Court Opinion

ID: 2783537
Source: CourtListenerOpinion
Date Created: 2015-03-03 17:05:14.849308+00
Date Added: 2024-06-11T12:45:09.484269
License: Public Domain

Filed 3/3/15

                            CERTIFIED FOR PUBLICATION

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                      DIVISION ONE

                                STATE OF CALIFORNIA

SHAUN TRABERT,                                      D065556

        Plaintiff and Respondent,

        v.                                          (Super. Ct. No. 37-2010-00096763-
                                                    CU-BT-CTL)
CONSUMER PORTFOLIO SERVICES,
INC.,

        Defendant and Appellant.

        APPEAL from an order of the Superior Court of San Diego County, Ronald L.

Styn, Judge. Reversed with directions.

        Sheppard, Mullin, Richter & Hampton, Robert J. Stumpf, Jr., Peter S. Hecker,

Anna S. McLean and Shannon Z. Peterson, for Defendant and Appellant.

        Michael E. Lindsey; The Hanson Law Firm and John W. Hanson, for Plaintiff and

Respondent.

        This is the second time this court has considered an appeal in this case involving

an automobile purchaser who brought consumer claims against the creditor-assignee of

the parties' sales contract. The first appeal involved the enforceability of an arbitration
agreement in the contract. (Trabert v. Consumer Portfolio Services, Inc. (Apr. 8, 2013,

D060491) [nonpub. opn.] (Trabert I).) In Trabert I, we held the arbitration agreement

contained certain unconscionable provisions, and remanded for the court to determine

whether these provisions could be severed from the remaining agreement. On remand,

the trial court declined to sever the provisions and denied the creditor-assignee's motion

to compel arbitration. The creditor-assignee, Consumer Portfolio Services, Inc.

(Portfolio), challenges this order in this second appeal.

       We conclude the trial court erred in denying Portfolio's motion. The

unconscionable provisions concern only exceptions to the finality of the arbitration

award, and can be deleted without affecting the core purpose and intent of the arbitration

agreement. The deletion of these exceptions creates a binding arbitration award and

promotes the fundamental attributes of arbitration, including speed, efficiency, and lower

costs. We reverse and remand with directions for the court to sever the unconscionable

provisions from the arbitration agreement and grant Portfolio's motion to compel

arbitration.

                   FACTUAL AND PROCEDURAL BACKGROUND

                                        Background

       Shaun Trabert purchased a used vehicle from an automobile dealer under a

preprinted industry-drafted installment sales contract. The dealer then assigned the

contract to Portfolio. Portfolio later repossessed Trabert's vehicle, and Trabert filed a

class action complaint alleging Portfolio's repossession/default notices were defective

under consumer statutes. (See Civ. Code, § 1750 et seq.; Bus. & Prof. Code, § 17200.)

                                              2
       Portfolio moved to compel arbitration under a lengthy arbitration provision in the

parties' sales contract.1 In opposition, Trabert argued the arbitration agreement was

1 This provision read: "PLEASE REVIEW-IMPORTANT-AFFECTS YOUR LEGAL
RIGHTS [¶] 1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE
BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY
TRIAL. [¶] 2. 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. [¶] 3. DISCOVERY AND RIGHTS TO APPEAL IN
ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND
OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE
AVAILABLE IN ARBITRATION. [¶] Any claim or dispute, whether in contract, tort,
statute or otherwise (including the interpretation and scope of this Arbitration Clause, and
the arbitrability of the claim or dispute), between you and us or our employees, agents,
successors or assigns, which arises out of or relates to your credit application, purchase or
condition of this vehicle, this contract or any resulting transaction or relationship
(including any such relationship with third parties who do not sign this contract) shall, at
your or our election, be resolved by neutral, binding arbitration and not by a court action.
If federal law provides that a claim or dispute is not subject to binding arbitration, this
Arbitration Clause shall not apply to such claim or dispute. 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. You may choose one
of the following arbitration organizations and its applicable rules: the National
Arbitration Forum . . . (www.arbforum. com), the American Arbitration Association . . .
(www.adr.org), or any other organization that you may choose subject to our approval.
You may get a copy of the rules of these organizations by contacting the arbitration
organization or visiting its website. [¶] 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. If the chosen arbitration
organization's rules conflict with this Arbitration Clause, then the provisions of this
Arbitration Clause shall control. The 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
                                              3
unenforceable because it contained two sets of unconscionable provisions: (1) provisions

creating exceptions to the finality of the arbitrator's decision; and (2) provisions allowing

the parties to seek relief outside the arbitration process through self-help remedies or

small claims court. (These challenged provisions are italicized in the quoted arbitration

agreement contained in footnote 1). The trial court (Superior Court Judge John Mayer)

found both sets of challenged provisions were unconscionable and denied Portfolio's

motion to compel arbitration.

                                          Trabert I

       In the first appeal, Portfolio contended the court erred in denying its motion to

compel because the challenged arbitration provisions were not procedurally or

substantively unconscionable. (Trabert I, supra, D060491.) We agreed with portions of

Portfolio's contentions and disagreed with others. We explained that to preclude

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 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." (Italics added.)

                                              4
enforcement under our state's unconscionability doctrine, the moving party must show

both procedural and substantive unconscionability. (Ibid.) Under these principles, we

determined the trial court correctly found the arbitration agreement was moderately

procedurally unconscionable. (Ibid.) But we concluded the court's evaluation of three

provisions impacting the substantive unconscionability analysis—self-help remedies,

small claims disputes, and finality of the arbitrator's findings—was partially flawed.

(Ibid.)

          On the self-help/small claims exceptions, we found "nothing unfair or

unreasonable in allowing the parties to retain their rights to these remedies outside the

arbitration process." (Trabert I, supra, D060491.) We thus agreed with Portfolio's

contentions that the court erred in concluding these exceptions were unconscionable.

(Ibid.)

          However, on the finality exceptions, we agreed with the trial court's findings.

(Trabert I, supra, D060491.) We explained the arbitration provision creates exceptions

to the binding and final nature of an arbitration award in three respects: (1) it provides an

exception to finality if the arbitration award is "$0" or exceeds $100,000; (2) it provides

an exception to finality if the arbitration award "includes an award of injunctive relief";

and (3) it requires the appealing party to advance all costs for the second arbitration

proceeding. (Ibid.) "Reviewing these challenged provisions together, we [found] they

are moderately unconscionable because they create a situation in which the arbitration

appellate rules benefit the economically stronger party (the automobile dealer) to the

detriment of the weaker party (the consumer) and, in doing so, defeat an essential purpose

                                                5
of the FAA, which is to encourage efficient and speedy dispute resolution." (Ibid.)

Considering "together the moderate levels of procedural and substantive

unconscionability," we "determine[d] these [finality-exception] provisions cannot be

enforced." (Ibid.)

       We then examined Portfolio's contention the arbitration agreement could be

enforced without the unconscionable provisions. (Trabert I, supra, D060491; see Civ.

Code, § 1670.5, subd. (a) (§ 1670.5(a).) We observed that because these objectionable

provisions were "contained solely in two sentences of the lengthy arbitration agreement

and pertain to a single part of the arbitration clause (concerning the finality of the

arbitration award), they can potentially be severed from the remaining portions of the

agreement." (Trabert I, supra, D060491.) However, we determined it was appropriate

for the trial court to initially consider the issue because it did not have the opportunity to

do so under a proper analysis of the limited unconscionability finding. We thus

remanded for the court to exercise its discretion on the severability issue under section

1670.5(a).

       Trabert petitioned for review of Trabert I in the California Supreme Court, but the

court denied the petition. At the time, the California Supreme Court was considering

(and is still considering) identical unconscionability challenges to the identical arbitration

provision in the same industry-drafted automobile sales contract. (Sanchez v. Valencia

Holding Co., LLC (2011) 201 Cal. App. 4th 74, review granted Mar. 21, 2012, S199119

(Sanchez).) During the three years that Sanchez has been pending, the high court has

granted and held numerous petitions for review of Court of Appeal decisions addressing

                                               6
similar (if not identical) unconscionability challenges to the identical arbitration provision

in the same industry-drafted contract.2 These intermediate courts (including different

panels of this court) have reached various different conclusions on the unconscionability

issues.3

                                          Remand

       On remand, Portfolio requested the trial court to sever the finality-exception

provisions and enforce the remaining portions of the arbitration agreement. Portfolio

argued that severance was required under controlling California Supreme Court authority

because the unconscionable provisions are "collateral" to the arbitration clause's central

purpose and the court "can readily excise them without disturbing the main objective of

the clause," citing Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24
Cal. 4th 83 (Armendariz) and Little v. Auto Stiegler, Inc. (2003) 29 Cal. 4th 1064 (Little).

2      These cases include: Gillespie v. Svale Del Grande, Inc., review granted July 9,
2014, S218704; Cheroti v. Harvey & Madding, Inc., review granted June 25, 2014,
S218724; Gonzalez v. Metro Nissan of Redlands, review granted November 26, 2013,
S214121; Vargas v. SAI Monrovia B, Inc. (2013) 216 Cal. App. 4th 1269, review granted
August 21, 2013, S212033; Vasquez v. Greene Motors, Inc. (2013) 214 Cal. App. 4th
1172, review granted June 26, 2013, S210439; Natalini v. Import Motors, Inc. (2013) 213
Cal. App. 4th 587, review granted May 1, 2013, S209324; Flores v. West Covina Auto
Group, LLC (2013) 212 Cal. App. 4th 895, review granted April 10, 2013, S208716;
Goodridge v. KDF Automotive Group, Inc. (2012) 209 Cal. App. 4th 325, review granted
December 19, 2012, S206153; Caron v. Mercedes-Benz Financial Services USA LLC
(2012) 208 Cal. App. 4th 7, review granted October 24, 2012, S205263.

3      To the extent this court's conclusions and/or reasoning has differed or changed
over this time, our views continue to evolve as we have the benefit of additional appellate
decisions in this area and the benefit of the California Supreme Court's continuing
refinement of our state's unconscionability analysis under the Federal Arbitration Act
(FAA). Additionally, each case must be decided on its own factual record.

                                              7
Portfolio also noted that the arbitration agreement contained a provision stating the

parties intended to permit severance if any provision is found unenforceable.

       Trabert opposed the severance request. As his central argument, Trabert argued

that Portfolio acted in bad faith by including the unconscionable "[o]ne-sided" finality-

exception provisions in the arbitration agreement because Portfolio knew or should have

known these provisions were unfair and unconscionable. Trabert said the court "should

not turn a blind eye to these intentionally and systematically created illegalities and allow

yet another arbitration contract to be enforced despite their presence. . . . [T]he Court

must draw a line to prevent and deter further wrongdoing and overreaching." Trabert

also argued the court should not sever the provisions because "substantive reformation

and augmentation would be required," particularly because the court should maintain a

consumer's right to challenge awards of $0 and thus would need to rewrite the rules

pertaining to these second arbitrations to make them fair for consumers.

       After conducting a hearing, the court (Judge Ronald Styn) denied Portfolio's

motion to sever. The court reasoned that "severance is not warranted in this consumer

case, involving [a Consumer Legal Remedies Act claim], because severance would not

further the interests of justice. It may result in augmenting the agreement with additional

terms, rather than merely striking the unconscionable portions." The court also noted that

courts may exercise their discretion to deny severance if the agreement is " ' "permeated"

by unconscionability,' " particularly where there are " ' "multiple defects," ' " citing

Armendariz, supra, 24 Cal. 4th 83. The court further stated that other courts considering

the same arbitration provision have "denied severance as there were multiple

                                               8
unconscionable provisions in the agreement," citing a federal district court decision,

Trompeter v. Ally Financial, Inc. (N.D.Cal. 2012) 914 F. Supp. 2d 1067 (Trompeter).

       Portfolio appeals.

                                         DISCUSSION

                                      I. Legal Principles

       Section 1670.5(a) provides: "If the court as a matter of law finds the contract or

any clause of the contract to have been unconscionable at the time it was made the court

may refuse to enforce the contract, or it may enforce the remainder of the contract

without the unconscionable clause, or it may so limit the application of the

unconscionable clause so as to avoid any unconscionable result."

       The California Supreme Court has interpreted this code section as manifesting a

preference for severance unless "an agreement is 'permeated' by unconscionability."

(Armendariz, supra, 24 Cal.4th at p. 122.) "It has long been the rule in this state" that

courts should make every effort to uphold the valid portion of the contract if " ' " 'it can

be separated from that which is bad . . . ,' " ' " particularly if this is consistent with the

parties' intent as expressed in the contract. (Ibid.) Accordingly, "[c]ourts are to look at

the various purposes of the contract. If the central purpose of the contract is tainted with

[unconscionability], then the contract as a whole cannot be enforced. If the

[unconscionability] is collateral to the main purpose of the contract, and the

[unconscionable] provision can be extirpated from the contract by means of severance or

restriction, then such severance and restriction are appropriate." (Id. at p. 124; accord,

                                                9
Marathon Entertainment, Inc. v. Blasi (2008) 42 Cal. 4th 974, 996; Dotson v. Amgen, Inc.

(2010) 181 Cal. App. 4th 975, 985-986 (Dotson).)

       In Armendariz, the court upheld a trial court's refusal to sever two unconscionable

provisions from a mandatory employment arbitration agreement: (1) a limitation on the

full recovery of statutory damages; and (2) the requirement that an employee—but not

the employer—arbitrate claims arising out of the employment relationship. (Armendariz,

supra, 24 Cal.4th at pp. 120-121.) The Armendariz court found these unconscionable

provisions could not be fairly severed from the agreement for two primary reasons.

"First, the arbitration agreement contains more than one unlawful provision; it has both

an unlawful damages provision and an unconscionably unilateral arbitration clause. Such

multiple defects indicate a systematic effort to impose arbitration on an employee not

simply as an alternative to litigation, but as an inferior forum that works to the employer's

advantage. . . . [¶] Second, in the case of the agreement's lack of mutuality, . . .

permeation [by an unlawful purpose] is indicated by the fact that there is no single

provision a court can strike or restrict in order to remove the unconscionable taint from

the agreement. Rather, the court would have to, in effect, reform the contract, not

through severance or restriction, but by augmenting it with additional terms. Civil Code

section 1670.5 does not authorize such reformation by augmentation, nor does the

arbitration statute. Code of Civil Procedure section 1281.2 authorizes the court to refuse

arbitration if grounds for revocation exist, not to reform the agreement to make it lawful.

Nor do courts have any such power under their inherent limited authority to reform

contracts." (Id. at pp. 124-125.)

                                              10
       Three years later, the California Supreme Court distinguished Armendariz and

held an unconscionable arbitration provision could be severed and the remaining

arbitration provision enforced. (Little, supra, 29 Cal.4th at pp. 1074-1076.) In Little, the

court found an employment arbitration agreement allowing appeals of awards exceeding

$50,000 to be unconscionable because it was unfairly one-sided in the employer's favor.

(Id. at pp. 1071-1074.) But the high court found the provision to be severable. (Id. at pp.

1074-1076.) The court reasoned: "There is only a single provision that is

unconscionable, the one-sided arbitration appeal. And no contract reformation is

required—the offending provision can be severed and the rest of the arbitration

agreement left intact. . . . [¶] Moreover, there is no indication that the state of the law

was 'sufficiently clear at the time the arbitration agreement was signed to lead to the

conclusion that this [appellate arbitration provision] was drafted in bad faith.' [Citation.]"

(Id. at pp. 1075-1076, fn. omitted.) The Little court also cited with approval two Court of

Appeal decisions holding unconscionable the portion of an arbitration agreement

allowing (in practical terms) only the economically-stronger party to challenge the

arbitration award, but determining this finality-exception provision to be severable from

the remainder of the arbitration agreement. (Id. at p. 1075; see Saika v. Gold (1996) 49
Cal. App. 4th 1074, 1082 (Saika); Beynon v. Garden Grove Medical Group (1980) 100
Cal. App. 3d 698, 713 (Beynon).)

       Each of these decisions (Armendariz, Little, Saika, and Beynon) was decided

before AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S. Ct. 1740]

(Concepcion), which reiterated the strong public policy favoring enforcement of an

                                              11
arbitration agreement governed by the FAA. Under Concepcion, state courts may not

interpret state rules in such a way as to preclude the enforcement of FAA arbitration

agreements if to do so would "interfere[ ]" with the fundamental attributes of arbitration

and/or would violate FAA's fundamental purpose of "ensur[ing] the enforcement of

arbitration agreements according to their terms . . . ." (Concepcion, supra, at p. 1748; see

Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal. 4th 348, 364; Sonic-

Calabasas A, Inc. v. Moreno (2013) 57 Cal. 4th 1109, 1143.)

       We review a court's severance ruling under the abuse of discretion standard.

(Lhotka v. Geographic Expeditions, Inc. (2010) 181 Cal. App. 4th 816, 821.) A court has

the authority to consider all relevant factors and reach reasonable conclusions based on

those facts. However, a court's discretion must be exercised under proper legal standards

and supported by the factual record. (See Dotson, supra, 181 Cal.App.4th at p. 986.) A

trial court abuses its discretion when it applies the wrong legal standard or its factual

findings are not supported by substantial evidence. (See Zurich American Ins. Co. v.

Superior Court (2007) 155 Cal. App. 4th 1485, 1493.) " 'Although "the statute[s] . . . give

a trial court some discretion as to whether to sever or restrict the unconscionable

provision or whether to refuse to enforce the entire agreement," ' " the " 'strong legislative

and judicial preference is to sever the offending term and enforce the balance of the

agreement,' " unless the agreement is "permeated" by unconscionability. (Dotson, supra,

181 Cal.App.4th at p. 986.)

                                             12
                                         II. Analysis

       The parties' arbitration agreement is a lengthy recitation of rules and procedures

governing the required arbitration. (See fn. 1, ante.) This court found that only one

discrete portion of this arbitration agreement—provisions setting forth finality exceptions

that are contained in two consecutive sentences—is unconscionable and thus

unenforceable. (Trabert I, supra, D060491.) As found in Little, Beynon, and Saika,

these finality-exception provisions can be severed without undermining the meaning and

core purpose of the agreement. Striking these two sentences would leave intact the rest

of the lengthy arbitration provision and sales agreement. The parties would then arbitrate

their dispute and would be limited to challenging the award under the statutory arbitration

provisions. (See Code Civ. Proc., § 1285, et seq.) By eliminating the finality exceptions

contained in this portion of the agreement, the court would ensure the parties receive the

benefit of their bargain (an arbitration instead of trial) and obtain a dispute resolution

forum that provides the parties with the fundamental attributes of arbitration (greater

efficiency and speed, lower costs, and a more focused dispute resolution forum).

Removing the exceptions to the finality rules will enhance—rather than defeat—these

core purposes.

       Unlike Armendariz and similar to the situation in Little, the "one-sidedness" at

issue in this case did not involve the scope of the arbitrator's powers, and was instead

confined to a single provision regarding the parties' rights after an arbitration award is

issued. Thus, the unconscionability could be cured by deleting the unconscionable

second-arbitration trigger provision. Moreover, the parties expressly agreed that "if any

                                              13
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." (Fn.

1, ante.) This clause reflects the "parties' intent that, to the extent possible, the valid

provisions of the contracts be given effect, even if some provision is found to be invalid

or unlawful." (Baeza v. Superior Court (2011) 201 Cal. App. 4th 1214, 1230.) Enforcing

this contractual severance clause is also consistent with the FAA's purpose to promote

enforcement of arbitration agreements according to their terms and to permit parties to

structure their arbitration agreements as they see fit. (Concepcion, supra, 131 S.Ct. at pp.

1745, 1748-1749; Stolt-Nielsen S.A. v. AnimalFeeds Internat. Corp. (2010) 559 U.S. 662,

683.) Severing the unconscionable provisions while enforcing the remaining agreement

would "conserve [the parties'] contractual relationship" with respect to their agreement to

submit the matter to arbitration. (Armendariz, supra, 24 Cal.4th at p. 124.)

       Under section 1670.5(a) and Armendariz, Little, and Concepcion, a court must

enforce an FAA arbitration agreement if the unconscionable provision does not permeate

the agreement with an unlawful purpose and can be severed without (1) rewriting the

arbitration agreement; and (2) undermining the agreement's meaning and core purpose to

provide an alternate dispute resolution forum to fairly resolve the parties' claims. These

factors were present here.

       In denying Portfolio's severance motion in "the interests of justice," the trial court

identified a single factor: severance "may result in augmenting the agreement with

additional terms, rather than merely striking the unconscionable portions." The record

does not support this finding. The finality provisions are contained in two sentences, and

                                               14
striking these sentences will merely impose binding and final arbitration with challenges

limited to those permitted under the general arbitration statutes. (See Code Civ. Proc.,

§ 1285 et seq.) To the extent the court believed it was required to retain a finality-

exception that Trabert now suggests is favorable (appeals of $0 awards) and rewrite the

rules pertaining to this exception, this view is unwarranted. When opposing the motion

to compel arbitration, Trabert consistently took the position that the finality exception

provisions are unconscionable in their entirety. A party cannot successfully oppose

severance by picking and choosing portions of an arbitration agreement that he or she

desires after prevailing on an argument that the entire clause is unconscionable.

       Trabert's additional arguments in support of the court order are unavailing.

       First, Trabert devotes a considerable portion of his appellate brief to argue that

Portfolio (or its assignor, the car dealer) inserted the arbitration-finality exception

provision in "bad faith" because the dealer knew some courts had concluded these

provisions were unconscionable. There is no support for this argument in the record

before us. Although several state and federal courts have found this provision

unenforceable, there is substantial conflicting authority regarding the same provision in

the same arbitration agreement, and the precise issue has been pending in the California

Supreme Court for three years. (See Sanchez, supra, 201 Cal. App. 4th 74, review granted

Mar. 21, 2012, S199119; fns. 2 & 3, ante.) Given this legal landscape, we cannot

attribute bad faith to the automobile dealer's decision (in 2008) to use the standard form

sales contract containing this arbitration clause.

                                              15
          Trabert's reliance on Parada v. Superior Court (2009) 176 Cal. App. 4th 1554

(Parada) is misplaced. In Parada, the court stated that at the time the arbitration

agreement was signed in 2006, at least seven decisions "had been decided and published"

making it "reasonably clear" that the core challenged arbitration provisions—requiring a

panel of three arbitrators (for the initial arbitration) and prohibiting consolidation or

joinder of claims—were unconscionable. (Id. at p. 1586.) Based on this observation and

the fact that there were "multiple" unconscionable contract provisions, the court found the

case indistinguishable from Armendariz and declined to enforce the arbitration provision.

(Ibid.)

          Parada is unhelpful because the issues here were not "reasonably clear" regarding

the enforceability of the arbitration agreement, including the finality-exception

provisions. Moreover, we question the continuing validity of Parada's severance

analysis because it was based on an unconscionability finding that is inconsistent (in part)

with the United States Supreme Court's later holding that joinder prohibitions in FAA

arbitration agreements are not unconscionable and are enforceable. (Concepcion, supra,

131 S.Ct. at pp. 1745-1753.)

          We also find unpersuasive Trabert's reliance on Trompeter, supra, 914 F. Supp. 2d
1067 regarding the severance issue. Trompeter reached the same unconscionability

conclusion as did this court regarding the finality provisions, but also found other

provisions in addition to the finality-exception provisions were unconscionable. (Id. at

pp. 1073-1076.) Thus, in refusing to sever, the court emphasized that there were

"multiple unconscionable provision[s] in the agreement" and thus severance would

                                              16
"encourage overreaching by creditors . . . ." (Id. at p. 1076, italics added.) Additionally,

we disagree with the district court's statement that the finality exceptions are "not

collateral" and "extirpating them by means of severance would amount to a reformation

of the agreement." (Ibid.) The finality exceptions are collateral because they concern

what happens after the arbitrator issues the arbitration award, not the manner in which

arbitration is conducted or the disputes to which the arbitration requirement pertains.

       Trabert's reference to another superior court case in which the plaintiffs brought

similar consumer challenges against Portfolio is also unhelpful. He directs us to his

counsel's declaration in which his counsel states that he represents different plaintiffs in a

Sacramento County Superior Court action, and that a pending settlement excludes

Portfolio customers whose sales contracts include arbitration clauses. The fact that

consumers who did not agree to arbitration were successful in certifying a class and

obtaining a tentative settlement does not have any impact on the interpretation of

Trabert's arbitration agreement. Trabert's claim of unequal treatment is founded on his

disagreement with the United States Supreme Court's decision that class action waivers in

FAA arbitration agreements are enforceable as a matter of law. (Concepcion, supra, 131
S. Ct. 1740.) Concepcion's holding is binding on this court, and any challenge to the

holding is frivolous.

       Finally, we reject Trabert's additional contention that "rewriting would be

necessary" because Portfolio has changed the scope of its requested severance. In the

court below, Portfolio requested the court strike the following two sentences in the

arbitration agreement:

                                             17
          "The 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." (Italics added.)

In this court, Portfolio requests that we order the court to strike these same sentences

except for the first 11 words italicized above: "The arbitrator's award shall be final and

binding on all parties . . . ." This is a change without a material difference. Either way,

after severance the arbitration award is final and binding on all parties except as

challenges are permitted under the applicable statutes. (See Code Civ. Proc., § 1285 et

seq.) We believe the better approach is to make explicit that the arbitrator's award shall

be final and binding on all parties and then strike the remaining words in the two

sentences that purport to create exceptions to this rule.

       Although a court has discretion to determine whether severance is appropriate

under the circumstances, it is essential that when ruling on severance motions, courts are

mindful of the strong policies in favor of upholding arbitration agreements and do not

merely impose their own conception of sound policy. (See Dotson, supra, 181

Cal.App.4th at pp. 985-986.) On the record before us, the arbitration agreement was not

permeated with unconscionable provisions; the provisions found to be unconscionable

were collateral to the core purpose of both the arbitration agreement and the sales

contract; and no rewriting or reformation was required. Thus, the severance motion

should have been granted.

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                                     DISPOSITION

       Order reversed. Court ordered to vacate its February 21, 2014 order, and enter a

new order severing the unconscionable finality-exception provisions from the arbitration

agreement and granting Portfolio's petition to compel arbitration. Respondent to bear

appellant's costs on appeal.

                                                                  HALLER, Acting P. J.

WE CONCUR:

AARON, J.

IRION, J.

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