Much has been written and discussed regarding whether or not arbitration provisions are enforceable in consumer adhesive contracts. In the case entitled California Supreme Court in Sanchez v. Valencia Holding Company, LLC (8/3/15) — Cal.4th —, the Court found that an adhesive car sales contract arbitration provision was valid and enforceable because it was not substantively unconscionable. The Supreme Court also found that the California Consumer Legal Remedies Act (CLRA) provision that provides a consumer’s waiver of his or her right to bring a class action “unenforceable and void” is preempted “insofar as it bars class waivers in arbitration agreements covered by the [Federal Arbitration Act] FAA.”
In Sanchez, the contract provided that an award could not be appealed unless: it were for $0; it exceeded $100,000; or it granted a request for injunctive relief. The Supreme Court held that this provision was not substantively unconscionable since the right to appeal awards of $0 or more than $100,000 is not “significantly more beneficial to the seller,” the party drafting the contract and, given the “broad impact that injunctive relief may have on the car seller’s business,” it would not be unreasonable to allow the seller to appeal an award granting injunctive relief.
The contract also provided that the seller would advance the consumer’s arbitration fees up to $2,500, subject to apportionment by the arbitrator, and the appealing party would pay the appellate fees and costs, subject to apportionment by the appellate panel. The Supreme Could concluded that this provision would be unconscionable in the context of unwaivable statutory employment rights, but California allows arbitration fees and costs to be charged to consumers, except those who are indigent. Consequently, a consumer attacking this clause would need to present evidence of his inability to pay these fees to find the provision unconscionable.
This decision permits new seller protections in consumer contract arbitration provisions to avoid prolonged litigation and class actions. We recommend that you promptly seek legal counsel to help re-write and formulate the language of your class action waivers and alternative dispute resolution provisions to take advantage of the opportunities presented by the California Supreme Court’s decision in Sanchez.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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