In Fuentes v. Empire Nissan, the Supreme Court today holds that an unreadable arbitration term in a contract doesn’t necessarily mean the provision is unenforceable, although it might be. The court doesn’t definitively decide arbitrability in the case before it, leaving that task to the superior court on remand. The Chief Justice dissents, asserting the court should rule arbitration is required.
Defeating a contract’s enforcement as unconscionable requires “show[ing] unfairness both in the procedure by which the contract was formed and the substance of its terms,” but, says the court’s opinion by Justice Joshua Groban, “a contract’s format generally is irrelevant to the substantive unconscionability analysis, which focuses on the fairness of the contract’s terms.” “An otherwise fair and mutual term is not made substantively unconscionable by printing it in a manner that makes it difficult to read.” The opinion does say, however, that “courts must closely scrutinize the terms of difficult-to-read contracts for unfairness or one-sidedness.”
Chief Justice Patricia Guerrero agrees that legibility is not a substantive unconscionability issue, but criticizes the majority for sending other substantive unconscionability issues back to the superior court for resolution. She writes that the remand is “based on errors neither raised nor briefed by the parties” and is “an apparent effort to give Fuentes the opportunity to raise arguments she has clearly forfeited.” The majority “also does a disservice to the parties, who have now litigated this matter for over five years but are no closer to a resolution of their dispute,” Guerrero says. (See Fuentes on our list of oldest non-capital Supreme Court cases.)
The court reverses a a 2-1 published opinion by the Second District, Division Eight, Court of Appeal. Division Eight got it right in not treating illegibility as substantively unconscionable, but erred in other respects when it ordered arbitration. Also, although it doesn’t say so specifically, today’s decision seems to disapprove the First District, Division Two, opinion in Davis v. TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662 (review and depublication request denied) insofar as it suggested that illegibility is part of a substantive unconscionability analysis (id. at p. 674).
