On November 23, 2011, the Court of Appeal issued a new opinion on rehearing in Sanchez v. Valencia Holding Corp., ___ Cal.App.3d ___ (Nov. 23, 2011) (Second Appellate District, Division One). (See this blog post for a discussion of the original Sanchez opinion.) The opinion's holding is unchanged, but its discussion of Concepcion has been expanded somewhat, as this redline comparison shows:
Before applying Armendariz to the present case, we note that Concepcion, supra, 131 S.Ct. 1740, does not preclude the application of the Armendariz principlesunconscionability doctrine to determine whether an arbitration provision is unconscionableunenforceable. Concepcion disapproved the “Discover Bank rule,” stating: “In Discover Bank, the California Supreme Court applied [the doctrine of unconscionability] to class-action waivers in arbitration agreements and held as follows: [¶] ‘[W]hen the [class action] waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then . . . the waiver becomes in practice the exemption of the party “from responsibility for [its] own fraud, or willful injury to the person or property of another.” Under these circumstances, such waivers are unconscionable under California law and should not be enforced.’” (Concepcion, at p. 1746, italics added.) The court in Concepcion ultimately concluded that “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” (Id. at p. 1748, italics added.)
With the exception of the Discover Bank rule, the Courtcourt acknowledged in Concepcion that the doctrine of unconscionability is stillremains a basis for invalidating arbitration provisions. (Concepcion, at pp.: “The final phrase of [title 9, United States Codes, section 2] . . . permits arbitration agreements to be declared unenforceable ‘upon such grounds as exist at law or in equity for the revocation of any contract.’ This saving clause permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” (Concepcion, supra, 131 S.Ct. at p. 1746, 1747; seeitalics added; accord, Kanbar v. O’Melveny & Myers (N.D.Cal. 2011) 2011 U.S. Dist. Lexis 79447, pp. *15–*16, *23–*24, 2011 WL 2940690, pp. *6, *9.) Thus, Concepcion is inapplicable where, as here, we are not concerned with a class action waiver or a judicially imposed procedure that conflicts*6, *9; see In re Checking Account Overdraft Litigation (S.D.Fla. 2011) 2011 U.S. Dist. Lexis 118462, p. *46, 2011 WL 4454913, p. *4 [“Concepcion did not completely do away with unconscionability as a defense to the enforcement of arbitration agreements under the FAA”].) Significantly, in Rent-A-Center, West, Inc. v. Jackson (2010) ___ U.S. ___ [130 S.Ct. 2772], an employment case decided less than a year before Concepcion, the question before the court was whether an arbitrator or a court should decide whether the doctrine of unconscionability — where the arbitration agreement was allegedly too one-sided and overly favorable to the employer — precluded arbitration. (Id. at pp. 2780–2781.) Given the clear and unmistakable language authorizing the arbitrator to decide the “enforceability” of the arbitration agreement, the court held that the arbitrator should decide whether the agreement was unconscionable and therefore unenforceable.
Thus, Concepcion is inapplicable where, as here, we are not addressing the enforceability of a class action waiver or a judicially imposed procedure that is inconsistent with the arbitration provision and the purposes of the Federal Arbitration Act (FAA) (9 U.S.C. §§ 1–16). (See Concepcion, at pp. 1748–1753.)supra,131 S.Ct. at pp. 1748–1753.) Concepcion “concerns the preemption of unconscionability determinations for class action waivers in consumer cases[,] . . . specifically . . . with the rule enunciated in Discover Bank . . . .” (Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 499, italics added.) The unconscionability principles on which we rely govern all contracts, are not unique to arbitration agreements, and do not disfavor arbitration. (See Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1158–1159 & fn. 4; see also Concepcion, at p. 1747 [unconscionability is “a doctrine normally thought to be generally applicable” to all contracts but cannot be invoked to disfavor arbitration or applied based on uniqueness of arbitration]; id. at p. 1748 [FAA “preserves generally applicable contract defenses” to arbitration].)
Our conclusion today does not undermine the purpose of the FAA: “to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings” (Concepcion, supra, 131 S.Ct. at p. 1748, italics added) or, as otherwise phrased, the “‘enforcement of private agreements and encouragement of efficient and speedy dispute resolution’” (id. at p. 1749, italics added). On the contrary, as we discuss below (see pt. II.C., post), the arbitration provision itself sacrifices efficient and speedy resolution through the adoption of harsh, one-sided terms in an effort to ensure that the car dealer will be the prevailing party.
Slip op. at 12-14. I have not seen the rehearing petition, but it is safe to assume the petition asked the court to alter its analysis of Concepcion.
