Sanchez v. Valencia Holding Co.

• Decision Date: 03 August 2015
• Docket Number: No. S199119.,S199119.
• Citation: 353 P.3d 741,61 Cal.4th 899,190 Cal.Rptr.3d 812
• Parties: Gil SANCHEZ, Plaintiff and Respondent, v. VALENCIA HOLDING COMPANY, LLC, Defendant and Appellant.
• Court: California Supreme Court

61 Cal.4th 899

353 P.3d 741

190 Cal.Rptr.3d 812

Gil SANCHEZ, Plaintiff and Respondent

v.VALENCIA HOLDING COMPANY, LLC, Defendant and Appellant.

No. S199119.

Supreme Court of California

Aug. 3, 2015.

Tharpe & Howell, Christopher S. Maile, Soojin Kang, Sherman Oaks; Callahan Thompson Sherman & Caudill, Robert W. Thompson, Charles S. Russell, Irvine; Atkinson, Andelson, Loya, Ruud & Romo, Kellie S. Christianson, Irvine; Greines, Martin, Stein & Richland, Robert A. Olson, Edward L. Xanders, Meehan R. Rasch and David E. Hackett, Los Angeles, for Defendant and Appellant.

Sheppard, Mullin, Richter & Hampton and Anna S. McLean, San Francisco, for Toyota Motor Credit Corporation and General Motors Financial Company, Inc., as Amici Curiae on behalf of Defendant and Appellant.

Pillsbury WinthropShaw Pittman, Richard M. Segal and Nathaniel R. Smith, San Diego, for Nissan Motor Acceptance Corporation as Amicus Curiae on behalf of Defendant and Appellant.

Littler Mendelson, Henry D. Lederman, Alexa L. Woerner, Walnut Creek, Anthony Ly, Los Angeles; Simpson, Cameron, Medina & Autrey and Erin Nemirovsky Medina for Volt Management Corp. and Volt Information Sciences, Inc., as Amici Curiae on behalf of Defendant and Appellant.

Horvitz & Levy, Lisa Perrochet, Felix Shafir, Robert H. Wright and John F. Querio, Encino, for California New Car Dealers Association as Amicus Curiae on behalf of Defendant and Appellant.

Severson & Werson, Jan T. Chilton and Donald J. Querio, San Francisco, for American Financial Services Association, California Financial Services Association and California Bankers Association as Amici Curiae on behalf of Defendant and Appellant.

Erika C. Frank and Fred J. Hiestand for The California Chamber of Commerce and The Civil Justice Association of California as Amici Curiae on behalf of Defendant and Appellant.

Mayer Brown, Donald M. Falk, Palo Alto, Andrew J. Pincus, Evan M. Tager, Archis A. Parasharami and Brian J. Wong for The Chamber of Commerce of the United States of America, The Association of Global Automakers, Inc., and The Alliance of Automobile Manufacturers as Amici Curiae on behalf of Defendant and Appellant.

Deborah J. La Fetra, Sacramento, for Pacific Legal Foundation as Amicus Curiae on behalf of Defendant and Appellant.

Toschi, Sidran, Collins & Doyle, David R Sidran, Thomas M. Crowell, Oakland; Manning Leaver Bruder & Berberich, Robert D. Daniels and Crystal S. Yagoobian, Los Angeles, for Federated Mutual Insurance Company as Amici Curiae on behalf of Defendant and Appellant.

Rosner, Barry & Babbitt, Hallen D. Rosner, San Diego, Christopher P. Barry and Angela J. Smith for Plaintiff and Respondent.

Kreindler & Kreindler, Gretchen M. Nelson, Los Angeles, and Jacob H. Mensch for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Respondent.

Chavez & Gertler, Mark A. Chavez, Mill Valley, and Nance F. Becker, San Francisco, for Arthur Lovett as Amicus Curiae on behalf of Plaintiff and Respondent.

Aimee Feinberg for Consumers for Auto Reliability and Safety as Amicus Curiae on behalf of Plaintiff and Respondent.

Arbogast Law and David M. Arbogast, Los Angeles, for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Respondent.

McKenna Long & Aldridge and J. Alan Warfield, Los Angeles, for Association of Southern California Defense Counsel as Amicus Curiae.

Opinion

LIU, J.

The automobile sales contract in the present case has an arbitration agreement that provides, among other things, that arbitral awards of $0 or over $100,000 as well as grants but not denials of injunctive relief may be appealed to a panel of arbitrators. The arbitration agreement also has provisions that require the party appealing the award to front the costs of the appeal, preserve the right of the parties to go to small claims court and to pursue self-help remedies, and waive the right to class action litigation or arbitration. The agreement further provides that if the class waiver is deemed unenforceable, then the entire arbitration agreement shall be unenforceable.

In this dispute over the sale of a car, plaintiff Gil Sanchez filed a class action lawsuit against defendant Valencia Holding Company (Valencia), and Valencia moved to compel arbitration. The trial court denied the motion, finding the class waiver and, in turn, the entire arbitration agreement unenforceable. Subsequently, the United States Supreme Court held in AT & T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (Concepcion ) that the Federal Arbitration Act (FAA) preempts California's unconscionability rule prohibiting class waivers in consumer arbitration agreements. In deciding Valencia's appeal from the trial court's denial of the motion to compel arbitration, the Court of Appeal declined to address whether the class waiver was enforceable and instead held that the arbitration appeal provision and the arbitration agreement as a whole were unconscionably one-sided. Valencia sought our review, relying on Concepcion.

While circumscribing the ability of states to regulate the fairness of arbitration agreements, Concepcion reaffirmed that the FAA does not preempt “ ‘generally applicable contract defenses, such as fraud, duress, or unconscionability.’ ” (Concepcion, supra, 563 U.S. at p. ––––, 131 S.Ct. at p. 1746.) Under the FAA, these defenses may provide grounds for invalidating an arbitration agreement if they are enforced evenhandedly and do not “interfere[ ] with fundamental attributes of arbitration.” ( Concepcion, at p. ––––, 131 S.Ct. at p. 1748 ; see Sonic–Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143–1145, 163 Cal.Rptr.3d 269, 311 P.3d 184 (we will use common name, Sonic II ).) In the present case, we hold that Concepcion requires enforcement of the class waiver but does not limit the unconscionability rules applicable to other provisions of the arbitration agreement. Applying those rules, we agree with Valencia that the Court of Appeal erred as a matter of state law in finding the agreement unconscionable. Accordingly, we reverse the judgment below.

I.

Plaintiff Gil Sanchez filed this class action in March 2010. Two months later, Sanchez filed a first amended complaint. The complaint arises from Sanchez's purchase of a 2006 “preowned” Mercedes–Benz S500V in 2008 for $53,498.60. Sanchez alleged that Valencia violated the Consumer Legal Remedies Act (CLRA) (Civ.Code, §§ 1750 –1784 ) by making false representations about the condition of the automobile. Sanchez also alleged that Valencia violated several other California laws by (1) failing to separately itemize the amount of the down payment that is deferred to a date after the execution of the sale contract, (2) failing to distinguish registration, transfer, and titling fees from license fees, (3) charging the optional Department of Motor Vehicles electronic filing fee without discussing it or asking if he wanted to pay it, (4) charging new tire fees for used tires, and (5) requiring him to pay $3,700 to have the vehicle certified so he could qualify for the 4.99 percent interest rate, when that payment was actually for an optional extended warranty unrelated to the interest rate. Sanchez alleged violations of the Automobile Sales Finance Act (Civ.Code, §§ 2981 –2984.6 ), the unfair competition law (UCL) (Bus. and Prof.Code, §§ 17200 –17210 ), the Song–Beverly Consumer Warranty Act (Civ.Code, §§ 1790 –1795.8 ), and Public Resources Code section 42885.

The complaint further alleged that a class action was appropriate based on the large number of putative class members who have suffered similar violations, the predominance of common questions of law and fact, the typicality of the claims, and the superiority and benefits of class litigation. He proposed four distinct classes based on the different types of violations Valencia allegedly committed.

Valencia filed a motion to compel arbitration pursuant to an arbitration clause in the sale contract that authorized either party to have any dispute between the parties decided by arbitration. The arbitration clause had a class action waiver: “If a dispute is arbitrated, you will give up your right to participate as a class representative or class member on any class claim you may have against us including any right to class arbitration or any consolidation of individual arbitrations.”

The arbitration clause further provided: “Arbitrators shall be attorneys or retired judges and shall be selected pursuant to the applicable rules. The arbitrator shall apply governing substantive law in making an award. The arbitration hearing shall be conducted in the federal district in which you reside.... We will advance your filing, administration, service or case management fee and your arbitrator or hearing fee all up to a maximum of $2500, which may be reimbursed by decision of the arbitrator at the arbitrator's discretion. Each party shall be responsible for its own attorney, expert and other fees, unless awarded by the arbitrator under applicable law.... Arbitrator's award shall be final and binding on all parties, except that in the event the arbitrator's award for a party is $0 or against a party is in excess of $100,000, or includes an award of injunctive relief against a party, that party may request a new arbitration under the rules of the arbitration organization by a three-arbitrator panel. The appealing party requesting new arbitration shall be responsible for the filing fee and other arbitration costs subject to a final determination by the arbitrators of a fair apportionment of costs. Any arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq. ) and not by any state law concerning arbitration.

“You and we retain any rights to self-help remedies, such as repossession. You and we retain the right to seek remedies in small claims court for disputes or claims within that court's jurisdiction, unless such action is transferred, removed or...