SANCHEZ v. VALENCIA HOLDING CO., LLC No. B228027.
201 Cal.App.4th 74 (2011)
GIL SANCHEZ, Plaintiff and Respondent, v. VALENCIA HOLDING COMPANY, LLC, Defendant and Appellant.
Court of Appeals of California, Second District, Division One.
November 23, 2011.
Tharpe & Howell, Christopher S. Maile , Soojin Kang ; Greines, Martin, Stein & Richland and Robert A. Olson for Defendant and Appellant.
Rosner, Barry & Babbitt, Hallen D. Rosner , Christopher P. Barry and Angela J. Smith for Plaintiff and Respondent.
Plaintiff, a car buyer, filed this class action against a car dealer, alleging violations of the Consumers Legal Remedies Act (CLRA) (Civ. Code, §§ 1750-1784), the Automobile Sales Finance Act (ASFA) (Civ. Code, §§ 2981-2984.6), the unfair competition law (UCL) (Bus. & Prof. Code, §§ 17200-17210), the Song-Beverly Consumer Warranty Act (Song-Beverly Act) (Civ. Code, §§ 1790-1795.8), and the California Tire Recycling Act (Tire Recycling Act) (Pub. Resources Code, §§ 42860-42895).
The car dealer filed a motion to compel arbitration pursuant to a provision in the sales contract, which also contained a class action waiver. The trial court determined that the class action waiver was unenforceable on the ground that a consumer is statutorily entitled to maintain a CLRA suit as a class action. (See Civ. Code, § 1781.) The arbitration provision in the sales contract stated that if the class action waiver was declared unenforceable, the entire arbitration provision was not to be enforced. Pursuant to this "poison pill" clause, the trial court denied the petition to compel arbitration. The car dealer appealed.
We affirm but for a different reason. We conclude that the arbitration provision is unconscionable: The provision is adhesive—involving oppression and surprise—and contains harsh one-sided terms that favor the car dealer to the detriment of the buyer. Because the provision contains multiple invalid clauses, it is permeated by unconscionability and is unenforceable. We cannot sever all of the offending language. Thus, regardless of the validity of the class action waiver, the trial court properly declined to compel arbitration.
The allegations and facts in this appeal are taken from the pleadings and the exhibits submitted in connection with the petition to compel arbitration.
Plaintiff, Gil Sanchez, filed this class action in March 2010. Two months later, Sanchez filed a first amended complaint (complaint). It alleged as follows.
After a test drive, the salesman told Sanchez that Valencia would give him $6,000 for his Cadillac, on which Sanchez still owed approximately $20,800, creating a negative equity of $14,800. Sanchez made a downpayment of $10,000. The salesman said Sanchez might be required to make a higher downpayment, but it could be paid over time.
Valencia informed Sanchez that he had to pay $3,700 to have the Mercedes-Benz "certified" to qualify for an interest rate of 4.99 percent. That statement was false. The $3,700 payment was actually for an extended limited warranty, which was optional and unrelated to the interest rate. Sanchez agreed to the additional payment, believing it was a certification fee required to obtain the offered rate.
Sanchez met with Valencia's finance manager, who completed all of the financial information on the sales documents, including a preprinted "Retail Installment Sale Contract" (Sale Contract).
Valencia represented that the vehicle was "certified," meaning it had been through a "rigorous inspection and certification process" in which any deficiencies were "repaired, replaced, or reconditioned." A certified vehicle
Sanchez executed the Sale Contract and took possession of the vehicle on August 8, 2008. A few days later, Valencia called him and said he owed more toward the downpayment. On August 15, 2008, Sanchez went to the dealership and wrote a check for $3,000. Sometime thereafter, Sanchez received another call, telling him he owed still more on the downpayment. He went to the dealership and wrote a check for $2,000, bringing the total downpayment to $15,000.
Sanchez soon experienced problems with the vehicle, including malfunctions with various electrical systems, water leaks inside the passenger cabin and the trunk, engine failures, and errors with the warning and indicator lights. Sanchez took the vehicle to authorized repair facilities on several occasions, including Valencia, but they were unable to repair the vehicle. Eventually, Valencia accused Sanchez of having tampered with or wrecked the vehicle, told him it would cost $14,000 to make the repairs, and said the warranties would not apply. The accusation against Sanchez was false. Sanchez then had the vehicle inspected elsewhere and learned it had been in an accident or had been inadequately repaired before he bought it.
Sanchez alleges that Valencia violated several California laws by (1) failing to separately itemize the amount of the downpayment that is deferred to a date after the execution of the Sale Contract; (2) failing to distinguish registration, transfer, and titling fees, on the one hand, from license fees, on the other hand; (3) charging buyers the Optional DMV Electronic Filing Fee without discussing it or asking the buyer if he or she wanted to pay it; (4) charging new tire fees for used tires; and (5) telling Sanchez to pay $3,700 to have the vehicle certified so he could qualify for the 4.99 percent interest rate when that payment was actually for an optional extended warranty unrelated to the rate.
The complaint alleged that a class action was appropriate based on the numerosity of putative class members, the predominance of common questions of law and fact, the typicality of the claims, and the superiority and benefits of class litigation. Four distinct classes were proposed based on the particular violations committed by Valencia.
B. Motion to Compel Arbitration
On June 7, 2010, Valencia filed a motion to compel arbitration pursuant to an arbitration provision in the Sale Contract. The provision stated: "1. Either you or we may choose to have any dispute between us decided by arbitration and not in court or by jury trial.
"2. If a dispute is arbitrated, you will give up your right to participate as a class representative or class member on any class claim you may have against us including any right to class arbitration or any consolidation of individual arbitrations.
"3. Discovery and rights to appeal in arbitration are generally more limited than in a lawsuit, and other rights that you and we would have in court may not be available in arbitration.
"Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Clause, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship . . . shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action. . . . Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action. You may choose one of the following arbitration organizations and its applicable rules: the National Arbitration Forum . . . (
"You and we retain any rights to self-help remedies, such as repossession. You and we retain the right to seek remedies in small claims court for disputes or claims within that court's jurisdiction, unless such action is transferred, removed or appealed to a different court. Neither you nor we waive the right to arbitrate by using self-help remedies or filing suit. Any court having jurisdiction may enter judgment on the arbitrator's award. This Arbitration Clause shall survive any termination, payoff or transfer of this contract. If any part of this Arbitration Clause, other than waivers of class action rights, is deemed or found to be unenforceable for any reason, the remainder shall remain enforceable. If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder of this Arbitration Clause shall be unenforceable." (Italics added, some capitalization omitted.)
In anticipation of Sanchez's contentions, Valencia asserted in its moving papers that (1) the arbitration provision was not procedurally or substantively unconscionable under the principles set forth in Armendariz v. Foundation
The Sale Contract is a preprinted document consisting of one page, eight and one-half inches wide and 26 inches long. There are provisions on both sides that occupy the entire document, leaving little in the way of margins. Sanchez signed or initialed the front in eight places, each related to a different provision. No signatures, initials, or other handwriting appears on the back. The arbitration provision, entitled "
In his opposition papers, Sanchez disagreed with Valencia's legal points. He also submitted a declaration, stating: ". . . When I signed the documents related to my purchase of the Subject Vehicle, I was presented with a stack of documents, and was simply told by the Dealership's employee where to sign and/or initial each one. All of the documents (including the purchase contracts) were pre-printed form documents. When I signed the documents, I was not given an opportunity to read any of the documents, nor was I given an opportunity to negotiate any of the pre-printed terms. The documents were presented to me on a take-it-or-leave-it basis, to either sign them or not buy the car. . . . There was no question of choice on my part or of my being able to `negotiate' anything. And I had no reason to suspect that hidden on the back of the contracts . . . was a section that prohibited me from being able to sue the Dealership in court if I had a problem.
". . . When I signed the purchase contract and related documents, the Dealership did not ask me if I was willing to arbitrate any disputes with it, did not tell me that there was an `arbitration clause' on the back side of the purchase contract, and I did not see any such clause before I signed the documents. The Dealership did not explain to me what an arbitration clause was. I was not given any opportunity at any time during my transaction with [the] Dealership to negotiate whether or not I would agree to arbitrate any
". . . Prior to the filing of [Valencia's motion to compel arbitration], I had never heard of the National Arbitration Forum or American Arbitration Association. Nor was I aware that there was a clause in my contract with the Dealership supposedly requiring me to go to arbitration if I had a dispute with the Dealership and that I had to read the rules of those organizations before signing my purchase contracts. No one at the Dealership turned my purchase contract over and showed me the writing on the back or asked me to sign any sections on the back of the contract where I have now learned the arbitration clause is located.
". . . At no point during my transaction with the Dealership was I presented with a separate arbitration agreement to review and sign.
". . . On both occasions when I was at the Dealership and signed purchase contracts, I did not have, nor was I given, an opportunity to use a computer to download any information about arbitration organizations, including their procedures or rules, nor was I aware that I could or should have done this."
The motion to compel was heard on August 19 and September 13, 2010. At the September 13 hearing, the trial court stated it was denying the motion and would issue a written order within a week. On September 14, the trial court issued an order denying the motion. The court explained that the CLRA expressly provides for class actions and declares the right to a class action to be unwaivable. (See Civ. Code, §§ 1781, 1751.) As a consequence, the class action waiver in the arbitration provision was unenforceable. Further, in accordance with the poison pill clause, the unenforceability of the class action waiver made the entire arbitration provision unenforceable. The trial court therefore denied the motion. Valencia appealed.
"`"Whether an arbitration provision is unconscionable is ultimately a question of law."' . . . `On appeal, when the extrinsic evidence is undisputed, as it is here, we review the contract de novo to determine unconscionability.'" (Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1511-1512 [105 Cal.Rptr.3d 585], citations omitted; accord, Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174 [116 Cal.Rptr.2d 671].) Because this appeal presents a question of law, we may resolve it in the first instance, without remand to the trial court. "`We are not bound by the trial court's stated reasons, if any,
The parties disagree as to whether the class action waiver is unenforceable under the CLRA, thereby making the entire arbitration provision unenforceable under the poison pill clause. They also dispute whether the arbitration provision is procedurally and substantively unconscionable and whether the provision is permeated by unconscionability, rendering it unenforceable.
We do not address whether the class action waiver is unenforceable. Rather, we conclude the arbitration provision as a whole is unconscionable: The provision is procedurally unconscionable because it is adhesive and satisfies the elements of oppression and surprise; it is substantively unconscionable because it contains harsh terms that are one sided in favor of the car dealer to the detriment of the buyer. Because the provision contains multiple invalid terms, it is permeated by unconscionability and is unenforceable. Severance of the offending language is not appropriate. It follows that the case should be heard in a court of law.
A. General Principles of Unconscionability
Before applying Armendariz to the present case, we note that Concepcion, supra, 563 U.S. ___ [131 S.Ct. 1740], does not preclude the application of the unconscionability doctrine to determine whether an arbitration provision is unenforceable. Concepcion disapproved the "Discover Bank rule," stating: "In Discover Bank, the California Supreme Court applied [the doctrine of unconscionability] to class-action waivers in arbitration agreements and held as follows: `[W]hen the [class action] waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then . . . the waiver becomes in practice the exemption of the party "from responsibility for [its] own fraud, or willful injury to the person or property of another." Under these circumstances, such waivers are unconscionable under California law and should not be enforced.'" (Concepcion, at p. ___ [131 S.Ct. at p. 1746], second italics added.) The court in Concepcion ultimately concluded that "[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA." (Id. at p. ___ [131 S.Ct. at p. 1748], italics added.)
With the exception of the Discover Bank rule, the court acknowledged in Concepcion that the doctrine of unconscionability remains a basis for invalidating arbitration provisions: "The final phrase of [title 9, United States Code, section 2] . . . permits arbitration agreements to be declared unenforceable `upon such grounds as exist at law or in equity for the revocation of any contract.' This saving clause permits agreements to arbitrate to be invalidated by `generally applicable contract defenses, such as fraud, duress, or unconscionability,' but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue." (Concepcion, supra, 563 U.S. at p. ___ [131 S.Ct. at p. 1746], italics added; accord, Kanbar v. O'Melveny & Myers (N.D.Cal., July 21, 2011, No. C-11-0892 EMC) 2011 U.S.Dist. Lexis 79447, pp. *15-*16, *23-*24
Our conclusion today does not undermine the purpose of the FAA: "to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings" (Concepcion, supra, 563 U.S. at p. ___ [131 S.Ct. at p. 1748], italics added) or, as otherwise phrased, the "`enforcement of private agreements and encouragement of efficient and speedy dispute resolution'" (id. at p. ___ [131 S.Ct. at p. 1749], italics added). On the contrary, as we discuss below (see pt. II.C., post), the arbitration provision itself sacrifices efficient and speedy resolution through the adoption of harsh, one-sided terms in an effort to ensure that the car dealer will be the prevailing party.
B. Procedural Unconscionability
In Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77 [7 Cal.Rptr.3d 267] (Gutierrez), the plaintiff leased a vehicle pursuant to a contract virtually identical to the one here and signed it under similar circumstances. The Court of Appeal had no difficulty concluding the arbitration provision was procedurally unconscionable, saying: "The trial court's implicit conclusion that the arbitration clause in the automobile lease is adhesive is supported by substantial evidence. The lease was presented to plaintiffs for signature on a `take it or leave it' basis. Plaintiffs were given no opportunity to negotiate any of the preprinted terms in the lease. The arbitration clause was particularly inconspicuous, printed in eight-point typeface on the opposite side of the signature page of the lease. [The plaintiff] was never informed that the lease contained an arbitration clause, much less offered an opportunity to negotiate its inclusion within the lease or to agree upon its specific terms. He was not required to initial the arbitration clause. . . . He either had to accept the arbitration clause and the other preprinted terms, or reject the lease entirely. Under these circumstances, the arbitration clause was procedurally unconscionable." (Id. at p. 89, citation omitted; accord, Fittante v. Palm Springs Motors, Inc. (2003) 105 Cal.App.4th 708, 722-723 [129 Cal.Rptr.2d 659].)
As a federal court explained in finding the arbitration provision in a Sale Contract to be procedurally unconscionable: "[The buyer] asserts the Contract was presented to him on a `take-it-or-leave-it' basis, . . . and he did not have an opportunity for meaningful negotiation. [The lender] disputes this assertion. . . . [The buyer] has submitted a declaration describing the circumstances under which he signed the Contract. According to [him], he was not provided an opportunity to read the Contract prior to signing it. . . . Instead, the finance person simply `held the contract flat on the desk with one hand and with the other pointed to the various places on the front of the contract for [the buyer] to sign that [were] marked in yellow.' . . . [The buyer] `was not allowed to read the back of the contract [where the Arbitration Clause is located], or asked to sign anywhere on the back of the contract. The finance person did not turn the contract over at all during the signing.' . . . No one pointed out the Arbitration Clause or discussed it with [the buyer] at any
"Oppression, however, is only one factor in the procedural unconscionability analysis. The other factor is surprise, and on this factor, [the buyer] asserts the Arbitration Clause was hidden in the lengthy form contract. [The lender] disputes this assertion, and points out that the Arbitration Clause is located within a box entitled `
Even the California Attorney General has commented that the lengthy one-page sale contract is problematic, describing it as "an unwieldy size for a business document, and incompatible with standard office printing and reproduction machines. This incompatibility leads to significant trouble and expense for automobile dealers, as well as for those consumers who need to make or transmit copies of their sales contracts." (92 Ops.Cal.Atty.Gen. 97, 98 (2009).) The Attorney General has advised that a sale contract need not be a single page but may consist of multiple pages fastened together and sequentially numbered. (Id. at pp. 100-101.) As the Attorney General explained, the use of multiple pages, as opposed to a single page, will "facilitat[e] . . . the consumer's review of all of the parties' agreements before the consumer signs the sale or lease contract, so that the consumer has complete and accurate information. The [multiple-page] rule also helps to avert later disputes about the terms of the parties' final agreement." (Id. at p. 100.)
Valencia also contends that, on the front page of the Sale Contract, Sanchez signed off on a provision stating: "You agree to the terms of this contract. You confirm that before you signed this contract, we gave it to you, and you were free to take it and review it. You acknowledge that you have read both sides of this contract, including the arbitration clause on the reverse side, before signing below. You confirm that you received a completely filled-in copy when you signed it." (Capitalization omitted.) This provision is located 22 inches from the top of the front page and flush to the right margin in a space measuring about two and one-fourth inches wide and one and one-eighth inches high. To the immediate left of the provision is boxed text discussing the lack of a cooling-off period; it is approximately five and seven-eighth inches wide and one and one-eighth inches high. A signature line for the buyer appears flush to the left margin directly below the boxed text about cooling off; that is the last signature line for the buyer in the contract. The only signature directly below the provision that mentions the "arbitration clause" is that of the car dealer's manager—the last signature on the front page and in the contract.
In short, the arbitration provision satisfies the two elements of procedural unconscionability: oppression and surprise. Its location at the bottom on the back of the Sale Contract made it unnoticeable to a buyer who was not given time to read the contract.
C. Substantive Unconscionability
1. Award Exceeding $100,000
Either party may appeal an initial decision exceeding $100,000. As courts have recognized, this type of provision, though seemingly neutral, has the effect of benefiting the party with superior bargaining power, here, the car dealer.
"Although parties may justify an asymmetrical arbitration agreement when there is a `legitimate commercial need' . . ., that need must be `other than the employer's desire to maximize its advantage' in the arbitration process. . . . There is no such justification for the $50,000 threshold." (Little, supra, 29 Cal.4th at p. 1073, citations omitted; accord, Gibson v. Nye Frontier Ford, Inc. (Alaska 2009) 205 P.3d 1091, 1098 & fn. 26.)
Little relied in part on Saika, supra, 49 Cal.App.4th 1074. In Saika, a patient signed a "Patient-Physician Arbitration Agreement" before undergoing a chemical skin peel of her face. The agreement provided that if an award exceeded $25,000, either party could request a trial de novo in superior court, and the arbitration award would be null and void. (Id. at p. 1077.) After the medical procedure, the patient filed a civil suit against the physician, alleging medical malpractice based on severe burns. The physician successfully moved to compel arbitration. The arbitrators awarded $325,000. The patient sought to strike the trial de novo clause and confirm the award; the physician countered with a request for a trial de novo. The trial court ruled in favor of the physician.
The Court of Appeal reversed, stating: "A trial de novo clause within the arbitration agreement purportedly allows either party to disregard the results of the arbitration and litigate in the courts when the arbitration award exceeds $25,000, but . . . the practical effect of the clause is to tilt the playing field in
The court realized that an arbitration award in favor of a patient in a malpractice case typically exceeds $25,000 by such a substantial amount that only the physician would invoke the trial de novo clause. In contrast, a claim by a physician against a patient, most likely a billing matter, would rarely result in an award exceeding $25,000, especially if the patient had private health insurance or was covered by some type of governmental assistance program. As the court explained: "True, there is a theoretical class of cases where the trial de novo clause could arguably benefit a patient—namely, situations where the initial arbitration award exceeds $25,000 but is still so low that it represents an injustice. . . . For example, the case before us appears to involve facial disfigurement. The arbitrators handed down what appears, at least insofar as the record discloses, an appropriately large award. Had they only given [the patient] $25,001, the trial de novo clause would . . . have been of some benefit to her.
"But . . . [a]s a practical matter, the benefit which the trial de novo clause confers on patients is nothing more than a chimera. The odds that an award will both (a) clear the $25,000 threshold but (b) still be so low that the patient would want to have a trial de novo are so small as to be negligible.. . . [T]he cases where the trial de novo clause could possibly benefit the patient are going to be rare indeed.
The same analysis applies here. The buyer will rarely benefit from the clause permitting an appeal of an award exceeding $100,000 because the buyer, not the dealer, is more likely to recover an award of that size and be satisfied with it; the car dealer would appeal it. Under the Sale Contract, Sanchez is obligated to make monthly payments totaling less than $50,000. In
Valencia emphasizes that an appeal of the initial award is permitted if either party brings a claim and recovers nothing. By providing an appeal where the arbitrator awards nothing, one party is not favored over the other. We cannot say that one of the parties is more likely to lose regardless of which party is the claimant or the respondent in the arbitration. Nevertheless, under the appeal clauses, if the buyer prevails but believes the award is too low, the arbitration is at an end unless the buyer recovers nothing; if the buyer prevails and recovers a substantial sum, the car dealer can start anew before a three-member panel if the award exceeds what the dealer considers too high. A truly bilateral clause would allow a buyer to appeal an award below $100,000.
2. Appeal of Award That Includes Injunctive Relief
The arbitration provision allows an appeal by either party if an award against it contains injunctive relief. This type of appeal unduly burdens the buyer because the buyer, not the car dealer, would be the party obtaining an injunction.
Preliminary injunctive relief is appropriate only if two interrelated factors are present: (1) the plaintiff is likely to prevail on the merits at trial, and
Preliminary injunctions are of particular importance in protecting the interests of consumers. (See, e.g., Regents of University of California v. ABC (9th Cir. 1984) 747 F.2d 511, 521; Sanderson Farms, Inc. v. Tyson Foods, Inc. (D.Md. 2008) 547 F.Supp.2d 491, 508-509; R.L. Polk & Co. v. infoUSA, Inc. (E.D.Mich. 2002) 230 F.Supp.2d 780, 796-797; F.T.C. v. Staples, Inc. (D.D.C. 1997) 970 F.Supp. 1066, 1091-1092; see also Vo v. City of Garden Grove, supra, 115 Cal.App.4th at p. 435 [one factor weighing against issuance of preliminary injunction is any adverse effect it would have on public interest].)
Not surprisingly, it is the buyer, not the car dealer, who would be seeking preliminary or permanent injunctive relief, primarily to enforce consumer laws like the CLRA. If an interim award (preliminary injunction) or final award (permanent injunction) is issued against the car dealer, the arbitrator has favorably reviewed the merits of the buyer's claims and determined that the interests of consumers will be irreparably injured without injunctive relief.
Nevertheless, here, the arbitration provision's appeal clauses allow the car dealer to delay the effect of an injunction by way of appellate review before a three-member arbitration panel. By subjecting injunctive relief to an appeal process, only the car dealer is benefited, making the clause one sided and undermining the purpose of the CLRA to protect consumer rights.
In addition, the arbitration provision is silent as to the procedure for taking an appeal. Presumably, if the arbitrator issues a preliminary injunction in the
Thus, when it serves the car dealer's interests—if an award against it is less than $100,000—the buyer cannot appeal, and the car dealer touts the benefits of mandatory arbitration: "efficient, streamlined procedures[,] . . . the informality of arbitral proceedings . . ., reducing the cost and increasing the speed of dispute resolution." (Concepcion, supra, 563 U.S. at p. ___ [131 S.Ct. at p. 1749].) But when those factors do not benefit the car dealer—if injunctive relief is issued against it—then delay, complexity, and higher costs take precedence, and the buyer is subjected to another level of arbitral review—by three arbitrators this time—denying the weaker party of the benefits of arbitration.
3. Advance Payment of Fees and Costs on Appeal
As provided in the arbitration provision, if either party recovers nothing, it "may request a new arbitration under the rules of the arbitration organization by a three-arbitrator panel. The appealing party requesting new arbitration shall be responsible for the filing fee and other arbitration costs subject to a final determination by the arbitrators of a fair apportionment of costs." (Italics added.)
Yet the American Arbitration Association (AAA) rules do not mention arbitration costs where a consumer appeals an initial award to a three-member panel. Nor do they permit any kind of appeal, to a three-member panel or otherwise. (See AAA, Consumer Procedures <http://www.adr.org/ sp.asp?id=29466> [as of Nov. 23, 2011]; AAA, Consumer-Related Disputes Supplementary Procedures <http://www.adr.org/sp.asp?id=22014> [as of Nov. 23, 2011]; see also AAA, Commercial Arbitration Rules and Mediation Procedures (eff. June 1, 2009) <http://www.adr.org/sp.asp?id=36905> [as of Nov. 23, 2011].) And the appeal clauses in the Sale Contract require the appealing party to advance the fees and costs for both parties.
Because the arbitration provision leaves the buyer in the dark as to the amount to be paid in advance, creating the possibility that the buyer may have to advance unaffordable expenses, the provision discourages buyers from pursuing an appeal and enforcing their rights under the CLRA. Although the AAA consumer rules ensure that a consumer does not have to advance an exorbitant sum at the beginning of the single-arbitrator process, the rules, as noted, do not address or permit an appeal. (See AAA, Consumer Arbitration Costs <http://www.adr.org/sp.asp?id=22039> [as of Nov. 23, 2011]; AAA, Administrative Fee Waivers and Pro Bono Arbitrators <http://www.adr.org/sp.asp?id=22040> [as of Nov. 23, 2011].) The requirement that the appealing party pay the filing fee and arbitration costs of both parties in advance puts an unduly harsh burden on a consumer.
"In contrast, the [arbitration provision here does not indicate] . . . how this process is begun, or who makes the determination, or what criteria are utilized to decide if [costs] should be reduced or deferred. . . .
4. Remedies Exempt from Arbitration
The arbitration provision expressly exempts self-help remedies including repossession, which is perhaps the most significant remedy from the car dealer's perspective. The buyer has no effective self-help remedies against a car dealer, and none of the buyer's remedies is exempt. Yet one of the most important remedies to a consumer—injunctive relief—is subject to arbitration. While a buyer is likely to seek an injunction against a car dealer—10 of the 15 causes of action in this case do—we cannot conceive of a situation where the dealer would be requesting that type of relief against a buyer.
In Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846 [113 Cal.Rptr.2d 376], the plaintiffs obtained a reverse mortgage on their home. The loan agreement contained an arbitration clause requiring the arbitration of all controversies with the exception of self-help remedies, stating: "`[T]his Section does not limit [the lender's] right to foreclose against the Property (whether judicially or non-judicially by exercising [its] right of sale or otherwise), to exercise self-help remedies such as set-off, or to obtain . . . appointment of a receiver from any appropriate court, whether before, during
Finally, the requirement that the buyer seek injunctive relief from the arbitrator is inconsistent with the CLRA. As our Supreme Court has explained: "[T]he purpose of arbitration is to voluntarily resolve private disputes in an expeditious and efficient manner. . . . Parties to arbitration voluntarily trade the formal procedures and the opportunity for greater discovery and appellate review for `"the simplicity, informality, and expedition of arbitration."' . . .
"On the other hand, the evident purpose of the injunctive relief provision of the CLRA is not to resolve a private dispute but to remedy a public wrong. Whatever the individual motive of the party requesting injunctive relief, the benefits of granting injunctive relief by and large do not accrue to that party, but to the general public in danger of being victimized by the same deceptive practices as the plaintiff suffered. . . . In other words, the plaintiff in a CLRA damages action is playing the role of a bona fide private attorney general. . . .
D. Severance or Nonenforcement
Accordingly, we conclude the arbitration provision is procedurally and substantively unconscionable. The provision is permeated by unconscionability that cannot be removed through severance or restriction. The trial court properly denied the motion to compel arbitration.
The order is affirmed.
Johnson, J., concurred.
ROTHSCHILD, J., Concurring.
I agree that the arbitration agreement is unconscionable for the following reasons: First, it is procedurally unconscionable because it is a contract of adhesion. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1280 & fn. 11 [16 Cal.Rptr.3d 296].) Second, it is substantively unconscionable because (1) the provision making monetary awards of exactly $0 or more than $100,000 appealable is unfairly one sided,
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