Common use of FACTUAL AND PROCEDURAL BACKGROUND Clause in Contracts

FACTUAL AND PROCEDURAL BACKGROUND. On August 8, 2008, Xxxxxxx went to Valencia‘s Mercedes-Benz dealership to shop for a certified preowned car. In response to his inquiry, a sales representative showed him a 2006 Mercedes-Benz S500V with an advertised price of approximately $48,000. After negotiations regarding various terms of the purchase, Xxxxxxx signed a contract entitled ―RETAIL INSTALLMENT SALE CONTRACT — SIMPLE FINANCE CHARGE,‖ which specified the total amount financed as $47,032.99. This amount included a price for the car of approximately $39,800, sales tax of approximately $3,330, a service contract price of $3,700, a cash down payment of $15,000, and a net trade-in amount for Xxxxxxx‘s 2004 Cadillac of -$14,800 (reflecting the amount Xxxxxxx still owed on the car ($20,800) offset by its value ($6,000)). Xxxxxxx later filed a class action against Valencia asserting violations of the Consumer Legal Remedies Act (CLRA) (Civ. Code, §§ 1750–1784), the Automobile Sales Finance Act (Civ. Code, §§ 2981–2984.6), the unfair competition law (UCL) (Bus. & Prof. Code, §§ 17200–17210), the Song-Xxxxxxx Consumer Warranty Act (Civ. Code, §§ 1790–1795.8), and Public Resources Code section 42885. He alleged that Valencia had (1) made false representations about the car‘s condition, (2) failed separately to itemize the amount of the down payment that was deferred, (3) failed to distinguish registration, transfer, and titling fees from license fees, (4) charged an optional electronic filing fee without discussing it with him, (5) charged new tire fees for used tires, and (6) required payment of $3,700 to have the car certified so he could qualify for a 4.99 percent interest rate, when that payment was actually for an optional extended warranty unrelated to the interest rate. Xxxxxxxx moved to compel arbitration pursuant to a provision in the contract that provided in relevant part: ―Any claim or dispute, whether in contract, tort, statute or otherwise . . . between you and us . . . which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship . . . shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action.‖ Xxxxxxx opposed the motion, principally asserting that the arbitration provision was illegal and unenforceable insofar as it required him ―to waive his unwaivable right to file a class action under the CLRA.‖ The unenforceability of this waiver, he argued, rendered the entire arbitration agreement unenforceable under a clause stating, ―If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder of this Arbitration Clause shall be unenforceable.‖ As an alternative ground for opposing the motion, Xxxxxxx argued that the arbitration agreement was unenforceable because it was ―both procedurally and substantively unconscionable.‖ Based solely on the invalidity of the class arbitration waiver, the trial court denied the motion to compel, explaining: ―As the CLRA contains a right to bring class actions, a waiver of such right is contrary to public policy and is unenforceable. [Citation.] Thus, the class action waiver herein is unenforceable. As such, the entire clause is unenforceable, as specifically provided for in that clause.‖ The trial court did not address Xxxxxxx‘s unconscionability claim. The Court of Appeal affirmed, but took the opposite approach, i.e., it declined to consider whether the class arbitration waiver was unenforceable and held instead that ―the arbitration clause as a whole is unconscionable.‖ It is ―procedurally unconscionable,‖ the court reasoned, ―because it is adhesive and satisfies the elements of oppression and surprise; it is substantively unconscionable because it contains harsh terms that are one-sided in favor of the car dealer to the detriment of the buyer.‖ ―First, a party who loses before the single arbitrator may appeal to a panel of three arbitrators if the award exceeds $100,000. Second, an appeal is permitted if the award includes injunctive relief. Third, the appealing party must pay, in advance, ‗the filing fee and other arbitration costs subject to a final determination by the arbitrators of a fair apportionment of costs.‘ Fourth, the provision exempts repossession from arbitration while requiring that a request for injunctive relief be submitted to arbitration. Although these provisions may appear neutral on their face, they have the effect of placing an unduly oppressive burden on the buyer.‖ Discussion

FACTUAL AND PROCEDURAL BACKGROUND. On August 8, 2008, Xxxxxxx went to Valencia‘s Mercedes-Benz dealership to shop for a certified preowned car. In response to his inquiry, a sales representative showed him a 2006 Mercedes-Benz S500V with an advertised price of approximately $48,000. After negotiations regarding various terms of the purchase, Xxxxxxx signed a contract entitled ―RETAIL INSTALLMENT SALE CONTRACT — SIMPLE FINANCE CHARGE,‖ which specified the total amount financed as $47,032.99. This amount included a price for the car of approximately $39,800, sales tax of approximately $3,330, a service contract price of $3,700, a cash down payment of $15,000, and a net trade-in amount for Xxxxxxx‘s 2004 Cadillac of -$14,800 (reflecting the amount Xxxxxxx still owed on the car ($20,800) offset by its value ($6,000)). Xxxxxxx later filed a class action against Valencia asserting violations of the Consumer Legal Remedies Act (CLRA) (Civ. Code, §§ 1750–1784), the Automobile Sales Finance Act (Civ. Code, §§ 2981–2984.6), the unfair competition law (UCL) (Bus. & Prof. Code, §§ 17200–17210), the Song-Xxxxxxx Consumer Warranty Act (Civ. Code, §§ 1790–1795.8), and Public Resources Code section 42885. He alleged that Valencia had (1) made false representations about the car‘s condition, (2) failed separately to itemize the amount of the down payment that was deferred, (3) failed to distinguish registration, transfer, and titling fees from license fees, (4) charged an optional electronic filing fee without discussing it with him, (5) charged new tire fees for used tires, and (6) required payment of $3,700 to have the car certified so he could qualify for a 4.99 percent interest rate, when that payment was actually for an optional extended warranty unrelated to the interest rate. Xxxxxxxx moved to compel arbitration pursuant to a provision in the contract that provided in relevant part: ―Any claim or dispute, whether in contract, tort, statute or otherwise . . . between you and us . . . which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship . . . shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action.‖ Xxxxxxx opposed the motion, principally asserting that the arbitration provision was illegal and unenforceable insofar as it required him ―to waive his unwaivable right to file a class action under the CLRA.‖ The unenforceability of this waiver, he argued, rendered the entire arbitration agreement unenforceable under a clause stating, ―If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder of this Arbitration Clause shall be unenforceable.‖ As an alternative ground for opposing the motion, Xxxxxxx argued that the arbitration agreement was unenforceable because it was ―both procedurally and substantively unconscionable.‖ Based solely on the invalidity of the class arbitration waiver, the trial court denied the motion to compel, explaining: ―As the CLRA contains a right to bring class actions, a waiver of such right is contrary to public policy and is unenforceable. [Citation.] Thus, the class action waiver herein is unenforceable. As such, the entire clause is unenforceable, as specifically provided for in that clause.‖ The trial court did not address Xxxxxxx‘s unconscionability claim. The Court of Appeal affirmed, but took the opposite approach, i.e., it declined to consider whether the class arbitration waiver was unenforceable and held instead that ―the arbitration clause as a whole is unconscionable.‖ It is ―procedurally unconscionable,‖ the court reasoned, ―because it is adhesive and satisfies the elements of oppression and surprise; it is substantively unconscionable because it contains harsh terms that are one-sided in favor of the car dealer to the detriment of the buyer.‖ ―First, a party who loses before the single arbitrator may appeal to a panel of three arbitrators if the award exceeds $100,000. Second, an appeal is permitted if the award includes injunctive relief. Third, the appealing party must pay, in advance, ‗the filing fee and other arbitration costs subject to a final determination by the arbitrators of a fair apportionment of costs.‘ Fourth, the provision exempts repossession from arbitration while requiring that a request for injunctive relief be submitted to arbitration. Although these provisions may appear neutral on their face, they have the effect of placing an unduly oppressive burden on the buyer.‖ DiscussionDISCUSSION

FACTUAL AND PROCEDURAL BACKGROUND. On August 8, 2008, Xxxxxxx went to Valencia‘s MercedesXxxxxxxx’x Xxxxxxxx-Benz dealership to shop for a certified preowned car. In response to his inquiry, a sales representative showed him a 2006 Mercedes-Benz S500V with an advertised price of approximately $48,000. After negotiations regarding various terms of the purchase, Xxxxxxx signed a contract entitled ―RETAIL “RETAIL INSTALLMENT SALE CONTRACT — SIMPLE FINANCE CHARGE,‖ CHARGE,” which specified the total amount financed as $47,032.99. This amount included a price for the car of approximately $39,800, sales tax of approximately $3,330, a service contract price of $3,700, a cash down payment of $15,000, and a net trade-in amount for Xxxxxxx‘s Xxxxxxx’x 2004 Cadillac of -$14,800 (reflecting the amount Xxxxxxx still owed on the car ($20,800) offset by its value ($6,000)). Xxxxxxx later filed a class action against Valencia asserting violations of the Consumer Legal Remedies Act (CLRA) (Civ. Code, §§ 1750–1784), the Automobile Sales Finance Act (Civ. Code, §§ 2981–2984.6), the unfair competition law (UCL) (Bus. & Prof. Code, §§ 17200–17210), the Song-Xxxxxxx Consumer Warranty Act (Civ. Code, §§ 1790–1795.8), and Public Resources Code section 42885. He alleged that Valencia had (1) made false representations about the car‘s car’s condition, (2) failed separately to itemize the amount of the down payment that was deferred, (3) failed to distinguish registration, transfer, and titling fees from license fees, (4) charged an optional electronic filing fee without discussing it with him, (5) charged new tire fees for used tires, and (6) required payment of $3,700 to have the car certified so he could qualify for a 4.99 percent interest rate, when that payment was actually for an optional extended warranty unrelated to the interest rate. Xxxxxxxx moved to compel arbitration pursuant to a provision in the contract that provided in relevant part: ―Any “Any claim or dispute, whether in contract, tort, statute or otherwise . . . between you and us . . . which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship . . . shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action.‖ action.” Xxxxxxx opposed the motion, principally asserting that the arbitration provision was illegal and unenforceable insofar as it required him ―to “to waive his unwaivable right to file a class action under the CLRA.‖ CLRA.” The unenforceability of this waiver, he argued, rendered the entire arbitration agreement unenforceable under a clause stating, ―If “If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder of this Arbitration Clause shall be unenforceable.‖ unenforceable.” As an alternative ground for opposing the motion, Xxxxxxx argued that the arbitration agreement was unenforceable because it was ―both “both procedurally and substantively unconscionable.‖ unconscionable.” Based solely on the invalidity of the class arbitration waiver, the trial court denied the motion to compel, explaining: ―As “As the CLRA contains a right to bring class actions, a waiver of such right is contrary to public policy and is unenforceable. [Citation.] Thus, the class action waiver herein is unenforceable. As such, the entire clause is unenforceable, as specifically provided for in that clause.‖ clause.” The trial court did not address Xxxxxxx‘s Xxxxxxx’x unconscionability claim. The Court of Appeal affirmed, but took the opposite approach, i.e., it declined to consider whether the class arbitration waiver was unenforceable and held instead that ―the “the arbitration clause as a whole is unconscionable.‖ unconscionable.” It is ―procedurally unconscionable,‖ “procedurally unconscionable,” the court reasoned, ―because “because it is adhesive and satisfies the elements of oppression and surprise; it is substantively unconscionable because it contains harsh terms that are one-sided in favor of the car dealer to the detriment of the buyer.‖ ―Firstbuyer.” “First, a party who loses before the single arbitrator may appeal to a panel of three arbitrators if the award exceeds $100,000. Second, an appeal is permitted if the award includes injunctive relief. Third, the appealing party must pay, in advance, ‗the ‘the filing fee and other arbitration costs subject to a final determination by the arbitrators of a fair apportionment of costs.‘ ’ Fourth, the provision exempts repossession from arbitration while requiring that a request for injunctive relief be submitted to arbitration. Although these provisions may appear neutral on their face, they have the effect of placing an unduly oppressive burden on the buyer.‖ Discussionbuyer.” DISCUSSION‌