However, California Supreme Court Will Likely Make Ultimate Determination of Issues in Pending Sanchez v. Valencia Holding Co. Case
Arbitration clauses in contracts for automobile purchases and leases offer fertile ground for litigation. See our April 12, 2012 post about Kolev v. Euromotors West/The Auto Gallery, 586 F.3d 1024 (9th Cir. 2011) (opinion withdrawn on April 11, 2012), and August 1 post about Caron v. Mercedes-Benz Financial Services USA LLC, Case No. G044550 (4th Dist., Div. 3 July 30, 2012). Our next case, Goodridge v. KDF Automotive Group, Inc., Case No. D060269 (4th Dist. Div. 1 August 24, 2012) (McDonald, Acting P.J., author) (unpublished), involves an automobile dealership’s appeal of an order denying its petition to compel arbitration of the action filed against it by plaintiff Goodridge arising out of his purchase of a used automobile. Both the trial judge and the Court of appeal concluded that the arbitration provision was procedurally and substantively unconscionable.
Marion Post Wolcott, photographer. 1939. Library of Congress.
Procedural unconscionability is rarely a difficult issue in such cases, since an adhesion contract is involved. Here, as described by the Court of Appeal, there was a “stack of preprinted form documents”, lack of an opportunity to read all the documents or to negotiate the terms, and lack of evidence that purchaser was clearly informed about the arbitration provision. The contract documents were long and printed on both the front and back sides of the pages. Though language in bold print on the front side of the preprinted contract did state that the contract contained an arbitration clause on the reverse side, “there is no provision for Goodridge’s signature or initials under or adjacent to that language.” The Court of Appeal readily concluded that there was both “oppression and surprise”, adding up to procedural unconscionability.
The contract was also found to be substantively unconscionable, because it was too one-sided (though printed on both sides). First, the arbitration clause provided either party could appeal an arbitrator’s award if it exceeded $100,000. Second, each party could appeal an arbitrator’s award of injunctive relief against it. Third, the arbitration clause provided an appealing party must pay the filing fees and other arbitration costs for appeal, subject to a final determination. Fourth, the arbitration clause did not apply to self-help remedies, including repossession. The court found that those provisions benefited the seller far more than the buyer. Because the contract had four problems permeating it with unconscionability, a court exercising its discretion could properly refuse a request to save the contract by severing unconscionable terms.
COMMENT: Footnote 1 of Goodridge notes, “the circumstances (e.g., preprinted contract and arbitration clause) and issues in this case are virtually identical to those in Sanchez v. Valencia Holding Co., LLC (2011) (A201 Cal.App.4th, review granted Mar. 21, 2012, S199119 (Sanchez). The California Supreme Court will likely make the ultimate determination of the issues discussed in this case.” The California Courts of Appeal website describes Sanchez for the public and the press: "Petition for review after the Court of Appeal affirmed an order denying a petition to compel arbitration. This case includes the following issue: Does the Federal Arbitration Act (9 U.S.C. ? 2), as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U. S. __, 131 S.Ct. 1740, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?”