Unconsionability | CALIFORNIA CLASS ACTION LAW

June 5, 2013

Arbitration Clause on Back of Pre-Printed Auto Purchase Contract Is Unconscionable

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Yesterday, in Vargas v. SAI Monrovia B, Inc., No. B237257, __ Cal. App. 4th __ (2d Dist. June 4, 2013), a putative class action, the Second District revisited its holding in Sanchez v. Valencia Holding Co., LLC, 201 Cal.App.4th 74 (2012), review granted March 21, 2012, S199119. In Sanchez the court held that a “Retail Installment Sale Contract” used to purchase an automobile is unconscionable and unenforceable. In Vargas, the court again concluded that the identical sale contract does not require the arbitration of disputes between a purchaser and a car dealer because it is permeated by unconscionability.

The arbitration provision, entitled, “ARBITRATION CLAUSE,” was on the back at the bottom of the page, outlined by a black box; the arbitration provision was the last provision in the Sale Contract concerning the purchase of the vehicle; a provision related to the assignment of the contract appeared below it. The buyers’ final signatures appeared near the bottom of the front side. The only signature line on the back was at the very bottom of the page; it required the seller’s signature to assign the contract to a third party.

Slip Op. at 3.

The court found that the arbitration provision satisfies the two elements of procedural unconscionability: oppression and surprise. Read the rest of this entry »

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March 19, 2013

California’s First District Invalidates Auto Dealer’s Arbitration Agreement Due to Lack of Mutuality

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The California Court of Appeal struck down an arbitration agreement by a car dealer defendant in a putative class action, rejecting an argument that an unconscionability analysis that focuses on the lack of mutuality in an arbitration contract violates Concepcion. Natalini v. Import Motor, Inc., 213 Cal. App. 4th 587 (1st Dist., mod. February 5, 2013).

Relying on the U.S. Supreme Court’s holding in AT & T Mobility LLC v. Concepcion, 563 U.S. –––– , 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), appellant car dealer argued that an “unconscionability analysis that focuses on the lack of mutuality or bilaterality in an arbitration provision is ‘an example of applying a generally applicable contract defense in a manner which disfavors arbitration.'” The First District declined to read Concepcion so broadly, and noted that:

Recent California and federal district court decisions addressing arbitration provisions very similar to that in the present case and in the identical car purchase context have not read Concepcion so broadly. (See Trompeter v. Ally Financial, Inc. (N.D.Cal., June 1, 2012, No. C–12–00392 CW) 2012 WL 1980894 [p. *8] [nonpub. opn.] ( Trompeter ); Smith v. Americredit Financial Services, Inc. (S.D.Cal., Mar. 12, 2012, No. 09cv1076 DMS (BLM)) 2012 WL 834784 [pp. *2–*4] ( Smith ); Lau v. Mercedes–Benz USA, LLC (N.D.Cal., Jan. 31, 2012, No. CV 11–1940 MEJ) 2012 WL 370557 [pp. *6–*7] ( Lau ); see also Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 804, fn. 18, 137 Cal.Rptr.3d 773.) Read the rest of this entry »

October 4, 2010

Second District Compels Arbitration of Individual Claims in a Class Action Where Arbitration Agreement Contained an Unenforceable Class Arbitration Waiver

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The Second District compelled a class action plaintiff to arbitrate his individual claims in Maiorano v. Professional Community Management, Inc., No. B220127, 2010 WL 3786721 (Cal. Ct. App. 2d Dist. Sept. 30, 2010). Defendant, Professional Community Management, Inc., appealed from an order denying its petition to compel arbitration of a putative class action filed by plaintiff, Ray A. Maiorano. Id. *1. The Second District held that “based solely on the parties’ agreement, we conclude they cannot be compelled to arbitrate on a class basis”, but it directed the trial court to compel arbitration of plaintiff’s individual claims. Id. The court reasoned that the “presence of a provision limiting arbitration to individual rather than joined or representative claims did not present a basis upon which the trial court could conclude the present arbitration agreement was permeated by an unlawful purpose.” Id. *4.

Background

Plaintiff brought a class action complaint alleging violations of statutory meal and rest breaks, wage reporting and overtime requirements, and unlawful and unfair business practices. Id. *2. Plaintiff also asserted a cause of action for penalties under the Labor Code Private Attorneys General Act of 2004–Labor Code sections 2698 and 2699. Id. Defendant filed a petition to compel arbitration. The trial court denied defendant’s petition, ruling that: Read the rest of this entry »

September 27, 2010

Northern District Denies Motion to Compel Arbitration Where Plaintiffs Sought Only Injunctive Relief Under Unfair Competition Law

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The United States District Court for the Northern District of California denied a motion to compel arbitration where plaintiffs sought only injunctive relief under the California Unfair Competition Law (“UCL”). Cardenas v. Americredit Financial Services Inc., No. C 09-04978 SBA, 2010 WL 3619851 (N.D. Cal. Sept. 13, 2010).

Plaintiffs allege that Defendant AmeriCredit Financial Services, Inc. (“AmeriCredit”), failed to provide Mr. Cardenas with proper notice of his rights in connection with the financing of his car, ostensibly in violation of California’s Unfair Competition Law (“UCL”), California Business and Professions Code § 17200. Id. *1. After plaintiff defaulted on his payments, AmeriCredit repossessed Cardenas’ vehicle. Id. *3. The vehicle was subsequently sold and on thereafter, AmeriCredit informed Cardenas that his car had been sold for $12,000, but that he still owed them a deficiency balance of $12,733.85 (i.e., the amount owed on his loan less the amount recovered from the sale of the car). Id. Mr. Cardenas paid only part of the deficiency balance, and AmeriCredit later reported Cardenas’ deficiency to credit bureaus. Id. Read the rest of this entry »

Category: Unconsionability