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Monday, April 29, 2013

Natalini v. Import Motors: Court Affirms Order Denying Enforcement of Arbitration Clause Found To Be Unconscionable

Another quick note on a case from earlier this year. In Natalini v. Import Motors (1/7/13, pub. 2/5/13) --- Cal.App.4th ---, a car buyer filed an action action alleging individual and class claims against a car dealer, for, inter alia, violation of the Consumer Legal Remedies Act, the Rees-Levering Motor Vehicle Sales and Finance Act, the Unfair Competition Law.

The dealer filed a petition to compel arbitration pursuant to a provision in the car sales contract, but the trial court denied the petition because it concluded the arbitration provision was unconscionable. The Court of Appeal affirmed, holding:
  • Concepcion does not invalidate unconscionability analysis. Slip op. at 3-7. 
  • The arbitration agreement was procedurally unconscionable because: (a) the seller presented it on a take it or leave it basis, and the buyer could not negotiate it; and (b) it was located on the back of the purchase contract and was not pointed out to the buyer. Slip op. at 7-8. 
  • The arbitration agreement was substantively unconscionable because it was designed to benefit the seller in a number of ways: (a) it permitted an appeal only in case of an award of $0 or greater than $100,000; (b) it permitted an appeal if the award included injunctive relief; and (c) it allowed self-help remedies, including repossession. Slip op. at 8-12. 
The Court declined to sever the unconscionable aspects of the agreement. Slip op. at 12-13.

The seller has filed a petition for review, and I assume that the California Supreme Court will grant and hold pending its decision in Iskanian v. CLS Transportation of Los Angeles (Case No. S204032) (discussed here).

Natalini v. Import Motors is available here.

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