Arbitration/Automobiles/Unconscionability: Arbitration Provision In Automobile Purchase Held Procedurally But Not Substantively Unconscionable

“Sliding Scale” Unconscionability Analysis Saves Arbitration Provision

      In a published decision, the Court of Appeal reverses the trial court’s denial of a petition to compel arbitration based on an automobile purchase contract.  Vasquez v. Greene Motors, Inc., Case No. A134289 (1st Dist. Div. 1 March 27, 2013) (Margulies, Acting P.J., author 3:0) (published).

      These contracts will be found procedurally unconscionable to some degree, because they are “take it or leave it” contracts of adhesion.  “In light of the minimal level of procedural unconscionability and the absence of significant substantive unconscionability, however, we reverse the trial court’s denial of the petition to compel.” 

      So what was the “minimal level” of substantive unconscionability here? 

      First, the first $2,500 in costs fell upon the seller, after which the buyer was responsible, subject to cost shifting by the arbitrator at the end of the proceeding.  Unconscionable?  Outside the area of employment, said the Court, it is not unconscionable for the plaintiff to pay costs.

      Second, an appeal to three arbitrators was possible if the award was zero, or over $100,000.  Unconscionable?  No, said the Court.  The buyer was most likely to appeal awards of zero, and the seller was most likely to appeal awards over $100,000.  So there were advantages and disadvantages to each.

      Third, self-help and small claims were exempted from arbitration.  Unconscionable?  No, said the Court, because the self-help exemption benefited sellers, and the small claim exemption benefited buyers.

      Fourth, the contract required class action waivers and arbitration of statutory claims.  Unconscionable?  No, said the Court, AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011) (Concepcion) permits waiver of class action claims in arbitration.  I note that Concepcion does not expressly address arbitration of statutory claims.   (While the Court of Appeal says that the same rationale applies to permitting waiver of class action claims and to “preemption of the statutory ban on class action waivers,” what is not clear to me is whether arbitration here required arbitrating other statutory claims.)

      Bottom line:  the order denying the petition to compel arbitration is reversed.