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Court of Appeal:
Procedurally Unconscionable Contract Is Enforceable
Wiley Says Agreement to Arbitrate May Be Disregarded Only If It Is Unconscionable Both
Procedurally and Substantively; Stratton Says Tiny Type Is Matter of Substance
By a MetNews Staff Writer
The Court of Appeal for this district held Friday, in two unrelated cases, that an arbitration clause in an employment contract is enforceable despite procedural unconscionability if it is not also substantively unconscionable, saying in one case that hard-to read type does not bar enforcement, and in the other that difficult-to-comprehend wording is also not an impediment.
Justice John Shepard Wiley Jr. of Div. Eight authored the majority opinion in each case, and was joined by San Diego Superior Court Judge Albert T. Harutunian III, sitting on assignment.
Presiding Justice Maria E. Stratton dissented in the cases. Agreeing that there must be both substantive and procedural unconscionability to deny a motion to compel arbitration, she maintained that a matter such as type that is too small to read can amount to substantive unconscionability.
Online Employment Agreement
Wiley said in Basith v. Lithia Motors, Inc., B316098, which dealt with an online agreement:
“A twist of fate brings to us substantially the same Nissan employment arbitration contract in two otherwise unrelated cases. The other case we decide today is Fuentes v. Empire Nissan, Inc….B314490….
“These two cases raise the same vital question in contract law: what exactly is California’s test for unconscionability? More precisely, when there is a very high degree of procedural unconscionability, is there any meaningful content to the second element of substantive unconscionability? In an online world where contracts usually appear only in a take-it-or-leave-it format and where there thus is much procedural unconscionability, this question about substantive unconscionability looms large.”
He declared:
“Our holding is that, unless we are to imperil the vast online world of take-it-or-leave-it contracts, substantive unconscionability must retain meaningful independent content. For that reason, the contracts here and in Fuentes are valid and enforceable, despite their procedural unconscionability.”
Opinion in Fuentes
In Fuentes, Wiley said:
“Nearly every form employment contract can be perceived as having some procedural unfairness. Employees may lack power to bargain at all. Sometimes employers insist, ‘sign it or no job.’…When the law attributes some procedural unfairness to every form employment contract, the real fight boils down to whether the substance of the final terms are fair. We must enforce this contract if its substance is even-handed.”
Plaintiff Evangelina Yanez Fuentes signed a paper contract. It was unenforceable, she contended because the type was small and difficult to read.
Wiley explained:
“Tiny font size and unreadability go to the process of contract formation, however, and not the substance of the outcome. Font size and readability thus are logically pertinent to procedural unconscionability and not to substantive unconscionability.
“To make this logical point plain, imagine shrinking a contract fair in substance down to less than one—point font: a font so minute as to be completely unreadable without a strong magnifying glass. The fairness of the contract’s substance, however, remains unchanged. Font is irrelevant to fairness.”
As a matter of procedural unconscionability, he said, “[w]e cannot double count it as a problem of substantive unconscionability.”
First District Opinion
Fuentes urged the court to adopt the reasoning expressed in 2019 by Div. Two of the First District Court of Appeal in Davis v. TWC Dealer Group, Inc.
“We respectfully disagree with Davis’s analysis of substantive unconscionability,” Wiley said.
He noted that the court there considered font size to relate to substance, suggested that there might be a problem in that the employee signed the agreement and not the employer, that it implied that it was unconscionable that the employer could later change the agreement but not the employee, and that the agreement could be read to bar an action under the Labor Code Private Attorneys General Act. Wiley disagreed on all points, and said that, in any event, Fuentes had forfeited an argument as to the last two points by not bringing them up in her brief.
The jurist added:
“We also distinguish this case from Davis, in two different ways.
From its initial paragraph to its last page, the Davis opinion prominently focused on the attorney misconduct in the case….We have no attorney misconduct in this case.
“Nor do we have the three separate and internally-contradictory arbitration contracts that troubled the Davis court.” He said the terms of the agreement were fair, and therefore, “we need not and do not address procedural unconscionability.”
Opinion in Basith
In Basith, plaintiff Mohammad Basith contended that the online agreement to which he assented contained legalese which was difficult to comprehend. Willey responded:
“[A] complaint about prolix legalese is the same type of objection as a complaint about font size. If the substance of a contract is fair, how the contract is expressed cannot change that. Font size, format style, or verbal obscurantism does not affect the fairness of the final allocation of rights and duties. This contention does not address, and cannot establish, substantive unfairness. To rule otherwise would drain the element of substantive unconscionability of meaningfully independent content and effectively would turn the unconscionability doctrine into a one-element test of vast and unsettling sweep.”
Stratton wrote a dissent in Fuentes and incorporated it by reference in Basith. She said the agreement signed by Fuentes “with font so small as to challenge the limits of legibility implicates a lack of mutuality,” and declared:
“I would find a sufficient level of substantive unconscionability in this arbitration agreement to render it unenforceable.”
The opinion in Fuentes, published at 2023 S.O.S. 1592, reverses an order by Los Angeles Superior Court Judge Mel Red Recana. Basith reverses an order by Los Angeles Superior Court Judge Michelle Williams Court.
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