• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

  • About
    • Events
  • Articles
    • Treaty Tips
    • Special Focus
    • Market
  • Contact
  • Exclusive Content
    • Blog Staff Picks
    • Cat Risks
    • Regulatory Modernization
    • Webinars
  • Subscribe
You are here: Home / Arbitration / Court Decisions / Arbitration Process Issues / CALIFORNIA COURT OF APPEALS FINDS ARBITRATION PROVISION UNCONSCIONABLE, AVOIDS APPLYING CONCEPCION

CALIFORNIA COURT OF APPEALS FINDS ARBITRATION PROVISION UNCONSCIONABLE, AVOIDS APPLYING CONCEPCION

December 19, 2011 by Carlton Fields

A purchaser filed a putative state class action against a car dealer alleging state law violations related to the sale of automobiles. The car dealer filed a motion to compel arbitration pursuant to a provision in the sales contract, which also contained a class action waiver. The trial court determined that the class action waiver was unenforceable, and, based upon this denial, a “poison pill” clause in the contract went into effect making the entire arbitration provision unenforceable. The trial court’s invalidation of the class arbitration waiver provision arguably could not stand in light of the US Supreme Court’s recent decision in AT&T Mobility LL v. Concepcion, 131 S.Ct. 1740 (2011). However, the Court of Appeals affirmed based upon another ground, that the arbitration provision itself was a product of adhesion and unequal bargaining power and hence unconscionable. The court found that Concepcion preserved the ability of state courts to invalidate entire arbitration provisions on the basis of unconscionability. However, the California “Discover Bank rule” disapproved by the Supreme Court in Concepcion was premised on a conclusion that the class arbitration waiver was the product of adhesion, and the Supreme Court found that justification insufficient to overcome the objectives of the Federal Arbitration Act. The Sanchez court’s invalidation of the entire arbitration provision on the same ground may raise a question as to whether this decision is consistent with the principles articulated by the Supreme Court in Concepcion. Sanchez v. Valencia Holding Co., LLC, No. BC433634 (Cal. Ct. App. Oct. 24, 2011). The Court of Appeals granted a petition for rehearing and issued a modified opinion affirming the lower court’s decision. In the new opinion, the Court of Appeals emphasized that unconscionability itself survived the Concepcion ruling, and that here, the unconscionability permeated the entire agreement with numerous unconscionable clauses. Again, the Court of Appeals took pains to limit the scope of the Supreme Court’s Concepcion opinion. Sanchez v. Valencia Holding Co., LLC, B228027 (Cal. Ct. App. Nov. 23, 2011).

This post written by John Black.

Filed Under: Arbitration Process Issues, Week's Best Posts

Primary Sidebar

Carlton Fields Logo

A blog focused on reinsurance and arbitration law and practice by the attorneys of Carlton Fields.

Focused Topics

Hot Topics

Read the results of Artemis’ latest survey of reinsurance market professionals concerning the state of the market and their intentions for 2019.

Recent Updates

Market (1/27/2019)
Articles (1/2/2019)

See our advanced search tips.

Subscribe

If you would like to receive updates to Reinsurance Focus® by email, visit our Subscription page.
© 2008–2025 Carlton Fields, P.A. · Carlton Fields practices law in California as Carlton Fields, LLP · Disclaimers and Conditions of Use

Reinsurance Focus® is a registered service mark of Carlton Fields. All Rights Reserved.

Please send comments and questions to the Reinsurance Focus Administrators

Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please contact us. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites. This site may be considered attorney advertising in some jurisdictions.