Issues and Cases

California courts undermine arbitration agreements in consumer contracts

Sanchez v. Valencia Holding Co., LLC

Contact: Deborah J. La Fetra

Status: Amicus brief filed in the California Supreme Court on September 25, 2012. Supplemental amicus brief due to the court on Mar. 12, 2014.

Summary:
Does the Federal Arbitration Act, as interpreted in AT&T Mobility LLC v. Concepcion, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?

As amicus in this case, PLF argues that it does. In Concepcion, the U. S. Supreme Court specifically took the California Supreme Court to task for its hostility to arbitration such that it was constantly invalidating arbitration contracts on grounds of unconscionability that it applied to no other type of contract. California courts continue to seek out ways to invalidate arbitration contracts in contravention of the Federal Arbitration Act.

In this case, a car buyer, purporting to represent a class of consumers, sued a dealership alleging violations of a variety of consumer protection laws, including the Consumers Legal Remedies Act (CLRA), and the Unfair Competition Law (UCL). The sales contract contained a class action waiver in its arbitration provision, coupled with a provision that if the waiver were invalidated, the entire arbitration provision would not be enforced. Citing the latter provision, the trial court denied a dealer’s motion to compel arbitration. The appellate court affirmed on different grounds, holding the arbitration provision as a whole to be unconscionable. The California Supreme Court agreed to review the case.

 

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