Court Opinion

ID: 2679074
Source: CourtListenerOpinion
Date Created: 2014-06-18 20:01:20.944808+00
Date Added: 2024-06-11T12:37:47.843743
License: Public Domain

Filed 6/18/14
                           CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                            SECOND APPELLATE DISTRICT

                                     DIVISION EIGHT

FRANK SABIA et al.,                             B243141

        Plaintiffs and Appellants,              (Los Angeles County
                                                 Super. Ct. No. BC469744)
        v.

ORANGE COUNTY METRO REALTY,
INC., et al.,

        Defendants and Respondents.

      APPEAL from an order of the Superior Court of Los Angeles County. William F.
Highberger, Judge. Reversed and remanded.

       Van Etten Suzumoto & Sipprelle, David B. Van Etten and Keith A. Sipprelle for
Plaintiffs and Appellants.

      Lewis Brisbois Bisgaard & Smith, Raul L. Martinez, Esther P. Holm; Carlson Law
Group, Mark C. Carlson and Warren K. Miller, for Defendants and Respondents Orange
County Metro Realty, Inc., Republic Realty Services, Inc., Joseph A. Broderick, Brenda
Caballero, Elizabeth Broderick, Victoria Viveros, Charles Penusis, and Marshal L. Lewis.

      Law Office of Robert E. Gibson and Robert E. Gibson for Defendant and
Respondent The Master Game.

                              __________________________
       In this appeal we are presented with the recurring issue of the reach of the United
States Supreme Court’s decision in AT&T Mobility LLC v. Concepcion (2011)
563 U.S. ___, 131 S.Ct. 1740 (Concepcion) as it impacts unconscionability as a state law
defense to arbitration provisions. The unconscionability defense has been the subject of
three relevant California Supreme Court cases filed both before and after Concepcion –
Armendariz v. Foundation Health Psychcare Servs. (2000) 24 Cal.4th 83 (Armendariz);
Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I), vacated and
remanded by Sonic-Calabasas A, Inc. v. Moreno (2011) __ U.S. __ [132 S.Ct. 496];
Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012)
55 Cal.4th 223 (Pinnacle); and Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th
1109, 1159-1160 (Sonic II), cert. den. (2014) ___ U.S. ___ [82 USLW 3462]. Each of
these cases upholds unconscionability as a viable defense to an arbitration provision.
       We are bound by precedent established by our Supreme Court (Auto Equity Sales,
Inc. v. Superior Court of Santa Clara County (1962) 57 Cal.2d 450), and are not free to
anticipate what the United States Supreme Court might decide if presented with the case
currently before us. Accordingly we apply our state law of unconscionability to the facts
of the case. In so doing, we conclude that the arbitration provision here was
unconscionable principally because it applied only to plaintiffs. We therefore reverse the
trial court’s order granting a motion to compel arbitration.

                       FACTS AND PROCEDURAL HISTORY

       Frank Sabia and eight other persons filed a class action complaint against
mortgage foreclosure consultant The Home Defender Center and several other persons
and entities allegedly affiliated with Home Defender for fraud, breach of contract, and
other statutory and common law claims, alleging that they were duped into signing their
agreements and lost the money they paid for services that were never rendered.1

1      The plaintiffs were Frank and Elidia Sabia, Armando Flores, Eladio and Blanca
Campos, George and Melissa Cruz, and Raul and Rita Venegas. We will refer to them
collectively as plaintiffs. Plaintiffs’ individual claims ranged from $3,500 to $4,500.
                                             2
       Defendants brought a petition to compel arbitration based on the following
provision in their written agreement with plaintiffs: “If a dispute arises between Home
Defender Center and Client regarding Home Defender Center’s actions under this
agreement and Client files suit in any court other than small claims court, Home
Defender Center will have the right to stay that suit by timely electing to arbitrate the
dispute under the Business and Professions Code, in which event Client must submit the
matter to such arbitration. The parties agree to bring any such action or proceeding in a
state or federal court of competent jurisdiction in Orange County, California, and that
jurisdiction and venue are proper in Orange County.”
       Defendants also contended that arbitration on a classwide basis was prohibited
pursuant to Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp. (2010) 559 U.S. 662 (Stolt-
Nielsen) because the arbitration provision did not mention classwide arbitration.2

        The entity defendants were: Master Game, Inc., dba the Home Defender Center;
Orange County Metro Realty, Inc., dba RE/Max Metro and RE/Max Metro Realty;
Orange County Metro Properties, Inc., dba RE/Max Metro; and Republic Realty
Services, Inc., dba RE/Max Metro Real Estate Services. The individual defendants were
Victoria Viveros, Arturo Diaz, Charles Penusis, Marsha Lewis, Joseph A. Broderick,
Brenda Caballero, Dereck Markovic, and Elizabeth Broderick. Some worked for or were
in controlling positions at Master Game/Home Defender, while others were either real
estate agents or brokers who either controlled or worked for the various real estate entity
defendants that allegedly arranged or took part in the disputed transactions. We will refer
to them collectively as defendants.

        The class action complaint included the following causes of action: (1) Civil
Code sections 2945-2945.11, which govern foreclosure consultant contracts; (2) Civil
Code section 1632, which requires that contracts negotiated in a foreign language must be
written in that language; (3) unfair business practices (Bus. & Prof. Code, § 17200 et
seq.); (4) breach of contract; (5) various forms of fraud and negligent misrepresentation;
(6) common counts; and others.

2     Federal law is applicable here because, as plaintiffs concede, their agreements
with Home Defender involved interstate commerce and were therefore subject to the
Federal Arbitration Act. (9 U.S.C. § 1 et seq.; FAA.)
                                              3
        Plaintiffs opposed the petition on the following grounds: First, the clause was not
enforceable because its references to courts and the venue for actions, along with its
mention of nonexistent Business and Professions Code arbitration rules, made it
hopelessly ambiguous. Second, the arbitration provision was void under the doctrine of
unconscionability, an ordinary contract law defense available under the FAA. (9 U.S.C.
§ 2.)
        Plaintiffs’ opposition was supported by declarations from four of the nine named
plaintiffs: Eladio Campos, Armando Flores, Elidia Sabia, and George Cruz. Distilled,
they said that Spanish was their native language and that defendant Viveros explained in
Spanish that Home Defender would try to obtain a loan modification for them. Viveros
said that their up-front fee payments would be held in escrow and returned to them if
Home Defender failed to obtain a loan modification. Viveros then handed them a pile of
English-language documents that included their agreement with Home Defender and told
them not to worry about the contents because they stated in English what she had
explained to them in Spanish. Viveros never mentioned that the agreement included an
arbitration provision. Sabia said Viveros told her to hurry and sign the documents
because Viveros needed to leave right away.
        Plaintiffs contended the arbitration provision was procedurally unconscionable
because the declarations showed they signed adhesion contracts written in English when
the terms were explained in Spanish, and because the arbitration provision did not include
or attach the Business and Professions Code rules mentioned in the provision. They
contended the arbitration provision was substantively unconscionable because it applied
to only actions brought by them, leaving Home Defender free to sue in court for any
claims it might have. Plaintiffs also contended that this defect could not be cured by
severing it from the provision.
        In reply, defendants argued that the lack of mutuality in the one-sided arbitration
provision was not grounds for invalidating that provision under Concepcion. Defendants
also argued that the arbitration clause was either not ambiguous, or that any ambiguities

                                              4
were overcome by its clear and express statement that Home Defender could require
arbitration.
       Defendants also asserted the agreement was not procedurally unconscionable
because, as evidenced by some of the plaintiffs’ own handwritten letters and notes in
Home Defender’s files, they could read and write in English. Defendants also pointed to
Spanish-language forms signed by the plaintiffs stating that plaintiffs had read the
documents presented to them. They also contended that the provision was not
substantively unconscionable because mutuality of obligations was not a prerequisite to
forming a valid contract and because decisions cited by plaintiffs in their opposition were
inapplicable. Finally, defendants contended that even if unconscionability existed, any
such terms could be severed.3
       As part of its order granting the petition to compel arbitration, the trial court noted
that only four of the nine named plaintiffs submitted declarations. As to those, the trial
court found that they were still bound by the contracts even if they did not read them in
advance or obtain a translation in Spanish. The trial court cited Brown v. Wells Fargo
Bank, N.A. (2008) 168 Cal.App.4th 938, 959 (Brown) to support that finding.
       The trial court found that any ambiguities surrounding the references to rules of
the Business and Professions Code or to venue for actions or courts were not sufficient
enough to render the arbitration provision unenforceable because the agreement “clearly
called out binding arbitration as the dispute resolution mechanism for disputes unless
they were first filed in small claims court.”
       The trial court found that plaintiffs did not “show that the agreements are
unconscionable to such a degree that they should not be enforced.” On the issue of
procedural unconscionability, the trial court said that the mere fact that the agreements
were adhesion contracts was not enough, and that the plaintiffs’ “generalized assertions”
that they were told the contract repeated in English what they had been told in Spanish

3      Defendants have abandoned that contention on appeal.
                                                5
was also insufficient to show procedural unconscionability. Plaintiffs’ alleged failure to
obtain Spanish translations of the documents was also insufficient, the trial court found.
       The trial court found that the provision was “not substantively unconscionable at
all as it furthers the public policy of the FAA, as interpreted by the United States
Supreme Court, to send matters to arbitration when a contract so authorizes.” In
connection with this finding, the trial court cited Iskanian v. CLS Transportation Los
Angeles, LLC (2012) 206 Cal.App.4th 949, as to which review was granted by the
California Supreme Court three months later (S204032) for the proposition that the state
courts must follow United States Supreme Court precedent on this issue.
       Finally, relying on Stolt-Nielsen, supra, 559 U.S. 662, the trial court ordered
arbitration as to plaintiffs’ individual claims alone, concluding that its ruling was the
“death knell” of any classwide resolution of the dispute.

                                STANDARD OF REVIEW

       Under both the FAA and its California counterpart there is a strong public policy
in favor of arbitration. (Brown, supra, 168 Cal.App.4th at pp. 953-954.) Doubts
regarding the validity of an arbitration agreement generally are resolved in favor of
arbitration. (Coast Plaza Doctors Hospital v. Blue Cross of California (2000)
83 Cal.App.4th 677, 686.) Under the FAA, however, arbitration agreements may be
invalidated under generally applicable contract defenses. (9 U.S.C. § 2.)
       Because unconscionability is a contract defense, plaintiffs bore the burden of
proving the arbitration provision was unenforceable on that ground. (Chin v. Advanced
Fresh Concepts Franchise Corp. (2011) 194 Cal.App.4th 704, 708.) Unconscionability
is a question of law that we review independently when there are no meaningful factual
disputes in the evidence. We review the trial court’s resolution of disputed facts under
the substantial evidence standard. When the trial court does not make express findings,
we infer that it made every factual finding necessary to support its order, and review
those implied findings for substantial evidence. (Ibid.)

                                              6
                                        DISCUSSION

1.     The Order Compelling Arbitration Was Appealable

       Defendants contend we should dismiss the appeal because orders compelling
arbitration are not ordinarily appealable. (Elijahjuan v. Superior Court (2012)
210 Cal.App.4th 15, 19 (Elijahjuan).) One exception to this rule is when an order
compelling arbitration effectively acts as the “death knell” for any class claims by
effectively terminating them. (Ibid.)
       We agree with the trial court that its ruling was the death knell of plaintiffs’ class
claims. The court in Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277
(Franco) held that the death knell doctrine applied to a trial court order compelling
arbitration of a plaintiff’s individual wage claims. The plaintiff filed a class action
complaint on behalf of himself and other similarly situated employees, but the trial court
enforced the class action waiver provisions of the parties’ arbitration agreement and
ordered the plaintiff to litigate only his individual claims. By doing so, the Franco court
held, the trial court sounded the “death knell” of plaintiff’s class litigation. (Id. at
p. 1288.)
       The trial court here found that under Stolt-Nielsen, supra, 559 U.S. 662, the
arbitration provision’s silence on the issue of classwide proceedings precluded any
classwide dispute resolution and ordered the plaintiffs to arbitrate their individual claims.
Defendants try to distinguish this case from Franco because the trial court in Franco
dismissed the civil action while the trial court in this case stayed the civil action.
However, the Franco court did not mention the dismissal of the action as a factor in its
death knell analysis, focusing instead on the order to arbitrate only individual claims.
       Upon request of a party, the trial court ordering arbitration must stay a civil action
covered by the arbitration provision. (Code Civ. Proc., § 1281.4.) The effect of such a
stay is to retain at best “vestigial jurisdiction” in the trial court with the power to appoint
arbitrators if the parties’ selected method fails, grant a provisional remedy, and confirm,
correct, or vacate the arbitration award. (Optimal Markets, Inc. v. Salant (2013)

                                               7
221 Cal.App.4th 912, 923.) This leaves the civil action in a “twilight zone of abatement.”
(Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796.)
       It is unclear whether the party moving to compel arbitration in Franco asked for a
stay. Regardless, we see little difference between dismissing an action and leaving it in
the legal equivalent of the Phantom Zone where its existence would be that of a legal
shade. In either case, class wide dispute resolution has been eliminated. We therefore
reject defendants’ attempt to distinguish Franco.
       Defendants also contend that the death knell doctrine does not apply unless the
order compelling arbitration makes it impossible or impracticable for the plaintiffs to
proceed with the action at all as either an individual or class action. They cite Nelsen v.
Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115, 1123 (Nelsen) for this
proposition, which in turn quoted Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094,
1098 (Szetela). Neither case is applicable.
       The plaintiff in Szetela filed a class action lawsuit against a credit card company,
which then obtained an order compelling arbitration of the dispute on only an individual
basis pursuant to a provision in the credit card agreement that required arbitration and
precluded classwide claims. The plaintiff arbitrated his dispute, and, after being awarded
$29, appealed the order compelling arbitration. In the interim, a second amended
complaint was filed that added a new class representative who was not bound by the
arbitration provision. The Szetela court deemed the appeal a petition for writ of mandate
after deciding that the death knell doctrine did not apply despite plaintiff’s contention that
the effect of the trial court’s order was to sharply limit the scope of the class. (Szetela,
supra, 97 Cal.App.4th at p. 1098.)
       As part of its general discussion of the death knell doctrine, Szetela cited
Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470 (Richmond) for the
proposition that “the death knell doctrine permits the appellate court to review an order
denying a motion to certify a class when it is unlikely the case will proceed as an
individual action.” (Szetela, supra, 97 Cal.App.4th at p. 1098.)

                                               8
       However, Richmond says no such thing. Instead, citing Daar v. Yellow Cab Co.
(1967) 67 Cal.2d 695, 698-699, the Richmond court said that a trial court order “denying
certification to an entire class is an appealable order.” (Richmond, supra, 29 Cal.3d at
470.) Szetela’s citation to Richmond’s true holding makes sense in the context of Szetela
– where the death knell doctrine was found inapplicable because the case would still
proceed as a class action, albeit one limited to persons not bound by the arbitration
provision. As best we can determine, however, Szetela simply misquoted Richmond.
This error was repeated in Nelson.
       Nelsen, supra, 207 Cal.App.4th 1115, treated a plaintiff’s appeal from an order
compelling arbitration of her class action complaint for wage and hour law violations on
an individual basis only as a petition for writ of mandate. The Nelsen court also
discussed the death knell doctrine. The court first cited Daar v. Yellow Cab Co., supra,
67 Cal.2d 695, which held that the death knell doctrine applied to an order sustaining a
demurrer to a class action complaint and transferring the matter to the municipal court as
to plaintiff’s individual claims only. Darr held that the trial court’s order determined the
legal insufficiency of the complaint as a class action and preserves for “plaintiff alone his
cause of action for damages. In its ‘legal effect’ the order is tantamount to a dismissal of
the action as to all members of the class other than plaintiff. It has virtually demolished
the action as a class action.” (Daar, at p. 699, citations omitted.)4
       Nelsen then cited Szetela’s statement about the death knell doctrine applying
“when it is unlikely the case will proceed as an individual action.” Based on this, Nelsen
concluded that because the plaintiff could pursue her individual claims through
arbitration, the death knell doctrine did not apply absent some showing that it was
impossible or impractical for her to do so. (Nelsen, supra, 207 Cal.App.4th at p. 1123.)
       We disagree with Nelsen. The appellate court uncritically quoted Szetela without
examining the true underlying context. Second, Nelsen and Szetela are flatly at odds with
Daar v. Yellow Cab Co., supra, 67 Cal.2d at pages 698 and 699 and our Supreme Court’s

4     The Nelsen court was actually citing a quote from Daar that was set forth in
General Motors Corp. v. Superior Court (1988) 199 Cal.App.3d 247, 251.
                                              9
most recent explanation of the death knell doctrine, which holds that the death knell
doctrine applies to rulings that “effectively terminate class claims but permit individual
claims to continue.” (In re Baycol Cases I and II (2011) 51 Cal.4th 751, 754.) Nelsen
never mentioned Baycol, and we therefore choose not to follow that decision. As a result,
we conclude that the death knell doctrine applies and the order compelling plaintiffs to
arbitrate is appealable.

2.     The Contract Terms Are Not Fatally Ambiguous

       Plaintiffs contend the arbitration provision is unenforceable because it is both
unintelligible and ambiguous in three respects: (1) it calls for arbitration pursuant to
unspecified “rules” of the Business and Professions Code; (2) it refers to courts and
venue for actions in Orange County, which could be construed to permit litigation; and
(3) it merely gives Home Defender the right to stay any superior court action but does
not give it the power to compel arbitration. Although we have little doubt that these
provisions were either inapplicable or poorly phrased and thus in the abstract may have
caused confusion, we disagree that they made the agreement legally unenforceable.
       As defendants point out, given the strong public policy in favor of arbitration, if an
arbitration provision is ambiguous, it must, if possible, be interpreted in a manner that
makes it lawful and operative. (Roman v. Superior Court (2009) 172 Cal.App.4th 1462,
1473 (Roman).)
       The failure to specify an arbitration method or procedure is not fatal because the
provisions governing arbitration provide that in such a case the trial court will appoint an
arbitrator. (Code Civ. Proc., § 1281.6; HM DG, Inc. v. Amini (2013) 219 Cal.App.4th
1100, 1103.) Therefore, even though, as defendants concede on appeal, the reference to
the Business and Professions Code has no ascertainable meaning, that defect can be
remedied.5

5     Defendants contended below that the reference to the Business and Professions
Code might have been to the provisions governing arbitration of attorney-client fee
                                             10
        Although the provision does not expressly state that Home Defender has the power
to compel arbitration, such language is not necessary given the clear expression of an
intent to arbitrate, coupled with the statutory power to compel arbitration when one party
to an arbitration provision files a civil action instead.
        Finally, the provision’s reference to venue in Orange County for actions or
proceedings is also not hopelessly ambiguous. Instead, because the provision allows
small claims actions, the provision should be interpreted in that light. The same language
could apply equally in regard to jurisdiction and venue for petitions to compel arbitration
as well as to cases where Home Defender elected not to seek arbitration of a superior
court action brought by its clients.

3.      General Principles of the Unconscionability Defense

        Plaintiffs contend the arbitration provision is unenforceable because it is both
procedurally and substantively unconscionable. A written agreement to submit a dispute
to arbitration is valid, enforceable, and irrevocable, except “upon such grounds as exist
for the revocation of any contract.” (Code Civ. Proc., § 1281.) When one party to a
written arbitration agreement refuses to submit to arbitration a dispute covered by the
agreement, the other party may petition the court to compel arbitration unless the court
determines that the right to compel arbitration has been waived by the petitioner, or
grounds exist for revocation of the agreement. (Code Civ. Proc., § 1281.2, subds. (a),
(b).)
        Unconscionability is a defense to the enforcement of an entire contract, or
particular provisions of a contract, including agreements to arbitrate disputes. (Civ.
Code, § 1670.5, subd. (a).)6 As noted earlier, the unconscionability defense is still

disputes. They do not make that contention on appeal. Neither side presently asserts that
provisions of the Business and Professions Code have any applicability to this case.

6     Civil Code section 1670.5 is a codification of this common law contract
enforcement defense. (Dean Witter Reynolds, Inc. v. Superior Court (1989)
211 Cal.App.3d 758, 766.)
                                               11
available under section 2 of the FAA.7 (9 U.S.C. § 2; Samaniego v. Empire Today, LLC
(2012) 205 Cal.App.4th 1138, 1150 (Samaniego).)
       The defense of unconscionability has two components – procedural
unconscionability and substantive unconscionability. The procedural component
generally occurs in adhesion contracts that were drafted by the party with superior
bargaining strength and are presented on a take it or leave it basis. This inquiry focuses
on oppression or surprise due to unequal bargaining power. The substantive component
turns on whether the terms are overly harsh or one-sided. (Gentry v. Superior Court
(2007) 42 Cal.4th 443, 468-469 (Gentry).) Both must be present, but not in the same
degree. Instead, a sliding scale is employed, and the greater the presence of one
component of unconscionability, the less of the other there need be in order to determine
that a contract is not enforceable. (Id. at p. 469.)

4.     The Arbitration Agreement Was Substantively Unconscionable

       (A)    The Agreement Is Unconscionably One-Sided

              (i)     Overview of the Law Regarding Bilaterality

       The element of substantive unconscionability involves an inquiry into whether the
contract terms are unfairly one-sided. (Gentry, supra, 42 Cal.4th at p. 469.) Although
some courts have framed the test as whether the disputed provisions “shock the
conscience,” that is simply one of several nonexclusive formulations describing “the
notion that unconscionability requires a substantial degree of unfairness beyond ‘a simple
old-fashioned bad bargain.’ [Citation.]” (Sonic II, supra, 57 Cal.4th at pp. 1159-1160.)
       This principle was most famously articulated in the context of arbitration
provisions in Armendariz, supra, 24 Cal.4th 83, which reversed the Court of Appeal and

7      Defendants contend that finding the arbitration agreement is unconscionable
because it requires only plaintiffs to arbitrate violates the Concepcion court’s
interpretation of section 2 of the FAA. As set forth in section 4(A)(ii) of our discussion,
post, we disagree.
                                              12
affirmed a trial court ruling denying an employer’s petition to compel arbitration of sex
discrimination claims brought by two plaintiffs. The arbitration provision was deemed
unilateral because it applied to only wrongful termination-related claims brought by
employees. (Id. at pp. 115, 120-121.)
       Although an arbitration provision need not mandate that all claims between
employer and employee be arbitrated in order to avoid a finding of unconscionability, “an
arbitration agreement imposed in an adhesive context lacks basic fairness and mutuality if
it requires one contracting party, but not the other, to arbitrate all claims arising out of the
same transaction or occurrence or series of transactions or occurrences.” (Armendariz,
supra, 24 Cal.4th at p. 120.) The arbitration provision at issue in Armendariz lacked
mutuality because it required employees, but not employers, to arbitrate claims arising
out of a wrongful termination. As a result, an employee fired for stealing trade secrets
would have to arbitrate his wrongful termination claim while the employer remained free
to litigate its trade secrets claims. (Ibid.)
       Armendariz cited with approval Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th
1519 (Stirlen), where the Court of Appeal affirmed an order denying an employer’s
petition to compel arbitration of a former company top executive’s action for wrongful
termination in violation of public policy and other related claims. The arbitration
provision was deemed unconscionably one-sided because it required the executive to
arbitrate all disputes related to the termination of his employment, but excluded from
arbitration all claims by the employer relating to protection of its intellectual property,
along with enforcement of a covenant not to compete. The agreement also eliminated
recovery for tort and punitive damages by limiting any award to the amount of actual
damages for breach of contract, less mitigation of damages, and cut off employer liability
for salary and benefits while the claims were arbitrated. (Id. at pp. 1528, 1533-1534.)
       Armendariz has since been applied in several Court of Appeal decisions, including
some post-Concepcion. For example in Samaniego v. Empire Today, LLC, supra,
205 Cal.App.4th at pages 1147-1148, the court held that the arbitration provision in a
contract with carpet installers was substantively unconscionable because it excluded from

                                                13
arbitration certain claims that only employers would bring, shortened the limitations
period for bringing employee claims, and contained a one-sided attorney’s fee provision.
As for the impact of the then recent Concepcion decision, the Samaniego court succinctly
stated: “We hold the provision is unconscionable and unenforceable under Armendariz[,
supra,] 24 Cal.4th 83 []; that our consideration of the issues is governed by California
law; and that the recent decision of the Supreme Court of the United States in
[Concepcion, supra,] 131 S.Ct. 1740[], does not change our analysis.” (Id. at p. 1141.)
       Earlier decisions that had relied on Armendariz in finding one sided arbitration
agreements unconscionable include: Zullo v. Superior Court (2011) 197 Cal.App.4th
477, 486-487 (arbitration agreement was one-sided even though it referred to arbitration
of all disputes because other qualifying language showed it applied to only employee
claims); Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 724-726 (arbitration provision
unconscionable where it excluded employee claims for workers compensation and
unemployment benefits, along with employer claims concerning confidentiality and
noncompetition agreements or intellectual property rights); Flores v. Transamerica
HomeFirst, Inc. (2001) 93 Cal.App.4th 846, 854-855 (arbitration provision in reverse
mortgage agreement held unconscionable where it said any disputes would be arbitrated,
but allowed lender to pursue judicial and nonjudicial self-help remedies, including set-
offs, foreclosure, injunctive relief, and appointment of a receiver; as a result, the
provision realistically applied to only claims brought by borrowers).

              (ii)    Application of Armendariz and Its Progeny to this Case

       The terms of Home Defender’s arbitration agreement bring it within the rationale
of these decisions. The provision applies when a client “files suit in any court other than
small claims court” for disputes “regarding Home Defender Center’s actions . . . .” In
such cases, Home Defender has the option to insist on arbitration.
       The net effect of this provision creates a two-pronged form of one-sidedness.
First, by its terms, only plaintiffs must arbitrate their superior court claims if Home
Defender so chooses, leaving Home Defender free to sue its clients for any claims it

                                              14
might have. Second, it appears directly aimed at limiting a client’s access to the courts to
the $10,000 small claims threshold of recovery. (Code Civ. Proc., § 116.221.) In other
words, plaintiffs who sustain anything more than a relatively modest amount of damages
above and beyond the amount of the fees they paid – such as the loss of their home due to
inaction or improper action by Home Defenders – must arbitrate. As the decisions cited
above make clear, this type of one-sidedness is substantively unconscionable.
       Defendants contend the provision is not one-sided because: (1) it is silent as to
what would occur if it had sued and a client pressed for arbitration; and (2) under
Roman, supra, 172 Cal.App.4th 1462, the provision can be interpreted to require
arbitration by both parties.
       At issue in Roman was an arbitration provision in an employment application that
said “I hereby agree” to submit to binding arbitration all disputes and claims arising out
of submission of the application or out of the applicant’s subsequent employment. The
Roman court held that such language created nothing more than an ambiguity that, under
ordinary rules of contract interpretation, was best interpreted to mean that both parties
were bound to arbitrate any disputes. In other words, the “I” referred to each party’s
respective obligations. (Roman, supra, 172 Cal.App.4th at pp. 1472-1473.)8
       The Home Defender arbitration provision is not ambiguous. It uses no “I’s.” It
states that Home Defender can force a client to arbitrate if the client sues outside of small
claims court for disputes regarding Home Defender’s actions. The provision is therefore
expressly limited to actions brought by Home Defender clients against Home Defender,
and cannot reasonably be construed as bilateral simply because it is silent as to Home
Defender’s right to litigate its claims. (See Armendariz, supra, 24 Cal.4th at p. 120 [lack

8       In another case that discusses the mutuality of an “I” clause, we rejected an
employer’s argument that “I” could be construed as “we.” We held there was no
bilaterality and that only the employee and not the employer was obligated to arbitrate.
(Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1253-1254 (Higgins).) The
Roman court acknowledged the differences in the arbitration clauses in the two cases.
(Roman, supra, 172 Cal.App.4th at pp. 1472-1473.)
                                             15
of mutuality existed even where arbitration provision did not expressly state that
employer could litigate its claims].)
       Although one-sided arbitration provisions may be justified by business realities
that create a special need for the advantage, those realities must either be explained in the
contract or factually established. (Higgins, supra, 140 Cal.App.4th at p. 1254, fn. 12.)
The contract contains no such explanation and Home Defenders has never raised the
issue. We therefore conclude that the provision is substantively unconscionable.

       (B)    The Armendariz One-Sidedness Rule Survives Concepcion

       Defendants contend that even if the provision were otherwise unconscionable, the
Armendariz rule of mutuality is no longer good law after Concepcion, supra, 131 S.Ct.
1740. As stated at the outset, we recognize that the law in this area is evolving. It is not
within our province to decide a case based on our prediction of what the Supreme Court
might rule in a case not before it. (See People v. Rogers (2013) 57 Cal.4th 296, 342
[“trial court properly refused to predict how the Florida Supreme Court might rule on the
issues”].) Time will tell whether the United States Supreme Court addresses the
unconscionability defense; until then we are duty bound to follow recent decisions by the
California Supreme Court that reaffirm that unconscionability, including the Armendariz
bilaterality rule, survives Concepcion and are applicable here. We begin by examining
Concepcion.

              (i)     The Holding of Concepcion

       Concepcion overruled Discover Bank v. Superior Court (2005) 36 Cal.4th 148
(Discover Bank), which had held that class action waivers in a limited class of consumer
contracts of adhesion were per se unconscionable in settings involving a scheme to
defraud large numbers of consumers out of individually small sums of money because
such waivers had the practical effect of exempting the wrongful party from responsibility
for its willful misconduct. (Id. at p. 162.)

                                               16
       Discover Bank was expressly overruled by Concepcion, supra, 131 S.Ct. 1740 on
the ground that it conflicted with the FAA. Even though Discover Bank involved the
application of a standard contract defense that was ordinarily permitted under section 2 of
the FAA, the Concepcion court concluded that, as applied, it had the effect of disfavoring
arbitration and was therefore contrary to the FAA’s animating philosophy of encouraging
arbitration. (Concepcion, at pp. 1746-1748.)
       State courts may not rely on the uniqueness of an agreement to arbitrate as a basis
for holding that the agreement is unconscionable because that would allow the courts to
do what the state legislatures cannot. (Concepcion, supra, 131 S.Ct. at p. 1747.)
Examples of such rulings, the Concepcion court said, would be cases finding a consumer
arbitration agreement unconscionable because it did not provide for judicially monitored
discovery, did not apply the rules of evidence, or did not allow for a jury to decide the
case. (Ibid.) Such holdings would “have a disproportionate impact on arbitration
agreements” even though they seemingly fell under the savings clause of FAA section 2
as part of the generally applicable state law defense of unconscionability. (Ibid.)
       The Discover Bank rule regarding class actions similarly interfered with
arbitration, the Concepcion court held. While the rule did not require class wide
arbitration, it essentially allowed any party to a consumer contract to demand it after the
fact. (Concepcion, supra, 131 S.Ct. at p. 1750.) Although parties to an arbitration
agreement are free to provide for class wide proceedings, such proceedings are generally
unsuited to arbitration because they make it more time consuming, expensive, and
formal. Imposing them on the parties when not provided for by their arbitration
agreement was therefore inconsistent with the FAA’s policy of enforcing arbitration
agreements according to their terms. (Id. at pp. 1750-1753.)

              (ii)   Armendariz Held That Bilaterality Is A Valid Defense Under the
                     FAA

       Defendants contend the rule of one-sidedness as applied by Armendariz and other
decisions violates Concepcion because a lack of perfect mutuality of obligation is not

                                             17
generally grounds to invalidate a contract under California law. As a result, defendants
argue, those decisions impose on arbitration agreements a degree of mutuality above and
beyond what is ordinarily required for contracts generally, and hence do not come within
the FAA section 2 savings clause.
       Although Armendariz preceded Concepcion by 11 years, the Armendariz court
considered and rejected this precise contention. After adopting the “modicum of
bilaterality” rule enunciated in Stirlen, supra, 51 Cal.App.4th at page 1541, the
Armendariz court distinguished the concept that lack of mutuality does not render a
contract illusory from the principles of unconscionability. “We conclude . . . that in the
context of an arbitration agreement imposed by the employer on the employee, such a
one-sided term is unconscionable. Although parties are free to contract for asymmetrical
remedies and arbitration clauses of varying scope, Stirlen and Kinney[9] are correct that
the doctrine of unconscionability limits the extent to which a stronger party may, through
a contract of adhesion, impose the arbitration forum on the weaker party without
accepting that forum for itself.” (Armendariz, supra, 24 Cal.4th at p. 118.)
       Armendariz then rejected the notion that enforcing this bilaterality rule singled out
arbitration agreements for suspect status in contravention of the FAA. Agreeing with the
court in Stirlen, supra, 51 Cal.App.4th at page 1551, the Armendariz court said, “the
ordinary principles of unconscionability may manifest themselves in forms peculiar to the
arbitration context. One such form is an agreement requiring arbitration only for the
claims of the weaker party but a choice of forums for the claims of the stronger party.
The application of this principle to arbitration does not disfavor arbitration.”
(Armendariz, supra, 24 Cal.4th at p. 119.)
       According to Armendariz, supra, 24 Cal.4th at page 119, the judicial forum
affords plaintiffs the advantages of discovery and the fact that judges and juries are more
likely to follow the law instead of splitting the difference as arbitrators often do, thereby
reducing damage awards. “An employer may accordingly consider a court to be a forum

9      Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322.
                                              18
superior to arbitration when it comes to vindicating its own contractual and statutory
rights, or may consider it advantageous to have a choice of arbitration or litigation when
determining how best to pursue a claim against an employee. It does not disfavor
arbitration to hold that an employer may not impose a system of arbitration on an
employee that seeks to maximize the advantages and minimize the disadvantages of
arbitration for itself at the employee’s expense. On the contrary, a unilateral arbitration
agreement imposed by the employer without reasonable justification reflects the very
mistrust of arbitration that has been repudiated by the United States Supreme Court in
Doctors’ Associates, Inc. v. Casarotto [(1996)] 517 U.S. 681, and other cases.” (Id. at
pp. 119-120, italics added.)

              (iii)   Post-Concepcion Decisions Hold That A Lack of Bilaterality Is Still
                      A Valid Defense Under the FAA

       Decisions of both the California and federal courts hold that Concepcion still
permits voiding an arbitration provision that applies to only the party with the weaker
bargaining strength, or is otherwise oppressively one-sided. (Serpa v. California Surety
Investigations, Inc. (2013) 215 Cal.App.4th 695, 705 [arbitration agreement in employee
handbook that on its face required only employees to arbitrate their claims would have
been found unconscionable for lack of bilaterality except for the fact that arbitration rules
incorporated by reference made clear that employer was also to arbitrate its own claims];
Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 506 (Truly
Nolen) [finding an adhesive arbitration provision unconscionable because it is overly
one-sided does not disfavor arbitration]; Sparks v. Vista Del Mar Child and Family
Services (2012) 207 Cal.App.4th 1511, 1523 [arbitration provision in employee
handbook unconscionable by forcing employee to relinquish federal and state statutory
rights and by allowing arbitrator to prevent discovery]; Ajamian v. CantorC02e, L.P.
(2012) 203 Cal.App.4th 771, 797-800 [arbitration provision in broker’s employment
contract unconscionable because it unreasonably limited damages available to the broker,
and contained unilateral attorney’s fee provision that might strip broker of right to

                                             19
recover fees for statutory wage and hour claims]; Noohi v. Toll Bros. (4th Cir. 2013)
708 F.3d 599, 612-614 [applying Maryland law, Concepcion not violated by invalidating
for lack of mutuality arbitration provision in home construction contracts that obligated
only buyers to arbitrate their claims].)10
       Most important, our Supreme Court has recently affirmed the continued vitality of
the unconscionability defense in general, and the bilaterality doctrine in particular, after
Concepcion.
       Sixteen months after Concepcion, the court in Pinnacle, supra, 55 Cal.4th 223
considered the enforceability of an arbitration provision that a condominium developer
included in the recorded covenants, conditions, and restrictions (CCRs) that required
those who later purchased condominiums to arbitrate any construction related disputes.
After concluding that the arbitration provision applied to the homeowners association
(HOA) pursuant to the statutory scheme that governed common interest developments,
the Pinnacle court considered whether the provision was nevertheless unconscionable.
       The Pinnacle court began by citing Armendariz, supra, 24 Cal.4th at page 114, for
the proposition that unconscionability was a generally applicable contract defense
allowed under the FAA. (Pinnacle, supra, 55 Cal.4th at p. 246.) It also quoted
Armendariz for the proposition that substantive unconscionability exists when contract
terms are “overly harsh or one-sided.” (Ibid., citing Armendariz, at p. 114.) Although
ultimately concluding that the arbitration provision was not unconscionable, the Pinnacle
court considered the HOA’s contention that the provision was substantively
unconscionable under Armendariz because it applied to only the homeowners and
therefore lacked bilaterality.

10      Other Court of Appeal decisions have recognized that unconscionability remains a
viable defense after Concepcion even if the facts of those cases did not support a finding
of unconscionability. (Sanchez v. Carmax Auto Superstores California, LLC (2014)
224 Cal.App.4th 398, 403 [arbitration provision not substantively unconscionable
because it was not unduly one-sided]; Nelsen, supra, 207 Cal.App.4th at pp. 1125-1126
[arbitration provision not unreasonably one-sided under Armendariz]. Both cases cite
Concepcion for the rule that an unconscionable arbitration provision is unenforceable.
                                             20
       In rejecting that contention, the Pinnacle court pointed to the statement in
Armendariz, supra, 24 Cal.4th at page 120, that arbitration provisions need not mandate
arbitration of all claims between the parties to avoid a finding of unconscionability, and
that arbitration clauses may be limited to a specific subject or subjects. (Pinnacle, supra,
55 Cal.4th at p. 248.) “Here, the challenged clause is limited to construction disputes.
To the extent Pinnacle wishes to allege the [HOA’s] comparative fault as an affirmative
defense with respect to damages[], such issue would fall within the scope of [the
arbitration provision]. Apart from that, the [HOA] fails to identify any potential
construction-related claims Pinnacle might assert against it that would not be subject to
arbitration. Accordingly, there appears no support for the [HOA’s] claims of unfairness
and absence of mutuality.” (Id. at pp. 248-249.)
       In short, by distinguishing its facts from those in Armendariz, the Pinnacle court
both rejected the defense in the case before it and also implicitly held that the Armendariz
rule of bilaterality is still good law in California. As we have already observed, the
arbitration provision at issue here qualifies under Armendariz because it applied to all
claims plaintiffs might have that arose out of their contractual relationship with Home
Defender.11
       In Sonic II, supra, 57 Cal.4th 1109, our Supreme Court reversed its previous
decision in Sonic I, supra, 51 Cal.4th 659, which held that even though an employer
could require its employees to arbitrate wage disputes, it was against public policy for
those arbitration provisions to require the employee’s waiver of his right to a “Berman
hearing,” a statutory dispute resolution procedure. On remand from the United States
Supreme Court with directions to reconsider Sonic I in light of Concepcion, the Sonic II
court held that its blanket prohibition against Berman waivers violated the principles set

11     We find it significant that neither Justice Baxter’s majority opinion nor the
concurring opinions of Justice Werdegar or Justice Liu, nor the dissenting opinion of
Justice Kennard even mentioned Concepcion, thus suggesting that none of the justices
believed that Concepcion, a class action arbitration case, had any precedential effect on
the defense of unconscionability.

                                             21
forth in Concepcion. However, the court also held that the waiver could be invalidated
under unconscionability principles if the arbitration provision did not provide a dispute
resolution mechanism that offered benefits and protections roughly comparable to those
found in Berman hearings, and remanded the matter to the trial court so that issue could
be developed and adjudicated. (Sonic II, supra, at pp. 1124-1125, 1147-1148.)12
       As part of its analysis, the Sonic II court made several pertinent observations
concerning the continued viability of the unconscionability defense after Concepcion. It
began by noting that even after Concepcion, unconscionability remained a valid defense
to a petition to compel arbitration so long as its application did not interfere with the
fundamental attributes of arbitration. (Sonic II, supra, 57 Cal.4th at pp. 1142, 1169-
1170.) It described the doctrine in terms of bargains that were unreasonably one-sided
(id. at p. 1143), referred to Armendariz as the “seminal California case” concerning
unconscionability in the context of adhesive arbitration agreements (id. at p. 1159), and
cited Stirlen, supra, 51 Cal.App.4th at page 1532, which Armendariz relied on, for the
rule that the unconscionability doctrine seeks to protect against contract terms that are
overly harsh. (Sonic II, at p. 1145.) The court also cited Armendariz for the proposition
that the FAA does not preempt general unconscionability principles merely because they
are applied in the specific context of arbitration. (Id. at p. 1169, citing Armendariz,
supra, 24 Cal.4th at p. 119.)
       When Pinnacle and Sonic II are read together, they show that the California
Supreme Court still applies the Armendariz bilaterality rule when determining whether to
invalidate an arbitration provision on the ground of unconscionability.
       This makes sense in light of the issues actually decided in Concepcion. As noted,
Discover Bank announced a per se rule of unconscionability as to class action waivers in
consumer adhesion contracts where it was alleged the seller had cheated many consumers
out of small sums of money. Concepcion held that the Discover Bank rule was inimical
to arbitration, and was therefore inconsistent with the FAA, because it required parties to

12     As noted in our introduction, the United States Supreme Court denied a petition
for writ of certiorari in Sonic II.
                                              22
an arbitration agreement to arbitrate class claims even when the agreement specifically
excluded such claims. That factual setting is not analogous to the issue raised here. If
anything, the rule of bilaterality as we apply it here promotes arbitration because its chief
complaint is that the party with superior bargaining strength has excluded its own claims
from the arbitration process. (See Noohi v. Toll Bros., supra, 708 F.3d at pp. 612-613.)13
       In short, Concepcion, a class action case, did not discuss the modicum of
bilaterality standard adopted by Armendariz, an unconscionability not a class action case,
and Concepcion did not overrule Armendariz. We are therefore bound to follow our
Supreme Court and apply Armendariz here. (Samaniego, supra, 205 Cal.App.4th at
p. 1141; see, Truly Nolen, supra, 208 Cal.App.4th at p. 507.) Accordingly, we conclude
that Concepcion does not apply to invalidate Armendariz’s modicum of bilaterality rule,
at least in this context.14

13     The presence of the class waiver plays no part in our analysis, which is instead
based on the generally applicable contract defense of unconscionability in light of the
very one-sided nature of the arbitration provision. We also note that plaintiffs do not
challenge the trial court’s application of Stolt-Nielsen, supra, 559 U.S. 662, and have
effectively conceded that if the arbitration provision is enforceable then class wide
dispute resolution is not available.

14      The California Supreme Court has granted review of numerous Court of Appeal
decisions that have tackled several issues left by Concepcion’s wake, including some
which have both found and rejected unconscionability in this context. The following is a
list of all Concepcion-related cases currently before our Supreme Court. (Vargas v. Sai
Monrovia B, Inc. (2013) 216 Cal.App.4th 1269 [157 Cal.Rptr.3d 742], review granted
Aug. 21, 2013, S212033; Brown v. Superior Court (2013) 216 Cal.App.4th 1302
[157 Cal.Rptr.3d 779], review granted Sep. 11, 2013, S211962; Vasquez v. Greene
Motors, Inc. (2013) 214 Cal.App.4th 1172 [154 Cal.Rptr.3d 778], review granted
June 26, 2013, S210439; Compton v. Superior Court (2013) 214 Cal.App.4th 873
[154 Cal.Rptr.3d 413], review granted June 12, 2013, S210261; Natalini v. Import
Motors, Inc. (2013) 213 Cal.App.4th 587 [153 Cal.Rptr.3d 224], review granted May 1,
2013, S209324; Flores v. West Covina Auto Group (2013) 212 Cal.App.4th 895
[151 Cal.Rptr.3d 481], review granted April 10, 2013, S208716; Franco v. Arakelian
Enterprises, Inc. (2013) 211 Cal.App.4th 314 [149 Cal.Rptr.3d 530], review granted
Feb. 13, 2013, S207760; Goodridge v. KDF Automotive Group, Inc. (2012)
209 Cal.App.4th 325 [147 Cal.Rptr.3d 16], review granted Dec. 19, 2012, S206153;
Reyes v. Liberman Broadcasting, Inc. (2012) 208 Cal.App.4th 1537 [146 Cal.Rptr.3d
                                             23
5.     The Agreement Is Procedurally Unconscionable

       Determining whether an arbitration provision was the product of procedural
unconscionability turns on two factors: oppression and surprise. Oppression arises from
an inequality of bargaining power that results in no real negotiations and an absence of
meaningful choice. Surprise involves the extent to which the terms are hidden in a
lengthy printed form. (Crippen v. Central Valley RV Outlet (2004) 124 Cal.App.4th
1159, 1165 (Crippen).) Ultimately the issue turns on evidence concerning the
circumstances surrounding the execution of the agreement, because procedural
unconscionability focuses on the manner in which the disputed clause is presented to the
weaker party. If the weaker party is effectively told to “take it or leave it” without the
opportunity for meaningful negotiation, an element of procedural unconscionability is
present. (Ibid.)

616], review granted Dec. 12, 2012, S205907; Caron v. Mercedes-Benz Financial
Services USA, LLC (2012) 208 Cal.App.4th 7 [145 Cal.Rptr.3d 296], review granted
Oct. 24, 2012, S205263; and Iskanian v. CLS Transportation Los Angeles, LLC (2012)
206 Cal.App.4th 949 [142 Cal.Rptr.3d 372], review granted Sept. 19, 2012, S204032.)
Our colleagues in the Fourth District recently applied Sonic II and Armendariz when
deciding that a provision in an arbitration clause that granted the arbitrator the right to
determine whether the clause was enforceable was not unconscionable. (Tiri v. Lucky
Chances, Inc. 226 Cal.App.4th 231.) Although the Tiri court held that the provision was
not substantively unconscionable, it cited both Sonic II and Armendariz for the
proposition that under both federal and California law arbitration provisions may be
voided if they are unconscionable. (Id. at p. 627.) The Tiri court also cited both
decisions for the rule that unconscionability exists when an arbitration provision is
unreasonably favorable to the other party (id. at p. 630), or is overly harsh and one-sided.
(Id. at p. 331.)

        Recently, a different panel of this court relied on Armendariz in concluding that
the arbitration provision in question was substantially unconscionable because it was one
sided as to choice of the arbitral or court forum. “The arbitration agreement lacks
mutuality not just in available forums, but in a few other ways, and in none of these cases
is there a justification proffered for the one-sidedness.” (Carmona v. Lincoln Millennium
Car Wash, Inc. (2014) 226 Cal.App.4th 74.)

                                             24
       Plaintiffs contend there was procedural unconscionability because: (1) Viveros
violated Civil Code section 1632, which required her to provide a Spanish language
version of the contract after she presented the terms in Spanish; (2) the trial court’s
reliance on Brown, supra, 168 Cal.App.4th 938 to determine that plaintiffs were bound
by the contract even if they did not read it or understand it was misplaced because
Viveros owed them a fiduciary duty to properly explain all the contract terms; (3) the
Business and Professions Code rules mentioned in the arbitration provision were not
attached to the contract; and (4) the contract was adhesive because it was on a pre-
printed form and was presented on a take it or leave it basis with no meaningful ability to
negotiate.
       Defendants contend there was no procedural unconscionability because: (1) Civil
Code section 1632 does not apply because it provides only rescission as a remedy, which
plaintiffs do not seek; (2) Brown applied because there was no evidence that Viveros
acted as a fiduciary; (3) the failure to supply a copy of any arbitration rules was
irrelevant because as it turned out the Business and Professions Code reference had no
effective meaning, and as a result there were no such rules; (4) the arbitration provision
was conspicuous and the contract was brief; (5) there was no evidence that the contract
was offered on a take it or leave it basis or that plaintiffs were unable to negotiate or were
otherwise subject to oppressive tactics; and (6) the contract was not adhesive.
       We begin with Brown, which was crucial to the trial court’s finding that there was
insufficient procedural unconscionability to justify vitiating the arbitration provision.
The plaintiff in Brown sued his bank for breach of fiduciary duty and unjust enrichment.
The bank’s petition to compel arbitration was denied by the trial court because, without
reaching the issue of substantive unconscionability, it determined the provision was
procedurally unconscionable. Although the trial court found the bank was plaintiff’s
fiduciary, it did not reach the issue of whether the entire agreement should have been
voided under the doctrine of fraud in the execution based on allegations that the bank did
not fully explain the agreement.

                                             25
       The Brown court reversed and in its opinion found no substantive
unconscionability as a matter of law. As a result, the court did not reach the procedural
unconscionability issue. (Brown, supra, 168 Cal.App.4th at pp. 956-958.) As Brown
also expressly states, the case “is not really about arbitration” but about the consequences
flowing from a fraud in the execution and breach of fiduciary duty. (Id. at p. 945.) The
Brown court held that the trial court erred by not reaching the fraud in the execution issue
and remanded so the trial court could do so. (Id. at p. 959.)
       Brown discussed the doctrine of fraud in the execution generally, noting that it is
applicable when the plaintiff was deceived as to the very nature of the agreement being
signed and did not know what he was signing. If so, the entire agreement is void.
(Brown, supra, 168 Cal.App.4th at p. 958.) However, the plaintiff must show reasonable
reliance on the defendant’s misrepresentation, and the defense ordinarily fails if the
plaintiff had an opportunity to discover the true contract terms but simply failed to read
the agreement. (Ibid.) An exception to this rule applies when the other party was
plaintiff’s fiduciary. In such cases, the defendant has a duty to fully and accurately
describe the contract terms. (Ibid.)
       We conclude that the trial court erred when it relied on Brown for its finding that
plaintiffs’ failure to read or inability to understand the contract did not make it
procedurally unconscionable. That portion of Brown went to the fraud in the execution
doctrine, not to procedural unconscionability, an issue that the Brown court expressly
declined to reach. (Brown, supra, 168 Cal.App.4th at pp. 944-945.) The rule that failure
to read a contract may not avoid its enforcement applies only in the absence of
unconscionable overreaching. In fact, the failure to read the contract helps establish
actual surprise. (Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1290-1291; see Higgins,
supra, 140 Cal.App.4th at p. 1251 [procedural unconscionability may exist even if
plaintiff reads an agreement; a contrary rule would seriously undermine the
unconscionability defense].)
       Of course, even a finding that a party’s failure to read the document may have
contributed to procedural unconscionability does not end the inquiry. In some cases the

                                              26
level of substantive unconscionability may be so low that the modicum of procedural
unconscionability is insufficient to render the contract unenforceable. We next consider
whether the arbitration provision was procedurally unconscionable in light of the
circumstances surrounding the execution of the parties’ agreement.15
       We agree that the arbitration provision was not concealed in the three-page written
contract. The agreement is short and the arbitration provision is as conspicuous as any
other provision. However, plaintiffs were presented with other documents at the same
time, including: (1) a one-page description of Home Defender’s services; (2) a one-
page list of “DO’s & DON’T’S”; (3) a two-page document granting power of attorney to
defendants; (4) a two-page authorization to release information; (5) a one-page deposit
receipt with instructions on when plaintiffs’ fees could be released to defendants; (6) a
combined eight pages of small print, densely worded California Association of Realtors
forms concerning agency disclosures and listing agreements for plaintiffs’ homes; and
(7) the Spanish language form stating that plaintiffs had read all the other forms.
       In examining the circumstances surrounding plaintiffs’ execution of these
documents, we begin with some of the evidence defendants submitted in support of their
petition to compel arbitration: the Home Defender’s files, which included “hardship”
letters written by plaintiffs to support their need for mortgage foreclosure consulting
services and a home loan modification. Distilled, the plaintiffs detailed a variety of
unfortunate circumstances, ranging from business failure, job loss, wage and hour
cutbacks, divorce, and damage to homes due to flooding or wildfires, that placed them in
jeopardy of foreclosure and necessitated a mortgage modification to save their homes.
       Next, according to plaintiffs’ uncontested declarations, Viveros told them that
Home Defender could get their mortgage payments reduced. After explaining in Spanish
how the program worked, Viveros presented them with many documents, claimed that
the documents stated in English what she had just told them in Spanish, and told them to
sign. We agree with the trial court that these statements are a bit generalized, but when

15     We agree with defendants that plaintiffs have failed to articulate either a legal or
factual basis for their contention that Viveros was their fiduciary.
                                             27
read in context with the circumstances shown by the plaintiffs’ hardship letters, it is
apparent that plaintiffs saw Home Defender as a way out of their serious financial
difficulties. The clear import of their declarations is that when Viveros told them to sign
the documents after claiming they simply repeated what she had told them, she was
effectively telling them there was no need to read them.
       Because defendants never submitted declarations or other evidence contradicting
plaintiffs’ declarations, we accept plaintiffs’ version of events. (Wherry v. Award, Inc.
(2011) 192 Cal.App.4th 1242, 1247.) The trial court did as well, assuming for purposes
of its analysis that the plaintiffs either did not read the contract or did not understand
English, while concluding under Brown that they were nevertheless bound by the
contracts. However, as our analysis of Brown, supra, 168 Cal.App.4th 938, makes clear,
that does not preclude a finding of procedural unconscionability.
       Defendants also contend that plaintiffs could have obtained mortgage foreclosure
consulting services elsewhere. However, they provide no evidence to support that claim,
which also overlooks the fact that in ordinary consumer transactions, where consumers
have little incentive to seek out alternatives, the mere theoretical opportunity to have
gone elsewhere will not preclude a finding of unconscionability. (Gatton v. T-Mobile
USA, Inc. (2007) 152 Cal.App.4th 571, 585.) We believe this rule applies here because
Viveros was not entirely a stranger to plaintiffs. Flores had used her as a real estate agent
in a previous transaction. He felt comfortable with Viveros because she spoke Spanish
and all of their communications were carried out in that language. Viveros contacted
Flores about a home loan modification, and Flores referred Campos, Sabia, and Cruz to
her. It appears that this referral was the reason why plaintiffs chose Viveros and the other
defendants, making it far less likely they would have looked elsewhere for the same
services.16

16      Defendants ask us to judicially notice “the plethora of loan modification services
offered to the public since the downfall of the real estate market in 2008.” Apart from the
fact that this request is procedurally defective, (Cal. Rules of Court, rule 8.252),
                                              28
       We next consider Viveros’s failure to provide a version of the agreements in
Spanish, in violation of Civil Code section 1632. Even though it appears that Viveros
violated Civil Code section 1632, the statute itself is inapplicable because plaintiffs do
not seek rescission. And, as defendants point out, plaintiffs’ hardship letters show a
certain proficiency in the English language. Further, because plaintiffs, in reliance on
Viveros, did not read the documents, her failure to provide a Spanish translation of the
documents arguably had little effect on the outcome. However, the undisputed fact that
Viveros explained the agreements in Spanish and had plaintiffs sign a Spanish language
acknowledgment that they had read the forms shows that plaintiffs were more
comfortable discussing complex concepts and contractual arrangements in their native
language. Viewed in that light, even though plaintiffs do not seek relief under Civil Code
section 1632, Viveros’s violation of that provision could be viewed as part of a scheme to
conceal from plaintiffs all the essential terms of the documents they were signing,
including the arbitration provision, thereby contributing to procedural unconscionability.
(See Carmona v. Lincoln Millennium Car Wash, Inc., supra, 226 Cal.App.4th 74.)
       Summing up, the evidence shows that plaintiffs were presented a stack of English
language documents and effectively told not to read them because they reflected what
Viveros had explained to them in Spanish. The form contract, presented under these
circumstances, was adhesive. Given plaintiffs’ economic circumstances and their
preference for dealing with Viveros based on either past experience or Flores’s referral,
we conclude there was sufficient oppression and surprise to create more than a minimum
of procedural unconscionability.17
       Defendants rely on Crippen, supra, 124 Cal.App.4th at pages 1165-1166 and
Trend Homes, Inc. v. Superior Court (2005) 131 Cal.App.4th 950, 958, disapproved on

defendants have made no factual or legal showing to support such a request, which we
therefore deny.

17      We agree with defendants that failure to attach to the agreement any rules of
arbitration did not contribute to procedural unconscionability under the circumstances of
this case.
                                             29
other grounds in Tarrant Bell Property, LLC v. Superior Court (2011) 51 Cal.4th 538,
545, footnote 5, to support their contention that there was no procedural
unconscionability. Neither is applicable here. In Crippen, the court concluded that there
was no evidence of procedural unconscionability. Although the form contract was an
adhesion contract, that alone did not make the contract procedurally unconscionable, and
the plaintiffs had not offered evidence concerning the negotiation and execution of the
disputed agreement. In Trend Homes, there was no evidence that the plaintiff asked to
negotiate the contract. In contrast, the record in this case contains circumstances
surrounding the formation of the contracts and that evidence shows procedural
unconscionability.

6.     The Unconscionable Terms Cannot Be Severed

       We may either refuse to enforce an arbitration provision if it is permeated by
unconscionability, or sever or restrict the offending portions. (Civ. Code, § 1670.5,
subd. (a).) Plaintiffs contend the arbitration provision is not severable. Defendants do
not contest that assertion on appeal and we agree with it.
       The arbitration provision states that “[i]f a dispute arises between Home Defender
Center and Client regarding Home Defender Center’s actions under this agreement and
Client files suit in any court other than small claims court, Home Defender Center will
have the right to stay that suit by timely electing to arbitrate . . . .” As discussed earlier,
this provision is substantively unconscionable because it effectively requires plaintiffs to
arbitrate their claims while leaving Home Defender free to sue in court for any claims it
might have. There is no language in this provision that could be severed to make it
bilateral. Instead, it would have to be rewritten to state that either party may require the
other to arbitrate its claims. However, our power to sever does not include the power to
reform the contract by augmenting it with additional terms. (Flores v. Transamerica
HomeFirst, Inc., supra, 93 Cal.App.4th at p. 857.) Therefore severance is not an option.

                                               30
7.     The Combined Procedural and Substantive Unconscionability Is Sufficient to
       Preclude Enforcement of the Arbitration Provision

       Our final task is to evaluate where on the sliding scale the degree of both
procedural and substantive unconscionability sit. In regard to substantive
unconscionability, there are certainly worse examples, where an arbitration provision not
only applies to one side, but shortens the limitations period, limits available remedies,
and imposes unfair procedures and costs. (See Samaniego, supra, 205 Cal.App.4th at
pp. 1147-1148; Stirlen, supra, 51 Cal.App.4th at pp. 1533-1534.) However, the provision
in the Home Defender contract is unfairly one-sided in two significant respects: by
allowing only Home Defender unfettered access to the courts for any claims it might have
against its clients, and by limiting plaintiffs’ access to the courts to only small claims
actions, thus cutting off civil actions involving substantial damage claims. We believe
this places it somewhere beyond the middle of the sliding scale.
       The level of procedural unconscionability sits somewhere below the middle of that
scale, but not toward the bottom. Plaintiffs were effectively steered away from
examining the contracts and other documents and were not given Spanish language
versions even though the negotiations were conducted in Spanish. Plaintiffs were also in
economic distress at the time. The combined effect of these two forms of
unconscionability is sufficient to tip the scales to the point where the arbitration provision
should not be enforced.

                                      DISPOSITION

       The order compelling arbitration is reversed and the matter is remanded to the
superior court for further proceedings. Plaintiffs shall recover their costs on appeal.

                                                   RUBIN, J.
I CONCUR:

              BIGELOW, P. J.

                                              31
Sabia et al. v. Orange County Metro Realty, Inc., et al.
B243141
Grimes, J., Dissenting.
       Respectfully, I dissent, not because of a conviction that the majority opinion
misapprehends how our Supreme Court would construe AT&T Mobility LLC v.
Concepcion (2011) 563 U.S. ___ [131 S.Ct. 1740] (Concepcion) as it applies in this case,
but because I am unable to set aside my doubts. I would have preferred to stay this case
to obtain the benefit of the opinions in cases now pending decision in our Supreme Court
that, it appears, will shed light on at least some of the unresolved issues concerning the
enforceability of arbitration agreements governed by the Federal Arbitration Act (FAA; 9
U.S.C. § 1 et seq.) that are claimed to be unconscionable. For example, Sanchez v.
Valencia Holding Co., (review granted Mar. 21, 2012, S199119) may decide the
following issue: Does the FAA (§ 2), as interpreted in Concepcion preempt state law
rules invalidating mandatory arbitration provisions in a consumer contract as
procedurally and substantively unconscionable?
       Recently, the Supreme Court held in Sonic-Calabasas A, Inc. v. Moreno (2013) 57
Cal.4th 1109 (Sonic II) that unconscionability remains a valid defense to a petition to
compel arbitration after Concepcion. (Sonic II, supra, at pp. 1142-1143, 1145.) The
Supreme Court is, as I write, continuing to develop the law in this area; and with so many
uncertainties, I cannot agree with my colleagues that the arbitration agreement here is
unenforceable under federal law construing the FAA. I have no desire or intent to violate
Auto Equity Sales v. Superior Court (1962) 57 Cal.2d 450. And, I do not believe this
dissenting opinion does so because, in my view, this case presents a question of first
impression to be determined by the application of federal law. (People v. Johnson (2012)
53 Cal.4th 519, 528 [“Lower courts may decide questions of first impression, including
the effect that subsequent events, such as a United States Supreme Court decision, have
on decisions from a higher court, including this one. . . . If a higher court believes the
lower court decided a question erroneously, it can take appropriate action. But a lower
court does not violate [Auto Equity] merely by deciding questions of first impression.”].)
       The arbitration agreement here is in a contract between the plaintiff mortgage
homeowners and the real estate business defendants they retained to provide services to
help them obtain a loan modification, loan restructuring, short-sale authorization, or deed
in lieu of foreclosure authorization. The majority finds this arbitration agreement is
substantively unconscionable because it compels only the plaintiff homeowners to
arbitrate their disputes with the defendants, and did not also expressly compel the
defendants to arbitrate their disputes with the homeowners. The majority relies largely
on Armendariz v. Foundation Health Psychcare Services (2000) 24 Cal.4th 83
(Armendariz) which carved out a class of claims, those involving an employee’s
unwaivable statutory rights, and applied a special rule to mandatory agreements to
arbitrate those claims, requiring them to meet its minimum requirements in order to be
enforceable. The majority focuses on language in Armendariz to the effect that the
doctrine of unconscionability prevents enforcement of one-sided arbitration agreements
imposed by an employer on an employee. As the majority notes, Armendariz rejected the
argument that requiring mutuality of arbitration disfavored arbitration agreements in
contravention of the FAA, reasoning in part that an arbitration agreement compelling one
but not both parties to arbitrate disputes reflects a mistrust of arbitration that has been
repudiated by the high court. The majority reasons that a rule prohibiting one-sided
arbitration agreements promotes arbitration by requiring both parties to arbitrate their
disputes.
       Assuming the language in Armendariz concerning one-sided arbitration
agreements was part of the holding in that case, and not dicta, nonetheless, Armendariz
was decided in 2000, and the Supreme Court did not have the benefit of the high court’s
decision in Concepcion, decided over a decade later. The Supreme Court may have
decided Armendariz differently if Concepcion had been the law in 2000, in part because
Concepcion indicates the way to promote arbitration is to enforce arbitration agreements
on their terms, not to refuse to enforce them under principles that discriminate against
arbitration agreements and which are not neutral principles applicable to contracts
generally.

                                               2
       Moreover, it is by no means clear that the Supreme Court would find a one-sided
arbitration agreement in the context of this contract to be substantively unconscionable.
Armendariz, Sonic II, and many of the lower court opinions cited in Sonic II (see, e.g.,
57 Cal.4th at p. 1151) concern mandatory employment arbitration agreements. This case
does not involve an employment agreement or employee rights but a home loan
restructuring agreement. I do not know how the Supreme Court may apply its precedent
developed in the employment context to contracts such as the one at issue here.
       Sonic II says the doctrine of unconscionability is “concerned with whether the
agreement is unreasonably favorable to one party, considering in context ‘its commercial
setting, purpose, and effect.’ (Civ. Code, § 1670.5, subd. (b).)” (Sonic II, supra,
57 Cal.4th at p. 1148.) The opinion cites the various formulations in the case law to
describe the test for substantive unconscionability (an issue now before the Supreme
Court in Sanchez v. Valencia Holding Co., supra) and tells us that all of the “formulations
point to the central idea that unconscionability doctrine is concerned not with ‘a simple
old-fashioned bad bargain’ [citation], but with terms that are ‘unreasonably favorable to
the more powerful party’ [citation]. 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.’ [Citation.]” (Sonic II, at p. 1145.) Later in the opinion, Sonic II gives an
example of a one-sided agreement that is substantively unconscionable: “adhesive
contracts or terms that are unreasonably one-sided in favor of the drafting party, such as
terms that effectively insulate the drafting party from liability.” (Id. at p. 1171.)
       I do not find in the record any basis on which to conclude as a matter of law that
this arbitration agreement falls within any of the categories of substantively
unconscionable contracts described in Sonic II. The agreement in this case by no means
insulates defendants from liability. It is not clear to me that either Armendariz or Sonic II

                                               3
establishes that a one-sided arbitration clause in a home loan restructuring contract is per
se substantively unconscionable. It would be so if it were the law that it is unfair or
unreasonable to substitute the arbitral forum for a court for one party but not the other.
But Sonic II says “[b]oth California and federal law treat the substitution of arbitration for
litigation as the mere replacement of one dispute resolution forum for another, resulting
in no inherent disadvantage.” (Sonic II, supra, 57 Cal.4th at p. 1152.)
       Concepcion determined “a court may not ‘rely on the uniqueness of an agreement
to arbitrate as a basis for a state-law holding that enforcement would be
unconscionable’ ” (131 S.Ct. at p. 1747), nor may it enforce “state-law rules that stand as
an obstacle to the accomplishment of the FAA’s objectives”, including the objective of “
‘ensur[ing] that private arbitration agreements are enforced according to their terms.’
[Citations.]” (Id. at p. 1748.) Before Concepcion, the high court explained in Perry v.
Thomas (1987) 482 U.S. 483 (Perry) that the FAA preempts a state unconscionability
rule that discriminates against arbitration. “A state-law principle that takes its meaning
precisely from the fact that a contract to arbitrate is at issue does not comport with [the
FAA’s savings clause]. [Citations.] A court may not, then, in assessing the rights of
litigants to enforce an arbitration agreement, construe that agreement in a manner
different from that in which it otherwise construes nonarbitration agreements under state
law.” (Perry, at p. 492, fn. 9.)
       Refusing to enforce an arbitration agreement because it does not require both
parties to arbitrate their disputes appears contrary to the decisions in Concepcion and
Perry, because there is no general principle of California contract law that promises must
be mutual in order to be enforceable. California law does not require mutuality of every
term and provision in a contract, so long as each party has made binding obligations in
consideration for their respective promises. (1 Witkin, Summary of Cal. Law (10th ed.
2005) Contracts, § 212, p. 247 [“the promise of one party is consideration for that of
another”]; id., § 225, pp. 260-261 [“doctrine of mutuality of obligation requires that the
promises on each side be binding obligations in order to be consideration for each
other”]; see also 2 Corbin on Contracts (rev. ed. 1995) § 6.1, p. 197 [“[S]ymmetry is not

                                              4
justice and the so-called requirement of mutuality of obligation is now widely
discredited.”]; 25 Williston on Contracts (4th ed. 2002) § 67:42, p. 332 [“mutuality of
obligation is simply a prerequisite to the formation of a valid bilateral contract” --
“mutuality of obligation in bilateral contracts is but another way of stating that
consideration is essential”].) Under general principles of California contract law, it is not
unconscionable to include terms in a contract that benefit one party but not the other, so
long as there is consideration for the contract. (Cf. Pinnacle Museum Tower Assn. v.
Pinnacle Market Development (2012) 55 Cal.4th 223, 246 [“A contract term 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.” ’ [Citation.]”].)
       Plaintiffs acknowledge they entered binding contracts with defendants: one of
their claims is for breach of contract. Plaintiffs attack only the arbitration clause as
lacking mutuality of obligation. Before Armendariz, the Supreme Court had not held
California law requires that both parties to a contract be subject to arbitration in order for
their arbitration agreement to be enforceable. The reasoning and analysis of Armendariz,
supra, 24 Cal.4th at pages 114 through 121, and the decisions by the intermediate
appellate courts holding that one-sided arbitration agreements are unconscionable, such
as Stirlen v. Supercuts (1997) 51 Cal.App.4th 1519, rest on special judge-made rules that
apply only to arbitration agreements, and not on general principles of contract law.
Because of this, it appears that a rule requiring mutuality of arbitration agreements would
run contrary to the FAA as interpreted by Concepcion because it discriminates against
arbitration, requiring arbitration clauses be mutual but not imposing that requirement on
other contract provisions. (Mortensen v. Bresnan Communications, LLC (9th Cir. 2013)
722 F.3d 1151, 1159-1161 [FAA preempts Montana reasonable expectations/fundamental
rights rule because it “disproportionally applies to arbitration agreements, invalidating
them at a higher rate than other contract provisions” reasoning in part, “We take
Concepcion to mean what its plain language says: Any general state-law contract
defense, based in unconscionability or otherwise, that has a disproportionate effect on
arbitration is displaced by the FAA.”]; see also Allied-Bruce Terminix Cos. v. Dobson

                                              5
(1995) 513 U.S. 265, 281 [“What States may not do is decide that a contract is fair
enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce
its arbitration clause. The [FAA] makes any such state policy unlawful, for that kind of
policy would place arbitration clauses on an unequal ‘footing,’ directly contrary to the
[FAA’s] language and Congress’ intent.”].)
       In summary, I cannot concur, at this time, in the majority’s conclusion that the
arbitration agreement is unenforceable.

                                           GRIMES, J.

                                              6