Vargas v. SAI Monrovia B, Inc.

Decision Date04 June 2013
Docket NumberB237257
Citation157 Cal.Rptr.3d 742
CourtCalifornia Court of Appeals Court of Appeals
Parties Jorge A. VARGAS et al., Plaintiffs and Appellants, v. SAI MONROVIA B, INC., et al., Defendants and Respondents.

Rosner, Barry & Babbitt, Hallen D. Rosner, Christopher P. Barry and Angela J. Smith for Plaintiffs and Appellants.

Arent Fox, Aaron H. Jacoby, Christian J. Scali, Victor P. Danhi ; The Scali Law Firm and Christian J. Scali for Defendants and Respondents.


In this appeal, we revisit our holding in Sanchez v. Valencia Holding Co., LLC (2012), 201 Cal.App.4th 74,135 Cal.Rptr.3d 19 ( Sanchez ), review granted March 21, 2012, S199119, that a "Retail Installment Sale Contract" used to purchase an automobile is unconscionable and unenforceable. Having considered the decisions of other California appellate courts handed down after Sanchez, we have refined our analysis and again conclude that the identical sale contract does not require the arbitration of disputes between a purchaser and a car dealer because it is permeated by unconscionability.


The allegations and facts in this appeal are taken from the pleadings and the exhibits submitted in connection with the motion to compel arbitration.

A. Complaint

Plaintiffs, Jorge Vargas and Guadalupe Carcamo, filed this putative class action on January 12, 2011. Two months later, plaintiffs filed a first amended complaint (complaint), which alleged as follows.

On or about September 20, 2008, plaintiffs went to the automobile dealership owned by defendant SAI Monrovia B, Inc., doing business as Assael BMW Mini of Monrovia (Assael BMW). Plaintiffs were interested in buying a new Mini Cooper S. A salesman, "Roger," showed them a 2008 model on the lot. Plaintiffs completed a credit application to obtain financing. As required by law ( Civ.Code, § 2981.9 ), plaintiffs should have been given a copy of the signed credit application, but Assael BMW did not give them one. Plaintiff Vargas took the car for a test drive. Upon returning to the dealership, plaintiffs told Roger they were interested in purchasing the car. In response to plaintiffs' inquiries about financing, Roger told them that to keep their monthly payments below $500, they would have to make a down payment of $1,500, and the loan would have to be for a term of six years. Because the finance office had closed for the day, Roger told plaintiffs to return the following day to complete the paperwork.

On September 21, 2008, plaintiffs returned to Assael BMW. Roger introduced them to one of the dealership's finance managers. During discussions with the manager, plaintiffs agreed to purchase an extended warranty, otherwise known as a service contract, for $1,845. Plaintiffs gave the manager $1,500 in cash as a down payment.

The manager presented plaintiffs with a "Retail Installment Sale Contract" (Sale Contract), which was a preprinted document consisting of one page, 8½ inches wide and 26 inches long. There were numerous and extensive provisions on both sides of the Sale Contract, leaving little in the way of margins. Plaintiffs signed or initialed the front side in 12 places, each relating to a different provision. No signatures or initials of the buyers were required on the back; there were no places on the back for the buyers to initial or sign. The arbitration provision, entitled, "ARBITRATION CLAUSE ," was on the back at the bottom of the page, outlined by a black box; the arbitration provision was the last provision in the Sale Contract concerning the purchase of the vehicle; a provision related to the assignment of the contract appeared below it. The buyers' final signatures appeared near the bottom of the front side. The only signature line on the back was at the very bottom of the page; it required the seller's signature to assign the contract to a third party. The Sale Contract was written by The Reynolds and Reynolds Company and, in this case, was designated Form No. 553–CA–ARB, effective May 2008.

The Sale Contract listed the price of the car as $25,900, the amount financed as $28,721.04, the monthly payments as $492.47, the term of the loan as 72 months, and an annual percentage rate of 7.10 percent. The Sale Contract listed a charge of $8.75 for "California Tire Fees" and a charge of $28 for "Optional DMV Electronic Filing Fee." Assael BMW was required by law to charge plaintiffs $1.75 for each new tire purchased (see Pub. Resources Code, § 42885, subds. (b)(1), (d) ); it unlawfully charged them for five new tires when the car had only four (see id., subd. (e)). Further, Assael BMW did not discuss the electronic filing fee with either plaintiff or tell them it was optional. If plaintiffs had been so informed, they would have declined to pay the fee. In addition, Assael BMW did not provide plaintiffs with a disclosure statement showing them what their monthly payments would be with and without the service contract, violating applicable law (see Civ.Code, § 2982.2 ).

At some point after September 21, 2008, Assael BMW assigned the Sale Contract to Chase Auto Finance Corporation (Chase).

Shortly after purchasing the car, plaintiffs experienced problems with it, including an intermittently inoperable window, inoperable headlamps, a repeatedly illuminated "check engine light," sluggish acceleration, poor gas mileage, and a "knocking noise." Plaintiffs took the car to Assael BMW to be repaired, but the dealer did not correct the problems. Plaintiff Carcamo then contacted BMW of North America, LLC, and complained about Assael BMW's failure to fix the car. Notwithstanding plaintiffs' efforts, the car was never fixed.

The complaint contained nine causes of action, alleging violations of the Consumers Legal Remedies Act (CLRA) ( Civ.Code, §§ 1750 – 1784 ), the Automobile Sales Finance Act ( Civ.Code, §§ 2981 – 2984.6 ), the California Unfair Competition Law (UCL) ( Bus. & Prof.Code, §§ 17200 – 17210 ), the Song–Beverly Consumer Warranty Act (Song–Beverly Act) ( Civ.Code, §§ 1790 – 1795.8 ), and the California Tire Recycling Act (Tire Recycling Act) ( Pub. Resources Code, §§ 42860 – 42895 ).1 Some of the causes of action were brought against only Assael BMW; some were brought against Assael BMW and Chase; and the last cause of action, for violation of the Song–Beverly Act, was brought against both Assael BMW and BMW of North America, LLC. Plaintiffs sought injunctive relief for violations of the CLRA and the UCL. Under the heading, "CLASS ALLEGATIONS," plaintiffs alleged that their causes of action satisfied the class action requirements of numerosity, predominate questions of law and fact, typicality, superiority of a class action over individual actions, and adequate class representation. At the end of the complaint, the prayer requested actual damages, restitution, punitive damages, and prejudgment interest, among other remedies. Plaintiffs also sought an award of attorney fees.

B. Motion to Compel Arbitration

On or about July 1, 2011, Assael BMW and JP Morgan Chase Bank, N.A. (erroneously sued as Chase), filed a motion to compel arbitration pursuant to the arbitration provision in the Sale Contract. As used in the arbitration provision, "you" referred to the buyer or cobuyers, and "we" or "us" referred to the seller. The provision stated: "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 ... shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.... Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action. You may choose one of the following arbitration organizations and its applicable rules: the National Arbitration Forum ... (www. ), the American Arbitration Association ... ( ), or any other organization that you may choose subject to our approval....[2 ]

"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 party may request a new arbitration under the rules of the arbitration organization by a three-arbitrator panel. The...

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