness degree old-fashioned it be can merely A not meet this test because contractual term does “ benefit.’ one side a greater “one-sided” or being ‘giv[ing] characterized as *35 ante, 910-911.) Moreover, (Maj. one-sidedness is not unconscio- opn., “ ‘ if it the nable a “provides party superior bargaining strength type ’ ” (Id. extra for which it has a commercial legitimate need.” protection 912.) The endorsement of various alterative majority’s formulations must understood in of these light be statements.
I also with the as its company majority insofar one-sidedness part analysis isolation, on each focuses of the in separately challenged rather provisions that, than the a Our bargain as whole. decisions establish in parties.’ assessing unconscionable, a claim that a contract or a clause in a contract a court the totality agreement’s substantive terms as well as the must “examine the overall bargain was” circumstances of its formation to determine the whether II, (Sonic so one-sided as be substantively unconscionable.
Cal.4th at added.) italics As Valencia are trade-offs explains, “[t]here in contract. Lien and every security rights favor one favors the party. Payment seller; delivery of favors the Notice required goods and an buyer. opportunity cure the usually favor in to default. But position these types unconscionable, are almost not inevitably because in the context whole, the transaction aas are fair and . . . they reasonable. same is [¶] too, true of They, arbitration must be evaluated provisions. as a whole. The trade-offs, fees, itself contain provision may one side certain e.g., pays results, the other side a gains measure of from outlier protection such And, entire needs to provision be examined based its overall on effect. even then the arbitration needs to be in evaluated the context of the overall transaction.” clause, I
Taking this conclude that the arbitration approach, viewed as a whole, is not substantively unconscionable under of the formulations the majority endorses. As Valencia argues, clause “is even-handed. It is well the business realities of the justified by and the buyer-dealer relationship threats outlier It posed by results. ... involves mutual tradeoffs and rational to the nature of automobile and to the relationship general purchases $50,000 transaction issue —the specific purchase of a pre-owned luxury automobile.” is a “There balance of clauses. There is an for opportunity further arbitral scrutiny outlier results. But of the given nature And, that will be the disputes, rule. further review exception, works both ways; buyers both and dealers can review seek of outlier awards. remedies, such as that would be more Self-help repossession, often invoked excluded, the dealer are but are by they definition outside even the by litigation small remedies process; comparable likely claims more invoked customer also excluded. the dealer Finally, buyer’s pays [¶] $2,500. initial arbitration expenses, if the a first round up Only buyer loses and wants to seek further arbitral review buyer does have advance further (the review arbitrators allocate ex- expenses ultimately That’s reasonable: or dealer) That the first penses). party (buyer losing round is sense and bear the common expense finality round has to Indeed, how the judicial system interests of that’s formality. furthers the for the record appellant appeal pays handles pays appeals —the And, return, individuals fee than the higher respondent. get speedy, [¶] *36 I with this resolving disputes.” agree analysis surer mechanism for cheaper, whole, a the as is not and would hold that arbitration evaluated provision, unconscionable. substantively
Nevertheless, I the that each of the agree challenged also with majority unconscionable, is not al- substantively considered individually, provisions, I the the reasoning. do not endorse all of though majority’s Regarding $0 if the award or a second arbitration arbitrator’s is either allowing provision both above, $100,000, noted this benefits Valencia provision over as cost in most from the of a second Sanchez them cases by protecting extreme, to review of outlier arbitration while both access further offering grants, is the but not making awards. Also beneficial mutually provision denials, to second arbitration. The Court of of relief injunctive subject on that it “only” this based the view benefits provision invalidated Appeal dealer, car . . . seeking Valencia “the not the would be buyer, because But, the correctly relief.” as injunctive majority preliminary permanent notes, in order “car sometimes must seek injunction repossess sellers ante, Thus, true, it 917.) at while as the car from the is buyer.” (Maj. opn., observes, relief have “broad on may majority injunctive impact” (ibid.), relief Valencia it to its business such “change by requiring practices” buyers forcing also a substantial them to surrender may by have impact as Accordingly, argues, their Valencia “both [parties] means of transportation. their would from a that allows second-level review when benefit process them to or refrain is decisions do liberty constrained arbitral requiring not “inordinately these do from certain activities.” Because doing decisions, Valencia, not one- they “unconscionably benefit” under our 1064, 1075, (Little v. Auto Inc. (2003) fn. 1 Stiegler, sided” 29 Cal.4th (Little)), regardless 892, is P.3d of whether Valencia Cal.Rptr.2d ante, 917) or more “substantially likely” “more even (maj. likely” opn., (ibid.).3 invoke them indicates, I the that there discussion also my agree majority As earlier from about the provision exempting repossession is unconscionable” “nothing ante, Because, this majority explains, arbitration. (Maj. opn., relief, injunctive majority that this mentioning public’s *37 Moreover, I with the agree that the majority record contains “no evidence” that, contract, at the time Sanchez signed the the cost of a second arbitration ante, would be “unaffordable” to him. (Maj. 921.) On the opn., contrary, as earlier explained, record indicates that Sanchez had significant financial addition, means when he time, the contract. signed In at that one of the organizations contract authorized to conduct the arbitration had estab- lished reduced fee substantially schedule “for consumer-related disputes” order “to make arbitration costs reasonable (AAA for consumers” General Rules, 0-8, rule Fees) Administrative and had for provided reduction elimination of administrative fees in cases of Given these hardship.5 circum- stances, provision regarding costs of a second arbitration does not of support finding unconscionability. gives The contract Sanchez the option having by, arbitration conducted and under the of, rules (AAA), Forum, the American Arbitration Association the National any Arbitration “or organization may other subject choose approval.” [he] There [Valencia’s] is no basis to that, executed, conclude or assume at the time the contract was organization the selected would have required Indeed, advance payment filing of all fees and other costs. although the AAA rules in effect in payment (AAA, 2008 called for advance of certain costs Commercial (amend. Arbitration Rules and 2007) Mediation Sept. R-4(a)(ii), Procedures & eff. rules R-49, (AAA Rules); AAA, 0-8 General Disputes: Consumer-Related Supplementary Proce C-2(a), C-2(e), (AAA dures Rules)), rules Supplementary C-8 they provided also for payment of this “defer[ral]” “in the event of extreme hardship part any (AAA on the party” Rules, R-49). General rule As to other expenses, arbitration payment rules made advance subject (Id., R-52.) to the AAA’s discretion. rule 5 The generally AAA’s applicable provided: rules “The may, AAA in the event of extreme hardship on the part party, (AAA Rules, . . . reduce the administrative fees.” General R-49.) rule Supplementary Its AAA Rules for disputes consumer-related expressly incorporated 1284.3, Code of Civil stating: Procedure section “Pursuant to Section 1284.3 of the California Procedure, Code of Civil gross consumers with a monthly income of less than 300% of poverty guidelines federal costs, are entitled to a waiver of arbitration fees and exclusive of arbitrator fees. applies This law agreements subject all consumer to the California Act,
Arbitration (AAA to all consumer arbitrations conducted in California.” Supplemen Rules, tary C-8.) rule unconscio- that the is not with the majority provision I
Although agree nable, in several analysis respects. majority the majority’s I disagree on a be unconscionability may premised of substantive finding that a suggests deterrent effect in have a substantial fee “would that the finding ante, But deterrence is surely case.” (Maj. opn., Sanchez’s all, here After at issue provision. important permissible purpose —and — second, on one dissatis- de novo arbitration based party’s of a are the costs Moreover, effect deterrent the first. provision’s with the results of faction with an award if Valencia is dissatisfied to both mutually parties; applies arbitration, for the fee and other filing then it also is a new “responsible seeks a fair the arbitrators of to a final determination costs subject the cost and secure finality In order to promote of costs.” apportionment want to arbitration, agreement may to an arbitration parties benefits second, new a contractual to a right from invoking each other discourage face deter- Indeed, in court similar litigants wanting appeal arbitration. unsuccessful, and, if rence, for fees filing appellate as they responsible 8.25, Court, 8.278(a).) rules (Cal. Rules of costs. other party’s appellate if, correctly as the majority mutual deterrence permissible such Surely at all. for an states, did not have to provide appeal” “the arbitration agreement ante, (Maj. opn., continues, “an
However, appeal,” having provided the majority *38 it unreason- so that structure the appeal process clause not “may ante, the 920.) Under this analysis, at p. Valencia. (Maj. opn., favors” ably would be, whether majority suggests, provision should question which, as a from second deter Sanchez substantially requesting arbitration-— and mutually applicable purposes of its is one permissible just explained, —(cid:127) favors” Valencia. “unreasonably deterrence the level of but should be whether would, words, of substantive (Ibid.) finding a In other (1) the determination of provision’s analysis, under the majority’s require turn, which, in would Valencia and deterrent effect on relative Sanchez— the contract at the time deterrent effect of the provision’s evidence require difference, if (2) whether and Sanchez—and on both Valencia was signed “ ‘ commercial “a legitimate was unjustified by deterrent effect in any, “ ’ ” (id. of unfairness degree ‘a substantial 912) at and established need” p. ”’ view, 911). In (id. my at bargain” p. bad “a beyond simple old-fashioned that the provision is unnecessary; inquiry this convoluted and complicated ’ ” “ ‘ of the 921) at on one (id. effect” p. “deterrent have a might greater $50,000 not render it one-sided car does luxury for a to this contract parties above, Indeed, that litigants as noted given, unconscionable. substantively that they responsible deterrence—in in court face similar wanting appeal unsuccessful, and, appellate the other party’s if fees filing for appellate Sanchez from less than would deter Valencia extent the costs—to the provision than arbitration, an advantage no more of it a second “confer[s] requesting court,” had the action been would be the case in and thus is not brought (Little, 1.) unconscionable. Cal.4th at fn. p.
Moreover, the FAA rule it a majority’s insofar as makes preempts “substantial deterrent effect” sufficient to establish substantive unconsciona- ante, In American Co. v. Italian Colors at Express bility. (Maj. opn., _ Restaurant 570 U.S. L.Ed.2d 133 S.Ct. (Italian Colors), court held that high the FAA required
2308-2311] enforcement of an arbitration clause uncontested that it notwithstanding proof would costs on under the federal impose prohibitive suing plaintiffs enforcement, antitrust laws. relied on “a plaintiffs, resisting judge- made to the FAA” —known as ‘effective vindication’ exception excep- “[t]he tion” —which allows federal courts to invalidate arbitration “that agreements (570 the ‘effective vindication’ of a federal at prevent statutory right.” U.S. _ 2310].) S.Ct. This court high exception, explained, “finds in the its desire to waiver of a party’s right origin prevent ‘prospective to pursue statutory remedies,’ That would cover a certainly provi- [citation]. sion in an arbitration agreement forbidding assertion of certain statutory And it rights. would cover attached perhaps filing administrative fees arbitration that are so as to make high access to the forum impracticable. But the fact that it is not worth the involved in a expense proving [Citation.] statutory does not constitute the elimination of the remedy right to pursue (Id. remedy. 2310-2311], S.Ct. at some italics p._[133 [Citation.]” omitted.) Under this binding if a cost precedent, does not impose (ibid.), fees that “make access to forum then the FAA impracticable” a court from precludes it as unconscionable invalidating because of will, case, determination that it subjective “have a substantial particular deterrent effect” on a exercise of party’s right second request ante, arbitration.6 (Maj. opn.,
I also with the disagree view that majority’s parties asserting unconsciona- bility based on their inability afford arbitration costs may satisfy their *39 “ burden with evidence of their financial situation at the time a ‘dispute ante, arises.’ at As the (Maj. opn., p. majority correctly recognizes 6 Colors, would, reasons, in Italian Even under the view of the dissent the FAA for two First, preempt majority’s rule. the effective vindication exception inapplicable when a Colors, (Italian party “could feasibly supra, vindicate” his or her claim in arbitration. 570 U.S. (dis. J.).) p._[133 Kagan, at at p. opn. S.Ct. A second arbitration is not infeasible 2320] merely provision because a cost has “a deterrent party’s substantial effect” on a decision to ante, Second, request (Maj. a second opn., p. enforcing arbitration. at concerns about “state law” “implicate do not even allegedly effective-vindication rule. When a state rule FAA, conflicts with the apply preemption principles, asking standard whether the state [courts] law purposes objectives. frustrates the FAA’s If the state rule does so —as ... in Colors, [Concepcion] (Italian Supremacy requires supra, Clause its invalidation.” 570 —the (dis. J.), added.) U.S. at p._[133 p. Kagan, S.Ct. at opn. of final italics
943 must be based on circum (ibid.), a determination of Code, (Civ. the time was made” that existed “at stances [the contract] (Setzer v. 1670.5, in events. (a)), hindsight light not on subsequent subd. § 124]; 368 P.2d Robinson (1962) 57 Cal.2d Cal.Rptr. [18 Thus, 16].) Cal. 351 P. Colton determining Stanford (and, evidence not what he showing, Sanchez must submit affordability, arose, Valencia) could afford when the dispute under majority’s approach, at the time he the contract. The signed he could have afforded but what (Parada v. Superior otherwise “is statute.” contrary assertion majority’s 743].) Court (2009) 176 Cal.App.4th blurs of the cost analysis improperly Finally, majority’s which this court has relied in decisions to invalidate distinct grounds prior here, which is at issue unconscionability, public arbitration provisions: ante, 918), at As the majority explains (maj. opn., which is not. policy, Armendariz, 110-111, held that “when 24 Cal.4th at this court supra, pages condition of arbitration as a mandatory employment, an employer imposes cannot generally the arbitration or arbitration process require would not be any type to bear expense employee employee However, free the action in court.” to bear if he or she were to bring required was not this suggests, holding to what discussion contrary majority’s Rather, it was based on the view forcing based on unconscionability. in court in arbitration would not have to they pay costs employees pay (id. 110) it would at in that would be “contrary public policy” (id. 107) unwaivable them from at vindicating” “effectively prevent[] Little, (id. 100-101). (See established for a reason rights pp. statutory public state rule “is derived from supra, Cal.4th at [Armendariz’s certain regarding unwaivability public contract law principles from on which the majority the discussion Gutierrez rights.”].) Similarly, ante, addressed, 919-920) but unconscionability, relies (maj. opn., pp. terms, unwaivable state statutory by “undercutting] whether contractual (Gutierrez, rights” underlying rights,” public policy [those] “violate[d] and unconsciona- 94-95). policy Cal.App.4th public “[T]he has announced “are different in important respects. defenses” this court bility of the contract to defense is concerned with the relationship A public policy whole, a clear that undermine contractual society targets right designed accomplish such as an unwaivable statutory public policy, the relation- is concerned with Unconscionability public purpose. [Citation.] [citation], such that and one-sided terms contracting between the ship parties Contracts can be lacking. contrary consent in real sense to be appears and vice versa but not unconscionable [citation].” public policy [citation] *40 A, Inc. Moreno (Sonic-Calabasas 51 Cal.4th 686-687 (Sonic I).) of these loses majority sight 247 P.3d differences in its discussion of Armendariz Gutierrez. another reason not applying
But there is important Armendariz's here, to the fact that it is not based on unconscio rule in addition categorical Colors, under Italian it. the FAA As earlier explained, nability; preempts the FAA enforcement of an court held in that case high required clause uncontested it would notwithstanding proof impose arbitration on the thus them from preventing effectively costs prohibitive plaintiffs, Colors, (Italian supra, their under the federal antitrust laws. vindicating rights _-_ 2308-2311].) The effective 570 U.S. at S.Ct. pp. pp. held, court covers cost high vindication exception, “perhaps” provisions that make access to arbitration but does not cover “imprácticable,” (Id. make a federal claim “not worth the merely expense” prove. based, 2310-2311].) S.Ct. at rule is categorical p._[133 Armendariz's would, not proof fact, that arbitration be for a financially impracticable but on the view that the mere particular employee, “possibility” employees “chillQ “will be substantial forum costs” arbitration would charged (Armendariz, supra, exercise” of their 24 Cal.4th at statutory right. holds, Italian
If, Colors the FAA enforcement requires costs, actual it would then it surely provision despite proof impose prohibitive courts from an arbitration clause based on the theoreti precludes invalidating cal, “any type effect of that the chilling unproven imposing expense [party would not be to bear” in a court action.7 resisting required arbitration] (Armendariz, 24 Cal.4th at reasons,
For I that Sanchez has failed to establish preceding agree substantive I therefore concur in the unconscionability. judgment. majority’s For the same in connection with the substantial previously reasons discussed Colors, (ante, 6), in Italian deterrence standard fn. even under the view of dissent prophylactic, categorical
the FAA rule. preempt would Armendariz’s interest in notes Although Broughton Concepcion, viability,” light in case does the “continued involve 58, Systems, (2003) P.3d Health Inc. v. Cal.4th 303 [133 Cruz PacifiCare 1157], prohibit majority permits held that the FAA California which a this court ante, injunctive (Maj. opn., and the UCL. relief under CLRA of claims Citibank, N.A., us in McGill Cal.App.4th pending question That before review granted April S224086. is “outside remedy there is self-help litigation,” nothing unconscionable arbitration, about not it making subject which is a litigation substitute. (Ibid.) Moreover, as the also majority explains, provision preserves to small ability go claims court parties’ “likely favors the car buyer.” (Ibid.) Thus, unfair, exclusion of from arbitration repossession is not one-sided, or unconscionable. arbitration, Regarding costs of a second I first note that the Court of erred in Appeal stating provision question requires party request- ing second arbitration to fees and other pay filing arbitration costs “in advance.” The states that the “shall be requesting party responsible costs, for” such fees but says about the time nothing payment. record otherwise no for the provides Court of support statement.4 Appeal’s