Last week, on February 19, 2014, the Supreme Court ordered supplemental briefing in Sanchez v. Valencia Holding Co., No. S199119.
This is the case in which the Court of Appeal declined to enforce a no-class-action arbitration clause in a consumer contract, notwithstanding Concepcion. Sanchez v. Valencia Holding Co., LLC, 201 Cal.App.4th 74 (2011). The Court of Appeal reasoned that ordinary state-law unconscionability principles were preserved by Concepcion.
This is the issue on review, as stated on the Supreme Court's docket:
Does the Federal Arbitration Act (9 U.S.C. § 2), as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U. S. __, 131 S.Ct. 1740, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?
The supplemental briefing order reads as follows:
The parties and interested persons and entities are invited to file supplemental briefing on the following questions. In formulating the standard for determining whether a contract or contract term is substantively unconscionable, this court has used a variety of terms, including "unreasonably favorable" to one party (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145); "so one-sided as to shock the conscience" (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (2012) 55 Cal.4th 223, 246); "unfairly one-sided" (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071-1072; "overly harsh" (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114; and "unduly oppressive" (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 925). Should the court use only one of these formulations in describing the test for substantive unconscionability and, if so, which one? Are there any terms the court should not use? Is there a formulation not included among those above that the court should use? What differences, if any, exist among these formulations either facially or as applied?
The parties are directed to serve and file simultaneous letter briefs on this issue on or before March 12, 2014. If any party or existing amicus curiae chooses to reply to the points raised in the supplemental briefs, the supplemental reply is to be served and filed on or before March 19, 2014.
In addition, any interested person or entity is invited to serve and file an application to file an amicus curiae brief, and that brief itself, by March 12, 2014. Any party may serve and file a reply to such a brief on or before March 19, 2014.
That's a tall order for a brief due in three weeks. It is plausible that the Court has decided that the FAA, as construed in Concepcion, does not preempt generally-applicable unconscionability principles, but that the Court wants to refine those princples for the lower courts on remand. Or maybe the Court wants to clarify its unconscionability jurisprudence before considering whether the application of that jurisprudence in the context of an arbitration clause interferes with the purpose of the FAA. It's tough to read the tea leaves here.
I would expect that the matter will be scheduled for oral argument shortly after the supplemental briefing is completed.