Unconscionability: Fourth District Div. 3 Finds Arbitration Provision Presented In English To Spanish Speaking Legal Client Was Not Enforceable
Presenting An English Contract To A Spanish Speaking Legal Client Illiterate In English Was Problematic
Justo Malo Sanchez filed a legal malpractice lawsuit against Consumer Defense Legal Group and its representatives, alleging issues with the firm's handling of his case. The retainer agreement he signed contained an arbitration clause, but Sanchez argued that the agreement was unconscionable. He contended it was procedurally unconscionable because he was illiterate in English, had a limited education, and was presented with the contract in a "take it or leave it" manner without translation or explanation. It was also substantively unconscionable due to high arbitration fees, which Sanchez could not afford.
The trial court initially denied the motion to compel arbitration, citing concerns about the lack of proof of a valid agreement and the significant procedural unconscionability. After reconsideration, the court reversed its decision, granting the motion, convinced by defense arguments that Sanchez was not truly indigent and could afford arbitration fees. Sanchez then sought writ relief from the Court of Appeal, which granted the petition, ruling that the arbitration clause was both procedurally and substantively unconscionable.
The Court of Appeal agreed the contract was a standard, adhesive one and the arbitration provision was hidden, written only in English, and not adequately explained. Furthermore, the arbitration costs were prohibitively high, effectively denying Sanchez access to a forum to litigate his claims, rendering the arbitration clause unenforceable. Sanchez v. Superior Court of Orange County, G064490 (4/3 2/3/25) (Delaney, Sanchez, Motoike).
COMMENT: In the past, we have blogged about many cases in which a contract written in English presented some degree of unconscionability for a person who did not speak English. Here, the contract at issue was an attorney-client agreement, and a California statutory provision applies. California Civil Code section 1632(b)(6) requires a person in a trade or business who negotiates a contract in Spanish (and other specified languages) to provide a translation in Spanish of the contract. And this applies to: "A contract or agreement, containing a statement of fees or charges, entered into for the purpose of obtaining legal services, when the person who is engaged in business is currently licensed to practice law pursuant to Chapter 4 (commencing with Section 6000) of Division 3 of the Business and Professions Code."
Preemption, Choice Of Law: Effort To Compel Arbitration With CAL Choice Of Law Provision Is Preempted
Can An Employer Avoid The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 With A California Choice Of Law Provision?
No. The EFAA preempts California law, rendering the arbitration agreement unenforceable in cases of sexual harassment disputes. That's the holding of Casey v. Sup. Ct., D.R. Horton, Inc., et al (Real Parties In Interest), A170650 (1/1 2/3/2025) (Humes, Banke, Langhorne Wilson).
Why? "The EFAA’s purpose is plainly obstructed by an attempt to use state law to force a person who is alleging sexual harassment to arbitrate their dispute."
Deadlines, FAA: First Dist. Div. 1 Sides With Courts Holding FAA Does Not Preempt Prompt Payment Of Arbitrator CA Statute
The Court Distinguishes The Case From Hernandez v. Sohnen Enterprises, Inc.
Jenny-Ashley Colon-Perez sued her former employer, Security Industry Specialists, Inc. (SIS), for various employment-related claims. After agreeing to arbitrate, SIS failed to pay arbitration fees within the 30-day deadline required by California Code of Civil Procedure section 1281.98. Colon-Perez chose to withdraw from arbitration, and the trial court ruled that SIS had materially breached the arbitration agreement. SIS attempted to vacate the order, citing the Federal Arbitration Act (FAA) and other arguments, but the trial court denied the motion.
The court held that section 1281.98 applied and was not preempted by the FAA. The failure to pay the arbitration fees within the statutory period constituted a material breach, allowing Colon-Perez to proceed with her claims in court. Colon-Perez v. Security Industry Specialists, Inc., A168297 (1/1 1/29/2025) (Banke, Humes, Langhorne Wilson).
Justice Kathleen Banke explained: "We recently addressed whether the FAA preempts section 1281.98 in Keeton v. Tesla, Inc. (2024) 103 Cal.App.5th 26, 32 (Keeton), review granted September 11, 2024, S286860. We concluded it does not, as have all but one of the Courts of Appeal that have considered the issue. We are not persuaded to depart from our conclusions in Keeton."
The Court of Appeal also addressed whether the denial of arbitration violated the Contract Clause of the Constitution. It concluded that it did not violate the clause, because insisting on prompt payment of the arbitrator did not substantially interfere with arbitration.
Also of note, the Court distinguished Colon-Perez from Hernandez v. Sohnen Enterprises, Inc., which holds that when the agreement is governed by the Federal Arbitration Act, § 1281.98 is preempted. Unlike the Hernandez arbitration provisions, the Colon-Perez provisions mentioned California state law and did not only refer to procedures in the FAA.
COMMENT: This last argument distinguishing Hernandez seems a bit sketchy. The arbitration clause in Colon-Perez provided: "Any proceeding pursuant to this Employment Dispute Arbitration Procedure is deemed to be an arbitration proceeding subject to the Federal Arbitration Act, 9 U.S.C. §§ 1–16, if applicable, to the exclusion of any state law inconsistent therewith; or, if the FAA is not applicable, to the law of the state of venue . . ."
I wrote an article for the Daily Journal published April 10, 2024, entitled: California: Friend or Foe of Arbitration?, addressing the preemption issue presented by the statutory deadline for paying attorney fees to the arbitrator. The article is available online here.
Reviews: Who Owns This Sentence? — Book Reviewed By Your Blogger Marc Alexander
A History Of Copyrights And Wrongs.
David Bellos, an academic, translator, and biographer, and Alexandre Montagu, an IP attorney and founder of MontaguLaw, have written an engaging history of copyright law. Blogger Marc Alexander has written a review of the book. The review is republished here with the permission of the Journal of the Litigation Section of the California Lawyers Association and the CLA. The review appears in the Journal, Vol. 37, issue 3, p. 53. Here's a link to the review: Download Who Owns This Sentence reviewed.
Agency: Third District Agrees Durable Power Of Attorney At Issue Did Not Confer Authority To Agent To Agree To Arbitrate
Authority To Make Medical Decisions Is Not The Same As Authority To Consent To Arbitration.
In Lombardo v. Gramercy Court, C098857 ( 3rd Dist. 12/31/24) (Robie, Earl, Mauro) the plaintiffs, Lisa Lombardo and others, sued Gramercy Court for wrongful death, negligence, elder abuse, and gross negligence after Elizabeth Stein, their relative, died following inadequate care at the defendant's facility. Gramercy Court sought to compel arbitration based on an agreement signed by Lombardo as Stein's agent under a durable power of attorney (DPOA). The trial court denied the motion, finding Lombardo lacked the authority to bind Stein to arbitration. The appellate court affirmed this decision.
The court determined that Stein’s DPOA did not grant Lombardo authority to sign arbitration agreements. Specifically, Stein left unchecked the section authorizing the agent to handle “claims and litigation,” which would have included arbitration authority. Furthermore, the DPOA explicitly excluded healthcare decisions, and arbitration agreements are distinct from medical decisions. The court also rejected Gramercy Court's argument that Lombardo had ostensible authority to bind Stein, finding no evidence of Stein’s conduct to justify such a conclusion.
The appellate court similarly ruled that the arbitration agreement did not bind Lombardo or other heirs individually. It interpreted the agreement's language as ambiguous and construed it against the drafter, Gramercy Court.
COMMENT: We have posted many times on nursing facilities that ran in to trouble enforcing arbitration agreements. Frequently a relative signs documents for an older relative, and unless all i's are carefully dotted and t's are carefully crossed, courts may find that authority was not conferred on the agent. There is also the issue with durable powers of attorney as to the scope of powers conferred under the DPOA — does it just cover medical decisions, or does it include the power to agree to arbitrate disputes. And if there is an agency, does it cover the patient's disputes, or the disputes of heirs?
PAGA: Reversing Trial Court, Second District, Div. 1 Requires Arbitration Of Individual PAGA Claim
Every PAGA Claim Necessarily Includes An Individual PAGA Claim.
We like it when judges neatly summarize a case and its ruling. It makes it much easier to do a quick post. Justice Frances Rothschild has made our job easier:
Shipt, Inc. (Shipt) and its parent company Target Corporation (Target) (collectively, appellants) appeal from an order denying their motion to compel arbitration in an action brought against them by respondent Christina Leeper under the Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (PAGA). The court denied the motion on the basis that Leeper’s PAGA action did not allege any individual claims subject to arbitration under the parties’ arbitration agreement.
Based on the unambiguous, ordinary meaning of the relevant statutory language and the legislative history of that language, however, we conclude that every PAGA action necessarily includes an individual PAGA claim.2 Accordingly, we reverse and direct the court to enter a new order (1) compelling the parties to arbitrate Leeper’s individual PAGA claim and (2) staying the representative PAGA claim portion of the lawsuit.
Christina Leeper v. Shipt, Inc., et al, B339670 (2/1 12/30/24) (Rothschild, Weingart, Klatchko).