Sixth District Does Agree That Federal Arbitration Act Preempts California Consumers Legal Remedies Act, So Class Action Waiver In Arbitration Clause Is Enforceable
Jalopy that has seen better days. Carol M. Highsmith, photographer. Library of Congress.
An arbitration clause that is “permeated with unconscionability” need not be enforced. Here, the scorecard in the trial court was as follows: (A) a class action waiver in an automobile installment contract was found enforceable; (B) four other provisions were unconscionable; (C) because the arbitration clause was permeated with unconscionability, the trial court refused to enforce it. Defendants appealed. Gillespie v. Svale Del Grande, Inc., H039428 (6th Dist. April 17, 2014) (Bamattre-Manoukian, Mihara, Grover) (unpublished).
In the Court of Appeal, the scorecard changed: (A) the class action waiver was found enforceable; (B) a self-help provision in the contract, allowing, for example, for repossession of a vehicle, was not found unconscionable; (C) three other provisions were found unconscionable: “(1) the exception to arbitral finality for an award in excess of $100,000, (2) the exception to arbitral finality for an award that includes injunctive relief, and (3) the requirement that the appealing party advance both parties’ costs for the second arbitration with a three-arbitrator panel”; (D) the case was remanded so that the trial court could exercise discretion and determine whether the unconscionable provisions could be severed pursuant to Cal. Civ. Code, section 1670.5(a).
First, Plaintiff’s attorney provided a convincing declaration showing that costs for a second arbitration could be onerous for the consumer. Compare my March 25, 2014 post on The McCaffrey Group, Inc. v. Superior Court, F066080 (5th Dist. March 24, 2014), in which the 5th District panel, signalling a failure of proof, stated homeowners “made no attempt to show that the mediation fees they are likely to pay would be exorbitant or place an unreasonable burden on them . . . “
Second, we are still waiting to hear from the California Supreme Court whether various clauses in automobile sales contracts are unconscionable, and whether the class action waiver in those contracts is proper. The California Supreme Court has granted review in a number of those cases.