Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899

The arbitration clause in a standard auto purchase contract used by most California car dealers mandated: (1) arbitration before a single arbitrator on an individual basis, waiving any class action; (2) exemption of self-help remedies like repossession; (3) a “second look” review for awards of $0, over $100,000, or affording injunctive relief; and (4) the losing party’s advance of the initial costs of “second look” review (the dealer bore the consumer’s first $2,500 in the initial arbitration).

Agreeing with GMSR, the California Supreme Court reversed the Court of Appeal and held that the arbitration provision was not unconscionable. It made clear that substantive unconscionability is a high hurdle, requiring something far beyond a “bad bargain.” And it determined that the various deviations from a straight, winner-take-all binding arbitration were not unduly unreasonable in the auto-sale context. This is the first instance in many years that the California Supreme Court has unreservedly upheld a standardized consumer arbitration provision.

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