In 2011, I blogged in this space about the US Supreme Court ruling in the AT&T Mobility v. Concepcion case, in which the court upheld the arbitration clause in AT&T’s customer agreement requiring the consumer to waive his or her right to take part in a class action.
Unfortunately for consumers, but not surprisingly, the trend continues.
Recently, the California Supreme Court reversed a lower court’s ruling that threw out an arbitration clause, citing the AT&T v. Concepcion SCOTUS ruling.
Gil Sanchez had purchased a Mercedes Benz automobile from Valencia Holding Company. The sales contract included an arbitration clause requiring that all claims and disputes be handled in arbitration, and not in court. The car began having troubles, and Mr. Sanchez brought suit against Valencia, accusing it of violating state consumer-protection laws in connection with its representations about the car’s condition, as well as disputes over certain fees and disclosures. Valencia cited the sales agreement and moved to compel arbitration. Sanchez argued that that the arbitration clause was unenforceable based on California’s Consumer Legal Remedies Act, which forbids contracts from forcing consumers to give up their rights to bring class actions. Sanchez pointed out that the sales contract read that if the arbitration clause was unenforceable, the entire contract was unenforceable. Therefore, Sanchez argued, the entire sales contract was unenforceable.
The trial court and the appeals court ruled in favor of Sanchez. The appeals court said the clause was “unconscionable” as it was unfairly one-sided in Valencia’s favor.
Valencia appealed, and unfortunately, the California Supreme Court reversed the lower court’s ruling, stating that whether an arbitration clause is unconscionable is “highly dependent on context.”
Writing for the majority, Justice Goodwin Liu stated,”Commerce depends on the enforceability, in most instances, of a duly executed written contract. A party cannot avoid a contractual obligation merely by complaining that the deal, in retrospect, was unfair or a bad bargain.”
Photo Credit: Ganna Todica