The Issue Is Also Pending In The California Supreme Court
The latest in the crop of cases concerning car sales contracts and petitions to compel arbitration is Natalini v. Import Motors, Inc., Case No. A133236 (1st Dist. Div. 1 January 7, 2013) (Simons, J., author) (unpublished). The Court had no trouble affirming the denial of the petition to arbitrate on grounds of procedural and substantive unconscionability. As recently as New Year’s Day, I posted about arbitration, unconscionability, and an auto sales contract involving a Dodge Avenger in another case.
The analysis here in Natalini fits the template for these cases: the contract is an adhesive “take it or leave it” contract, and there is an element of surprise, because the arbitration provision is not particularly conspicuous, on the back of a form, and not pointed out to the buyer. That satisfies the “procedural unconscionability” prong.
As to the “substantive unconscionability” prong, the arbitration provision shares characteristics of other one-sided arbitration provisions designed to favor the car dealer in car sales contracts. Thus, the arbitration provision authorizes an appeal resulting in new arbitration before a three-arbitrator panel only for an award of $0 or in excess of $100,000, the provision authorizes an appeal resulting in a new arbitration before a three-arbitrator panel if the award includes injunctive relief, and the provision exempts self-help remedies, perhaps the car dealer’s most significant remedies. Those provisions, treated as one-sided in other cases, added up to substantive unfairness. And because the arbitration provision can be considered “permeated by unconscionability” if it has more than one unlawful provision, the trial court does not abuse its discretion by declining to sever unconscionable aspects of provision.
Keep in mind that Sanchez v. Valencia Holding Company (S199119) is pending before the California Supreme Court. The issue presented in Sanchez is: “Does the Federal Arbitration Act . . . as interpreted in AT&T Mobility LLC v. Concepcion . . . preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable.”