Samaniego v. Empire Today, LLC - 205 Cal. App. 4th 1138, 140 Cal. Rptr. 3d 492 (2012)

Rule:

Unconscionability includes an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. Phrased another way, unconscionability has both a procedural and a substantive element. The procedural element requires oppression or surprise. Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form. The substantive element concerns whether a contractual provision reallocates risks in an objectively unreasonable or unexpected manner. Under this approach, both the procedural and substantive elements must be met before a contract or term will be deemed unconscionable. Both, however, need not be present to the same degree. A sliding scale is applied so that the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.

Facts:

Plaintiffs Salome Samaniego and Juventino Garcia work or worked as carpet installers for Flooring Install, Inc., an alleged subsidiary or affiliate of Empire Today, LLC (“Empire”). Plaintiffs were given form contracts in English, which they could not read well enough to understand, and were told that no Spanish translation was available and that they had to sign the contracts if they wanted to work. The contracts were lengthy, single-spaced, in small print, lacked headings, contained a choice-of-law provision specifying Illinois law, and contained an arbitration clause near the end. The plaintiffs were not given copies of the applicable arbitration rules. The arbitration clause shortened the limitations period to six months and contained several one-sided provisions, including an attorney fee clause that imposed no obligation on the company. The trial court denied Empire’s motion to compel contractual arbitration of wage and hour claims asserted by the plaintiffs. Empire appealed.

Issue:

Should the court grant Empire’s motion to compel contractual arbitration?

Answer:

No.

Conclusion:

The Court of Appeal affirmed, holding that the agreement to arbitrate was both procedurally and substantively unconscionable. The inconspicuous arbitration clause, the lack of a Spanish translation, and the failure to provide the arbitration rules demonstrated procedural unconscionability. The multiple one-sided provisions supported a finding of substantive unconscionability. California law applied because enforcing the choice-of-law provision would result in substantial injustice.