In Norton v. Ford of Santa Monica et al., 2012 WL 6721400 (Cal.App. 2 Dist. 2012), the Court of Appeal for the Second District, found in an unpublished decision that an automobile RISC’s arbitration was procedurally and substantively unconscionable. As to procedural unconscionability, the Court of Appeal found:
The vehicle purchase contract contains elements of surprise. Placement of the arbitration agreement was inconspicuous, on the reverse of the page that Norton signed. Although he was required to sign the first page of the vehicle purchase contract seven times, he was not required to sign or initial the arbitration clause on the reverse side. There was actual surprise because of SSM’s failure to call the arbitration clause to the attention of its customer. ( A & M Produce Co. v. FMC Corp. (1980) 135 Cal.App.3d 473, 490.) Under these circumstances, the arbitration clause was procedurally unconscionable. (Ibid.; Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 89 (Gutierrez ).) Because the vehicle purchase contract contained an elements of surprise, the contract was procedurally unconscionable.
As to substantive unconscionability, the Court of Appeal found:
Although superficially bilateral insofar as in some circumstance, each party is provided a method for requesting a new arbitration after an arbitrator’s award, this provision of the arbitration agreement has the effect of benefiting the party with superior bargaining power, the automobile dealer. A car buyer does not benefit from a provision allowing the dealership to seek a new arbitration of an award of more than $100,000 because the buyer, not the dealer, will be the party more likely to recover an award of that size. If the buyer obtains an award under the $100,000 threshold but believes it is too low, the buyer has no option to request a new arbitration unless the award is $0. Therefore in practical terms, this provision makes a new arbitration available only to the dealer. Additionally, this arbitration provision requiring the party requesting a new arbitration to advance filing fees and arbitration costs is unconscionable because it allows a financially strong automobile dealership to request a new arbitration while discouraging or preventing a cash-strapped consumer from doing so. In the trial court, Norton’s declaration stated that arbitrators typically charged hundreds of dollars per hour, and that if SSM lost it could request a new arbitration with a three-arbitrator panel and that Norton could be responsible for all the costs of those three arbitrators if he did not win that new arbitration. Norton stated that he was not financially able to pay such potential arbitration fees. This was sufficient evidence of the amount of filing fees and other costs for a new three-arbitrator arbitration, and that this amount would exceed plaintiff’s ability to pay. (Gutierrez, supra, 114 Cal.App.4th at p. 90.) Gutierrez holds that it is substantively uncon-scionable to require a consumer to give up the right to utilize the judicial system while imposing prohibitively high arbitral forum fees. ( Gutierrez, supra, 114 Cal.App.4th at p. 90.) Gutierrez also found that despite the potential for imposition of a substantial administrative fee on plaintiff, the arbitration agreement had no effective procedure for a consumer to obtain a fee waiver or reduction. Gutierrez found that the arbitration agreement must provide some effective avenue of relief from unaffordable fees and that the arbitration agreement before it did not do so. ( Id. at pp. 91–92.) The absence of any procedure for a consumer to obtain a fee waiver or reduction or of some effective avenue of relief from unaffordable fees makes the arbitration agreement in the SSM–Norton vehicle purchase contract substantively unconscionable.