Title: Sanchez v. Valencia Holding Co., LLC
Citation: N/A
Docket Number: S199119
State: California
Issuer: California Supreme Court
Date: August 3, 2015

Filed 8/3/15 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
GIL SANCHEZ, 
) 
 
 
) 
 
Plaintiff and Respondent, 
) 
 
 
) 
S199119 
 
v. 
) 
 
 
) 
Ct.App. 2/1 B228027 
VALENCIA HOLDING COMPANY, LLC, ) 
 
) 
Los Angeles County 
 
Defendant and Appellant. 
) 
Super. Ct. No. BC433634 
 
____________________________________) 
 
The automobile sales contract in the present case has an arbitration 
agreement that provides, among other things, that arbitral awards of $0 or over 
$100,000 as well as grants but not denials of injunctive relief may be appealed to a 
panel of arbitrators.  The arbitration agreement also has provisions that require the 
party appealing the award to front the costs of the appeal, preserve the right of the 
parties to go to small claims court and to pursue self-help remedies, and waive the 
right to class action litigation or arbitration.  The agreement further provides that if 
the class waiver is deemed unenforceable, then the entire arbitration agreement 
shall be unenforceable. 
In this dispute over the sale of a car, plaintiff Gil Sanchez filed a class 
action lawsuit against defendant Valencia Holding Company (Valencia), and 
Valencia moved to compel arbitration.  The trial court denied the motion, finding 
the class waiver and, in turn, the entire arbitration agreement unenforceable.  
Subsequently, the United States Supreme Court held in AT&T Mobility LLC v. 
2 
Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740] (Concepcion) that the Federal 
Arbitration Act (FAA) preempts California‘s unconscionability rule prohibiting 
class waivers in consumer arbitration agreements.  In deciding Valencia‘s appeal 
from the trial court‘s denial of the motion to compel arbitration, the Court of 
Appeal declined to address whether the class waiver was enforceable and instead 
held that the arbitration appeal provision and the arbitration agreement as a whole 
were unconscionably one-sided.  Valencia sought our review, relying on 
Concepcion. 
While circumscribing the ability of states to regulate the fairness of 
arbitration agreements, Concepcion reaffirmed that the FAA does not preempt 
― ‗generally applicable contract defenses, such as fraud, duress, or 
unconscionability.‘ ‖  (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at 
p. 1746].)  Under the FAA, these defenses may provide grounds for invalidating 
an arbitration agreement if they are enforced evenhandedly and do not ―interfere[] 
with fundamental attributes of arbitration.‖  (Concepcion, at p. __ [131 S.Ct. at 
p. 1748]; see Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143–
1145 (we will use common name, Sonic II).)  In the present case, we hold that 
Concepcion requires enforcement of the class waiver but does not limit the 
unconscionability rules applicable to other provisions of the arbitration agreement.  
Applying those rules, we agree with Valencia that the Court of Appeal erred as a 
matter of state law in finding the agreement unconscionable.  Accordingly, we 
reverse the judgment below. 
I. 
Plaintiff Gil Sanchez filed this class action in March 2010.  Two months 
later, Sanchez filed a first amended complaint.  The complaint arises from 
Sanchez‘s purchase of a 2006 ―preowned‖ Mercedes-Benz S500V in 2008 for 
$53,498.60.  Sanchez alleged that Valencia violated the Consumer Legal 
3 
Remedies Act (CLRA) (Civ. Code, §§ 1750–1784) by making false 
representations about the condition of the automobile.  Sanchez also alleged that 
Valencia violated several other California laws by (1) failing to separately itemize 
the amount of the down payment that is deferred to a date after the execution of 
the sale contract, (2) failing to distinguish registration, transfer, and titling fees 
from license fees, (3) charging the optional Department of Motor Vehicles 
electronic filing fee without discussing it or asking if he wanted to pay it, 
(4) charging new tire fees for used tires, and (5) requiring him to pay $3,700 to 
have the vehicle certified so he could qualify for the 4.99 percent interest rate, 
when that payment was actually for an optional extended warranty unrelated to the 
interest rate.  Sanchez alleged violations of the Automobile Sales Finance Act 
(Civ. Code, §§ 2981–2984.6), the unfair competition law (UCL) (Bus. & Prof. 
Code, §§ 17200–17210), the Song-Beverly Consumer Warranty Act (Civ. Code, 
§§ 1790–1795.8), and Public Resources Code section 42885. 
The complaint further alleged that a class action was appropriate based on 
the large number of putative class members who have suffered similar violations, 
the predominance of common questions of law and fact, the typicality of the 
claims, and the superiority and benefits of class litigation.  He proposed four 
distinct classes based on the different types of violations Valencia allegedly 
committed. 
Valencia filed a motion to compel arbitration pursuant to an arbitration 
clause in the sale contract that authorized either party to have any dispute between 
the parties decided by arbitration.  The arbitration clause had a class action waiver:  
―If a dispute is arbitrated, you will give up your right to participate as a class 
representative or class member on any class claim you may have against us 
including any right to class arbitration or any consolidation of individual 
arbitrations.‖ 
4 
The arbitration clause further provided:  ―Arbitrators shall be attorneys or 
retired judges and shall be selected pursuant to the applicable rules.  The arbitrator 
shall apply governing substantive law in making an award.  The arbitration 
hearing shall be conducted in the federal district in which you reside . . . .  We will 
advance your filing, administration, service or case management fee and your 
arbitrator or hearing fee all up to a maximum of $2500, which may be reimbursed 
by decision of the arbitrator at the arbitrator‘s discretion.  Each party shall be 
responsible for its own attorney, expert and other fees, unless awarded by the 
arbitrator under applicable law. . . .  Arbitrator‘s award shall be final and binding 
on all parties, except that in the event the arbitrator‘s award for a party is $0 or 
against a party is in excess of $100,000, or includes an award of injunctive relief 
against a party, that party may request a new arbitration under the rules of the 
arbitration organization by a three-arbitrator panel.  The appealing party 
requesting new arbitration shall be responsible for the filing fee and other 
arbitration costs subject to a final determination by the arbitrators of a fair 
apportionment of costs.  Any arbitration under this Arbitration Clause shall be 
governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state 
law concerning arbitration. 
―You and we retain any rights to self-help remedies, such as repossession.  
You and we retain the right to seek remedies in small claims court for disputes or 
claims within that court‘s jurisdiction, unless such action is transferred, removed 
or appealed to a different court.  Neither you nor we waive the right to arbitrate by 
using self-help remedies or filing suit.  Any court having jurisdiction may enter 
judgment on the arbitrator‘s award.  This Arbitration Clause shall survive any 
termination, payoff or transfer of this contract.  If any part of this Arbitration 
Clause, other than waivers of class action rights, is deemed or found to be 
unenforceable for any reason, the remainder shall remain enforceable.  If a waiver 
5 
of class action rights is deemed or found to be unenforceable for any reason in a 
case in which class action allegations have been made, the remainder of this 
Arbitration Clause shall be unenforceable.‖   
As the Court of Appeal summarized:  ―The Sale Contract is a preprinted 
document consisting of one page, 8 1/2 inches wide and 26 inches long.  There are 
provisions on both sides that occupy the entire document, leaving little in the way 
of margins.  Sanchez signed or initialed the front in eight places, each related to a 
different provision.  No signatures, initials, or other handwriting appears on the 
back.  The arbitration provision, entitled ‗ARBITRATION CLAUSE,‘ is on the 
back at the bottom of the page, outlined by a black box.  It is the last provision of 
the Sale Contract concerning the purchase transaction; a provision related to the 
assignment of the contract appears below it.  The buyer‘s final signature appears 
near the bottom on the front side.‖ 
In opposing arbitration, Sanchez submitted a declaration that said:  ―When I 
signed the documents related to my purchase of the Subject Vehicle, I was 
presented with a stack of documents, and was simply told by the Dealership‘s 
employee where to sign and/or initial each one.  All of the documents (including 
the purchase contracts) were pre-printed form documents.  When I signed the 
documents, I was not given an opportunity to read any of the documents, nor was I 
given an opportunity to negotiate any of the pre-printed terms.  The documents 
were presented to me on a take-it-or-leave-it basis, to either sign them or not buy 
the car. . . .  There was no question of choice on my part or of my being able to 
‗negotiate‘ anything.  And I had no reason to suspect that hidden on the back of 
the contracts . . . was a section that prohibited me from being able to sue the 
Dealership in court if I had a problem. 
―. . . When I signed the purchase contract and related documents, the 
Dealership did not ask me if I was willing to arbitrate any disputes with it, did not 
6 
tell me that there was an ‗arbitration clause‘ on the back side of the purchase 
contract, and I did not see any such clause before I signed the documents.  The 
Dealership did not explain to me what an arbitration clause was.  I was not given 
any opportunity at any time during my transaction with [the] Dealership to 
negotiate whether or not I would agree to arbitrate any potential disputes.  I was 
not given an option whether to sign a contract with an arbitration clause or one 
without.‖  
The trial court denied the motion to compel arbitration.  It held the class 
waiver unenforceable on the ground that the CLRA expressly provides for class 
action litigation and declares the right to a class action to be unwaivable.  (See 
Civ. Code, §§ 1751, 1781.)  Because the arbitration clause provided that ―[i]f a 
waiver of class action rights is deemed or found to be unenforceable for any 
reason in a case in which class action allegations have been made, the remainder 
of this Arbitration Clause shall be unenforceable,‖ the court denied the motion to 
compel arbitration. 
After the trial court‘s decision but before the Court of Appeal‘s opinion in 
this case was filed, the United States Supreme Court in Concepcion, supra, 563 
U.S. __ [131 S.Ct. 1740] held that the FAA requires enforcement of class waivers 
in consumer arbitration agreements and preempts state law to the contrary.  The 
Court of Appeal declined to decide whether the class waiver at issue was 
enforceable and instead affirmed the trial court‘s decision on different grounds.  
First, the court concluded that the agreement contained elements of procedural 
unconscionability, both oppression and surprise.  Second, the court held that four 
provisions made the agreement unfairly one-sided in favor of Valencia.  ―First, a 
party who loses before the single arbitrator may appeal to a panel of three 
arbitrators if the award exceeds $100,000.  Second, an appeal is permitted if the 
award includes injunctive relief.  Third, the appealing party must pay, in advance, 
7 
‗the filing fee and other arbitration costs subject to a final determination by the 
arbitrators of a fair apportionment of costs.‘  Fourth, the provision exempts 
repossession from arbitration while requiring that a request for injunctive relief be 
submitted to arbitration.  Although these provisions may appear neutral on their 
face, they have the effect of placing an unduly oppressive burden on the buyer.‖  
We granted review. 
II. 
To aid understanding of the issues in this case, we begin by discussing 
general principles of unconscionability.  ― ‗One common formulation of 
unconscionability is that it refers to ― ‗an absence of meaningful choice on the part 
of one of the parties together with contract terms which are unreasonably 
favorable to the other party.‘ ‖  [Citation.]  As that formulation implicitly 
recognizes, the doctrine of unconscionability has both a procedural and a 
substantive element, the former focusing on oppression or surprise due to unequal 
bargaining power, the latter on overly harsh or one-sided results.‘ ‖  (Sonic II, 
supra, 57 Cal.4th at p. 1133.) 
― ‗The prevailing view is that [procedural and substantive 
unconscionability] must both be present in order for a court to exercise its 
discretion to refuse to enforce a contract or clause under the doctrine of 
unconscionability.‘  [Citation.]  But they need not be present in the same degree.  
‗Essentially a sliding scale is invoked which disregards the regularity of the 
procedural process of the contract formation, that creates the terms, in proportion 
to the greater harshness or unreasonableness of the substantive terms themselves.‘  
[Citations.]  In other words, the more substantively oppressive the contract term, 
the less evidence of procedural unconscionability is required to come to the 
conclusion that the term is unenforceable, and vice versa.‖  (Armendariz v. 
Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114 
8 
(Armendariz).)  Courts may find a contract as a whole ―or any clause of the 
contrat‖ to be unconscionable.  (Civ. Code, § 1670.5, subd. (a).) 
As we stated in Sonic II:  ―The unconscionability doctrine ensures that 
contracts, particularly contracts of adhesion, do not impose terms that have been 
variously described as ‗ ― ‗overly harsh‘ ‖ ‘ (Stirlen v. Supercuts, Inc. (1997) 51 
Cal.App.4th 1519, 1532), ‗ ―unduly oppressive‖ ‘ (Perdue v. Crocker National 
Bank (1985) 38 Cal.3d 913, 925 (Perdue)), ‗ ―so one-sided as to ‗shock the 
conscience‘ ‖ ‘ (Pinnacle Museum Tower Assn. v. Pinnacle Market Development 
(2012) 55 Cal.4th 223, 246 (Pinnacle)), or ‗unfairly one-sided‘ (Little [v. Auto 
Stiegler, Inc. (2003)] 29 Cal.4th [1064], 1071).  All of these formulations point to 
the central idea that unconscionability doctrine is concerned not with ‗a simple 
old-fashioned bad bargain‘ (Schnuerle v. Insight Communications Co. (Ky. 2012) 
376 S.W.3d 561, 575 (Schnuerle)), but with terms that are ‗unreasonably favorable 
to the more powerful party‘ (8 Williston on Contracts (4th ed. 2010) § 18.10, 
p. 91).  These include ‗terms that impair the integrity of the bargaining process or 
otherwise contravene the public interest or public policy; terms (usually of an 
adhesion or boilerplate nature) that attempt to alter in an impermissible manner 
fundamental duties otherwise imposed by the law, fine-print terms, or provisions 
that seek to negate the reasonable expectations of the nondrafting party, or 
unreasonably and unexpectedly harsh terms having to do with price or other 
central aspects of the transaction.‘  (Ibid.)‖  (Sonic II, supra, 57 Cal.4th at 
p. 1145.)  Because unconscionability is a contract defense, the party asserting the 
defense bears the burden of proof.  (Id. at p. 1148.) 
We further observed in Sonic II, and reaffirm today, that ―an examination 
of the case law does not indicate that ‗shock the conscience‘ is a different standard 
in practice than other formulations or that it is the one true, authoritative standard 
for substantive unconscionability, exclusive of all others.‖  (Sonic II, supra, 57 
9 
Cal.4th at p. 1159.)  Nor do we see any conceptual difference among these 
formulations.  Rather, ―courts, including ours, have used various nonexclusive 
formulations to capture the notion that unconscionability requires a substantial 
degree of unfairness beyond ‘a simple old-fashioned bad bargain.’ ‖  (Id. at 
p. 1160, italics added.)  This latter qualification is important.  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.  Not all one-sided contract provisions are 
unconscionable; hence the various intensifiers in our formulations:  ―overly 
harsh,‖ ―unduly oppressive,‖ ―unreasonably favorable.‖  (See Pinnacle, supra, 55 
Cal.4th at p. 246 [―A contract term is not substantively unconscionable when it 
merely gives one side a greater benefit . . . .‖].)  We clarify today that these 
formulations, used throughout our case law, all mean the same thing. 
An evaluation of unconscionability is highly dependent on context.  (See 
Williams v. Walker-Thomas Furniture Co. (D.C. Cir. 1965) 350 F.2d 445, 450 
[―The test is not simple, nor can it be mechanically applied.‖].)  The doctrine often 
requires inquiry into the ―commercial setting, purpose, and effect‖ of the contract 
or contract provision.  (Civ. Code, § 1670.5, subd. (b); accord, Sonic II, supra, 57 
Cal.4th at pp. 1147–1148; Walker-Thomas Furniture, at p. 450 [unconscionability 
must ―be considered ‗in the light of the general commercial background and the 
commercial needs of the particular trade or case‘ ‖].)  As we have recognized, ― ‗a 
contract can provide a ―margin of safety‖ that provides the party with superior 
bargaining strength a type of extra protection for which it has a legitimate 
commercial need without being unconscionable.‘ ‖  (Armendariz, supra, 24 
Cal.4th at p. 117; see Walker-Thomas Furniture, at p. 450 [―where no meaningful 
choice was exercised upon entering the contract,‖ the test is ―whether the terms are 
‗so extreme as to appear unconscionable according to the mores and business 
10 
practices of the time and place‘ ‖].)  And, as noted, the substantive unfairness of 
the terms must be considered in light of any procedural unconscionability.  The 
ultimate issue in every case is whether the terms of the contract are sufficiently 
unfair, in view of all relevant circumstances, that a court should withhold 
enforcement. 
Moreover, our unconscionability standard is, as it must be, the same for 
arbitration and nonarbitration agreements.  (Concepcion, supra, 563 U.S. at p. __ 
[131 S.Ct. at p. 1747].)  Of course, unconscionability can manifest itself in 
different ways, depending on the contract term at issue.  (See, e.g., Washington 
Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 916–917 [choice of law 
clause]); City of Santa Barbara v. Superior Court (2007) 41 Cal.4th 747, 777 
[waivers of liability provision]); Moreno v. Sanchez (2003) 106 Cal.App.4th 1415, 
1434 [statutes of limitation provision]; Smith, Valentino & Smith, Inc. v. Superior 
Court (1976) 17 Cal.3d 491, 495–496 [forum selection clause].)  But the 
application of unconscionability doctrine to an arbitration clause must proceed 
from general principles that apply to any contract clause.  In particular, the 
standard for substantive unconscionability — the requisite degree of unfairness 
beyond merely a bad bargain — must be as rigorous and demanding for arbitration 
clauses as for any contract clause. 
Valencia broadly contends that under Concepcion, ―absent exceptional 
circumstances, states –– either judicially or legislatively –– may not, under the 
guise of unconscionability, judge the supposed fairness of the parties‘ agreed 
arbitration process.‖  In support of that assertion, Valencia cites ―the examples of 
arbitration-process unconscionability evaluations (ranging from discovery to 
evidentiary requirements) that the FAA precludes.‖  (See Concepcion, supra, 563 
U.S. at p. __ [131 S.Ct. at p. 1747].) 
11 
We recently considered the effect of Concepcion on state law 
unconscionability doctrine and observed that ―after Concepcion, unconscionability 
remains a valid defense to a petition to compel arbitration.‖  (Sonic II, supra, 57 
Cal.4th at p. 1142, citing Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at 
p. 1746].)  ―What is new,‖ we said, ―is that Concepcion clarifies the limits the 
FAA places on state unconscionability rules as they pertain to arbitration 
agreements.  It is well established that such rules must not facially discriminate 
against arbitration and must be enforced evenhandedly.  Concepcion goes further 
to make clear that such rules, even when facially nondiscriminatory, must not 
disfavor arbitration as applied by imposing procedural requirements that 
‗interfere[] with fundamental attributes of arbitration,‘ especially its ‗ ―lower costs, 
greater efficiency and speed, and the ability to choose expert adjudicators to 
resolve specialized disputes.‖  [Citation.]‘  (Concepcion, supra, 563 U.S. at pp. __, 
__ [131 S.Ct.at pp. 1748, 1751].)‖  (Sonic II, at p. 1143.) 
We proceeded to give examples of ―state law rules that do not ‗interfere[] 
with fundamental attributes of arbitration‘ ‖ and thus ―do not implicate 
Concepcion‘s limits on state unconscionability rules.‖  (Sonic II, supra, 57 Cal.4th 
at p. 1143.)  ―In Little, for example, we found unconscionable a $50,000 threshold 
for an arbitration appeal that decidedly favored defendants in employment contract 
disputes.  (Little [v. Auto Stiegler, Inc.], supra, 29 Cal.4th at pp. 1071–1074.)‖  (Id. 
at p. 1144.)  As our reference to Little suggests, Concepcion does not immunize 
adhesive arbitration processes from state law unconscionability principles as 
broadly as Valencia contends. 
Justice Chin says allowing multiple formulations to capture the notion of 
substantive unconscionability will undermine predictability and will subject 
arbitration and nonarbitration provisions of a contract to different standards.  
(Conc. & dis. opn., post, at pp. 14–15.)  But we have just made clear that all the 
12 
formulations ―mean the same thing‖ and ―must be as rigorous and demanding for 
arbitration clauses as for any contract clause.‖  (Ante, at pp. 9, 10.)  It seems the 
main reason Justice Chin favors ―shock the conscience‖ as the sole formulation is 
that he believes it is a higher standard than the alternatives.  (Conc. & dis. opn., 
post, at p. 14.)  Adopting his approach, however, would call into question a 
number of cases where we have found substantive unconscionability under other 
formulations.  (See, e.g., Little, supra, 29 Cal.4th at p. 1074 [―unfairly one-
sided‖]; Armendariz, supra, 24 Cal.4th at p. 114 [― ‗ ―overly harsh‖ ‘ or ‗ ―one-
sided‖ ‘ ‖]; Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 820 (Scissor-Tail) 
[―unduly oppressive‖].)  We see no reason to disturb our precedents, and we reject 
the view that ―shock the conscience‖ is a higher standard. 
We turn now to Valencia‘s alternative argument that the arbitration 
agreement in this case was not unconscionable under state law. 
III. 
Valencia does not dispute that the contract was adhesive; at oral argument, 
Valencia said the contract ―meets the definition of adhesive in California.‖  
Instead, Valencia argues that ―adhesion contracts are not per se procedurally 
unconscionable,‖ noting that the car was a luxury item and that Sanchez was able 
to negotiate the price.  Although Valencia says Sanchez has not shown he was 
unable to negotiate the arbitration provision (conc. & dis. opn., ante, at p. 12), 
Valencia does not contend in this court that Sanchez could have opted out of the 
arbitration agreement or that he could have negotiated a sales contract without an 
arbitration agreement.  Indeed, Valencia acknowledged at oral argument that 
―[m]any people who are not legally trained do not understand the vast majority of 
what is in this contract‖ and that ―if you asked that dealer about everything other 
than the negotiable terms of price and interest, they probably don‘t understand that 
either . . . .‖  Moreover, in the context of consumer contracts, we have never 
13 
required, as a prerequisite to finding procedural unconscionability, that the 
complaining party show it tried to negotiate standardized contract provisions.  
(See, e.g., Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 160, 
disapproved of on other grounds in Concepcion, supra, 563 U.S. __ [131 S.Ct. 
1740] [cardholder agreement in ―bill stuffer‖ had an element of procedural 
unconscionability]; Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 924–
925 [signature card ―offered to the customer without negotiation is a classic 
example of the contract of adhesion‖].)  And although Valencia argues that 90 
percent of the standardized contract was mandated by statute, it does not contend 
that the arbitration agreement was so mandated. 
As in many consumer transactions involving standard form contracts, 
Sanchez apparently did not read the entirety of his contract, including the 
arbitration clause.  (See Consumer Financial Protection Bur., Arbitration Study:  
Rep. to Congress Pursuant to the Dodd-Frank Act (Mar. 2015) § 3, p. 19 [fewer 
than 7 percent of credit card consumers subject to predispute arbitration clauses 
knew that they could not sue in court]; cf. Madden v. Kaiser Foundation Hospitals 
(1976) 17 Cal.3d 699, 710–711 [applying ―the general rule that one who assents to 
a contract is bound by its provisions and cannot complain of unfamiliarity with 
[its] language‖ to a nonadhesive health care contract negotiated by the Board of 
Administration of the State Employees Retirement System on the plaintiff‘s 
behalf].)  
On the other hand, Valencia was under no obligation to highlight the 
arbitration clause of its contract, nor was it required to specifically call that clause 
to Sanchez‘s attention.  Any state law imposing such an obligation would be 
preempted by the FAA.  (See Doctor’s Associates, Inc. v. Casarotto (1996) 517 
U.S. 681, 684, 687–688 [holding state statute requiring arbitration clause to be in 
underlined capital letters on the first page of a contract is preempted]; but cf. 
14 
Concepcion, supra, 563 U.S. at pp. __, fn. 6 [131 S.Ct. at p. 1750, fn. 6] [―States 
remain free to take steps addressing the concerns that attend contracts of 
adhesion—for example, requiring class-action-waiver provisions in adhesive 
arbitration agreements to be highlighted.‖].)  Furthermore, we have held that even 
when a customer is assured it is not necessary to read a standard form contract 
with an arbitration clause, ―it is generally unreasonable, in reliance on such 
assurances, to neglect to read a written contract before signing it.‖  (Rosenthal v. 
Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 424.) 
Here the adhesive nature of the contract is sufficient to establish some 
degree of procedural unconscionability.  Yet ―a finding of procedural 
unconscionability does not mean that a contract will not be enforced, but rather 
that courts will scrutinize the substantive terms of the contract to ensure they are 
not manifestly unfair or one-sided.‖  (Gentry, supra, 42 Cal.4th at p. 469.)  We 
now address each of Sanchez‘s claims of substantive unconscionability. 
A. 
The arbitration agreement in this case provides that an arbitrator‘s award 
―shall be final and binding on all parties, except that in the event the arbitrator‘s 
award for a party is $0 or against a party is in excess of $100,000, or includes an 
award of injunctive relief against a party, that party may request a new arbitration 
under the rules of the arbitration organization by a three-arbitrator panel.‖  
Valencia challenges the Court of Appeal‘s holding that this provision was 
unreasonably one-sided and unenforceable. 
In Little, we unanimously found unconscionable an employment contract 
provision that permitted an appeal to a second arbitrator only if the arbitral award 
was greater than $50,000.  (Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at 
p. 1073 (Little); id. at p. 1085 (conc. & dis. opn. of Baxter, J.); id. at p. 1089 (conc. 
& dis. opn. of Brown, J.).)  In so concluding, we discussed with approval two 
15 
pertinent Court of Appeal cases.  In Beynon v. Garden Grove Medical Group 
(1980) 100 Cal.App.3d 698, 706 (Beynon), the court found unconscionable a 
provision of a mandatory arbitration agreement between a medical group and a 
patient that authorized the medical group, but not the patient, to reject the first 
arbitration award and submit the dispute to a second arbitration panel.  In Saika v. 
Gold (1996) 49 Cal.App.4th 1074 (Saika), the court found unconscionable a 
provision in a doctor-patient agreement that allowed a party to request a trial de 
novo in superior court when the award was over $25,000.  ―The [Saika] court 
rejected the doctor‘s argument that the case was distinguishable from Beynon 
because the challenged arbitration provision permitted either party to request a 
trial de novo if the award exceeded the stated amount.  ‗[I]n the vernacular of late 
20th century America, let us ―get real.‖  As a practical matter, the benefit which 
the trial de novo clause confers on patients is nothing more than a chimera.  The 
odds that an award will both (a) clear the $25,000 threshold but (b) still be so low 
that the patient would want to have a trial de novo are so small as to be negligible.  
Unless we are to assume that arbitrators in medical malpractice cases regularly and 
capriciously make awards substantially below what justice requires –– and that is 
an assumption which we will not indulge –– the cases where the trial de novo 
clause could possibly benefit the patient are going to be rare indeed.‘ ‖  (Little, at 
pp. 1072–1073, quoting Saika, at p. 1080.) 
The employer in Little attempted to distinguish these cases on the ground 
that ―an arbitration appeal is less objectionable than a second arbitration, as in 
Benyon, or a trial de novo, as in Saika, because it is not permitting a wholly new 
proceeding, making the first arbitration illusory, but only permitting limited 
appellate review of the arbitral award.‖  (Little, supra, 29 Cal.4th at pp. 1073–
1074.)  Rejecting this argument, we said:  ―We fail to perceive a significant 
16 
difference.  Each of these provisions is geared toward giving the arbitral defendant 
a substantial opportunity to overturn a sizable arbitration award.‖  (Id. at p. 1074.) 
Valencia argues that the present agreement is distinguishable from Little in 
three respects.  First, it provides that a party who is awarded nothing may appeal.  
Second, the upper threshold for an appeal is $100,000 instead of $50,000.  Third, 
this is an auto sales agreement, not an employment contract.  According to 
Valencia, because the purchase price of an automobile averages around $30,000, 
the vast majority of awards are below $100,000, in contrast to typically greater 
awards in employment cases.  (See, e.g., Roitz v. Coldwell Banker Residential 
Brothers (1998) 62 Cal.App.4th 716, 721, 726 [upholding a $260,000 arbitral 
award for wrongful termination].)  Thus, Valencia contends, both an award of $0 
and an award greater than $100,000 are outliers in disputes between automobile 
buyers and sellers, so the appeal thresholds are not significantly more beneficial to 
the seller, who is likely to be the defendant, than to the buyer, who is likely to be 
the plaintiff. 
We agree with Valencia that the appeal threshold provision does not, on its 
face, obviously favor the drafting party.  Assuming, as the parties do, the likely 
scenario of the buyer as plaintiff and the seller as defendant, the unavailability of 
an appeal from an award that is greater than $0 but not greater than $100,000 
means that the buyer may not appeal from a non-$0 award that he or she believes 
to be too small, nor may the seller appeal from a quite substantial award (up to 
$100,000) that it believes to be too big.  It may be reasonable to assume that the 
ability to appeal a $0 award will favor the buyer, while the ability to appeal a 
$100,000 or greater award will favor the seller.  But nothing in the record indicates 
that the latter provision is substantially more likely to be invoked than the former.  
We cannot say that the risks imposed on the parties are one-sided, much less 
unreasonably so. 
17 
As to the contract term providing that only arbitral grants of injunctive 
relief are subject to a second arbitration, Valencia notes that car sellers sometimes 
must seek an injunction in order to repossess a car from the buyer.  But Valencia 
acknowledged at oral argument that overall the car buyer is more likely than the 
seller to seek injunctive relief.  Nevertheless, we find significant Valencia‘s 
concern that the scope of an injunction can extend well beyond the transaction at 
issue and can compel a car seller to change its business practices.  Because of the 
broad impact that injunctive relief may have on the car seller‘s business, the 
additional arbitral review when such relief is granted furnishes ― ‗a ―margin of 
safety‖ that provides the party with superior bargaining strength a type of extra 
protection for which it has a legitimate commercial need.‘ ‖  (Armendariz, supra, 
24 Cal.4th at p. 117.)  The potentially far-reaching nature of an injunctive relief 
remedy, which Sanchez does not dispute, is sufficiently apparent here to justify the 
extra protection of additional arbitral review. 
Of course, apart from the parties‘ particular interests, the public has a 
strong interest in ensuring that fraudulent business practices are enjoined.  In 
Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1082–1084, and Cruz v. 
PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 316, we held that claims 
seeking injunctive relief designed to protect the public by stopping ongoing 
practices unlawful under the CLRA and the UCL, respectively, were inarbitrable.  
Valencia argues that Broughton and Cruz are no longer good law in light of 
Concepcion.  (See Ferguson v. Corinthian Colleges, Inc. (9th Cir. 2013) 733 F.3d 
928, 932–937.)  The Court of Appeal below did not address whether Broughton or 
Cruz has been abrogated, and Sanchez takes no position on the issue in this appeal, 
focusing instead on the asymmetry of affording arbitral appeals to grants but not 
denials of injunctive relief.  We likewise do not address the continued viability of 
Broughton and Cruz in this case. 
18 
B. 
The Court of Appeal also held that the provision concerning appellate 
arbitration filing fees and costs contributed to the unconscionability of the 
arbitration agreement.  As noted, the arbitration clause provides that Valencia will 
advance the car buyer‘s filing, administration, service, and case management fees 
and arbitrator or hearing fees ―up to a maximum of $2,500, which may be 
reimbursed‖ at the arbitrator‘s discretion.  The clause also provides that in case of 
an appeal to a three-arbitrator panel, the appealing party ―shall be responsible for 
the filing fee and other arbitration costs subject to a final determination by the 
arbitrators of a fair apportionment of costs.‖  The Court of Appeal held that this 
latter provision is inadequate for consumers ― ‗who cannot afford to initiate the 
[appeal] process in the first place‘ ‖ given large arbitration costs.  ―Items covered 
by an appeal payment made in advance include, as stated in the Sale Contract, ‗the 
filing fee and other arbitration costs.‘  Arbitrator fees in Los Angeles average 
around $450 per hour.  [Citation.])‖  Contrasting this arbitral scheme with the 
American Arbitration Association rules, which do not require consumers to front 
arbitration fees, the Court of Appeal concluded that ―[t]he requirement that the 
appealing party pay the filing fee and arbitration costs of both parties in advance 
puts an unduly harsh burden on the buyer.‖ 
In the context of mandatory employment arbitration of unwaivable 
statutory rights, we have held that arbitration agreements ―cannot generally require 
the employee to bear any type of expense that the employee would not be required 
to bear if he or she were free to bring the action in court.‖  (Armendariz, supra, 24 
Cal.4th at pp. 110–111.)  In the area of consumer arbitration, the Legislature has 
addressed costs in a different way.  In 2002, shortly after Armendariz was decided, 
the Legislature enacted Code of Civil Procedure section 1284.3 to address fees and 
costs in consumer arbitration.  Subdivision (a) of section 1284.3 provides that 
19 
―[n]o neutral arbitrator or private arbitration company shall administer a consumer 
arbitration under any agreement or rule requiring that a consumer who is a party to 
the arbitration pay the fees and costs incurred by an opposing party if the 
consumer does not prevail in the arbitration, including, but not limited to, the fees 
and costs of the arbitrator, provider organization, attorney, or witnesses.‖  Most 
pertinently, section 1284.3, subdivision (b)(1) provides that ―[a]ll fees and costs 
charged to or assessed upon a consumer party by a private arbitration company in 
a consumer arbitration, exclusive of arbitrator fees, shall be waived for an indigent 
consumer.  For the purposes of this section, ‗indigent consumer‘ means a person 
having a gross monthly income that is less than 300 percent of the federal poverty 
guidelines.  Nothing in this section shall affect the ability of a private arbitration 
company to shift fees that would otherwise be charged or assessed upon a 
consumer party to a nonconsumer party.‖  Subdivision (b)(2) requires the 
arbitration provider to give notice of the fee waiver provision, and subdivision 
(b)(3) provides that ―[a]ny consumer requesting a waiver of fees or costs may 
establish his or her eligibility by making a declaration under oath on a form 
provided to the consumer by the private arbitration company for signature stating 
his or her monthly income and the number of persons living in his or her 
household.  No private arbitration company may require a consumer to provide 
any further statement or evidence of indigence.‖  (Code Civ. Proc., § 1284.3, 
subd. (b)(2) & (3).) 
The legislative history shows that the statute‘s specific provisions were part 
of a general concern about the affordability of arbitration:  ―One of the primary 
arguments advanced in support of mandatory consumer arbitration is that it is less 
costly than civil litigation.  However, this argument is cast into significant doubt 
by the available evidence.  In fact, arbitration costs are so high that many people 
drop their complaints because they can‘t afford to pursue them, a recent study by 
20 
Public Citizen found.‖  (Assem. floor analysis, Assem. Bill No. 2915 (Reg. Sess. 
2001–2002) as amended Aug. 26, 2002, at p. 2.)  The analysis observed that 
―unlike civil court, private arbitration is subject to no fee limitations.  As a result, 
access to the system may be greatly affected by the wealth of the consumer.  The 
author states that this bill addresses these inequities by prohibiting large private 
judging companies from conducting mandatory consumer arbitrations where a 
consumer who loses the case must pay the winning company‘s fees and costs.  
This bill also implements a fee waiver policy for indigent consumers akin to the 
long-standing practice in public courts.  This bill does not affect commercial 
arbitrations between businesses.‖  (Ibid.)   
As noted in Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77 
(Gutierrez), on which the Court of Appeal below relied, the Legislature in 
enacting Code of Civil Procedure section 1284.3 ―did not adopt the Armendariz 
categorical approach and direct that all administrative fees be paid by 
nonconsumer parties without regard to the size of the costs or the wealth of the 
consumer. . . .  [T]he Legislature did adopt an ability-to-pay approach, which, 
though limited in this statute to indigents, provides direction for a rule applicable 
to all consumers faced with arbitral forum fees that are prohibitively high.  In 
Armendariz the court signaled its deference to the Legislature in selecting a 
categorical rule.  (Armendariz, supra, 24 Cal.4th at pp. 112–113.)  In this 
consumer case, that same deference leads us to adopt a case-by-case determination 
of affordability:  plaintiffs suing under the [consumer protection] statutes may 
resist enforcement of an arbitration agreement that imposes unaffordable fees.‖  
(Gutierrez, at pp. 97–98.) 
We agree with Gutierrez‘s approach.  As Gutierrez said in distinguishing 
Armendariz‘s categorical rule in the employment context, ―jobseekers are more 
likely to face ‗particularly acute‘ economic pressure to sign an employment 
21 
contract with a predispute arbitration provision, ‗for the arbitration agreement 
stands between the employee and necessary employment, and few employees are 
in a position to refuse a job because of an arbitration requirement.‘  (Armendariz, 
supra, 24 Cal.4th at p. 115.)  A family in search of a job confronts a very different 
set of burdens than one seeking a new vehicle.  Consumers, who face significantly 
less economic pressure[,] would seem to require measurably less protection.‖  
(Gutierrez, supra, 114 Cal.App.4th at p. 97.)  In enacting Code of Civil Procedure 
section 1284.3, the Legislature concluded that an ability-to-pay approach is 
appropriate in the context of consumer arbitration agreements.  Although the 
statute specifically addresses the affordability of consumer arbitration for people 
who are indigent, high arbitration fees can be unaffordable for nonindigent as well 
as indigent consumers, and nothing in the statute‘s text or legislative history 
precludes courts from using unconscionability doctrine on a case-by-case basis to 
protect nonindigent consumers against fees that unreasonably limit access to 
arbitration.  (See Sonic II, supra, 57 Cal.4th at p. 1145 [endorsing Gutierrez‘s 
view that unaffordable arbitration costs that ―effectively blocks every forum for 
the redress of disputes‖ may render an arbitration agreement unconscionable].) 
In the present case, the arbitration agreement did not have to provide for an 
appeal.  But having done so, the agreement may not structure the appeal process so 
that it unreasonably favors one party, just as the agreement may not authorize only 
one party and not the other to take an appeal.  (Little, supra, 29 Cal.4th at 
pp. 1073–1074.)  We agree with the Court of Appeal below that a requirement that 
a consumer front any appellate filing fees or other arbitration costs — recall that 
an appeal here requires not one but three arbitrators — has the potential to deter 
the consumer from using the appeal process.  But given the Legislature‘s approach 
to the affordability of consumer arbitration, the provision cannot be held 
unconscionable absent a showing that appellate fees and costs in fact would be 
22 
unaffordable or would have a substantial deterrent effect in Sanchez‘s case.  (See 
Gutierrez, supra, 114 Cal.App.4th at pp. 90–91.) 
Moreover, courts are required to determine the unconscionability of the 
contract ―at the time it was made.‖  (Civ. Code, § 1670.5.)  In light of this 
requirement, we recently clarified the proper affordability inquiry in Sonic II in the 
context of employment arbitration:  ―Because a predispute arbitration agreement is 
an agreement to settle future disputes by arbitration, the proper inquiry is what 
dispute resolution mechanism the parties reasonably expected the employee to be 
able to afford.  Absent unforeseeable (and thus not reasonably expected) 
circumstances, there is no reason to think that what an employee can afford when 
a wage dispute arises will materially differ from the parties‘ understanding of what 
the employee could afford at the time of entering the agreement.‖  (Sonic II, supra, 
57 Cal.4th at p. 1164.)  The same principle applies to consumer arbitration. 
Justice Chin says American Express Co. v. Italian Colors Restaurant 
(2013) 570 U.S. __, __–__ [133 S.Ct. 2304, 2310–2311] (Italian Colors) entails 
that ―if a cost provision does not impose fees that ‗make access to the forum 
impracticable‘ [citation], then the FAA precludes a court from invalidating it as 
unconscionable because of a subjective determination that it will, in a particular 
case, ‗have a substantial deterrent effect‘ on a party‘s exercise of the right to 
request a second arbitration.‖  (Conc. & dis. opn., post, at pp. 23–24.)  But it is not 
clear that the notion of ―impracticab[ility]‖ mentioned in passing in Italian Colors 
(Italian Colors, at p. __ [133 S.Ct. at p. 2311]) differs from ―a substantial deterrent 
effect‖ (ante, at p. 21).  In any event, we explained in Sonic II that Italian Colors 
reaffirmed the principle stated in Concepcion that ―[w]here a state-law rule 
interferes with fundamental attributes of arbitration, the FAA preempts the state-
law rule even if the rule is designed to facilitate prosecution of certain kinds of 
claims.‖  (Sonic II, supra, 57 Cal.4th at p. 1157.)  Neither Concepcion nor Italian 
23 
Colors precludes states from ensuring, through rules that do not interfere with 
arbitration‘s fundamental attributes, that the arbitral scheme set forth in a contract 
is in practice ―an accessible, affordable process for resolving . . . disputes.‖  (Sonic 
II, at p. 1158.) 
The dispute in this case concerns a high-end luxury item.  Sanchez does not 
claim, and no evidence in the record suggests, that the cost of appellate arbitration 
filing fees were unaffordable for him, such that it would thwart his ability to take 
an appeal in the limited circumstances where such appeal is available.  We 
therefore conclude on the record before us that the arbitral appeal fee provision is 
not unconscionable. 
C. 
The arbitration agreement further provides:  ―You and we retain any rights 
to self-help remedies, such as repossession.‖  The Court of Appeal held that this 
provision also contributed to the unconscionability of the arbitration agreement.  
We disagree. 
The Court of Appeal explained its conclusion as follows:  ―By exempting 
repossession — to which only the car dealer would resort — from arbitration, 
while subjecting a request for injunctive relief — the buyer‘s comparable 
remedy — to arbitration, the Sale Contract creates an unduly oppressive 
distinction in remedies.  This is especially so given that the California Arbitration 
Act (Code Civ. Proc., §§ 1280–1294.2) exempts preliminary injunctions from 
arbitration, allowing an application for ‗provisional‘ remedies to be filed directly 
in court (id., § 1281.8, subd. (b)).  Nevertheless, the Sale Contract dictates 
otherwise.  As several courts have held, arbitration provisions are unconscionable 
if they provide for the arbitration of claims most likely to be brought by the 
weaker party but exempt from arbitration claims most likely to be filed by the 
stronger party.‖ 
24 
As an initial matter, the arbitration agreement does not appear to preclude 
provisional injunctive relief authorized by statute.  Code of Civil Procedure 
section 1281.8, subdivisions (a) and (b) authorize a court to issue before 
arbitration ―a provisional remedy . . . upon the ground that the award to which the 
applicant may be entitled may be rendered ineffectual without provisional relief.‖  
Although the arbitration agreement in the present case provides that the arbitration 
is to be governed by the FAA and not California law, generally the California 
Arbitration Act governs arbitral procedures brought in California courts.  (See 
Cronus Investments, Inc. v. Concert Services (2005) 35 Cal.4th 376, 389–390.)  
Even if FAA procedures apply, federal courts have concluded that a court may 
―issue interim injunctive relief on arbitrable claims if interim relief is necessary to 
preserve the status quo and the meaningfulness of the arbitration process.‖  (Toyo 
Tire Holdings v. Continental Tire North Amer. (9th Cir. 2010) 609 F.3d 975, 981, 
and cases cited therein.)  Regardless of whether an arbitration agreement could 
deprive a court of the power to grant preliminary injunctive relief, the present 
agreement does not do so.  It addresses injunctive relief in connection with the 
relief granted by the arbitrator, subjecting such a remedy to review by a panel of 
three arbitrators.  The agreement does not purport to limit a court‘s power to issue 
preliminary injunctive relief to preserve the status quo pending a final judgment. 
Moreover, we see nothing unconscionable about exempting the self-help 
remedy of repossession from arbitration.  First, although this remedy is favorable 
to the drafting party, the contract provision that preserves the ability of the parties 
to go to small claims court likely favors the car buyer.  Second, arbitration is 
intended as an alternative to litigation, and the unconscionability of an arbitration 
agreement is viewed in the context of the rights and remedies that otherwise would 
have been available to the parties.  (See Sonic II, supra, 57 Cal.4th at pp. 1146–
1148.)  Self-help remedies are, by definition, sought outside of litigation, and they 
25 
are expressly authorized by statute.  Commercial Code section 9609, subdivisions 
(a)(1) and (b)(2) authorize a secured creditor ―[a]fter default‖ to ―[t]ake possession 
of the collateral‖ ―[w]ithout judicial process, if it proceeds without breach of the 
peace.‖  Civil Code sections 2983.2 and 2983.3 set forth the requirements for post-
repossession notice and opportunity to cure default in the case of automobile 
loans.  Moreover, it is undisputed that the remedy of repossession of collateral is 
an integral part of the business of selling automobiles on credit and fulfills a 
― ‗legitimate commercial need.‘ ‖  (Armendariz, supra, 24 Cal.4th at p. 117.)  We 
thus conclude that the exclusion of such a remedy from an arbitration agreement, 
while favorable to Valencia, is not unconscionable. 
IV. 
The trial court held, prior to Concepcion, that the class waiver was 
unconscionable and invalidated the entire arbitration agreement based on a poison 
pill provision that said:  ―If a waiver of class action rights is deemed or found to be 
unenforceable for any reason in a case in which class action allegations have been 
made, the remainder of this Arbitration Clause shall be unenforceable.‖  The Court 
of Appeal, deciding the case after Concepcion, took no position on the 
enforceability of the class waiver.  Sanchez now advances several arguments for 
why the trial court‘s decision was correct, but none is persuasive. 
In Discover Bank v. Superior Court (2005) 36 Cal.4th 148, we announced a 
rule that class arbitration waivers in consumer contracts are unconscionable when 
they are found ―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.‖  (Id. at 
pp. 162–163.)  This rule was abrogated by Concepcion, supra, 563 U.S. at p. __ 
[131 S.Ct. at p. 1753]; see Sonic II, supra, 57 Cal.4th at pp. 1137–1139.)  As 
26 
noted, the imposition of class action arbitration or litigation interferes ―with 
fundamental attributes of arbitration and thus creates a scheme inconsistent with 
the FAA.‖  (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1748].)  To find 
the class waiver here unconscionable would run afoul of Concepcion. 
Sanchez correctly notes that the CLRA sets forth a number of unwaivable 
rights, including the right to a class action.  The anti-waiver provision is found in 
Civil Code section 1751:  ―Any waiver by a consumer of the provisions of this 
title is contrary to public policy and shall be unenforceable and void.‖  Civil Code 
section 1780 permits the consumer damaged by certain enumerated practices to 
seek various remedies including damages and injunctive relief.  Civil Code section 
1781, subdivision (a) provides:  ―Any consumer entitled to bring an action under 
Section 1780 may, if the unlawful method, act, or practice has caused damage to 
other consumers similarly situated, bring an action on behalf of himself and such 
other consumers to recover damages or obtain other relief as provided for in 
Section 1780.‖  Thus, class actions are among the provisions of the CLRA that 
may not be waived.  (See Fisher v. DCH Temecula Imports LLC (2010) 187 
Cal.App.4th 601, 613.) 
Nonetheless, Concepcion‘s rule that states may not require a procedure that 
interferes with fundamental attributes of arbitration, ―even if it is desirable for 
unrelated reasons‖ (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1753]), 
applies equally to requirements imposed by statute or judicial rule.  We conclude 
that the CLRA‘s anti-waiver provision is preempted insofar as it bars class waivers 
in arbitration agreements covered by the FAA.  Sanchez‘s argument that enforcing 
the CLRA‘s anti-waiver provision merely puts arbitration agreements on an equal 
footing with other contracts is unavailing.  Concepcion held that a state rule can be 
preempted not only when it facially discriminates against arbitration but also when 
it disfavors arbitration as applied.  (Concepcion, supra, 563 U.S. at p. __ [131 
27 
S.Ct. at pp. 1747].)  Concepcion further held that a state rule invalidating class 
waivers interferes with arbitration‘s fundamental attributes of speed and 
efficiency, and thus disfavors arbitration as a practical matter.  (Id. at pp. 1750–
1753.) 
Finally, Sanchez contends that the language of the arbitration agreement –– 
―If a waiver of class action rights is deemed or found to be unenforceable for any 
reason . . . , the remainder of this Arbitration Clause shall be unenforceable‖ –– 
means that once a class action waiver is deemed unenforceable, as the trial court 
ruled here, then the rest of the agreement is likewise unenforceable.  But plainly 
the quoted provision was not meant to apply when a trial court erroneously holds 
the class waiver unenforceable and the error is corrected on appeal.  Rather, the 
provision is most reasonably interpreted to permit the parties to choose class 
litigation over class arbitration in the event that the class waiver turns out to be 
legally invalid.  Because we conclude in light of Concepcion that the FAA 
preempts the trial court‘s invalidation of the class waiver on unconscionability 
grounds, the agreement‘s poison pill provision is inoperable. 
28 
CONCLUSION 
The judgment of the Court of Appeal is reversed, and the cause is remanded 
for proceedings not inconsistent with this opinion. 
 
 
 
 
 
 
LIU, J. 
 
WE CONCUR: 
 
CANTIL-SAKAUYE, C. J. 
 
WERDEGAR, J. 
 
CORRIGAN, J. 
 
CUÉLLAR, J. 
 
KRUGER, J. 
 
1 
 
 
 
 
 
 
 
 
CONCURRING AND DISSENTING OPINION BY CHIN, J. 
 
 
I agree with the majority that, under the high court‘s decision in AT&T 
Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740] (Concepcion), 
the Federal Arbitration Act (FAA) requires enforcement of the class arbitration 
waiver in the contract between plaintiff Gil Sanchez and defendant Valencia 
Holding Company, LLC (Valencia).  I also agree with the majority that Sanchez 
has failed to carry his burden of establishing that the arbitration agreement in that 
contract is unconscionable.  However, as explained below, my analysis of these 
issues differs from the majority‘s in several respects, and I do not endorse all of 
the majority‘s reasoning.  Therefore, I concur only in the judgment. 
FACTUAL AND PROCEDURAL BACKGROUND 
 
 
On August 8, 2008, Sanchez went to Valencia‘s Mercedes-Benz dealership 
to shop for a certified preowned car.  In response to his inquiry, a sales 
representative showed him a 2006 Mercedes-Benz S500V with an advertised price 
of approximately $48,000.  After negotiations regarding various terms of the 
purchase, Sanchez signed a contract entitled ―RETAIL INSTALLMENT SALE 
CONTRACT — SIMPLE FINANCE CHARGE,‖ which specified the total 
amount financed as $47,032.99.  This amount included a price for the car of 
approximately $39,800, sales tax of approximately $3,330, a service contract price 
of $3,700, a cash down payment of $15,000, and a net trade-in amount for 
 
2 
Sanchez‘s 2004 Cadillac of -$14,800 (reflecting the amount Sanchez still owed on 
the car ($20,800) offset by its value ($6,000)). 
 
Sanchez later filed a class action against Valencia asserting violations of the 
Consumer Legal Remedies Act (CLRA) (Civ. Code, §§ 1750–1784), the 
Automobile Sales Finance Act (Civ. Code, §§ 2981–2984.6), the unfair 
competition law (UCL) (Bus. & Prof. Code, §§ 17200–17210), the Song-Beverly 
Consumer Warranty Act (Civ. Code, §§ 1790–1795.8), and Public Resources 
Code section 42885.  He alleged that Valencia had (1) made false representations 
about the car‘s condition, (2) failed separately to itemize the amount of the down 
payment that was deferred, (3) failed to distinguish registration, transfer, and 
titling fees from license fees, (4) charged an optional electronic filing fee without 
discussing it with him, (5) charged new tire fees for used tires, and (6) required 
payment of $3,700 to have the car certified so he could qualify for a 4.99 percent 
interest rate, when that payment was actually for an optional extended warranty 
unrelated to the interest rate.   
 
Valencia moved to compel arbitration pursuant to a provision in the 
contract that provided in relevant part:  ―Any claim or dispute, whether in contract, 
tort, statute or otherwise . . . between you and us . . . which arises out of or relates 
to your credit application, purchase or condition of this vehicle, this contract or 
any resulting transaction or relationship . . . shall, at your or our election, be 
resolved by neutral, binding arbitration and not by a court action. . . .  Any claim 
or dispute is to be arbitrated by a single arbitrator on an individual basis and not as 
a class action.  You expressly waive any right you may have to arbitrate a class 
action.‖   
 
Sanchez opposed the motion, principally asserting that the arbitration 
provision was illegal and unenforceable insofar as it required him ―to waive his 
unwaivable right to file a class action under the CLRA.‖  The unenforceability of 
this waiver, he argued, rendered the entire arbitration agreement unenforceable 
under a clause stating, ―If a waiver of class action rights is deemed or found to be 
 
3 
unenforceable for any reason in a case in which class action allegations have been 
made, the remainder of this Arbitration Clause shall be unenforceable.‖  As an 
alternative ground for opposing the motion, Sanchez argued that the arbitration 
agreement was unenforceable because it was ―both procedurally and substantively 
unconscionable.‖   
 
Based solely on the invalidity of the class arbitration waiver, the trial court 
denied the motion to compel, explaining:  ―As the CLRA contains a right to bring 
class actions, a waiver of such right is contrary to public policy and is 
unenforceable.  [Citation.]  Thus, the class action waiver herein is unenforceable.  
As such, the entire clause is unenforceable, as specifically provided for in that 
clause.‖  The trial court did not address Sanchez‘s unconscionability claim. 
 
The Court of Appeal affirmed, but took the opposite approach, i.e., it 
declined to consider whether the class arbitration waiver was unenforceable and 
held instead that ―the arbitration clause as a whole is unconscionable.‖  It is 
―procedurally unconscionable,‖ the court reasoned, ―because it is adhesive and 
satisfies the elements of oppression and surprise; it is substantively 
unconscionable because it contains harsh terms that are one-sided in favor of the 
car dealer to the detriment of the buyer.‖  ―First, a party who loses before the 
single arbitrator may appeal to a panel of three arbitrators if the award exceeds 
$100,000.  Second, an appeal is permitted if the award includes injunctive relief.  
Third, the appealing party must pay, in advance, ‗the filing fee and other 
arbitration costs subject to a final determination by the arbitrators of a fair 
apportionment of costs.‘  Fourth, the provision exempts repossession from 
arbitration while requiring that a request for injunctive relief be submitted to 
arbitration.  Although these provisions may appear neutral on their face, they have 
the effect of placing an unduly oppressive burden on the buyer.‖   
 
4 
DISCUSSION 
 
I.  The FAA Requires Enforcement of the Class Arbitration 
Waiver. 
 
 
In Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 161 (Discover 
Bank), a four-to-three majority of this court held that certain waivers of classwide 
arbitration procedures are unconscionable and unenforceable because they ―may 
operate effectively as exculpatory contract clauses that are contrary to public 
policy.‖  This rule, the Discover Bank majority concluded, is not preempted by the 
FAA because (1) enforcement of arbitration provisions under the FAA ―is limited 
by certain general contract principles ‗ ―at law or in equity for the revocation of 
any contract‖ ‘ ‖ (id. at p. 163), and (2) ―the principle that class action waivers are, 
under certain circumstances, unconscionable as unlawfully exculpatory is a 
principle of California law that does not specifically apply to arbitration 
agreements, but to contracts generally,‖ i.e., ―it applies equally to class action 
litigation waivers in contracts without arbitration agreements as it does to class 
arbitration waivers in contracts with such agreements‖ (id. at pp. 165-166).  The 
Discover Bank majority found ―[n]othing in‖ the high court‘s decisions 
―suggest[ing] that state courts are obliged to enforce contractual terms even if 
those terms are found to be unconscionable or contrary to public policy under 
general contract law principles.‖  (Id. at p. 166.)  In other words, the Discover 
Bank majority declared, ―the FAA does not federalize the law of unconscionability 
or related contract defenses except to the extent that it forbids the use of such 
defenses to discriminate against arbitration clauses.‖  (Id. at p. 167.) 
 
In Concepcion, the high court rejected the Discover Bank majority‘s 
preemption analysis and held that the FAA does, in fact, preempt Discover Bank‘s 
rule against enforcement, on grounds of unconscionability, of class arbitration 
waivers.   (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1753].)  The court 
explained that, under certain circumstances, the FAA‘s preemptive effect 
 
5 
―extend[s] even to grounds‖ ―normally thought to be generally applicable, such 
as . . . unconscionability.‖  (Id. at p. __ [131 S.Ct. at p. 1747].)  The FAA preempts 
such ―generally applicable contract defenses‖ if they ―stand as an obstacle to the 
accomplishment of the FAA‘s objectives.‖  (Id. at p. __ [131 S.Ct. at p. 1748].)  
The Discover Bank rule stands as such an obstacle for two reasons.  First, it 
contravenes the FAA‘s ― ‗principal purpose,‘ ‖ which ―is to ‗ensur[e] that private 
arbitration agreements are enforced according to their terms.‘  [Citations.]‖  (Id. at 
p. __ [131 S.Ct. at p. 1748], italics added.)  Second, it frustrates the FAA‘s goal of 
encouraging ―efficient, streamlined,‖ speedy procedures.  (Id. at p. __ [131 S.Ct. at 
p. 1749].)  Because, in these respects, the Discover Bank rule ― ‗stands as an 
obstacle to the accomplishment and execution of the full purposes and objectives 
of Congress,‘ ‖ the FAA preempts it.  (Id. at p. __ [131 S.Ct. at p. 1753].)  As the 
majority explains, under Concepcion, the FAA ―requires enforcement‖ of the class 
arbitration waiver at issue in this case.  (Maj. opn., ante, at p. 2.)   
 
Although I also agree with the majority that, under Concepcion, 
unconscionability remains a valid defense to a petition to compel arbitration (maj. 
opn., ante, at p. 11), I do not subscribe to the majority‘s broad dictum that 
Concepcion ―does not limit the unconscionability rules applicable to other 
provisions of the arbitration agreement‖ (maj. opn., ante, at p. 2).  Indeed, as the 
majority later explains, under Concepcion, in order to avoid FAA preemption, our 
standard for unconscionability ―must be[] the same for arbitration and 
nonarbitration agreements.‖  (Maj. opn., ante, at p. 10.)  In other words, ―the 
application of unconscionability doctrine to an arbitration clause must proceed 
from general principles that apply to any contract clause.  In particular, the 
standard for substantive unconscionability . . . must be as rigorous and demanding 
for arbitration clauses as for any contract clause.‖  (Ibid.)  Moreover, Concepcion 
declares that, although ―[s]tates remain free to take steps addressing the concerns 
that attend contracts of adhesion,‖ those steps ―cannot . . . conflict with the FAA 
or frustrate its purpose to ensure that private arbitration agreements are enforced 
 
6 
according to their terms.‖  (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 
1750], fn. 6.)  Concepcion also declares that ―[w]hen state law prohibits outright 
the arbitration of a particular type of claim,‖ the state law ―is displaced by the 
FAA.‖  (Id. at p. __ [131 S.Ct. at p. 1747].)  The high court has subsequently made 
clear that this principle precludes courts from basing a finding of 
unconscionability on a state rule that precludes, as a matter of state public policy, 
arbitration of certain types of claims.  (Marmet Health Care Center Inc. v. Brown 
(2012) __ U.S. __, __ [132 S.Ct. 1201, 1204].)  These general principles from 
Concepcion do, in fact, ―limit the unconscionability rules applicable to‖ provisions 
of arbitration agreements other than class arbitration waivers.  (Maj. opn., ante, at 
p. 2.) 
II.  Sanchez Has Not Established Unconscionability. 
 
 
Unconscionability has both a procedural and substantive element, and the  
party asserting the defense bears the burden of proving both by a preponderance of 
the evidence.  (Pinnacle Museum Tower Assn. v. Pinnacle Market Development 
(US), LLC (2012) 55 Cal.4th 223, 246-247 (Pinnacle); Engalla v. Permanente 
Medical Group, Inc. (1997) 15 Cal.4th 951, 972 (Engalla).)  Below, I explain my 
reasons for agreeing with the majority that Sanchez has failed to establish 
substantive unconscionability.  Before that, I explain why I do not endorse the 
majority‘s discussion of procedural unconscionability. 
1.  We need not decide, and the record fails to establish, procedural 
unconscionability. 
 
 
Initially, it is both unnecessary and, on the state of the record here, 
improper under our case law to decide that the agreement was procedurally 
unconscionable.  It is unnecessary given the majority‘s conclusion, with which I 
agree, that the arbitration provision is not substantively unconscionable.  (Maj. 
opn., ante, at p. 2.)  Because, as explained above, a showing of both procedural 
 
7 
and substantive unconscionability is required to render a contract unenforceable, a 
contract that is not substantively unconscionable is fully enforceable regardless of 
procedural unconscionability.  Given our unanimous conclusion regarding 
substantive unconscionability, ―adherence to judicial restraint and economy 
counsels against an unnecessary detour into an analysis‖ of procedural 
unconscionability.  (People v. Mosley (2015) 60 Cal.4th 1044, 1055, fn. 7; see 
Brown v. Wells Fargo Bank, NA (2008) 168 Cal.App.4th 938, 956 [declining to 
consider procedural unconscionability given finding of no substantive 
unconscionability]; Crippen v. Central Valley RV Outlet (2004) 124 Cal.App.4th 
1159, 1167 (Crippen) [declining to consider substantive unconscionability given 
finding of no procedural unconscionability].) 
It is improper to decide the issue because, as explained earlier, the trial 
court made no findings regarding unconscionability and denied Valencia‘s motion 
to compel based solely on its conclusion that the class arbitration waiver 
constituted an illegal and unenforceable waiver of Sanchez‘s ―unwaivable right to 
file a class action under the CLRA.‖  Thus, the trial court has never resolved 
factual conflicts that must be resolved in Sanchez‘s favor in order to warrant a 
finding of procedural unconscionability (discussed post).  Our decisions establish 
that where a trial court fails to resolve factual conflicts that must be resolved in 
favor of a party who alleges that an arbitration provision is unenforceable, the 
proper course for an appellate court is to remand the case to the trial court to 
determine those factual issues, not to determine them itself in the first instance.  
(Engalla, supra, 15 Cal.4th at pp. 972-973; Rosenthal v. Great Western Fin. 
Securities Corp. (1996) 14 Cal.4th 394, 414.)  Under these decisions, were a 
finding on procedural unconscionability necessary, the majority should remand for 
the trial court to consider the issue rather than resolve it in Sanchez‘s favor in the 
first instance on appeal.  The majority offers no explanation for departing from our 
precedents. 
 
8 
 
On the merits, the majority‘s summary dicta is incomplete and 
unpersuasive.  The only basis the majority offers for finding ―some degree of 
procedural unconscionability‖ is the ―adhesive nature of the contract.‖1  (Maj. 
opn., ante, at p. 14.)  But the majority offers no independent legal analysis for 
establishing that the contract was adhesive, asserting instead that ―Valencia does 
not dispute that the contract was adhesive.‖  (Id. at p. 12.)  It is true that Valencia‘s 
counsel stated at oral argument that the contract was ―adhesive in the sense that it 
is . . . a form contract.‖  But the circumstance that a contract is ―standardized in 
form‖ does not alone establish adhesiveness.  (Izzi v. Mesquite Country Club 
(1986) 186 Cal.App.3d 1309, 1318 (Izzi); see Federico v. Frick (1970) 3 
Cal.App.3d 872, 875 [―nothing in the record provid[es] evidentiary support for 
th[e] conclusion‖ that ―[t]he standard union employment contract before us‖ is ―a 
contract of adhesion‖].)  The additional characteristics of adhesiveness are that the 
contract was drafted and imposed ― ‗by the party of superior bargaining strength‘ ‖ 
(Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 817) ― ‗on essentially a ―take 
it or leave it‖ basis without affording the consumer a realistic opportunity to 
bargain and under such conditions that the consumer cannot obtain the desired 
product or services except by acquiescing in the form contract‘ ‖ (Victoria v. 
Superior Court (1985) 40 Cal.3d 734, 743 (Victoria)).   
 
At all levels of this litigation, Valencia clearly has disputed whether 
Sanchez has met his burden to prove by a preponderance of the evidence that these 
additional characteristics of adhesiveness are present.  In the Court of Appeal, 
                                              
1  
The majority states that ―Sanchez apparently did not read the entirety of his 
contract, including the arbitration clause‖ (maj. opn., ante, at p. 13), but it does not 
conclude that this circumstance contributes to a finding of procedural 
unconscionability.  I agree.  As the majority explains, ―even where a customer is 
assured it is not necessary to read a standard form contract with an arbitration 
clause, ‗it is generally unreasonable, in reliance on such assurances, to neglect to 
read a written contract before signing it.‘ ‖  (Id. at p. 14.)   
 
 
9 
Valencia argued that the contract, although ―a pre-printed form contract,‖ was   
―not a contract of adhesion‖ and that, as relevant to this issue, Sanchez had failed 
to show that he ―had no realistic choice,‖ that he could not have ―negotiate[d] a 
contract term‖ had he attempted to do so, that ―he was under any compulsion to 
finalize the purchase of a vehicle at any particular point in time,‖ that the car ―was 
unique,‖ or that he could not have purchased it without agreeing to arbitration 
from either a private individual or from one of the other five Mercedes-Benz 
dealers ―[w]ithin 25 miles of‖ Valencia.  Valencia made the same arguments in the 
trial court` and asserted in its opening brief in this court that Sanchez had failed to 
satisfy his ―burden of proof‖ because he ―made no showing that he could not 
negotiate the arbitration provision or that he lacked other alternatives, such as 
going to another dealer.‖  Thus, the record reflects that Valencia does, in fact, 
―dispute that the contract was adhesive‖ and that, as part of its argument, has 
emphasized both in the lower courts and ―in this court‖ Sanchez‘s failure to show 
he could not ―have opted out of the arbitration agreement‖ or ―negotiated a sales 
contract without an arbitration agreement.‖2  (Maj. opn., ante, at p. 12.)  
 
Indeed, the majority‘s discussion overlooks the legal significance of the 
fact that the burden of proof was on Sanchez to establish procedural 
unconscionability.  Valencia‘s asserted failure to ―dispute‖ the contract‘s adhesive 
nature or to ―contend in this court‖ that Sanchez could have obtained the car 
without accepting the arbitration agreement (maj. opn., ante, at p. 12), even if 
consistent with the record, does not substitute for evidence that satisfies Sanchez’s 
burden to establish procedural unconscionability.  This is especially true given the 
                                              
2   
After stating at oral argument that the contract was ―adhesive in the sense 
that it is . . . a form contract,‖ Valencia‘s counsel added:  ―I think that meets the 
definition of adhesive in California.  But I think adhesive without more does not 
get . . . one unconscionability.‖  Unlike the majority (see maj. opn., ante, at p. 12), 
I do not, in the context of the entire record, view these additional statements as a 
basis for dispensing with a proper and complete analysis of adhesiveness.   
 
10 
procedural posture of this case, i.e., the trial court made no findings regarding 
unconscionability, and the majority is deciding the issue on appeal in the first 
instance. 
 
The majority also overlooks the fact that case law strongly supports 
Valencia‘s arguments.  In Crippen, supra, 124 Cal.App.4th at page 1165, the 
Court of Appeal, in ordering enforcement of an arbitration agreement between a 
dealer and the purchaser of a motor home, rejected the argument that the 
agreement was ―a contract of adhesion and therefore procedurally 
unconscionable‖ simply ―because [it] was a form contract [the dealer] used with 
many customers.‖  The court explained:  ―[T]here is no general rule that a form 
contract used by a party for many transactions is procedurally unconscionable.  
Rather, ‗[p]rocedural unconscionability focuses on the manner in which the 
disputed clause is presented to the party in the weaker bargaining position. . . . 
There is no reason in this case to conclude that plaintiff lacked power to bargain.  
In general, nothing prevents purchasers of . . . vehicles from bargaining with 
dealers, even though dealers use form contracts, and nothing in the record shows 
that plaintiff could not bargain in this case.‖  (Id. at pp. 1165-1166.)  ―There is 
nothing in this buyer-seller relationship from which we can infer a great disparity 
of bargaining power.‖  (Id. at p. 1166; cf. Izzi, supra, 186 Cal.App.3d at p. 1318 
[although the contract was standardized, ―no presumption is warranted that 
plaintiffs had no choice or power to negotiate as to the terms of their purchase 
agreement or that they could not obtain comparable or superior terms on a suitable 
condominium nearby‖] .)   
 
Indeed, the record here is consistent with the analysis in Crippen and 
supports Valencia‘s arguments.  It indicates that Sanchez had significant financial 
means when he signed the contract, which is the relevant time for judging 
unconscionability (Civ. Code, § 1670.5, subd. (a)).  He contracted to pay nearly 
$50,000 for a luxury automobile for personal use, traded in a relatively new (four-
year old) luxury automobile as part of the purchase and, at the time he signed the 
 
11 
contract, wrote a $10,000 check for the down payment and agreed to put down 
more money within 30 days if necessary.  Over the course of the next week, he 
returned to Valencia and increased his down payment by $5,000, for a total of 
$15,000.  The record also shows that Sanchez actually bargained for a substantial 
reduction in the car‘s purchase price.  Finally, the record contains evidence — 
submitted by Sanchez — that, during the time period when he executed the 
contract, contracts without an arbitration provision were available to Valencia‘s 
buyers; that Valencia had not used contracts with arbitration clauses since August 
29, 2008, a few weeks after Sanchez signed the contract; and that Valencia no 
longer uses contracts with arbitration clauses.  Thus, the record fails to show that 
Sanchez lacked bargaining power or that he could not have obtained the car, either 
from Valencia or elsewhere, ― ‗except by acquiescing in the form contract.‘ ‖  
(Victoria, supra, 40 Cal.3d at p. 743.)   
 
The majority‘s response to my analysis — that ―in the context of consumer 
contracts, we have never required‖ a party asserting procedural unconscionability 
to ―show it tried to negotiate standardized contract provisions‖ (maj. opn., ante, at 
pp. 12-13, italics added) — is unpersuasive.  Although we may never have 
required such proof, we have expressly stated that ―freedom to choose whether or 
not to enter a contract of adhesion is a factor weighing against a finding of 
procedural unconscionability.‖  (Gentry v. Superior Court (2007) 42 Cal.4th 443, 
470.)  Notably, the decision we cited in support of this statement — Dean Witter 
Reynolds, Inc. v. Superior Court (1989) 211 Cal.App.3d 758 — involved ―the 
context of consumer contracts‖ (maj. opn., ante, at p. 12), a circumstance we 
expressly acknowledged in our explanation of that decision:  ―agreement between 
brokerage house and sophisticated consumer of financial services that included a 
$50 termination fee on an IRA account was not unconscionable where competing 
IRA‘s without the challenged fee were freely available.‖  (Gentry, supra, at p. 470, 
italics added.)   
 
12 
 
Indeed, Discover Bank, which the majority cites in support of its response, 
actually confirms the validity of this principle ―in the context of consumer 
contracts.‖  (Maj. opn., ante, at p. 12.)  There, a majority of this court stated that 
―when a consumer is given an amendment to its cardholder agreement in the form 
of a ‗bill stuffer‘ that he would be deemed to accept if he did not close his account, 
an element of procedural unconscionability is present.‖  (Discover Bank, supra, 36 
Cal.4th at p. 160.)  In making this statement, we relied on Szetela v. Discover Bank 
(2002) 97 Cal.App.4th 1094.  There, consistent with our precedents, the Court of 
Appeal stated that ―[t]he availability of similar goods or services elsewhere may 
be relevant to whether the contract is one of adhesion . . . .‖  (Id. at p. 1100.)  The 
court then explained that, on ―the [particular] facts in the case,‖ this was ―not the 
deciding factor‖ because of the ―oppressive‖ manner in which the defendant had 
―imposed‖ the arbitration provision; the record showed that the consumer, who 
already had a ―Cardholder Agreement‖ with the defendant, subsequently 
―received‖ an ―amendment‖ imposing the arbitration provision ―in a bill stuffer‖ 
and ―was told to ‗take it or leave it.‘  His only option, if he did not wish to accept 
the amendment, was to close his account.‖  (Ibid.)  The facts in Discover Bank 
were virtually identical.  (Discover Bank, supra, at pp. 153-154.)  The facts in this 
case are completely different.  Thus, although Discover Bank is factually 
distinguishable, legally, it confirms that Sanchez‘s failure to show he was unable 
to obtain the car from Valencia or elsewhere without agreeing to arbitration is an 
important factor in determining procedural unconscionability.   
 
Even more supportive of this conclusion is the other decision the majority 
cites in support of its response:  Perdue v. Crocker National Bank (1985) 38 
Cal.3d 913.  (Maj. opn., ante, at p. 13.)  There, we considered the legal sufficiency 
of the plaintiff‘s claim that the fee the defendant bank charged customers for 
returned checks was unconscionable.  (Perdue, supra, 38 Cal.3d at pp. 920-921.)  
In addressing this question, we first reaffirmed the principle that the determination 
of procedural unconscionability ―may turn on the absence of meaningful choice.‖  
 
13 
(Id. at p. 927.)  In holding that the plaintiff had sufficiently stated a claim for 
relief, we then stressed that he had ―alleged . . . that similar arrangements would 
be imposed by other banks.‖  (Id. at p. 927, fn. 12, italics added.)  This 
―allegation[],‖ we explained, rendered ―distinguish[able]‖ a decision in which a 
court had ―reject[ed]‖ a similar unconscionability claim because of the plaintiffs‘ 
― ‗fail[ure] to show that they were deprived of a meaningful choice of banks with 
which they could do business.‘ ‖  (Ibid.)  Thus, like Discover Bank, Perdue 
confirms the significance of Sanchez‘s failure to show (or even allege) that he 
either tried to negotiate with Valencia or could not have obtained a similar car 
elsewhere without agreeing to arbitration.  
 
Consistent with these precedents, our Courts of Appeal have, in rejecting 
claims of adhesiveness, relied in part on the absence of evidence that the 
complaining parties tried to negotiate the terms they were seeking to invalidate.  
(Spinello v. Amblin Entertainment (1994) 29 Cal.App.4th 1390, 1397; Union Bank 
v. Ross (1976) 54 Cal.App.3d 290, 296 (Union Bank).)  Thus, under existing 
California case law, Sanchez‘s failure to show that he ―tried to negotiate‖ the 
arbitration provisions (maj. opn., ante, at p. 13) is an important factor in 
determining whether he has established adhesivenesss.  The majority‘s contrary 
view, which is not supported by our precedents, effectively disapproves these 
decisions. 
 
I also disagree with the majority that the statements of Valencia‘s counsel 
at oral argument regarding the clarity of the contract are relevant.  (Maj. opn., 
ante, at p.  12.)  Counsel stated:  ―I think many people who are not legally trained 
don‘t understand the vast majority of what is in this contract.  My guess is that if 
you asked that dealer about everything other than the negotiable terms of price and 
interest they probably don‘t understand that either, even though that language is 
required by statute.‖  Unlike the majority, I would not rely on counsel‘s ―guess‖ 
about these matters, which lacks any evidentiary support in the record.  Indeed, the 
contract here clearly provided for arbitration of ―[a]ny claim or dispute . . . 
 
14 
between‖ Sanchez and Valencia, and there is no reason Sanchez would have been 
unable to understand this had he read the contract.  Moreover, if, as the majority 
asserts, Sanchez ―did not read‖ the contract (see maj. opn., ante, at p. 13), then 
under existing case law, he ―may not,‖ in asserting adhesiveness, ―properly argue 
that he did not give an ‗understanding consent.‘ ‖  (Union Bank, supra, 54 
Cal.App.3d at p. 296.)  Finally, ―[t]he general rule‖ in California, established now 
for over 100 years, ―is that, when a person with the capacity of reading and 
understanding an instrument signs it, he is, in the absence of fraud and imposition, 
bound by its contents, and is estopped from saying that its provisions are contrary 
to his intentions or understanding.‖  (Smith v. Occidental etc. Steamship (1893) 99 
Cal. 462, 470-71.)  For these reasons, the majority‘s reliance on counsel‘s ―guess‖ 
during oral argument is misplaced. 
 
In any event, our prior decisions establish that adhesiveness does not alone 
necessarily establish procedural unconscionability.  In Pinnacle, the trial court, on 
grounds of unconscionability, refused to enforce against a condominium 
homeowners association an arbitration provision in the condominium‘s covenants, 
conditions, and restrictions (CC&R‘s).  (Pinnacle, supra, 55 Cal.4th at p. 234.)  It 
based a finding of procedural unconscionability on the fact that ―the [a]ssociation 
had no opportunity to participate in the drafting of‖ the CC&R‘s because they 
were recorded ―before the [a]ssociation was formed.‖  (Id. at p. 247.)  We 
disagreed with the trial court‘s conclusion, explaining:   ―That the . . . CC&R‘s 
were drafted and recorded before the sale of any unit and without input from the 
[a]ssociation was a circumstance dictated by the legislative policy choices 
embodied in the Davis–Stirling Act. . . .  Thus, while a condominium declaration 
may perhaps be viewed as adhesive, a developer‘s procedural compliance with the 
Davis–Stirling Act provides a sufficient basis for rejecting an association‘s claim 
of procedural unconscionability.‖  (Id. at pp. 247-248, italics added, fn. omitted.)  
Here, Valencia asserts — and Sanchez does not dispute — ―that over 90% of the 
contract is statutorily dictated in both form and content‖ by the Automobile Sales 
 
15 
Finance Act (Civ. Code, § 2981 et seq.).  Therefore, as Valencia argues, under 
Pinnacle, the contract is not procedurally unconscionable even if it could ―be 
viewed as adhesive.‖  (Pinnacle, supra, at p. 248.)  This conclusion does not, as 
the majority suggests, depend on whether the arbitration agreement ―was 
mandated by statute‖ (maj. opn., ante, at p. 13), because the arbitration agreement 
in Pinnacle was not statutorily required (Pinnacle, supra, at pp. 235-242; see 
Morris v. Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, 1320 
[―adhesion contracts‖ are ―not always‖ procedurally unconscionable]).  
 
California has a ―strong public policy in favor of enforcing arbitration 
agreements.‖  (Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1073.)  
―In keeping with [this] strong public policy . . . , any doubts regarding the validity 
of an arbitration agreement [must be] resolved in favor of arbitration.‖  
(Samaniego v. Empire Today LLC (2012) 205 Cal.App.4th 1138, 1144; Lhotka v. 
Geographic Expeditions, Inc. (2010) 181 Cal.App.4th 816, 821.)  Consistent with 
these principles, were it either necessary or appropriate to decide the issue, I 
would, for the reasons set forth above, find that Sanchez has failed to prove 
adhesiveness that supports a finding of procedural unconscionability. 
2.  Sanchez has not established substantive unconscionability. 
 
―Civil Code section 1670.5, subdivision (a), authorizes a court, upon 
finding ‗as a matter of law‘ that a ‗contract or any clause of the contract‘ was 
‗unconscionable at the time it was made,‘ to ‗refuse to enforce the contract,‘ to 
‗enforce the remainder of the contract without the unconscionable clause,‘ or to 
‗so limit the application of any unconscionable clause as to avoid any 
unconscionable result.‘  The official Assembly comment accompanying this 
section explains:  ‗The basic test [of unconscionability] is whether, in the light of 
the general background and the needs of the particular case, the clauses involved 
are so one-sided as to be unconscionable under the circumstances existing at the 
time of the making of the contract. . . . The principle is one of prevention of 
 
16 
oppression and unfair surprise [citation] and not of disturbance of allocation of 
risks because of superior bargaining power.‘  (Rep. on Assem. Bill No. 510 
(1979–1980 Reg. Sess.) 5 Assem. J. (1979–1980 Reg. Sess.) p. 9231, reprinted as 
Legis. Com. com., 9 West‘s Ann. Civ. Code (2011 ed.) p. 74 (Official 
Comment).)‖  (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1176 
(conc. & dis. opn. of Chin, J.) (commonly known as Sonic II).) 
Consistent with these legislative pronouncements, in Pinnacle, we recently 
explained that ―[a] contract term,‖ including an arbitration provision, ―is not 
substantively unconscionable when it merely gives one side a greater benefit; 
rather, the term must be ‗so one-sided as to ―shock the conscience.‖ ‘ ‖ (Pinnacle, 
supra, 55 Cal.4th at p. 246.)  The ― ‗ ―shock the conscience‖ ‘ ‖ standard we 
applied in Pinnacle is the standard this court has been applying for well over 100 
years.  (E.g., Herbert v. Lankershim (1937) 9 Cal.2d 409, 475 [inadequacy of 
consideration must be ― ‗so gross as to shock the conscience and common sense of 
all men‘ ‖]; Boyce v. Fisk (1895) 110 Cal. 107, 116 [contract must be ― ‗grossly 
against conscience,‘ ‖ and ― ‗the mere fact that the bargain is a very hard or 
unreasonable one is not generally sufficient‘ ‖]; see also Tarver v. State Bar 
(1984) 37 Cal.3d 122, 134 [test for whether an attorney‘s fee is unconscionable is 
whether it is ― ‗ ― ‗so exorbitant and wholly disproportionate to the services 
performed as to shock the conscience‘ ‖ ‘ ‖].)  It is ―derivative of the term 
‗unconscionable.‘ ‖  (California Grocers Assn. v. Bank of America (1994) 22 
Cal.App.4th 205, 215.)  It is the standard we should continue to apply.  I thus 
agree with the majority‘s discussion insofar as it reaffirms the validity of the shock 
the conscience standard.  (Maj. opn., ante, at pp. 8-9.) 
However, I part company with the majority insofar as it continues to 
endorse several alternative formulations for substantive unconscionability.  i.e., 
overly harsh, unduly oppressive, unfairly one-sided.  (Maj. opn., ante, at pp.8-9.)  
As the majority observes, this court has sometimes used these formulations instead 
of the shock the conscience standard.  (Ibid.)  This practice has generated 
 
17 
confusion and uncertainty, because our lower courts have understood these 
different formulations as stating a lower standard for substantive unconscionability 
than ―shock the conscience.‖  (Sonic II, supra, 57 Cal.4th at p. 1178  (conc. & dis. 
opn. of Chin, J.) [―our Courts of Appeal have consistently recognized [that] shock 
the conscience is not . . . ‗synonymous with ―unreasonable‖ ‘ ‖]; Peng v. First 
Republic Bank (2013) 219 Cal.App.4th 1462, 1469 [shock the conscience is ― ‗a 
higher standard‘ ‖ than one-sided or overly harsh]; Gutierrez v. Autowest, Inc. 
(2003) 114 Cal.App.4th 77, 88 (Gutierrez) [same].)  Today, the majority declares 
that these alternative formulations ―all mean the same thing‖ as ―shock the 
conscience.‖  (Maj. opn., ante, at p. 9.)  If that is true, then why not settle on the 
traditional ―shock the conscience‖ test as the single formulation?  Why perpetuate 
the uncertainty that arises from having multiple formulations?   
The majority‘s only answer — that adopting ―shock the conscience‖ as the 
sole formulation somehow ―would call into question‖ decisions in which we have 
used ―other formulations‖ (maj. opn., ante, at p. 12) — is unpersuasive.  If, as the 
majority states, those other formulations are not conceptually or practically 
different from, and mean the same thing as, ―shock the conscience‖ (id. at pp. 8-
9), then why would adopting a single standard call any of our prior decisions into 
question?  We could simply make clear that we are clarifying the law, without 
suggesting that our earlier cases were wrongly decided.   
Moreover, maintaining multiple formulations is problematic for several 
reasons.  First, although, as the majority recognizes, ―[c]ommerce depends on the 
enforceability, in most instances, of a duly executed, written contract‖ (maj. opn., 
ante, at p. 9), it also depends on ―certainty and predictability‖ of enforcement 
(Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1269.)  As we have 
explained, ―[p]arties enter into contracts to allocate risks and to bring certainty, 
order, and predictability to their mutual relations.  One of the principal aims of 
contract law is to assist contracting parties in achieving this objective by making 
the outcome of legal disputes clear and predictable.‖  (Nedlloyd Lines B.V. v. 
 
18 
Superior Court (1992) 3 Cal.4th 459, 494.)  Having multiple formulations for 
determining whether a contract is substantively unconscionable, and therefore 
unenforceable, undermines the certainty and predictability that are vital to 
commerce.  
Second, the need for a uniform standard is crucial in light of the FAA.  As 
already explained, the FAA requires that our standard for unconscionability be 
―the same for arbitration and nonarbitration agreements,‖ i.e., that it be ―as 
rigorous and demanding for arbitration clauses as for any contract clause.‖  (Maj. 
opn., ante, at p. 10.)  However, as Valencia argues, ―[i]f there are multiple 
unconscionability standards, then arbitration provisions may well be subjected, in 
practice, to a different standard than other contract provisions.‖  Indeed, this court 
first articulated the ―unfairly one-sided‖ formulation specifically in the context of 
an unconscionability challenge to an arbitration provision (Armendariz v. 
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 117 
(Armendariz)), and the formulation has since been used almost exclusively in that 
context.  Notably, in Concepcion, the high court, immediately after explaining that 
―judicial hostility‖ towards arbitration has ―manifested itself in ‗a great variety‘ of 
‗devices and formulas,‘ ‖ observed ―that California‘s courts have been more likely 
to hold contracts to arbitrate unconscionable than other contracts.  [Citations.]‖  
(Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1747].)  Having multiple 
formulations lends substantial credence to the ―loud chorus of courts and 
commentators‖ who assert that, contrary to the high court‘s decisions, we are 
using unconscionability ―as a ruse for a ‗new judicial hostility‘ toward 
arbitration.‖  (Aragaki, AT&T Mobility v. Concepcion and the Antidiscrimination 
Theory of FAA Preemption (2012-2013) 4 Y.B. Arb. & Mediation 39, 60.)  
Although the majority‘s endorsement of multiple formulations is 
problematic for these reasons, several of its related comments are worthy of note.  
First and foremost is the majority‘s statement, as noted above, that all of the 
alternative formulations ―mean the same thing‖ as ―shock the conscience.‖  (Maj. 
 
19 
opn., ante, at p. 9.)  Second, the majority emphasizes that ― ‗central‘ ‖ to all of its 
formulations is that substantive unconscionability is more than just ― ‗ ―a simple 
old-fashioned bad bargain.‖ ‘ ‖  (Id. at p. 8.)  Thus, ―[a] party cannot avoid a 
contractual obligation merely by complaining that the deal, in retrospect, was 
unfair or a bad bargain.‖  (Id. at p. 9.)  Instead, the party resisting contract 
enforcement must prove, and a court must find, ― ‗a substantial degree of 
unfairness beyond ―a simple old-fashioned bad bargain.‖ ‘ ‖  (Ibid.)  A contractual 
term does not meet this test merely because it can be characterized as being ―one-
sided‖ or ― ‗giv[ing] one side a greater benefit.‘ ‖ (Ibid.)  Moreover, one-sidedness 
is not unconscionable if it ― ‗ ―provides the party with superior bargaining strength 
a type of extra protection for which it has a legitimate commercial need.‖ ‘ ‖  
(Ibid.)  The majority‘s endorsement of various alterative formulations must be 
understood in light of these statements. 
I also part company with the majority insofar as its one-sidedness analysis 
focuses separately on each of the challenged provisions in isolation, rather than the 
parties‘ bargain as a whole.  Our decisions establish that, in assessing a claim that 
a contract or a clause in a contract is unconscionable, a court must ―examine the 
totality of the agreement’s substantive terms as well as the circumstances of its 
formation to determine whether the overall bargain was‖ so one-sided as to be 
substantively unconscionable.  (Sonic II, supra, 57 Cal.4th at p. 1146, italics 
added.)  As Valencia explains, ―[t]here are trade-offs in every contract.  Lien and 
security rights favor one party.  Payment favors the seller; required delivery of 
goods favors the buyer.  Notice and an opportunity to cure usually favor the party 
in the position to default.  But these types of provisions are almost inevitably not 
unconscionable, because in the context of the transaction as a whole, they are fair 
and reasonable. . . . [¶]  The same is true of arbitration provisions.  They, too, must 
be evaluated as a whole.  The provision itself may contain trade-offs, e.g., one side 
pays certain fees, the other side gains a measure of protection from outlier results, 
such that the entire provision needs to be examined based on its overall effect.  
 
20 
And, even then the arbitration provision needs to be evaluated in the context of the 
overall transaction.‖  
Taking this approach, I conclude that the arbitration clause, viewed as a 
whole, is not substantively unconscionable under any of the formulations the 
majority endorses.  As Valencia argues, the clause ―is even-handed.  It is well 
justified by the business realities of the buyer-dealer relationship and the threats 
posed by outlier results. . . . It involves mutual tradeoffs and a rational relationship 
to the nature of automobile purchases in general and to the specific transaction at 
issue — the purchase of a $50,000 pre-owned luxury automobile.‖  ―There is a 
balance of clauses.  There is an opportunity for further arbitral scrutiny for outlier 
results.  But given the nature of the disputes, that will be the exception, not the 
rule.  And, further review works both ways; both buyers and dealers can seek 
review of outlier awards.  Self-help remedies, such as repossession, that would be 
more often invoked by the dealer are excluded, but they are by definition outside 
even the litigation process; and comparable small claims remedies more likely 
invoked by the customer are also excluded.  [¶]  Finally, the dealer pays the 
buyer‘s initial arbitration expenses, up to $2,500.   Only if the buyer loses a first 
round and wants to seek further arbitral review does the buyer have to advance 
further arbitration expenses (the review arbitrators ultimately allocate expenses).  
That‘s reasonable:  That the party (buyer or dealer) losing the first round has to 
bear the expense of the finality round is common sense and furthers the interests of 
formality.  Indeed, that‘s how the judicial system handles appeals — the appellant 
pays for the record on appeal and pays a higher fee than the respondent.  [¶]  And, 
in return, individuals get a speedy, cheaper, surer mechanism for resolving 
disputes.‖  I agree with this analysis and would hold that the arbitration provision, 
evaluated as a whole, is not substantively unconscionable. 
Nevertheless, I also agree with the majority that each of the challenged 
provisions, considered individually, is not substantively unconscionable, although 
I do not endorse all of the majority‘s reasoning.  Regarding the provision allowing 
 
21 
a second arbitration if the arbitrator‘s award is either $0 or over $100,000, as noted 
above, this provision benefits both Valencia and Sanchez by protecting them in 
most cases from the cost of a second arbitration while offering both access to 
further review of extreme, outlier awards.  Also mutually beneficial is the 
provision making grants, but not denials, of injunctive relief subject to a second 
arbitration.  The Court of Appeal invalidated this provision based on the view that 
it benefits ―only‖ Valencia because ―the buyer, not the car dealer, . . . would be 
seeking preliminary or permanent injunctive relief.‖  But, as the majority correctly 
notes, ―car sellers sometimes must seek an injunction in order to repossess a car 
from the buyer.‖  (Maj. opn., ante, at p. 17.)  Thus, while it is true, as the majority 
observes, that injunctive relief may have a ―broad impact‖ on Valencia by 
requiring it to ―change its business practices‖ (ibid.), such relief also may have a 
substantial impact on buyers by forcing them to surrender their means of 
transportation.  Accordingly, as Valencia argues, ―both [parties] would benefit 
from a process that allows second-level review when their liberty is constrained by 
arbitral decisions requiring them to do or refrain from doing certain activities.‖  
Because these provisions do not ―inordinately benefit‖ Valencia, under our 
decisions, they are not ―unconscionably one-sided‖ (Little v. Auto Stiegler, Inc. 
(2003) 29 Cal.4th 1064, 1075, fn. 1 (Little)), regardless of whether Valencia is 
―more likely‖ (maj. opn., ante, at p. 17) or even ―substantially more likely‖ to 
invoke them (id. at p. 16).3   
                                              
3  
Although mentioning the public‘s interest in injunctive relief, the majority 
notes that this case does not involve the ―continued viability,‖ in light of 
Concepcion, of Broughton and Cruz v. PacifiCare Health Systems, Inc. (2003) 30 
Cal.4th 303, in which a majority of this court held that the FAA permits California 
to prohibit arbitration of claims for injunctive relief under the CLRA and the UCL.  
(Maj. opn., ante, at p. 17.)  That question is pending before us in McGill v. 
Citibank, N.A. (S224086, review granted Apr. 1, 2015.) 
 
22 
As my earlier discussion indicates, I also agree with the majority that there 
is ―nothing unconscionable‖ about the provision exempting repossession from 
arbitration.  (Maj. opn., ante, at p. 24.)  Because, as the majority explains, this self-
help remedy is ―outside of litigation,‖ there is nothing unconscionable about not 
making it subject to arbitration, which is a litigation substitute.  (Ibid.)  Moreover, 
as the majority also explains, the provision that preserves the parties‘ ability to go 
to small claims court ―likely favors the car buyer.‖  (Ibid.)  Thus, the exclusion of 
repossession from arbitration is not unfair, one-sided, or unconscionable.     
Regarding the costs of a second arbitration, I first note that the Court of 
Appeal erred in stating that provision in question requires the party requesting the 
second arbitration to pay filing fees and other arbitration costs ―in advance.‖  The 
provision states that the requesting party ―shall be responsible for‖ such fees and 
costs, but says nothing about the time of payment.  The record otherwise provides 
no support for the Court of Appeal‘s statement.4  
Moreover, I agree with the majority that the record contains ―no evidence‖ 
that, at the time Sanchez signed the contract, the cost of a second arbitration would 
be ―unaffordable‖ to him.  (Maj. opn., ante, at p. 23.)  On the contrary, as earlier 
explained, the record indicates that Sanchez had significant financial means when 
                                              
4  
  The contract gives Sanchez the option of having arbitration conducted by, 
and under the rules of, the American Arbitration Association (AAA), the National 
Arbitration Forum, ―or any other organization that [he] may choose subject to 
[Valencia‘s] approval.‖  There is no basis to conclude or assume that, at the time 
the contract was executed, the selected organization would have required advance 
payment of all filing fees and other costs.  Indeed, although the AAA rules in 
effect in 2008 called for advance payment of certain costs (AAA, Commercial 
Arbitration Rules and Mediation Procedures (amend. & eff. Sept. 1, 2007) rules R-
4(a)(ii), R-49, O-8 (AAA General Rules); AAA, Supplementary Procedures for 
Consumer-Related Disputes (2005) rules C-2(a), C-2(e), C-8 (AAA 
Supplementary Rules)), they also provided for ―defer[ral]‖ of this payment ―in the 
event of extreme hardship on the part of any party‖ (AAA, General Rules, rule R-
49).  As to other arbitration expenses, the rules made advance payment subject to 
the AAA‘s discretion.  (Id., rule R-52.)   
 
23 
he signed the contract.  In addition, at that time, one of the organizations the 
contract authorized to conduct the arbitration had established a substantially 
reduced fee schedule ―for consumer-related disputes‖ in order ―to make arbitration 
costs reasonable for consumers‖ (AAA General Rules, Administrative Fees) and 
had provided for reduction or elimination of administrative fees in cases of 
hardship.5  Given these circumstances, the provision regarding the costs of a 
second arbitration does not support a finding of unconscionability.   
Although I agree with the majority that the provision is not unconscionable, 
I disagree with the majority‘s analysis in several respects.  The majority suggests 
that a finding of substantive unconscionability may be premised on a finding that 
the fee provision ―would have a substantial deterrent effect in Sanchez‘s case.‖  
(Maj. opn., ante, at p. 22.)  But deterrence is surely an important — and 
permissible — purpose of the provision.  After all, at issue here are the costs of a 
second, de novo arbitration based on one party‘s dissatisfaction with the results of 
the first.  Moreover, the provision‘s deterrent effect applies mutually to both 
parties; if Valencia is dissatisfied with an award and seeks a new arbitration, then 
it also is ―responsible for the filing fee and other arbitration costs subject to a final 
determination by the arbitrators of a fair apportionment of costs.‖  In order to 
promote finality and secure the cost benefits of arbitration, parties to an arbitration 
agreement may want to discourage each other from invoking a contractual right to 
                                              
5  
The AAA‘s generally applicable rules provided:  ―The AAA may, in the 
event of extreme hardship on the part of any party, . . . reduce the administrative 
fees.‖  (AAA General Rules, rule R-49.)  Its Supplementary Rules for consumer-
related disputes expressly incorporated Civil Code section 1284.3, stating:  
―Pursuant to Section 1284.3 of the California Code of Civil Procedure, consumers 
with a gross monthly income of less than 300% of the federal poverty guidelines 
are entitled to a waiver of arbitration fees and costs, exclusive of arbitrator fees.  
This law applies to all consumer agreements subject to the California Arbitration 
Act, and to all consumer arbitrations conducted in California.‖  (AAA 
Supplementary Rules, rule C-8.)   
 
24 
a second, new arbitration.  Indeed, litigants wanting to appeal in court face similar 
deterrence, as they are responsible for appellate filing fees and, if unsuccessful, the 
other party‘s appellate costs.  (Cal. Rules of Court, rules 8.25, 8.278(a).)  Surely 
such mutual deterrence is permissible if, as the majority correctly states, ―the 
arbitration clause did not have to provide for an appeal‖ at all.  (Maj. opn., ante, at 
p. 21.)   
However, the majority continues, having provided for ―an appeal,‖ the 
arbitration clause ―may not structure the appeal process so that it unreasonably 
favors‖ Valencia.  (Maj. opn., ante, at p. 21.)  Under this analysis, the question 
should not be, as the majority suggests, whether the provision would substantially 
deter Sanchez from requesting a second arbitration — which, as just explained, is 
one of its permissible and mutually applicable purposes — but should be whether 
the level of deterrence ―unreasonably favors‖ Valencia.  (Ibid.)  In other words, a 
finding of substantive unconscionability would, under the majority‘s analysis, 
require determination of (1) the provision‘s relative deterrent effect on Valencia 
and Sanchez — which, in turn, would require evidence of the provision‘s deterrent 
effect at the time the contract was signed on both Valencia and Sanchez — and (2) 
whether the difference, if any, in deterrent effect was unjustified by ― ‗ ―a 
legitimate commercial need‖ ‘ ‖ and established ― ‗a substantial degree of 
unfairness beyond ―a simple old-fashioned bad bargain.‖ ‘ ‖  (Id. at p. 9.)  In my 
view, this convoluted and complicated inquiry is unnecessary; that the provision 
might have a greater ―deterrent effect‖ (id. at p. 22) on one of the parties to this 
contract for a $50,000 luxury car does not render it one-sided or substantively 
unconscionable.  Indeed, given, as noted above, that litigants wanting to appeal in 
court face similar deterrence — in that they are responsible for appellate filing 
fees and, if unsuccessful, the other party‘s appellate costs — to the extent the 
provision would deter Valencia less than Sanchez from requesting a second 
arbitration, it ―confer[s] no more of an advantage than would be the case had the 
 
25 
action been brought in court,‖ and thus is not unconscionable.  (Little, supra, 29 
Cal.4th at p. 1075, fn. 1.) 
Moreover, the FAA preempts the majority‘s rule insofar as it makes a 
―substantial deterrent effect‖ sufficient to establish substantive unconscionability.  
(Maj. opn., ante, at p. 22.)  In American Exp. Co. v. Italian Colors Restaurant 
(2013) __ U.S. __ [133 S.Ct. 2304, 2308-2311] (Italian Colors), the high court 
held that the FAA required enforcement of an arbitration clause notwithstanding 
uncontested proof that it would impose prohibitive costs on plaintiffs suing under 
the federal antitrust laws.  The plaintiffs, in resisting enforcement, relied on ―a 
judge-made exception to the FAA‖ — known  as ―[t]he ‗effective vindication‘ 
exception‖ — which allows federal courts to invalidate arbitration agreements 
―that prevent the ‗effective vindication‘ of a federal statutory right.‖  (Id. at p. __ 
[133 S.Ct. at p. 2310].)  This exception, the high court explained, ―finds its origin 
in the desire to prevent ‗prospective waiver of a party‘s right to pursue statutory 
remedies,‘ [citation].  That would certainly cover a provision in an arbitration 
agreement forbidding the assertion of certain statutory rights.  And it would 
perhaps cover filing and administrative fees attached to arbitration that are so high 
as to make access to the forum impracticable.  [Citation.]  But the fact that it is not 
worth the expense involved in proving a statutory remedy does not constitute the 
elimination of the right to pursue that remedy.  [Citation.]‖  (Id. at pp. __ [133 
S.Ct. at pp. 2310–2311].)  Under this binding precedent, if a cost provision does 
not impose fees that ―make access to the forum impracticable‖ (ibid.), then the 
FAA precludes a court from invalidating it as unconscionable because of a 
subjective determination that it will, in a particular case, ―have a substantial 
 
26 
deterrent effect‖ on a party‘s exercise of the right to request a second arbitration.6  
(Maj. opn., ante, at p. 22.)  
I also disagree with the majority‘s view that parties asserting 
unconscionability based on their inability to afford arbitration costs may satisfy 
their burden with evidence of their financial situation at the time a ― ‗dispute 
arises.‘ ‖  (Maj. opn., ante, at p. 22.)  As the majority correctly recognizes (ibid.), 
a determination of unconscionability must be based on the circumstances that 
existed ―at the time [the contract] was made‖ (Civ. Code, § 1670.5, subd. (a)), not 
on hindsight in light of subsequent events.  (Setzer v. Robinson (1962) 57 Cal.2d 
213, 217; Colton v. Stanford (1890) 82 Cal. 351.) Thus, in determining 
affordability, Sanchez must submit evidence showing, not what he (and, under the 
majority‘s approach, Valencia) could afford when the dispute arose, but what he 
could have afforded at the time he signed the contract.  The majority‘s assertion 
otherwise ―is contrary to statute.‖  (Parada v. Superior Court (2009) 176 
Cal.App.4th 1554, 1583.) 
Finally, the majority‘s analysis of the cost provision improperly blurs 
distinct grounds on which this court has relied in prior decisions to invalidate 
arbitration provisions:  unconscionability, which is at issue here, and public policy, 
                                              
6  
Even under the view of the dissent in Italian Colors, the FAA would, for 
two reasons, preempt the majority‘s rule.  First, the effective vindication exception 
is inapplicable when a party ―could feasibly vindicate‖ his or her claim in 
arbitration.  (Italian Colors, supra, __ U.S. at p. __ [133 S.Ct. at p. 2320] (dis. 
opn. of Kagan, J.).)  A second arbitration is not infeasible merely because a cost 
provision has ―a substantial deterrent effect‖ on a party‘s decision to request a 
second arbitration.  (Maj. opn., ante, at p. 22.)  Second, concerns about enforcing 
―state law‖ do not even ―implicate the effective-vindication rule.  When a state 
rule allegedly conflicts with the FAA, [courts] apply standard preemption 
principles, asking whether the state law frustrates the FAA‘s purposes and 
objectives.  If the state rule does so — as . . . in [Concepcion] — the Supremacy 
Clause requires its invalidation.‖  (Italian Colors, supra, at p. __ [133 S.Ct. at p. 
2320] (dis. opn. of Kagan, J.), final italics added.)   
 
27 
which is not.  As the majority explains (maj. opn., ante, at p. 18), in Armendariz, 
supra, 24 Cal.4th at pages 110-111, this court held that ―when an employer 
imposes mandatory arbitration as a condition of employment, the arbitration 
agreement or arbitration process cannot generally require the employee to bear any 
type of expense that the employee would not be required to bear if he or she were 
free to bring the action in court.‖  However, contrary to what the majority‘s 
discussion suggests, this holding was not based on unconscionability.  Rather, it 
was based on the view that forcing employees to pay costs in arbitration they 
would not have to pay in court would be ―contrary to public policy‖ (id. at p. 110) 
in that it would ―effectively prevent[] them from vindicating‖ (id. at p. 107) 
unwaivable statutory rights established for a public reason (id. at pp. 100-101).  
(See Little, supra, 29 Cal.4th at p. 1084 [Armendariz‘s rule ―is derived from state 
contract law principles regarding the unwaivability of certain public rights‖].)  
Similarly, the discussion from Gutierrez on which the majority relies (maj. opn., 
ante, at pp. 20-21) addressed, not unconscionability, but whether contractual 
terms, by ―undercut[ting] unwaivable state statutory rights,‖ ―violate[d] the public 
policy underlying [those] rights.‖  (Gutierrez, supra, 114 Cal.App.4th at pp. 94-
95.)  ―[T]he public policy and unconscionability defenses‖ this court has 
announced ―are different in important respects.  A public policy defense is 
concerned with the relationship of the contract to society as a whole, and targets 
contractual provisions that undermine a clear public policy, such as an unwaivable 
statutory right designed to accomplish a public purpose.  [Citation.]  
Unconscionability is concerned with the relationship between the contracting 
parties and one-sided terms [citation], such that consent in any real sense appears 
to be lacking.  Contracts can be contrary to public policy but not unconscionable 
[citation] and vice versa [citation].‖  (Sonic-Calabasas A, Inc. v. Moreno (2011) 
51 Cal.4th 659, 686 (Sonic I).)  The majority loses sight of these differences in its 
discussion of Armendariz and Gutierrez. 
 
28 
But there is another important reason for not applying Armendariz‘s 
categorical rule here, in addition to the fact that it is not based on 
unconscionability:  under Italian Colors, the FAA preempts it.  As earlier 
explained, the high court held in that case that the FAA required enforcement of 
an arbitration clause notwithstanding uncontested proof that it would impose 
prohibitive costs on plaintiffs, thus preventing them from effectively vindicating 
their rights under the federal antitrust laws.  (Italian Colors, supra, __ U.S. at pp. 
__ [133 S.Ct. at pp. 2308-2311.)  The effective vindication exception, the high 
court held, ―perhaps‖ covers cost provisions that make access to arbitration 
―impracticable,‖ but does not cover provisions that merely make a federal claim 
―not worth the expense‖ to prove.  (Id. at pp. __ [133 S.Ct. at pp. 2310–2311].)  
Armendariz‘s categorical rule is based, not on proof that arbitration would, in fact, 
be financially impracticable for a particular employee, but on the view that the 
mere ―possibility‖ employees ―will be charged substantial forum costs‖ in 
arbitration would ―chill[] the exercise‖ of their statutory right.  (Armendariz, 
supra, 24 Cal.4th at p. 110.)  If, as Italian Colors holds, the FAA requires 
enforcement of an arbitration provision despite actual proof it would impose 
prohibitive costs, then surely it precludes courts from invalidating an arbitration 
clause based on the theoretical, unproven chilling effect of imposing ―any type of 
expense that the [party resisting arbitration] would not be required to bear‖ in a 
court action.7  (Armendariz, supra, 24 Cal.4th at p. 110.) 
For the preceding reasons, I agree that Sanchez has failed to establish 
substantive unconscionability.  I therefore concur in the judgment.  
CHIN, J.
                                              
7  
For the same reasons previously discussed in connection with the 
majority‘s substantial deterrence standard (ante, p. 26, fn. 6), even under the view 
of the dissent in Italian Colors, the FAA would preempt Armendariz’s 
prophylactic, categorical rule.   
 
1 
 
See last page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Sanchez v. Valencia Holding Company, LLC 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 201 Cal.App.4th 74 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S199119 
Date Filed: August 3, 2015 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: Rex Heeseman 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Tharpe & Howell, Christopher S. Maile, Soojin Kang; Callahan Thompson Sherman & Caudill, Robert W. 
Thompson, Charles S. Russell; Atkinson, Andelson, Loya, Ruud & Romo, Kellie S. Christianson; Greines, 
Martin, Stein & Richland, Robert A. Olson, Edward L. Xanders, Meehan R. Rasch and David E. Hackett 
for Defendant and Appellant. 
 
Sheppard, Mullin, Richter & Hampton and Anna S. McLean for Toyota Motor Credit Corporation and 
General Motors Financial Company, Inc., as Amici Curiae on behalf of Defendant and Appellant. 
 
Pillsbury Winthrop Shaw Pittman, Richard M. Segal and Nathaniel R. Smith for Nissan Motor Acceptance 
Corporation as Amicus Curiae on behalf of Defendant and Appellant. 
 
Littler Mendelson, Henry D. Lederman, Alexa L. Woerner, Anthony Ly; Simpson, Cameron, Medina & 
Autrey and Erin Nemirovsky Medina for Volt Management Corp. and Volt Information Sciences, Inc., as 
Amici Curiae on behalf of Defendant and Appellant. 
 
Horvitz & Levy, Lisa Perrochet, Felix Shafir, Robert H. Wright and John F. Querio for California New Car 
Dealers Association as Amicus Curiae on behalf of Defendant and Appellant. 
 
Severson & Werson, Jan T. Chilton and Donald J. Querio for American Financial Services Association, 
California Financial Services Association and California Bankers Association as Amici Curiae on behalf of 
Defendant and Appellant. 
 
Erika C. Frank and Fred J. Hiestand for The California Chamber of Commerce and The Civil Justice 
Association of California as Amici Curiae on behalf of Defendant and Appellant. 
 
Mayer Brown, Donald M. Falk, Andrew J. Pincus, Evan M. Tager, Archis A. Parasharami and Brian J. 
Wong for The Chamber of Commerce of the United States of America, The Association of Global 
Automakers, Inc., and The Alliance of Automobile Manufacturers as Amici Curiae on behalf of Defendant 
and Appellant. 
 
 
 
2 
 
 
 
 
Page 2 – S199119 – counsel continued 
 
Counsel: 
 
Deborah J. La Fetra for Pacific Legal Foundation as Amicus Curiae on behalf of Defendant and Appellant. 
 
Toschi, Sidran, Collins & Doyle, David R Sidran, Thomas M. Crowell; Manning Leaver Bruder & 
Berberich, Robert D. Daniels and Crystal S. Yagoobian for Federated Mutual Insurance Company as Amici 
Curiae on behalf of Defendant and Appellant. 
 
Rosner, Barry & Babbitt, Hallen D. Rosner, Christopher P. Barry and Angela J. Smith for Plaintiff and 
Respondent. 
 
Kreindler & Kreindler, Gretchen M. Nelson and Jacob H. Mensch for Consumer Attorneys of California as 
Amicus Curiae on behalf of Plaintiff and Respondent. 
 
Chavez & Gertler, Mark A. Chavez and Nance F. Becker for Arthur Lovett as Amicus Curiae on behalf of 
Plaintiff and Respondent. 
 
Aimee Feinberg for Consumers for Auto Reliability and Safety as Amicus Curiae on behalf of Plaintiff and 
Respondent. 
 
Arbogast Law and David M. Arbogast for Consumer Attorneys of California as Amicus Curiae on behalf of 
Plaintiff and Respondent. 
 
McKenna Long & Aldridge and J. Alan Warfield for Association of Southern California Defense Counsel 
as Amicus Curiae. 
 
 
 
 
 
 
3 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Robert A. Olson 
Greines, Martin, Stein & Richland 
5900 Wilshire Boulevard, 12th Floor 
Los Angeles, CA  90036 
(310) 859-7811 
 
Hallen D. Rosner 
Rosner, Barry & Babbitt 
10085 Carroll Canyon Road, Suite 100 
San Diego, CA  92131 
(858) 348-1005