Court of Appeal (Cal.) Adds Another to Sanchez Queue: “Let’s not beat about the bush. Businesses put arbitration provisions in their adhesion contracts because they think that if they are sued they will fare better in arbitration than they will before a jury.”

In Castellanos v. Quality Nissan, Inc., 2013 WL 6234205 (Cal. App. 4 Dist. 2013), the Fourth District Court of Appeal, Division Three in an unpublished decision found the standard form RISC arbitration clause to be unconscionable, and affirmed the trial court’s denial of the dealership’s petition to compel arbitration.  The Court of Appeal mentioned, in particular, the issue with the appellate procedure contained in the Clause:   

Arbitration is final and binding, except when it isn’t. When it isn’t is most likely to be when OC Nissan loses and faces a big award or has an injunction entered against it. (It is hard to imagine a scenario in which an arbitrator enters an injunction against a customer.) Then OC Nissan gets to start all over, with more artillery. ¶  The California Supreme Court examined a similar provision in Little, supra, 29 Cal.4th 1064, an employment case. In Little, the arbitration clause provided that either party could request a “reversal and remand, modification, or reduction” by a second arbitrator of any award over $50,000. ( Id. at p. 1071.) The court pointed out that, in practical terms, this provision benefited the employer, since the employer, not the employee, is the party most likely to have a large damage award entered against it. As the court observed, an asymmetrical arbitration agreement may be justified “when there is a ‘legitimate commercial need’ [citation],” but “that need must be ‘other than the employer’s desire to maximize its advantage’ in the arbitration process. [Citation.]” ( Id. at p. 1073.) ¶  Assuming an OC Nissan customer lost the arbitration completely and wanted to appeal, he or she would face the daunting prospect of paying the filing fee and all the expenses for not one but three arbitrators until the end of the appeal, when the arbitrators might reapportion costs. A potential car buyer who could afford such an outlay would probably not be shopping for a Nissan. ¶  Let’s not beat about the bush. Businesses put arbitration provisions in their adhesion contracts because they think that if they are sued they will fare better in arbitration than they will before a jury. Consumers and employees think so too; that is why they fight arbitration clauses. Arbitration clauses are in a contract to protect the company proffering the agreement, not the person signing it. The arbitration provision in this contract is designed to give OC Nissan every possible advantage if it is sued for some cause of action that could yield substantial damages, such as the statutory violations alleged in Castellanos’ complaint. OC Nissan is not concerned about being sued because a car’s heater does not work or a hubcap fell off.  ¶  The $100,000 threshold is OC Nissan’s tacit acknowledgement that the costs of appealing any award under that amount outweigh the potential for recovery. In other words, a person who wanted to appeal from a zero award, such as Castellanos, should expect to have to come up with cash somewhere in that neighborhood to fund the appeal. The improbability that the typical car buyer could bear that expense thus insulates OC Nissan from any threat of appeal of a customer’s adverse award in arbitration.